-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DrkMGqQeuPYQsT3RZzuNrIKJjSVKs1lFGVm3Lsy4tOVC3CtoGj4Ajlj8ONMw5el0 RbXUPaqQjaFaCKeaLZ+lJQ== 0001437749-10-000770.txt : 20100324 0001437749-10-000770.hdr.sgml : 20100324 20100324171439 ACCESSION NUMBER: 0001437749-10-000770 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20100505 FILED AS OF DATE: 20100324 DATE AS OF CHANGE: 20100324 EFFECTIVENESS DATE: 20100324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRM Holdings, Ltd. CENTRAL INDEX KEY: 0001338949 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-32705 FILM NUMBER: 10702462 BUSINESS ADDRESS: STREET 1: PO BOX HM 2062 CITY: HAMILTON STATE: D0 ZIP: HM HX BUSINESS PHONE: 441-295-2185 MAIL ADDRESS: STREET 1: PO BOX HM 2062 CITY: HAMILTON STATE: D0 ZIP: HM HX DEF 14A 1 crm_def14a-032310.htm DEFINITIVE PROXY STATEMENT crm_def14a-032310.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12

CRM HOLDINGS, LTD.

(Name of Registrant as Specified in its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 

Payment of Filing Fee (Check the appropriate box):

þ      No fee required.
 
o      Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
(1)
Title of each class of securities to which transaction applies:

 
(2)
Aggregate number of securities to which transaction applies:

 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
(4)
Proposed maximum aggregate value of transaction:
 
 
 
(5)
Total fee paid:
 
o      Fee paid previously with preliminary materials.
 
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 
(1)
Amount Previously Paid:

 
(2)
Form, Schedule or Registration Statement No.:

 
(3)
Filing Party:

 
(4)
Date Filed:
 
 
 

 

 



March 31, 2010

Dear Shareholder:
 
You are cordially invited to attend the Annual General Meeting of Shareholders of CRM Holdings, Ltd. to be held on Wednesday, May 5, 2010 at 12:00 p.m. (local time) at the Fairmont Hamilton Princess, 76 Pitts Bay Road, Pembroke, Bermuda. On the following pages you will find the formal notice of the Annual General Meeting of Shareholders and the proxy statement.
 
All holders of record of the Company’s Common Shares at the close of business on March 23, 2010 will be entitled to notice of, and to vote at, the Annual General Meeting of Shareholders. To assure that you are represented at the Annual General Meeting, whether or not you plan to attend the meeting in person, please read carefully the accompanying proxy statement, which describes the matters to be voted upon, and please complete, date, sign and return the enclosed proxy card promptly.
 
We look forward to seeing you at the Annual General Meeting.
 

Sincerely,
 
 
 
 
 
         
/s/ Keith S. Hynes  
 
 
 
Keith S. Hynes
       
 Chairman of the Board of Directors        
 
       
         
/s/ James J. Scardino  
 
 
 
James J. Scardino
       
Chief Executive Officer

 
 
 

 
CRM HOLDINGS, LTD.
PO BOX HM 2062
HAMILTON HM HX
BERMUDA

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 2010

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Shareholders of CRM Holdings, Ltd. (the Company) will be held on Wednesday, May 5, 2010, at 12:00 p.m. (local time), at the Fairmont Hamilton Princess, 76 Pitts Bay Road, Pembroke, Bermuda, and at any adjournment or postponement thereof, for the following purposes:
 
 
1.
To elect three Class II Directors;
 
 
2.
To direct the Company to elect director designees who shall serve as directors of the Company’s subsidiary, Twin Bridges (Bermuda) Ltd.;
 
 
3.
To appoint Ernst & Young LLP as the Company’s independent auditors for the year ended December 31, 2010 and authorize the Board of Directors, acting through the Audit Committee, to set the fees for the independent auditors;
 
 
4.
To approve changing the name of CRM Holdings, Ltd. to Majestic Capital, Ltd.;
 
 
5.
To approve the Company’s Amended and Restated Bye-Laws;
 
 
6.
To approve, and authorize the Board of Directors to effect a reverse share split of the Company’s Common and Class B shares within a range of 1-for-5 shares to 1-for-10 shares; and
 
 
7.
To transact such other business as may properly come before the Annual General Meeting or at any adjournment or postponement thereof.
 
Shareholders of record, as shown by the Register of Members of the Company, at the close of business on March 23, 2010 are entitled to notice of, and to vote at, the Annual General Meeting or any adjournment or postponement thereof.
 
All shareholders are cordially invited to attend the Annual General Meeting. If you do not expect to be present at the Annual General Meeting, you are requested to complete, date and sign the enclosed proxy and mail it promptly in the enclosed envelope to make sure that your shares are represented at the Annual General Meeting. In order for the votes represented by your proxy to be counted, your proxy must be received at least one hour before the Annual General Meeting. In the event you decide to attend the Annual General Meeting in person, you may, if you desire, revoke your proxy by voting your shares in person prior to the vote pursuant to the proxy.
 
      By Order of the Board of Directors,  
         
 
   
/s/ Louis J. Viglotti
 
 
   
Louis J. Viglotti, Esq.
 
     
Secretary and General Counsel
 
 
Hamilton, Bermuda
March 31, 2010
 
 
YOUR VOTE IS IMPORTANT

IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
 
 

 
 

 
TABLE OF CONTENTS
VOTING INSTRUCTIONS AND INFORMATION
1
   
What am I voting on?
1
Who is entitled to vote?
1
How do I vote?
2
How many votes do I have?
2
What constitutes a quorum?
3
How many votes are required to approve each proposal?
3
What is the effect of abstentions and broker non-votes on voting results?
3
What is the effect of signing the proxy card but not designating how shares should be voted?
3
Who will count the votes?
3
May I change my vote or revoke my proxy?
3
How does the Board of Directors recommend I vote?
4
Who will pay for the cost of this proxy solicitation?
4
What is “householding”?
4
2009 Audited Financial Statements
4
   
PROPOSAL NO. 1 ELECTION OF DIRECTORS
5
   
Directors of CRM Holdings currently serving as Class II Directors
5
Board of Directors’ Recommendation
6
Directors of CRM Holdings currently serving as Class III Directors
7
Directors of CRM Holdings currently serving as Class I Directors
8
Executive Officers who are not Directors:
9
   
THE BOARD AND BOARD COMMITTEES
10
   
Meetings
10
Executive Sessions
11
Board Leadership Structure
11
Committee Charters
11
Audit Committee
11
Nominating and Corporate Governance Committee
12
Compensation Committee
13
Finance and Investment Committee
14
Other Committees
14
Oversight of Risk Management
14
Director Compensation
15
   
CORPORATE GOVERNANCE
16
   
Guidelines of Corporate Governance
16
Code of Business Conduct and Ethics
16
Director Independence and Independence Determinations
17
Communications with the Board of Directors
17
   
COMPENSATION DISCUSSION AND ANALYSIS
17
   
COMPENSATION COMMITTEE REPORT
26
   
EXECUTIVE COMPENSATION
27
   
2009 Summary Compensation Table
27
2009 Grants of Plan-Based Awards
28
Employment Agreements
29
 
 
 

 
Annual Incentive Cash Bonuses
31
Restricted Share Awards under Our 2005 Long-Term Incentive Plan
31
Total Mix of Compensation
32
2009 Outstanding Equity Awards at Fiscal Year-End
32
2009 Option Exercises and Stock Vested
34
Potential payments upon termination or change-in-control
34
   
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
41
   
RELATED PARTY TRANSACTIONS
41
   
Our Related Party Transactions
41
Our Related Party Review, Approval or Ratification Process
42
   
SHARE OWNERSHIP INFORMATION
43
   
Principal Shareholders Table
43
Section 16(a) Beneficial Ownership Reporting Compliance
44
   
PROPOSAL NO. 2  ELECTION OF DIRECTOR DESIGNEES OF TWIN BRIDGES (BERMUDA) LTD.
45
   
Nominees for Election of Twin Bridges Director Designees:
45
Board of Directors’ Recommendation
45
   
PROPOSAL NO. 3.    APPROVAL OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION OF THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO SET THE FEES FOR THE INDEPENDENT AUDITORS
46
   
Board of Directors’ Recommendation
46
Independent Registered Public Accountants’ Fees
46
Pre-Approval Policy for Services of the Independent Registered Public Accounting Firm
47
Audit Committee Report
47
   
PROPOSAL NO. 4.    CHANGE OF NAME FROM CRM HOLDINGS, LTD. TO MAJESTIC CAPITAL, LTD.
48
   
Board of Directors’ Recommendation
48
   
PROPOSAL NO. 5.  APPROVAL OF AMENDED AND RESTATED BYE-LAWS
49
   
Electronic Delivery of Documents
49
Treasury Shares
49
Execution of Instruments without Seal
49
Flexibility in Titles and Identities of Officers
49
Directors’ Authority
49
Size of the Board
50
Capitalization of Profits
50
Poll Voting
50
Name Change
50
Text of the Proposed Amended and Restated Bye-laws
50
Board of Directors’ Recommendation
50
   
PROPOSAL NO. 6.    APPROVE AND AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE SHARE SPLIT OF OUR COMMON AND CLASS B SHARES
51
   
Purposes of Reverse Share Split
51
Anticipated Effects of Reverse Share Split
52
 
 
 

 
Board of Directors Discretion
55
No Dissenters Rights
55
Approval Required
56
Board of Directors’ Recommendation
56
   
OTHER MATTERS
57
   
Shareholder Proposals
57
Future Electronic Delivery of Documents to Our Shareholders
57
   
APPENDIX A
 
   
APPENDIX B
 
   
ANNUAL MEETING PROXY CARD
 

 
 

 
CRM Holdings, Ltd.
PO Box HM 2062
Hamilton HM HX
Bermuda
 

PROXY STATEMENT

 
For the
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 2010


VOTING INSTRUCTIONS AND INFORMATION
 
This proxy statement is furnished in connection with the solicitation of proxies by CRM Holdings, Ltd. (the Company, CRM Holdings, we, us or our) on behalf of the Board of Directors (the Board or Board of Directors) for the 2010 Annual General Meeting of Shareholders (the Annual General Meeting) to be held on Wednesday, May 5, 2010, at 12:00 p.m. (local time) at the Fairmont Hamilton Princess, 76 Pitts Bay Road, Pembroke, Bermuda, and at any adjournment or postponement thereof.
 
This proxy statement, the attached Notice of Annual General Meeting and the enclosed Proxy Card are first being mailed to CRM Holdings’ shareholders on or about March 31, 2010.
 
What am I voting on?
 
There are six proposals scheduled to be voted on at the meeting:
 
 
1.
To elect three Class II Directors;
 
 
2.
To direct CRM Holdings to elect director designees to serve as directors of Twin Bridges (Bermuda) Ltd. (Twin Bridges), our wholly-owned Bermuda-based reinsurance subsidiary;
 
 
3.
To appoint Ernst & Young LLP as the Company’s independent auditors for the year ended December 31, 2010 and authorize the Board of Directors, acting through the Audit Committee, to set the fees for the independent auditors;
 
 
4.
To approve changing the name of CRM Holdings, Ltd. to Majestic Capital, Ltd.;
 
 
5.
To approve our Amended and Restated Bye-Laws; and
 
 
6.
To approve and authorize the Board of Directors to effect a reverse share split of our common and Class B shares within a range of 1-for-5 shares to 1-for-10 shares.
 
Each proposal is described in more detail in this proxy statement. Other than matters incident to the conduct of the Annual General Meeting, we do not know of any business or proposals to be considered at the Annual General Meeting other than those discussed in this Proxy Statement. If any other business is proposed and properly presented at the Annual General Meeting, the proxies received from our shareholders give the proxy holders the authority to vote on the matter at their discretion.
 
Who is entitled to vote?
 
You are entitled to notice of, and to vote at or direct the voting of your shares at, our Annual General Meeting if you were a shareholder of record at the close of business (Bermuda time) on March 23, 2010. As of that date, we had 16,535,206 common shares issued and outstanding. This number does not include 395,000 non-voting class B shares. The common shares comprise all of our issued and outstanding voting shares.
 
 
1

 
How do I vote?
 
You can vote your shares at the Annual General Meeting in one of the following three ways:
 
 
·
By Internet or Telephone. If you have internet or telephone access, you may submit your proxy by following the voting instructions on the proxy card. If you vote by internet or telephone, you do not need to return your proxy card.
 
 
·
By Mail. Mark the enclosed proxy card, sign and date it, and return it in the pre-paid envelope that has been provided. To be valid, your vote by mail must be received by 5:00 p.m., Eastern Daylight Savings Time, on Tuesday, May 4, 2010.
 
 
·
In Person at the Annual General Meeting. You can vote in person at the Annual General Meeting. If you own shares in street name, you will need to obtain a legal proxy from your broker or bank and bring the legal proxy to the meeting. Please note that if you own common shares in street name and request a legal proxy, any previously executed proxy will be revoked and your vote will not be counted unless you appear at the meeting and vote in person.
 
How many votes do I have?
 
You will generally have one vote for each of our common shares that you held as at the close of business on March 23, 2010, unless you owned “controlled shares.”
 
Under Section 63 of our Amended and Restated Bye-Laws (the Bye-Laws), if the “controlled shares” of any person would otherwise represent more than 9.9% of the voting power of all of the shares entitled to vote at a meeting of our shareholders, then the votes conferred by the shares of such person’s “controlled shares” shall be reduced by whatever amount is necessary so that after any such reduction the votes conferred by the “controlled shares” of such person shall not exceed such 9.9% limitation. “Controlled shares” in reference to any person means all common shares that confer the right to vote that a person is deemed to own directly, indirectly (within the meaning of Section 958(a) of the Internal Revenue Code of 1986, as amended (the Code)), or, in the case o f a U.S. person (as defined in the Bye-Laws), constructively (within the meaning of Section 958(b) of the Code). The reduction in votes is generally to be applied proportionately among all shares and shareholders who are members of the shareholder’s “control group.” “Control group” means, with respect to any person, all shares that confer the right to vote directly owned by such person and all shares that confer the right to vote directly owned by each other shareholder any of whose shares that confer the right to vote are included in the controlled shares of such person.
 
In addition, if the shares held directly by any “related group” would otherwise exceed the 9.9% limitation, then the votes conferred by the shares held directly by members of such “related group” shall be reduced by whatever amount is necessary so that after any such reduction the votes conferred by the shares held directly by such related group shall not exceed the 9.9% limitation. The reduction in votes is generally to be applied proportionately among all directly held shares of such related group. “Related group” means a group of shareholders that are investment vehicles and are under common control or management.
 
For purposes of applying these provisions, shareholders will be entitled to direct that the Board (1) treat them (and certain affiliates) as U.S. persons, and/or (2) treat them (and certain related shareholders) as one person for purposes of determining a shareholder’s control group. The amount of any reduction of votes that occurs by operation of the above limitations will generally be allocated proportionately among all other shareholders. Consequently, under these provisions certain shareholders may have their voting rights limited to less than one vote per share, while other shareholders may have voting rights in excess of one vote per share.
 
In addition, our Board of Directors may adjust a shareholder’s voting rights to the extent that it reasonably determines in good faith that an adjustment is necessary in order to avoid adverse tax consequences or materially adverse legal or regulatory treatment to us, any of our subsidiaries or any of our shareholders or their affiliates. This adjustment may result in a shareholder having voting rights in excess of one vote per share. Therefore, your voting rights might increase above 5% of the aggregate voting power of the outstanding common shares, thereby possibly resulting in your becoming a reporting person subject to Schedule 13D or 13G filing requirements under the U.S. Securities Exchange Act of 1934, as amended (the Securities Exchange Act of 1934).
 
 
2

 
If your voting interests have been adjusted such that your vote is greater than or less than one vote per share, pursuant to the terms of our Bye-Laws as described above, then the attached proxy card indicates the voting interest attributed to you by the Board of Directors.
 
What constitutes a quorum?
 
A quorum is required to transact business at the Annual General Meeting. A quorum exists when there are not less than four persons present in person or by proxy holding in excess of 50% of the votes entitled to be cast at the Annual General Meeting. Votes attributable to common shares owned by shareholders who are present in person or by proxy at the Annual General Meeting, but who elect to abstain from voting, will be counted towards the presence of a quorum. In addition, broker “non-votes” will be counted towards to the presence of a quorum. A broker “non-vote” occurs when a nominee (such as a broker) holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular matter and has not received instru ctions from the beneficial owner.
 
How many votes are required to approve each proposal?
 
The approval of each of the matters to be voted upon at the Annual General Meeting requires the affirmative vote of a majority of the votes cast at the Annual General Meeting, provided there is a quorum.
 
What is the effect of abstentions and broker non-votes on voting results?
 
Abstentions and broker non-votes, if any, will not affect the voting results on our proposals.
 
What is the effect of signing the proxy card but not designating how shares should be voted?
 
Votes attributable to common shares held by shareholders who have signed their proxy cards but have not designated how such shares are to be voted will be counted towards the presence of a quorum and will be voted “FOR” Proposals Nos. 1, 2, 3, 4, 5 and 6 as described in this proxy statement.
 
Who will count the votes?
 
The Proxy Committee of our Board of Directors has appointed Appleby Management (Bermuda), Ltd. as the inspector of election to count votes cast in person or by proxy.
 
May I change my vote or revoke my proxy?
 
Any person signing a proxy in the form accompanying this proxy statement has the power to revoke it prior to the Annual General Meeting or at the Annual General Meeting prior to the vote pursuant to the proxy. A proxy may be revoked by any of the following methods:
 
 
·
by writing a letter to our corporate secretary at: Louis J. Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., PO Box HM 2062, Hamilton HM HX, Bermuda, stating that the proxy is revoked; or
 
 
·
by submitting another proxy with a later date; or
 
 
·
by voting in person at the Annual General Meeting (attendance at the Annual General Meeting will not, in and of itself, revoke the earlier proxy).
 
Any notice of revocation of an outstanding proxy must be received at least one hour before the Annual General Meeting. Any shareholder entitled to vote at the Annual General Meeting may attend the Annual General Meeting and any shareholder who has not submitted a proxy or who has properly revoked a proxy or who votes prior to the vote pursuant to the proxy may vote in person at the Annual General Meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee, you may not vote in person at the Annual General Meeting, unless you request and obtain a valid proxy from your bank or broker.
 
 
3

 
How does the Board of Directors recommend I vote?
 
The Board of Directors unanimously recommends that you vote:
 
 
1.
FOR the election of Keith S. Hynes, Salvatore A. Patafio and Louis Rosner as Class II Directors;
 
 
2.
FOR directing CRM Holdings to elect director designees to serve as directors of Twin Bridges;
 
 
3.
FOR the appointment of Ernst & Young LLP as the Company’s independent auditors for the year ended December 31, 2010 and authorization of the Board of Directors, acting through the Audit Committee, to set the fees for the independent auditors;;
 
 
4.
FOR the approval of changing the name of CRM Holdings, Ltd. to Majestic Capital, Ltd.;
 
 
5.
FOR the approval of our Amended and Restated Bye-Laws; and
 
 
6.
FOR the approval and authorization of the Board of Directors to effect a reverse share split of our common and Class B shares within a range of 1-for-5 shares to 1-for-10 shares.
 
Who will pay for the cost of this proxy solicitation?
 
We will pay the costs relating to this proxy statement, the proxy card and the Annual General Meeting. We have retained Georgeson Shareholder Communications, Inc. to solicit proxies personally or by mail or facsimile at an anticipated cost of approximately $7,500, plus routine out-of-pocket disbursements. We may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to beneficial owners. Directors, officers and regular employees may also solicit proxies by mail, facsimile or other means or in person. They will not receive any additional payments for the solicitation.
 
What is “householding”?
 
If you and others who share your mailing address own our common shares or shares of other companies through bank or brokerage accounts, you may have received a notice that your household will receive only one proxy statement from each company whose shares are held in such accounts. This practice, known as “householding,” is designed to reduce the volume of duplicate information and reduce printing and postage costs. You may discontinue householding by contacting your bank or broker.
 
You may also request delivery of an individual copy of the proxy statement by contacting us at (441) 295-6689, or by writing to our corporate secretary at: Louis J. Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., PO Box HM 2062, Hamilton HM HX, Bermuda.
 
You may be able to initiate householding if your bank or broker has chosen to offer this service, by following the instructions provided by your bank or broker.
 
2009 Audited Financial Statements
 
Under our Bye-Laws and Bermuda law, audited financial statements must be presented to shareholders at an annual general meeting of shareholders. To fulfill this requirement, we will present at the annual meeting consolidated financial statements for the fiscal year 2009, which have been audited by Ernst & Young LLP. Those financial statements are included in our Annual Report on Form 10-K for the year ended December 31, 2009, a copy of which is being delivered, or is otherwise made available, together with this proxy statement. Representatives of Ernst & Young LLP are expected to attend the annual meeting and to respond to appropriate questions and will have the opportunity to make a statement should they so desire. No vote is required by shareholders with respect to our 2009 audited financial statements.
 
 
4

 
PROPOSAL NO. 1
 
ELECTION OF DIRECTORS
 
Three individuals are to be elected as Class II directors at this Annual General Meeting. Our Board of Directors currently consists of 8 individuals, although the size of our Board is presently fixed at 9 directors. The full Board has 9 members in the absence of any vacancies. The Board is divided into three classes of approximately equal size serving staggered three-year terms. Currently, there is one vacancy in Class III.
 
The term of the Class II directors will expire at the Annual General Meeting. Our current Class II directors are Keith S. Hynes, Salvatore A. Patafio, and Louis Rosner. Each is currently a director of CRM Holdings. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated each of Mr. Hynes, Mr. Patafio and Mr. Rosner to stand for re-election at the Annual General Meeting as a Class II director. If elected, these directors will hold office until their respective successors have been duly elected and qualified at the 2013 Annual General Meeting or, if earlier, their death, resignation or removal. The election of each nominee for director requires the affirmative vote of a majority of the votes cast at the Annual General Meeting. Proxies cannot be voted for a greater number o f persons than the nominees named. Each person nominated has agreed to serve if elected. If any of the nominees for director should become unavailable for election for any presently unforeseen reason, the persons named in the accompanying proxy card have the right to use their discretion to vote for a substitute nominee to be determined by our Board of Directors.
 
Directors of CRM Holdings currently serving as Class II Directors
 
The following is biographical information concerning the persons who currently serve as Class II Directors, whose terms will expire in 2010, unless re-elected at the Annual General Meeting to hold office until our annual general meeting of shareholders in 2013:
 
Name, Title and Age
 
Principal Occupation, Business Experience and Directorships
KEITH S. HYNES
Chairman of the Board
Director since 2005
Age 57
Mr. Hynes has served as a member of our Board of Directors since November 2005 and as the Chairman of the Board since March 2009, having previously served as Deputy Chairman since December 2006. Mr. Hynes served as a member of the Board of Directors of one of our subsidiaries, Majestic Insurance Company (Majestic), from November 2006 until January 2008. From September 1999 until his retirement in March 2007, Mr. Hynes served as Executive Vice President and Chief Financial Officer of Max Re Capital Ltd. From 1994 to 1999, Mr. Hynes held various senior management positions, including chief financial officer, at Renaissance Re Holdings, Ltd. From 1983 to 1994, Mr. Hynes held various positions, including chief financial officer, at Hartford Steam Boiler Inspection and Insurance Co, and from 1978 to 1983, he held various positions at Aetna Life and Casualty Company. Mr. Hynes served as a director of Grand Central Re Ltd. from 2001 until 2007 and as a director of DaVinciRe Holdings Ltd. from 2001 to 2006. Mr. Hynes is a chartered financial analyst admitted to the CFA Institute. Mr. Hynes graduated from the State University of New York at Albany with a B.S. in math and computer science and holds an M.B.A. in Finance and Accounting from the Amos Tuck School of Business at Dartmouth College.
 
Mr. Hynes has significant experience in insurance and reinsurance, spanning a 30 year career in the industry. Mr. Hynes has served as a director of other insurance companies and has held various senior management positions at several large insurance and reinsurance companies, most recently as chief financial officer of Max Re Capital Ltd., a global insurance enterprise, with over a $1 billion dollars of gross written premiums, dedicated to providing diversified specialty insurance and reinsurance products. In addition, Mr. Hynes has a strong background in accounting, finance and risk assessment, and his credentials include being a chartered financial analyst admitted to the CFA Institute and holding an M.B.A. in Finance and Accounting. Mr. Hynes’ experi ence and background provides the Board with the perspective of someone with experience in all facets of a global insurance enterprise, including direct responsibility for financial and accounting issues.
 
 
 
 
 
5

 
SALVATORE A. PATAFIO
Director since 2005
Age 65
Mr. Patafio has served as a member of our Board of Directors since September 2005. Mr. Patafio, who is retired, has more than thirty years of extensive experience in various aspects of human resources with IBM Corporation, most recently as Human Resources Manager, Commercial Alliances. From 2002 until 2004, Mr. Patafio held the position of Manager of Human Resources at Micron Technology. For more than five years prior to 2002, Mr. Patafio was a Human Resources Consultant at Dominion Semiconductor L.L.C. He is a graduate of the University of Bridgeport with a B.S. in Industrial and Labor Relations.
 
Mr. Patafio has an extensive background in human resources, spanning a 35 year career. Mr. Patafio spent 30 years at IBM Corporation in various human resource management positions, including several years as the Employee Relations Manager for a 10,000 person facility. Mr. Patafio has significant experience in staffing and recruitment, compensation, performance planning, benefits, and employee relations, among other aspect of human resources. In particular, Mr. Patafio’s experience and background helps our Board address the challenges faced by our company with respect to setting effective executive compensation and other human resources issues.
 
 
   
LOUIS ROSNER, ESQ.
Director since 2005
Age 61
Mr. Rosner has served as a member of our Board of Directors since September 2005. Mr. Rosner has been involved in the private practice of law, concentrating in employment, labor relations and related business matters, since 1985. Prior to such time he was a Board Attorney and Litigation Specialist with the National Labor Relations Board. Mr. Rosner graduated from Cornell University with a B.S. degree and holds a J.D. from Antioch School of Law. Mr. Rosner also serves on the board of The Work Group, a community based non-profit agency which works with disadvantaged youths.
 
Mr. Rosner has a broad legal background in personnel and employment matters and business affairs. Mr. Rosner’s experience includes advising employers on personnel policies and practices, terms of employment, contractual agreements, general business matters, strategy and regulatory issues. Mr. Rosner has also been involved with other boards, having served as an independent director of two non-profit agencies. Mr. Rosner’s broad experience and background as an attorney provide him with insights into our governance, challenges, opportunities and operations.
 
 

Board of Directors’ Recommendation
 
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF MR. HYNES, MR. PATAFIO, AND MR. ROSNER AS CLASS II DIRECTORS. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
 
 
6

 
Directors of CRM Holdings currently serving as Class III Directors
 
The following is biographical information concerning the persons who are currently serving as Class III Directors, whose term will expire in 2011:
 
Name, Title and Age
 
Principal Occupation, Business Experience and Directorships
CHARLES I. JOHNSTON
Director since 2006
Age 55
Mr. Johnston has served as a member of our Board of Directors since May 2006. Since August 2008, Mr. Johnston has served as a managing director of Deutsche Bank Securities, Inc. in the private wealth management division. Mr. Johnston had been the managing member of Johnston Capital Management, LLC, from April 2006 to August 2008. Before this, Mr. Johnston served as Chief Executive Officer of Ladenburg Thalmann & Co. Inc., an investment brokerage firm, from April 2004 until March 2005. Mr. Johnston served as a managing director of Lehman Brothers, an investment banking institution, where his responsibilities included acting as the global head of the private client services group, from June 1996 until February 2004. Mr. Johnston graduated from Colgate University with a B.A. in Russian Studies and holds an M.B.A. fr om the Amos Tuck School of Business at Dartmouth College.
 
Mr. Johnston has a wide-ranging knowledge of the capital markets, having served as the chief executive officer of a publicly traded investment brokerage firm and in various management positions at two large investment banking institutions, Lehman Brothers and Deutsche Bank Securities. In addition, Mr. Johnston has significant academic credentials, including an M.B.A. and a previous certification as a public accountant. Mr. Johnston’s experience and background is invaluable to the Board’s oversight of our investment strategies and objectives and capital and liquidity resources.
 
 
   
JAMES J. SCARDINO
Deputy Chairman and Chief Executive Officer
Director since 2006
Age 56
Mr. Scardino has served as our Chief Executive Officer since March 2009 and as Deputy Chairman of the Board since May 2009. Mr. Scardino also serves as the Chief Executive Officer of our operating subsidiaries, Twin Bridges, Majestic, Compensation Risk Managers, LLC (CRM), Compensation Risk Managers of California, LLC (CRM of CA), and Eimar, LLC (Eimar). Mr. Scardino served as our Chief Financial Officer from August 2005 to May 2009, as Executive Vice President, Chief Financial Officer of Majestic from July 2007 to May 2009, and as Chief Financial Officer of CRM, CRM of CA, and Eimar from August 2005 to May 2009. From 2003 to 2005, Mr. Scardino held the position of Senior Vice President, Finance with RSC Insurance Brokerage, Inc., where his responsibilities included financial management. From March 2000 until May 200 3, Mr. Scardino was Executive Vice President of Allied American Insurance Agency, Inc., where he was responsible for program management. Mr. Scardino graduated from the University of California, Berkeley with a B.A. in Anthropology and holds an M.B.A. from the Amos Tuck School of Business at Dartmouth College.
 
Mr. Scardino has an extensive background in insurance, spanning a 30 year career in the industry. Mr. Scardino has served in various financial management positions on both the agency and insurance company sides of the industry, including as chief financial officer of us and another large insurance company. His academic credentials include holding an M.B.A. Mr. Scardino’s day to day leadership as our chief executive officer provides him with an intimate knowledge of our operations.
 
 
 
 
7

 
Directors of CRM Holdings currently serving as Class I Directors
 
The following is biographical information concerning the persons who currently serve as Class I Directors, whose terms will expire in 2012:
 
Name, Title and Age
 
Principal Occupation, Business Experience and Directorships
DAVID M. BIRSNER
Director since 2005
Age 42
Mr. Birsner has served as a member of our Board of Directors since September 2005. Mr. Birsner served as a member of the Board of Directors of Majestic from November 2006 until January 2008. Since 1996, Mr. Birsner has served as an insurance broker for Hickey-Finn and Company, Inc., where his responsibilities have involved insurance sales and service. Mr. Birsner graduated from Siena College with a B.A. in Marketing.
 
Mr. Birsner’s background comes from the retail insurance brokerage business, having been an insurance agent and broker for the past 14 years. Mr. Birsner’s experience includes the placement and servicing of various types of insurance products, including workers’ compensation, with an emphasis on the contracting industry. From this, Mr. Birsner brings to our Board experience and a background in sales and marketing of insurance products from the retail agency side of the business.
 
 
   
DANIEL G. HICKEY, SR.
Director since 2005
Age 65
Mr. Hickey, Sr. has served as a member of our Board of Directors since September 2005. Mr. Hickey, Sr. has also served as a member of the Board of Directors of Majestic since our acquisition of Majestic in November 2006. He served as a member of the board of managers of CRM, CRM CA and Eimar from 1999, 2001 and 2003, respectively, until December 2005. Since 1980, Mr. Hickey, Sr. has served as President of Hickey-Finn and Company, Inc., an insurance brokerage firm, where his responsibilities have involved sales and management functions. Mr. Hickey, Sr. graduated from Marist College with a B.A. in Psychology. Mr. Hickey, Sr. is the father of Daniel G. Hickey, Jr., who was our Chief Executive Officer and Chairman of the Board prior to March 13, 2009.
 
Mr. Hickey, Sr. has extensive experience in the retail insurance brokerage business. For the past 30 years, Mr. Hickey, Sr. has owned and operated a retail insurance agency, and Mr. Hickey, Sr. has developed a significant background in insurance agency operations and the selling and servicing of various insurance products, including workers’ compensation insurance. From this, Mr. Hickey, Sr. brings to the Board an understanding of the sales and marketing of insurance products, as well as his executive leadership and management experience.
 
 
   
PHILIP J. MAGNARELLA
Director since 2005
Age 72
Mr. Magnarella has served as a member of our Board of Directors since September 2005. Mr. Magnarella, who is retired, has significant experience working in various areas of education. From 1994 until 2004, Mr. Magnarella held various administrative and consulting positions with the Moore County Schools in Carthage North Carolina. From 2000 until 2004, Mr. Magnarella was also a program evaluator for Sandhills Community College and Hoke County Schools, both in North Carolina. Mr. Magnarella graduated from the State University College at Buffalo with a B.S. degree in Industrial Arts Education and holds an M.Ed from the State University of New York at Buffalo in Counseling and Guidance, a CAS from the State University College, New Paltz, New York in Education Administration, and an Ed.D from Columbia University, New York , N.Y. in Education Administration.
 
Mr. Magnarella has extensive experience in education, spanning over a 35 year career. Mr. Magnarella served as the superintendent of a large school district for 10 years, and his academic credentials include a doctorate in education from Columbia University. Mr. Magnarella brings to our Board a unique background from this experience in education, which provides a perspective to the Board in leadership and governance.
 
 

 
8

 
Executive Officers who are not Directors:
 
The following is biographical information concerning each our executive officers who are not directors:
 
Name, Title and Age
 
Principal Occupation, Business Experience and Directorships
JOSEPH F. TAYLOR
Chief Financial Officer
Age 59
Mr. Taylor has served as our Chief Financial Officer since May 2009. Mr. Taylor has also served as Executive Vice President, Chief Financial Officer of Majestic and as Chief Financial Officer of CRM, CRM CA and Eimar since May 2009. He previously served as our Chief Compliance Officer from May 2008 to May 2009 and as our Senior Vice President of Compliance from August 2005 to May 2008. From July 2002 to August 2005, Mr. Taylor served as Chief Financial Officer of CRM. Prior to this, Mr. Taylor held various positions in investment management, financial management and public accounting. Mr. Taylor graduated from Iona College with a B.BA. in Accounting and is a certified public accountant. In 2002, Mr. Taylor filed for personal bankruptcy. In appointing Mr. Taylor to the position of Chief Financial Officer, our Boa rd of Directors determined that Mr. Taylor’s past bankruptcy filing would not have a material impact upon his ability to perform his duties due to (1) the length of time that had elapsed since the bankruptcy filing, (2) the reasons for the filing, and (3) his current positive net worth.
 
 
   
LOUIS J. VIGLOTTI, ESQ.
General Counsel and Secretary
Age 53
Mr. Viglotti has served as our General Counsel since September 2005 and as Secretary since December 2005. Mr. Viglotti has also served as General Counsel of CRM since 2002 and as General Counsel of Eimar and CRM of CA since 2002 and 2003, respectively. Mr. Viglotti has over 20 years of legal experience. Prior to 2002, he was a partner in the law firm of Vergilis, Stenger, Roberts, Pergament & Viglotti in Poughkeepsie, New York. Mr. Viglotti graduated from Marist College, with a B.A. in Pre-Law and holds a J.D. from Pace University School of Law. Mr. Viglotti is admitted to practice before the U.S. Supreme Court, the Federal District Courts for the Southern and Eastern Districts of New York, and New York State courts.
 
 
   
CHESTER J. WALCZYK
Chief Operating Officer
Age 55
Mr. Walczyk has served as our Chief Operating Officer since September 2005. Mr. Walczyk has served as Executive Vice President, Chief Operating Officer and a member of the Board of Directors of Majestic since November 2006 and May 2007, respectively. Mr. Walczyk has also served as Chief Operating Officer of CRM since November 2004 and as Chief Operating Officer of CRM of CA and Eimar since July 2005. Prior to this, Mr. Walczyk served as Vice President of Loss Control of CRM from 2000 to January 2003, when he was promoted to Senior Vice President of Loss Control and Risk Management, which position he has also held at CRM of CA since October 2003. Mr. Walczyk began his career in the industry in 1980 as a Loss Control Consultant. Mr. Walczyk holds the professional designation of Associate in Risk Management (ARM) and ha s significant experience in the areas of risk management, underwriting, product development and marketing, which he has used to develop and present training seminars throughout the country. Mr. Walczyk graduated from the State University of New York at Buffalo with a B.S. in Industrial Technology.
 
 
 
 
9

 
ROBERT V. POLANSKY
Chief Marketing Officer
Age 43
Mr. Polansky has served as our Chief Marketing Officer since May 2008, having previously served as Senior Vice President of Sales and Product Development since December 2006. However, due to the change in our business direction, we determined that we no longer require a Chief Marketing Officer at the holding company level and have decided to eliminate the position, which will result in the termination of Mr. Polansky’s employment with us effective April 2, 2010. From 1999 until December 2006, Mr. Polansky was Executive Vice President of Gallagher Re, where his responsibilities included developing and implementing new products and managing a team of domestic reinsurance brokers. Mr. Polansky graduated from Providence College with a B.S. in Marketing and Finance.
 
 
THE BOARD AND BOARD COMMITTEES
 
Our Board of Directors currently consists of 8 individuals, although the size of our Board is presently fixed at 9 directors. The Board is divided into three classes of approximately equal size serving staggered three-year terms. There is currently one vacancy on our Board that has not been filled. The Board has four primary standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Finance and Investment Committee. The members of these committees are:
 
Name
Audit Committee
Compensation Committee
Nominating and Corporate Governance Committee
Finance and Investment Committee
David M. Birsner
       
Daniel G. Hickey, Sr.
     
Chair
Keith S. Hynes*
X
   
X
Charles I. Johnston*
Chair
X
 
X
Philip J. Magnarella*
 
X
Chair
 
Salvatore A. Patafio*
X
Chair
X
 
Louis Rosner, Esq.*
   
X
X
James J. Scardino         

* Independent director

In addition to these committees, our Board also has a standing Qualified Legal Compliance Committee, Proxy Committee and Disclosure Committee.
 
Meetings
 
The Board and its Committees held the following number of meetings during 2009:
 
 
Number of meetings in 2009
Board of Directors                                                                                  
7
Audit Committee                                                                                  
4
Compensation Committee                                                                                  
4
Nominating and Corporate Governance Committee                                                                                  
4
Finance and Investment Committee                                                                                  
4

All of our incumbent directors attended in person, or by telephone from outside of the United States, at least 75% of the total number of meetings of the board and any committee on which he served. We encourage and expect all of our directors to attend our annual general meetings of shareholders, in the absence of a scheduling conflict or other valid reason. Seven out of eight then-current directors attended in person the 2009 Annual General Meeting held on May 5, 2009.
 
 
10

 
Executive Sessions
 
As required by our Guidelines of Corporate Governance, the Board holds meetings in “executive sessions.” Executive sessions are meetings of the non-employee members of the Board (including those who may not be independent) and are scheduled throughout the year. For 2009, the Board held five executive session meetings.
 
Board Leadership Structure
 
In March 2009, we separated the chairman of the Board and chief executive officer positions. Mr. Hynes serves as our non-executive Chairman of the Board, while Mr. Scardino serves as our Chief Executive Officer. We separated the positions in recognition of the differences between the two roles, and we believe that this action will improve accountability and provide checks and balances in the boardroom. Having an independent chairman helps us ensure that our chief executive officer is accountable for managing the company in close alignment with the interests of shareholders, while also recognizing that managing the board can be a separate and time intensive responsibility. The change was a logical next step in the development of our Board and management structure. It helps us curb conflicts of interest, promote overs ight of risk, and manage the relationship between the Board and the chief executive officer. Our chief executive officer is responsible for overseeing the day-to-day leadership and performance of the company, while our chairman of the Board provides guidance to our chief executive officer, oversees Board meetings and agendas, and, if requested by shareholders, ensures that he is available for consultation and direct communication.
 
Committee Charters
 
The Board has adopted written charters for all of its committees, including the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The respective charters govern each committee’s duties and conduct. Each committee reviews its charter annually for any appropriate revisions. You may obtain copies of all of the committees’ charters free of charge on our website at www.crmholdingsltd.bm, or by contacting our corporate secretary at: Louis J. Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., P.O. Box HM 2062, Hamilton HM HX, Bermuda.
 
Audit Committee
 
The Audit Committee consists of directors Johnston, who chairs the committee, Hynes and Patafio. Our Board has determined that all directors serving on our Audit Committee meet the independence standards required of Audit Committee members by the Securities Exchange Act of 1934 and Nasdaq’s listing standards. Our Board has also determined that none of the Audit Committee members has participated in preparing our financial statements or any of our subsidiaries’ financial statements at any time during the past three years and that all of our Audit Committee members are able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement.
 
Mr. Hynes, who is a chartered financial analyst admitted to the CFA Institute, has been designated as the Audit Committee financial expert. In making this determination, our Board made a qualitative assessment of Mr. Hynes’ level of knowledge and experience based on a number of factors, including his formal education, past financial experience, and professional certification in finance.
 
The Audit Committee is primarily concerned with assisting our Board of Directors in monitoring the integrity of our financial statements, our independent auditor’s qualifications and independence, performance of our independent auditors and our compliance with legal and regulatory requirements. The Audit Committee’s responsibilities also include appointing, reviewing, determining funding for and overseeing our independent auditors and their services, and to the extent it deems necessary or appropriate among other responsibilities:
 
 
·
reviewing and discussing with our management team and independent auditors our audited financial statements, related accounting and auditing principles, practices and disclosures;
 
 
·
reviewing and discussing our audited annual and unaudited quarterly financial statements before their filing;
 
 
11

 
 
·
establishing procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding our financial statements or accounting policies;
 
 
·
reviewing reports from the independent auditors on all critical accounting policies and practices to be used for our financial statements and reviewing the results of those audits; and
 
 
·
monitoring the adequacy of our operating and internal controls as reported by our management and the independent or internal auditors.
 
Nominating and Corporate Governance Committee
 
The Nominating and Corporate Governance Committee consists of directors Magnarella, who chairs the committee, Patafio and Rosner. Our Board has determined that all directors on the Nominating and Corporate Governance Committee meet Nasdaq’s listing standards for independence.
 
The Nominating and Corporate Governance Committee’s primary responsibilities are to:
 
 
·
identify individuals qualified to become directors for recommendation to our Board of Directors;
 
 
·
identify and recommend for appointment to our Board of Directors, directors qualified to fill vacancies on any committee of our board of directors;
 
 
·
have sole authority to retain and terminate any consultant or search firm to identify director candidates and to have sole authority to approve the consultant or search firm’s fees and other retention terms;
 
 
·
develop and recommend to the Board a set of corporate governance principles and code of business conduct and ethics applicable to us; and
 
 
·
exercise oversight of the evaluation of the Board and management.
 
Our Nominating and Corporate Governance Committee considers the following criteria for membership on our Board:
 
 
·
personal and professional integrity, exceptional ability and judgment, diversity of experience and leadership ability;
 
 
·
a high-quality education and extensive business, professional or academic experience;
 
 
·
the requisite reputation, character, skills and judgment, which, in the Nominating and Corporate Governance Committee’s view, have prepared the candidate for dealing with the multifaceted financial, business and other issues that confront boards of companies with our similar size, complexity, reputation and level of success;
 
 
·
whether or not the person has any relationships that might impair his or her independence, such as any business, financial or family relationships with us or our management;
 
 
·
whether or not the person serves on boards of, or is otherwise affiliated with, competing companies;
 
 
·
whether or not the person is willing to serve as, and willing and able to commit the time necessary for the performance of the duties of, a director; and
 
 
·
the contribution which the person can make to the Board and the company.
 
The Nominating and Corporate Governance Committee will consider all shareholder recommendations for candidates for our Board of Directors. The Nominating and Corporate Governance Committee will also consider candidates recommended by our current directors, executive officers, employees and others.
 
 
12

 
All shareholder recommendations of candidates for our Board should be in writing and received by us between 150 days and 120 days before the date of the first anniversary of the notice convening the previous year’s annual general meeting. Therefore, if you are proposing to a submit a candidate for our Board for consideration by our Nominating and Corporate Governance Committee for the 2011 Annual General Meeting, the information should be received by us between November 1, 2010 and December 1, 2010. Your candidate recommendation submission should contain the following information:
 
 
·
the shareholder’s name and address, as it appears in the register of shareholders;
 
 
·
a representation that the shareholder is a holder of record of shares entitled to vote and intends to appear in person or by proxy at the meeting to make such nomination;
 
 
·
the class and number of shares which are held by the shareholder;
 
 
·
the name and address of each individual to be nominated;
 
 
·
a description of all arrangements or understandings between the shareholder and any such nominee and any other person or persons (naming such person or persons) pursuant to which such nomination is to be made by the shareholder;
 
 
·
a description of all material personal and business relationships between the shareholder and any such nominee during the prior 10 years;
 
 
·
such other information regarding any such nominee that would be required to be included in a proxy statement filed pursuant to Regulation 14A under the Exchange Act;
 
 
·
the signed consent of any such nominee to serve as a director, if so elected; and
 
 
·
the certification of any such nominee as to the accuracy and completeness of the information provided in such submission.
 
Once the Nominating and Corporate Governance Committee has identified prospective nominees, background information will be solicited on the candidates, and all candidates will be investigated, interviewed and evaluated. The Committee then reports its findings and recommendations to our Board for a final determination of the nominees. No distinctions will be made between internally recommended candidates and candidates recommended by our shareholders.
 
All nominees for director in this proxy statement met our Board’s criteria for membership and were recommended by the Nominating and Corporate Governance Committee for election by shareholders at this Annual General Meeting.
 
Compensation Committee
 
The Compensation Committee consists of directors Patafio, who chairs the committee, Magnarella and Johnston. Our Board has determined that all directors on the Compensation Committee meet Nasdaq’s listing standards for independence. Each committee member is also a “non-employee director” as defined under Rule 16b-3 of the Securities Exchange Act of 1934 and an “outside director” as defined under Code Section 162(m).
 
The Compensation Committee’s responsibilities include:
 
 
·
reviewing and approving corporate and individual goals and objectives relevant to the compensation of our executive officers;
 
 
·
evaluating the performance of our executive officers in light of such corporate and individual goals and objectives and, based on that evaluation, together with the other independent directors if directed by the board of directors, determining the base salary and bonus of the executives officers;
 
 
13

 
 
·
administering any management incentive plan, stock option plan or other similar plan we may adopt and approving all grants made pursuant to such plan; and
 
 
·
making recommendations to our Board of Directors regarding director compensation and any equity-based compensation plans.
 
Further information on the role of the Compensation Committee is described below under the section entitled “Compensation Discussion and Analysis.”
 
Finance and Investment Committee
 
The Finance and Investment Committee consists of directors Hickey, Sr., who chairs the committee, Hynes, Johnston and Rosner. The Finance and Investment Committee’s primary responsibility is to oversee our Board’s responsibilities relating to our financial affairs and make recommendations to the Board in connection with our investment policy. The Finance and Investment Committee also oversees:
 
 
·
our capital structure;
 
 
·
our cash management and investment policies and guidelines;
 
 
·
new business initiatives and strategic investments, policies and strategies for achieving investment objectives;
 
 
·
issuances of our shares;
 
 
·
any repurchases of our common shares;
 
 
·
proposed acquisitions or dispositions of assets, material capital expenditures and long-term commitments; and
 
 
·
the performance of our investment managers and their compliance with our investment policy.
 
Other Committees
 
In addition to these committees, our Board also has a standing Qualified Legal Compliance Committee, Proxy Committee and Disclosure Committee.
 
The Qualified Legal Compliance Committee consists of the same members as our Audit Committee, who are directors Johnston, Hynes and Patafio. The Qualified Legal Compliance Committee’s function is to receive, review, investigate and take any appropriate actions on reports from our in-house attorneys or outside counsel of material violations of U.S. federal or state laws or of a material breach of a fiduciary duty arising under U.S. federal or state law. The Disclosure Committee consists of certain members of our management team, including our chief executive officer and chief financial officer. The Disclosure Committee is primarily responsible for designing our disclosure controls and procedures and reviewing and supervising all of our filings with the Securities and Exchange Commission (SEC) and press releases . The Proxy Committee consists of directors Rosner, who chairs the committee, Magnarella and Patafio. The Proxy Committee’s primary responsibilities are to appoint the inspector of election for our annual general meetings, represent proxies as assigned by our shareholders, oversee the proxy voting process and ensure that all proxies are accurately represented.
 
Oversight of Risk Management
 
Insurance companies make money by managing various types of risk for others. Consequently, we are essentially a risk warehouse: we engage in writing, pricing, and serving insurance contracts that cover workers’ compensation risks for companies and organizations. The risk-intensive nature of our operations makes the risk dynamics that we are exposed to very different from other industries. The risk and volatility from our insurance products cannot be eliminated; rather we seek to understand and mange our risk. We do this through an enterprise risk management program. The enterprise risk management program guides us in identifying and quantifying our risks, setting risk tolerances based on our overall corporate objectives, and taking the necessary actions to manage risk in light of our corporate objectives.
 
 
14

 
Our enterprise risk management program is overseen by our vice president of internal audit and risk management, who reports directly to our chief executive officer. Our Audit Committee has primary responsibility for overseeing our risk management, although our full Board of Directors is actively involved as well. On a quarterly basis, our Audit Committee receives a report from the vice president of internal audit and risk management that discusses the most significant risks that we are facing as well as discussions on how the risk exposures are tracked and monitored. Our full Board reviews our enterprise risk management program on a whole on an annual basis. In addition, each of our Board committees considers the risks within its area of responsibilities. For example, our Compensation Committee considers the risks t hat may be implicated by our executive compensation programs, and our Nominating and Corporate Governance Committee focuses on risks that may result from changes in our corporate strategy to develop and recommend to the Board corporate governance principles and the Company’s corporate policies.
 
Director Compensation
 
Our current compensation and benefit program for non-management directors is designed to achieve the following goals: compensation should fairly pay directors for work required for a company of our size and scope; compensation should align our directors’ interests with the long-term interests of shareholders; and the structure of the compensation should be simple, transparent and easy for our shareholders to understand. Our program therefore consists of two components: retainer fees paid in cash and an annual grant of restricted stock under our 2005 Long-Term Incentive Plan.
 
Our non-employee directors receive annual compensation of $50,000 in cash as our retainer fee for the directors’ services. We also award our directors an annual grant of $25,000 of restricted shares, which vest over a three year period, at a rate of one-third each year. Our directors are also reimbursed for any out-of-pocket expenses they may incur for their services. We also pay our directors who serve on certain committees and on the Board of Directors of Majestic an additional cash stipend for the additional time required by such service.
 
On November 4, 2009, the Board, upon the recommendation of the Compensation Committee, approved a decrease to the annual cash compensation paid to our directors. This decrease resulted in a 20% reduction to the annual fees paid for Board and committee service effective January 1, 2010, and is expected to yield annualized pre-tax expense savings of approximately $123,000.
 
The following table shows our non-management director compensation plan for the 2009 and 2010 fiscal years:
 
Fees Earned or Paid in Cash($)
 
2009
 
2010
Non-Employee Director Retainer
 
50,000
 
40,000
Non-Employee Director Restricted Stock Grant (grant date fair value)
 
25,000
 
25,000
Chairman of the Board
 
50,000
 
40,000
Audit Committee Member
 
25,000
 
20,000
Audit Committee Chairperson
 
50,000
 
40,000
Compensation Committee Member
 
10,000
 
8,000
Compensation Committee Chairperson
 
15,000
 
12,000
Nominating & Corporate Governance Committee
 
10,000
 
8,000
Nominating & Corporate Governance Chairperson
 
15,000
 
12,000
Finance & Investment Committee Member
 
10,000
 
8,000
Finance & Investment Committee Chairperson
 
15,000
 
12,000
Majestic Board of Directors Member
 
25,000
 
20,000

 
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The following table shows the compensation earned by our non-employee directors for the 2009 fiscal year:
 
Name
Fees Earned or Paid in Cash ($)
 
Stock Awards ($)(1)
 
Total ($)
David M. Birsner
50,000
 
25,000
 
75,000
Daniel G. Hickey, Sr.
81,058
 
25,000
 
106,057
Keith S. Hynes
114,135
 
25,000
 
139,134
Charles I. Johnston
99,135
 
25,000
 
124,134
Philip J. Magnarella
75,000
 
25,000
 
100,000
Salvatore A. Patafio
100,000
 
25,000
 
125,000
Louis Rosner, Esq.
64,038
 
25,000
 
89,038

(1)
Each non-employee director received an award of restricted stock valued at $25,000 (22,727 shares) on May 5, 2009. The amounts reflected in the table represent the aggregate grant date fair value of the equity awards made during the fiscal year calculated in accordance with FASB ASC Topic 718, except that no estimate of forfeitures is made. The assumptions we used to value the stock awards are found in Note 18 to our Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2009, as filed with the SEC. The aggregate number of unvested restricted shares held by each director at December 31, 2009 is as follows:

 
Number of Unvested
Shares Outstanding at
December 31, 2009
David M. Birsner
28,441
Daniel G. Hickey, Sr.
28,441
Keith S. Hynes
28,441
Charles I. Johnston
28,441
Philip J. Magnarella
28,441
Salvatore A. Patafio
28,441
Louis Rosner, Esq.
28,441

CORPORATE GOVERNANCE
 
Our Board members are kept informed of our business through discussions with our chief executive officer and other executive officers, by reviewing materials provided to them, by visiting our offices and by participating in meetings of the Board and its committees. The Board is committed to good business practices, transparency in financial reporting and the highest level of corporate governance.
 
Guidelines of Corporate Governance
 
Our Board’s commitment to good corporate governance is reflected in our Guidelines of Corporate Governance, which describe the Board’s views on a wide range of governance topics. The Nominating and Corporate Governance Committee is responsible for overseeing and reviewing the Guidelines at least annually and recommending any proposed changes to the Board for approval. You may obtain a copy of our Guidelines of Corporate Governance free of charge on our website at www.crmholdingsltd.bm, or by contacting our corporate secretary at: Louis J. Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., P.O. Box HM 2062, Hamilton HM HX, Bermuda.
 
Code of Business Conduct and Ethics
 
In addition to our Guidelines of Corporate Governance, our Board has adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics includes provisions relating to conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of company assets, gifts and entertainment, equal employment opportunity and harassment, records retention, compliance with laws, rules and regulations, and ethical behavior. Our Code of Business Conduct and Ethics is intended to meet the definition of a “code of ethics” under applicable SEC rules. It applies to all of our directors, officers and employees, including our chief executive officer, chief financial officer and other executive officers. You may obtain a copy of our Code of Business Conduct and Ethics free of charge on our website at www.crmholdingsltd.bm, or by contacting our corporate secretary at: Louis J. Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., P.O. Box HM 2062, Hamilton HM HX, Bermuda.
 
 
16

 
Director Independence and Independence Determinations
 
Under Nasdaq’s listing standards and our Guidelines of Corporate Governance, our Board of Directors must have a majority of “independent” directors who meet the applicable criteria for independence. Our Board examines the independence of the directors on an annual basis in both fact and appearance to promote arms-length oversight. To make the independence determinations, the Board relies on the standards set forth in Rule 5600 of the Nasdaq Marketplace Rules. The independence standards require the Board to affirmatively determine whether a director is “independent” by reviewing a set of objective standards. These objective standards generally provide that no director or nominee for director qualifies as “independent” unless our Board affirmatively determines that the directo rs does not have a relationship with us which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In addition to the objective standards, Rule 5600 specifies certain transactions that will automatically disqualify a director from being considered independent.
 
Based upon this, our Board has affirmatively determined that we have a majority of “independent” directors that comprise our Board, as required by Nasdaq’s listing standards and our Guidelines of Corporate Governance. Our independent directors as of December 31, 2009 were directors Hynes, Johnston, Magnarella, Patafio and Rosner. The Board believes that these directors are independent, because they are not executive officers or employees of CRM Holdings or its subsidiaries and otherwise satisfy all of the Nasdaq independence requirements and, in the opinion of the Board of Directors, are not individuals having a relationship which will interfere with the exercise of independent judgment in carrying out the responsibilities of a director. As part of our Board’s evaluation process, each directo r provided confirmation that all of the objective criteria for independence are satisfied and that each director has no other relationship with CRM Holdings or its subsidiaries which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
 
Communications with the Board of Directors
 
Shareholders may communicate with our Board of Directors or the chairman of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Finance and Investment Committee by writing to the Chairman of the Board or the chairman of the intended committee, as the case may be, at: c/o Louis J. Viglotti, General Counsel and Secretary, CRM Holdings, Ltd., P.O. Box HM 2062, Hamilton HM HX, Bermuda. The envelope should clearly indicate the person or persons to whom the corporate secretary should forward the communication. Communications will be distributed to the Board, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications.
 
COMPENSATION DISCUSSION AND ANALYSIS
 
Overview
 
This Compensation Discussion and Analysis is designed to provide our shareholders with an understanding of our executive compensation decision-making processes, our compensation philosophy and program objectives, and an overview of our executive compensation program. It discusses our Compensation Committee’s determinations of how and why, in addition to what, compensation actions were taken for our executive officers.
 
We did not achieve our overall financial and shareholder performance expectations for fiscal year 2009. Specifically, we experienced significant net losses and, as a result, shareholder returns were well below desired results. Accordingly, the following key decisions were made regarding our compensation programs:
 
 
·
For the second year in a row, we paid no bonuses to our executive officers, and our Compensation Committee does not anticipate paying bonuses to our executive officers until we return to profitability.
 
 
·
No long-term incentive awards were granted to our executive officers based on our 2009 financial results and share price.
 
 
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·
Because our long-term incentive program is denominated entirely in equity vehicles, it has reflected the decline in our stock price, such that our executive officers’ unvested restricted shares have declined in value along with the declines in our share price.
 
 
·
Four of our executive officers volunteered a temporary 6% reduction to their respective base salaries effective January 1, 2010.
 
 
·
We have continued a company-wide base salary freeze for 2010.
 
Our Named Executive Officers
 
We made the following changes to our management team and executive officer positions during 2009 and the first part of 2010:
 
 
·
Mr. Hickey, Jr., our founder, chairman of the board and chief executive officer, resigned from the company on March 13, 2009 (for further information concerning Mr. Hickey, Jr.’s resignation and severance, see “Employment Agreements — Mr. Hickey, Jr.” below).
 
 
·
Mr. Scardino, our former chief financial officer, was promoted to chief executive officer on May 5, 2009, having served as our acting chief executive officer after Mr. Hickey, Jr.’s resignation.
 
 
·
Mr. Taylor, our former chief compliance officer, was promoted to chief financial officer on May 5, 2009.
 
 
·
Due to the change in our business direction, we determined that we no longer require a Chief Marketing Officer at the holding company level and have decided to eliminate the position, which will result in the termination of Mr. Polansky’s employment with us effective April 2, 2010. Mr. Polansky has been offered a Severance Agreement under which he will be entitled to receive payment in cash for his accrued but unused paid time off, severance pay equal to $66,250 and a cash payment equal to the fair market value of his 5,755 unvested restricted shares, valued as of the close of trading on April 1, 2010.
 
For 2009, our Named Executive Officers and their titles were:
 
 
Name
 
 
Title
James J. Scardino      
 
Chief Executive Officer/Chief Financial Officer
Joseph F. Taylor      
 
Chief Financial Officer
Louis J. Viglotti   
 
General Counsel and Secretary
Chester J. Walczyk   
 
Chief Operating Officer
Robert V. Polansky  
 
Chief Marketing Officer
Daniel G. Hickey, Jr.     
 
Former Chief Executive Officer

Our Executive Compensation Decision Process
 
Overview
 
Our compensation planning and decision-making process is an on-going process. Although many of the decisions are made in either the fourth or first quarter of a fiscal year, the compensation planning process neither begins nor ends with any particular meeting. This continued to be the case during 2009. Our Compensation Committee regularly met to review and continue developing our compensation programs. Our Compensation Committee’s intention is to continually review our business and succession planning and evaluate our executive officers’ performance and their compensation packages.
 
Management’s Role in the Compensation Setting Process
 
Our corporate staff (including finance, human resources and legal staff members) supports the Compensation Committee in its work and no executive officers (other than the chief executive officer, with respect to compensation for each of the other executive officers) determine or recommend the amount or form of executive compensation.
 
 
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Our chief executive officer plays a significant part in the compensation setting process for our executive officers (except for his own). Generally, our chief executive officer’s role is to:
 
 
·
evaluate the performance of each executive, other than himself,
 
 
·
recommend business performance-targets and objectives to our Compensation Committee for the upcoming year with respect to each executive, other than himself, and
 
 
·
recommend salary levels with respect to each executive, other than himself.
 
Our Compensation Committee is solely responsible for making decisions with respect to our chief executive officer’s compensation package.
 
Compensation Advisors
 
Our Compensation Committee’s charter grants it the authority to hire and fire advisors and compensation consultants. We are obligated to pay any advisors retained by the Compensation Committee. These advisors report directly to the Committee. Consistent with its charter, the Compensation Committee is not bound by the recommendations provided by its professional advisors, and reserves the right to make decisions which are inconsistent with that advice, to the extent that the Committee believes such decisions are in our best interests. Our Compensation Committee did not engage any consultants during 2008 or 2009.
 
Competitive Market Analysis
 
When making compensation decisions, our Compensation Committee will sometimes consider the compensation of our executive officers relative to the compensation paid to similarly-situated executives at companies that we consider to be our peers. Under this approach, our Compensation Committee uses comparable company analysis or survey data as a “market check” after determining the compensation. We believe that information regarding pay practices at other companies can be useful in three respects:
 
 
·
our compensation practices must be competitive in the marketplace,
 
 
·
the marketplace information is one of the many factors that we consider in assessing the reasonableness of compensation, and
 
 
·
the information helps us to establish the targets for our compensation decisions.
 
This is not to say, however, that we will solely rely on these analyses. Rather, we believe that competitive market analysis should be just that—a point of reference for measurement—but not the determinative factor for our executive officers’ compensation. We do not believe that it is appropriate to establish compensation levels exclusively based on competitive market analysis, because we believe that we must make decisions based upon our business objectives. As such, our competitive market analysis is not outcome determinative in our decisions but instead provides us with confirmation that our compensation packages were similar to those of our peer group.
 
During 2009, our Compensation Committee considered a competitive market analysis for our chief executive officer’s compensation. Our Compensation Committee reviewed surveys, reports, and other market data compiled by Equilar Inc., an on-line database of executive and director compensation, which is drawn directly from SEC filings. Our Compensation Committee considered the information from Equilar in setting the compensation of our chief executive officer following our management changes. The compensation information from Equilar was used by our Compensation Committee to measure the competitiveness of our proposed chief executive officer compensation package against that of other companies within our industry with comparable revenues.
 
 
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The following companies comprised our performance peer group:
 
Peer Group Companies
American Physicians Capital Inc.
Mercer Insurance Group, Inc.
American Safety Insurance Holdings, Ltd.
National Interstate Corp.
Amerisafe, Inc.
Navigators Group, Inc.
Baldwin & Lyons, Inc.
NYMAGIC, Inc.
Brooke Corp.
Procentury Corp.
Citizens, Inc.
Radian Group, Inc.
Darwin Professional Underwriters, Inc.
RLI Corp.
Employers Holdings, Inc.
Seabright Insurance Holdings, Inc.
First Mercury Financial Corp.
Specialty Underwriters Alliance, Inc.
FPIC Insurance Group, Inc.
Tower Group, Inc.
Gainsco, Inc.
Universal Insurance Holdings, Inc.
Meadowbrook Insurance Group, Inc.
 

Evaluations
 
Our Compensation Committee’s charter and our Guidelines of Corporate Governance require an annual review by the Compensation Committee of the chief executive officer’s corporate and individual goals and objectives relevant to his compensation. These findings then help our Compensation Committee in setting our chief executive officer’s base salary and bonus, subject to the terms of his employment agreement.
 
Our Compensation Committee used a formal evaluation to set the chief executive officer’s compensation package for 2009. This process included receiving input from our Board of Directors and other executive officers through a written questionnaire. The questionnaire’s responses were then reviewed by our Compensation Committee on an anonymous basis and discussed with the chief executive officer. The evaluations allowed the Compensation Committee to continually work with our chief executive officer to highlight and improve on his strengths and weaknesses. The evaluations also provide our Compensation Committee with a form of subjective analysis to assist in setting future incentive payments. Our Compensation Committee completed its evaluation for the 2009 performance period in March 2010.
 
For the other executive officers, our Compensation Committee uses an informal evaluation process that includes regular review of our on-going business performance compared with their objectives and discussions with the chief executive officer, other members of our Board and our other executives.
 
Our Compensation Philosophy and Program Objectives
 
Our core compensation philosophy is to pay our executive officers competitive levels of compensation that best reflect their individual responsibilities and contributions to us, while providing incentives to achieve our business and financial objectives. We endeavor to reward our executive officers for proactive and timely performance, value creation, achievement of our business plan, performance at or above the expected levels and an overall entrepreneurial spirit. For our executive officers whose roles directly impact the production of our revenues (producers), we seek to reward the executives through higher annual incentive opportunities and lower base salaries, thereby implementing our philosophy of more pay-for-performance. Our compensation programs are also designed, in part, to encourage our executive officer s to think and act like, and over time to become, shareholders of our company. We want our executive officers to profitably grow our business and to take appropriate risk with our capital in order to generate returns for our shareholders, while at the same time sharing the downside risk if those risks cause poor performance or loss.
 
 
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We therefore try to create an environment that fosters and rewards the following objectives:
Objective
Discussion
Execution and Efficiency
We seek to reward our executive officers for effectively executing all phases of our business operations and for achieving key benchmarked goals, including prudent revenue and premium growth, net income growth, strong return on equity, and a favorable combined ratio (which is the amount that an insurer must pay to cover claims and expenses as a percentage of every dollar of earned premium).
Company Performance
We seek to reward our executive officers for the following performance objectives:
●  finding and assuming attractively priced risk for our workers’ compensation insurance products;
●  generating profitable returns on our fee-based workers’ compensation products;
●  strategic partnerships; and
●  positive return on equity and enhancement of our capital position.
Individual Performance
We seek to reward our executive officers for their personal contribution to both short-term and long-term business results, their successful execution of key strategic objectives, their demonstrated leadership capability, their demonstrated application of relevant technical expertise, and their ethical conduct and regulatory compliance.

While we believe that overall compensation levels should be sufficiently competitive to attract, maintain and motivate skilled and talented executives, we also believe that compensation must be set at reasonable levels.
 
Our Executive Compensation Program
 
Overview
 
Our executive officers’ compensation program consists of the following four components:
 
 
·
Base salary
 
 
·
Annual Cash Bonuses
 
 
·
Long-Term Incentive Awards
 
 
·
Additional Benefits and Perquisites
 
We believe that an appropriate mix of short-term compensation, such as base salaries, annual cash bonuses, and perquisites, with long-term compensation helps us to achieve our compensation philosophy and objectives. We also believe that the appropriate mix of these elements helps our goals of aligning our executives’ interests with those of our shareholders. The proportions of our named executive officers’ individual compensation components in relation to their total compensation for 2009 are presented below under the heading “Executive Compensation – Total Mix of Compensation.” Based on this, we believe that our executive officer’s compensation program strikes an appropriate balance between salary and incentive compensation policies. The short-term and long-term incentives are ti ed to the evaluation of our executive officers’ performance as a whole. We use a holistic approach to executive compensation but try to balance the individual compensation elements for each executive officer individually.
 
Base Salary
 
Base salary is an important element of our executive officers’ compensation program. We seek to recognize the experience, skills, knowledge and responsibilities of our executive officers. We establish base salary levels which also seek to provide our executive officers with a minimum level of monthly income and steady cash flow during the course of the year that is not contingent on short-term variances in our operating performance.
 
 
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The base salary amounts are set by our Compensation Committee by using its subjective judgment to determine the appropriate amounts. The base salary level of our executive officers are based on our overall compensation philosophy, the experience and industry knowledge of the executive officer, the quality and effectiveness of his leadership abilities, the input from our chief executive officer (other than with respect to his base salary) and the base salaries paid to executives in comparable positions at companies in the same industry. We did not apply any specific weighting to these factors, but instead relied on our subjective judgment and an understanding of the market for executive officers in the insurance industry.
 
We annually review our executives’ base salaries and expect our executive officers’ salaries to stay relatively constant, materially increasing their respective salary levels only when the insurance market changes drastically or when an executive assumes a larger role. When doing so, we will primarily consider our compensation philosophy, our business performance, the present state of the insurance industry employment market and overall increases in the economic cost of living.
 
In connection with the management changes during 2009, we increased the base salaries of two of our executive officers. These increases were consistent with our compensation philosophy of materially increasing salary levels when an executive officer is promoted and assumes a larger role and more responsibilities within our organization.
 
Mr. Scardino, our former chief financial officer, was promoted to chief executive officer on May 5, 2009. As a part of this promotion, his base salary was increased from $350,000 to $450,000, a 29% increase. However, while the base salary received by Mr. Scardino increased, the base salary paid to the chief executive officer position actually decreased – from $650,000 to $450,000, or a 31% decrease. Our Compensation Committee set Mr. Scardino’s base salary at $450,000, using its subjective judgment, taking into account current market conditions and our current and projected business and operations.
 
Mr. Taylor, our former chief compliance officer, was promoted to the role of chief financial officer on May 5, 2009. As a result of this promotion, Mr. Taylor’s base salary was increased from $200,000 to $275,000, a 38% increase. However, similar to our chief execution position, while Mr. Taylor’s base salary increased, the base salary paid to our chief financial officer position actually decreased – from $350,000 to $275,000, or a 21% decrease. Our Compensation Committee set Mr. Taylor’s base salary at $275,000, using its subjective judgment, taking into account current market conditions and our current and projected business and operations.
 
In addition, we increased Mr. Polansky’s base salary to $265,000 from $250,000, or a 6% increase, which took into account the contractual protections foregone by Mr. Polansky when he became an “at will” employee when his employment agreement expired by its terms effective January 1, 2010.  Mr. Polansky’s employment with us will terminate as of April 2, 2010.
 
The base salaries of chief operating officer and general counsel remained the same in 2008 and 2009. These were the minimum amounts for base salaries required under their respective employment agreements.
 
Effective January 1, 2010, four of our executive officers volunteered a temporary 6% reduction to their base salaries. The four executive officers are Mr. Scardino, Mr. Taylor, Mr. Viglotti, and Mr. Walczyk. The salary reduction will continue at the executive officer’s discretion and will be reviewed no later than November 1, 2010. The adjustment will not change any terms of the employment contracts and will not otherwise affect the determination of other amounts owing or that may become owing under the contracts that are based on the level of base salary. The reduction was offered in view of our 2009 operating results and in support of our cost reduction strategy and return to profitability.
 
Annual Cash Bonuses
 
In addition to base salaries, our executive officers are eligible for annual cash bonuses. We did not pay cash bonuses for 2008 or 2009, and we do not expect to pay any bonuses for 2010.
 
Cash bonuses are intended to reward individual performance by achieving specified, performance-based goals established for the year. Our Compensation Committee annually reviews our executive officers’ cash bonus opportunities. We believe cash bonuses can represent an integral part of our compensation philosophy and can provide an incentive to create business and shareholder value.
 
 
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Incentive Opportunities. Our executive officers are eligible for cash bonuses under their respective employment agreements. Our Compensation Committee has discretion to award annual incentive payments up to a specified percentage of executive officer’s base salary, which can be paid in cash, restricted shares under our equity incentive plan, or a combination thereof. The following table shows the potential incentive payouts to our executive officers:
 
Executive Officer
 
Bonus at Target
Performance Level
 
Bonus at Maximum
Performance Level
Chief Executive Officer
 
50% of Base Salary
 
100% of Base Salary
Chief Financial Officer
 
50% of Base Salary
 
75% of Base Salary
Chief Operating Officer
 
50% of Base Salary
 
75% of Base Salary
General Counsel
 
50% of Base Salary
 
75% of Base Salary

In making the annual incentive payment award determinations, our Compensation Committee determines the amounts based on its subjective judgment using both quantitative business factors and qualitative input from our chief executive officer regarding his evaluation of the annual performance and contribution of each executive officer (other than his own performance).
 
During 2009, our chief marketing officer had an employment agreement that provided for an annual cash incentive opportunity of 40% of his annual salary. As opposed to our other executive officers, our chief marketing officer’s incentive opportunity did not provide for payment of the incentive opportunity in restricted shares. This difference was based on him being a “producer,” and we therefore sought to reward him through annual cash incentive opportunities and a lower base salary. This employment agreement expired by its terms effective January 1, 2010, and Mr. Polansky’s employment with us will terminate as of April 2, 2010.
 
Performance Goals for 2009. Our Compensation Committee determined at the end of 2008 that annual incentive compensation awards would be not be paid for 2009 based on our projected financial results. As a result, our Compensation Committee did not set performance goals for 2009.
 
In previous years, our Compensation Committee retained discretion to award annual incentive payments to our executive officers on a discretionary basis, relying in part on earnings per share performance targets established in the beginning part of the year. This would be combined with a subjective judgment determination and qualitative considerations by the Committee. We believe that considering an earnings per share target reflects our continuing desire to create shareholder value and provides for a direct linkage to shareholder expectations and share price growth. We may, however, shift our performance targets away from earnings per share or net income in the coming years.
 
No Incentive Payouts for 2009. Our Compensation Committee did not award annual incentive cash bonuses to our executive officers for 2009. This decision was based on our poor financial results for the 2009 fiscal year. We believe that not paying annual incentive cash bonuses is consistent with our compensation philosophy and program objectives of paying our executive officers incentives for achieving our business and financial objectives.
 
Based upon our current expected levels of financial performance for 2010, cost reduction strategy and desire to return to profitability, our Compensation Committee does not expect to pay annual cash bonuses to our executive officers based on our expected 2010 performance. Our Compensation Committee, however, retains the discretion to review the bonus parameters and may pay discretionary cash bonuses to our executive officers upon our actual performance substantially exceeding our current levels of expected financial performance.
 
 
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Long-Term Incentive Awards
 
We adopted the 2005 Long-Term Incentive Plan that provides for grants of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights, performance awards, restricted share units, phantom shares and other share based awards to our executives, directors and key employees. The 2005 Long-Term Incentive Plan is administered by our Compensation Committee. We believe that stock-based incentives should be appropriately granted to our executive officers to help align their interests with those of our shareholders, in accordance with our compensation policy. Through these equity grants, we seek to emphasize the importance of improving the performance of our stock price, increasing shareholder value over the long-term and encouraging our executive officers to own our common shares.< /div>
 
To date, we have only granted restricted shares, despite other equity awards, including stock options, being available under the plan. The restricted shares vest in three equal installments over a three-year period from when they are granted. We believe these grants provide an effective means of long-term incentive compensation because:
 
 
·
the vesting feature of the shares provides an incentive to remain employed with us;
 
 
·
the long-term nature of the vesting period provides the executives with an incentive to improve stock price performance and to increase our shareholder value; and
 
 
·
using restricted shares allows us to fix our compensation costs at the date of grant, instead of expensing stock options which is subject to the volatility of our stock price.
 
Our Compensation Committee did not grant awards of restricted shares to our executive officers as part of the 2009 annual performance review and compensation determination. In making this decision, our Compensation Committee considered our current share price and the failure of our 2009 financial results to achieve our expectations.
 
Our Compensation Committee did, however, grant awards of restricted shares to Mr. Scardino and Mr. Taylor in connection with our management changes in May 2009. Mr. Scardino received a grant of 100,000 restricted shares, which had a grant date fair value of $110,000, or 24% of his increased base salary, upon his full-time assumption of the chief executive officer position. Mr. Taylor received a grant of 25,000 restricted shares, which had a grant date fair value of $27,500, or 10% of his increased base salary, upon his assumption of the chief financial officer position. The amounts were determined by the Compensation Committee’s using its subjective judgment and took into account the incentive to assume new responsibilities, the long-term vesting of the feature of the restricted shares, the reduction in base s alaries associated with the positions, and the fact that both positions were filled internally.
 
Additional Benefits and Perquisites
 
Our final primary compensation element consists of other benefits and perquisites provided to our executive officers.
 
All of our executive officers are eligible to participate in our employee benefit plans, including medical, dental, vision, group life insurance, disability and our 401(k) plan. In each case, we provide these benefits to our executive officers on the same basis as our other employees.
 
We have a tax-qualified employee stock purchase plan, generally available to all employees including executive officers, that allows participants to acquire our common shares at a discount price. This plan has a three-month look-back and allows participants to buy our common shares at a 15% discount to the market price with up to 15% of their salary (subject to IRS limits), with the objective of allowing employees to profit when the value of our common shares increases over time.
 
We also provide our executive officers with perquisites, including vehicle allowances, tax gross-ups, life insurance policy premiums, housing allowances, personal financial or tax advice, which are described in more detail in a footnote to our Summary Compensation Table. We believe that the provided perquisites are generally comparable to those offered to executive officers in companies similar to our size and industry. We also believe that these perquisites help us to attract and retain our executives. Our Compensation Committee regularly reviews these benefits to determine that such prerequisites are reasonable and justified. If our Compensation Committee determines that the perquisites are not reasonable or justified, then our Compensation Committee may stop offering the perquisites to our executive officers.
 
 
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Severance and Change-in-Control Agreements
 
Finally, we also provide our executive officers with severance and change-in-control benefits under their employment agreements. We believe that severance packages are a common characteristic of compensation for key executive officers. They are intended to provide our executive officers with a sense of security in making the commitment to dedicate their professional career to our success. Due to our size relative to other public companies and our relatively short operating history, we believe that severance and change-in-control agreements are necessary to help us attract and retain necessary skilled and qualified executive officers to continue to grow our business.
 
Our Compensation Policies
 
Section 162(m) Policy
 
Section 162(m) of the U.S. Internal Revenue Code denies a U.S. federal income tax deduction for compensation paid in excess of $1 million by our U.S. domiciled subsidiaries to our chief executive officer and next four most highly compensated executive officers. Qualified performance-based compensation is not subject to the deduction limit if certain requirements are met.
 
To date, we have not adopted a “Section 162(m)” policy, but we may do so in the future. We believe that our Compensation Committee will consider the impact of Section 162(m) in the future and will design our executive compensation program, such as our annual incentive payments and restricted stock awards, to be eligible for tax deductions to the extent permitted by the relevant tax regulations, including Section 162(m) of the Code. However, we may from time to time pay compensation to our executive officers that may not be deductible if there are non-tax reasons for doing so.
 
Common Share Ownership Requirements
 
Part of our compensation philosophy involves common share ownership by our executive officers, because we believe that it helps to align their financial interests with those of our shareholders. We also recognize, on the other hand, that our executive officers cannot acquire more than 10% of our common shares without triggering adverse tax consequences. We have not adopted a formal written policy on common share ownership requirements, because of these stringent tax guidelines. We do, however, strongly encourage our executive officers to acquire and own our common shares. We also recognize that the use of hedging instruments creates a divergence in the alignment of interests and, consequently, strongly discourage our executives from using hedging instruments that would diminish their financial risk of ownership.
 
Timing of Awards
 
Our Compensation Committee has the sole authority to issue equity awards under our 2005 Long-Term Incentive Plan. We do not expect the Compensation Committee to delegate any authority to our executive officers to grant awards, although it is allowed to do so under the plan. Other than new hires, we and the Compensation Committee plan to tie the grant of equity awards to specific, recurring dates, generally coinciding with our quarterly Compensation Committee meetings. We believe this approach will guard against possible manipulations of issuance dates benefiting our executive officers or employees. We also expect that the Compensation Committee may make annual restricted stock awards to our executive officers and key employees.
 
Financial Restatement
 
Although we have not adopted a formal written policy, it is our Board of Directors’ informal policy that the Compensation Committee will, to the extent permitted by governing law, have the sole and absolute authority and discretion to make retroactive adjustments to any cash or equity based incentive payments to executive officers where the payment was based upon the achievement of certain financial results that were subsequently the subject of a restatement, without regard to misconduct being involved. If the Compensation Committee were to exercise this discretion, we would seek to recover any amount determined to have been improperly paid to the executive.
 
 
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Relationship between Compensation and Risk
 
We have reviewed our compensation policies and practices for all employees, including our executive officers, and determined that our compensation programs will not have a material adverse effect on us. In reaching this conclusion, we reviewed our compensation programs for certain design features which have been identified by experts as having the potential to encourage excessive risk-taking, including too much focus on equity; compensation mix overly weighted toward annual incentives; highly leveraged payout curves and uncapped payouts; unreasonable goals or thresholds; and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds.
 
We have noted several design features of our compensation programs for all employees, including our executive officers, which reduce the likelihood of excessive risk-taking:
 
 
·
Our annual cash incentives for all employees, including our executive officers, are discretionary in nature, which allows our Compensation Committee and management to consider all aspects of our performance.
 
 
·
Our annual cash incentive targets focus on our overall performance, profitability and stock price; we do not pay incentives based on particular operating unit or business line results.
 
 
·
Our program design seeks to provide a balanced mix of cash and equity and annual and longer-term incentives.
 
 
·
We currently do not grant stock options.
 
 
·
The three-year vesting feature of our restricted stock awards discourages short-term risk taking and accounts for the time horizon of risk.
 
 
·
We impose “claw back” provisions on annual incentive payments made to our executive officers, which allows us to make retroactive adjustments to any cash or equity based incentive payments to executive officers where the payments were based upon the achievement of financial results that were later restated, without regard to misconduct being involved.
 
 
·
We consider compliance and ethical behaviors as integral factors in all performance assessments.
 
COMPENSATION COMMITTEE REPORT
 
We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and CRM Holdings’ annual report on Form 10-K for the year ended December 31, 2009.
 
      Compensation Committee  
     
Salvatore A. Patafio (Chairman)
 
 
   
Dr. Philip J. Magnarella
 
 
   
Charles I. Johnston
 
 
 
 
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EXECUTIVE COMPENSATION
 
2009 Summary Compensation Table
 
The following table sets forth information concerning the compensation of our named executive officers during the fiscal years ended December 31, 2007, 2008 and 2009:
 
Name and principal position
 
Year
 
Salary
($)(2)
 
Stock Awards
($)(3)
 
Non-Equity
Incentive Plan
Compensation ($)
 
All Other
Compensation
($)(4)
 
Total ($)
James J. Scardino,
Chief Executive Officer / Chief Financial Officer(1)
 
2009
2008
2007
 
427,308
350,000
300,000
 
110,000
75,006
 
75,000
 
45,080
44,738
48,767
 
582,388
469,744
423,767
Joseph F. Taylor,
Chief Financial Officer(1)
 
2009
 
247,308
 
27,500
 
 
22,759
 
297,566
Louis J. Viglotti,
General Counsel
 
2009
2008
2007
 
300,000
300,000
300,000
 
75,006
 
195,000
 
37,282
28,091
23,444
 
332,716
403,097
518,444
Chester J. Walczyk,
Chief Operating Officer
 
2009
2008
2007
 
300,000
300,000
177,846
 
75,006
 
75,000
 
37,282
38,950
34,459
 
337,282
413,956
409,459
Robert V. Polansky, 
Chief Marketing Officer
 
2009
2008
2007
 
250,000
250,000
250,000
 
125,006
 
100,000
 
30,605
29,139
32,266
 
280,605
404,145
382,266
Daniel G. Hickey, Jr.,
Former Chief Executive Officer(1)
 
2009
2008
2007
 
212,500
650,000
650,000
 
500,002
446,018
 
 
(5) 
1,040,000
 
 
3,428,362
28,280
15,825
 
3,640,862
1,178,282
2,151,843

(1)
During 2009, we had changes to our executive officer positions, which are discussed above under heading “Compensation Discussion and Analysis – Our Named Executive Officers.”
 
(2)
Each of our executive officers contributed a portion of his salary to our 401(k) savings plan.
 
(3)
There were no equity award forfeitures by our executive officers during the fiscal years ended December 31, 2007, 2008 and 2009. The assumptions we used to value the stock awards are found in Note 18 to our Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2009, as filed with the SEC.
 
 
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(4)
The following table is a breakdown of the compensation and benefits included in the All Other Compensation:
 
Name
 
Year
 
Tax
Gross-Ups
($)
 
Vehicle
Allowances
($)
 
 Life
 Insurance
Policy
Premiums
($)
 
Housing
($)
 
Personal
Financial
or Tax
Advice ($)
 
401(k)
Company
Contributions
 
Severance
Payments
James J. Scardino
 
2009
2008
2007
 
635
3,975
17,532
 
12,000
12,000
12,000
 
432
468
450
 
17,313
14,495
15,410
 
 
14,700
13,800
3,375
 
Joseph F. Taylor
 
2009
 
320
 
10,200
 
432
 
 
 
11,807
 
Louis J. Viglotti
 
2009
2008
2007
 
500
1,023
6,306
 
11,400
11,400
11,400
 
432
318
225
 
 
10,000
1,550
2,138
 
10,385
13,800
3,375
 
Chester J. Walczyk
 
2009
2008
2007
 
403
2,162
9,840
 
12,000
12,000
11,308
 
432
468
225
 
13,832
10,520
9,711
 
 
10,615
13,800
3,375
 
Robert V. Polansky
 
2009
2008
2007
 
1,068
2,504
14,946
 
9,000
9,000
9,000
 
432
318
225
 
4,672
3,517
5,405
 
1,272
 
14,161
13,800
2,690
 
Daniel G. Hickey, Jr.
 
2009
2008
2007
 
 
2,700
11,700
11,700
 
391
780
750
 
 
5,000
2,000
 
12,750
13,800
3,375
 
3,407,521

With the exception of Mr. Hickey, Jr.’s severance payments, all amounts in the table reflect our actual cash outlays, since there are no perquisites that do not involve any incremental costs to us.  As discussed below under the heading “Related Party Transactions – Our Related Party Transactions,” Mr. Hickey, Jr.’s severance included the immediate vesting and distribution of 46,040 unvested restricted shares that were previously granted to Mr. Hickey, Jr., which did not result in a cash outlay. In addition, the continuation of Mr. Hickey, Jr’s welfare benefits did not result in immediate cash outlay and such benefits will be paid over a period of three years.
 
(5)
This amount represents a grant of restricted shares received in lieu of an annual cash bonus. At Mr. Hickey, Jr.’s election, instead of receiving an annual cash incentive payment for his 2006 performance, our Compensation Committee granted him an award of 55,822 shares of restricted stock under 2005 Long-Term Incentive Plan, with a grant date fair value of $446,016. The vesting of the restricted shares was based solely on Mr. Hickey, Jr.’s continued employment with us and they vested ratably over a two-year period.
 
 
28

 
2009 Grants of Plan-Based Awards
 
The following table shows the restricted stock grants to our named executive officers during the fiscal year ended December 31, 2009 and the estimated possible payouts under the annual cash bonus incentive awards:
 
Name
Grant Date
Plan
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards
All Other
Stock Awards:
Number of
Shares of
Stock or
Units (#)
Grant Date
 Fair Value of
Stock and
Options($)
Threshold
($)
Target
($)
Maximum ($)
James J. Scardino
5/6/09
2005 LTIP
     
100,000
110,000
 
Employment Agreement
225,000
450,000
   
Joseph F. Taylor
5/6/09
2005 LTIP
     
25,000
27,500
 
Employment Agreement
137,500
206,250
   
Louis J. Viglotti
 
Employment Agreement
150,000
225,000
   
Chester J. Walczyk
 
Employment Agreement
150,000
   
Robert V. Polansky
 
Employment Agreement
100,000
   
Daniel G. Hickey, Jr.
 
Employment Agreement
650,000
1,300,000
   

For additional information concerning our grants of plan based awards, see the following discussion of the employment agreements with our executive officers and restricted share awards under our 2005 Long-Term Incentive Plan.
 
Employment Agreements
 
We currently have employment agreements with all of our executive officers, except for Mr. Polansky, our chief marketing officer. For all of these agreements, after the initial contract term, the term of each agreement is automatically renewed for successive one-year terms, unless either party delivers notice to the other party of its intention not to renew the term of the agreement. The severance portions of these employment agreements are discussed in more detail under the heading “Potential payments upon termination or change-in-control.”
 
Mr. Scardino. On August 31, 2009, we entered into an employment agreement with Mr. Scardino, which operated retroactively with an effective date of May 5, 2009, and supersedes the employment agreement between us and Mr. Scardino, dated as of January 1, 2007. Under the terms of this employment agreement, we will employ Mr. Scardino as our chief executive officer until December 31, 2012, with successive one-year renewals thereafter. Mr. Scardino will receive an annual base salary of $450,000, to be reviewed annually by the Compensation Committee for increase. Mr. Scardino is also eligible for an annual incentive award with a target award opportunity of 50% of his then-current base salary and a maximum bonus opportunity of 100% of such salary, based upon his individual performance, our profitability and our stock price. The amount of the annual bonus will be subject to the discretion of our Compensation Committee and will be paid in cash, restricted stock or some combination thereof. We will also pay Mr. Scardino’s monthly rental payment for an apartment located in Poughkeepsie, New York, and he will receive $12,000 per year for a car allowance.
 
Mr. Taylor. On November 24, 2009, we entered into an employment agreement with Mr. Taylor, which operated retroactively with an effective date of May 5, 2009, and supersedes the employment agreement between us and Mr. Taylor, dated as of January 1, 2007. Under the terms of this employment agreement, we will employ Mr. Taylor as our chief financial officer until December 31, 2012, with successive one-year renewals thereafter. Mr. Taylor will receive an annual base salary of $275,000, to be reviewed annually by the Compensation Committee for increase. Mr. Taylor is also eligible for an annual incentive award with a target award opportunity of 50% of his then-current base salary and a maximum bonus opportunity of 75% of such salary, based upon his individual performance, our profitability and our stock price. The amount of the annual bonus will be subject to the discretion of our Compensation Committee and will be paid in cash, restricted stock or some combination thereof. Mr. Taylor will also receive $12,000 per year for a car allowance.
 
 
29

 
Mr. Viglotti. Under the terms of his employment agreement, we will employ Mr. Viglotti as our general counsel for a period of 5 years, beginning in December 2005, with successive one-year renewals thereafter. Mr. Viglotti’s employment agreement provides for an annual base salary of not less than $300,000, which will be reviewed by the Compensation Committee annually for increase. Mr. Viglotti is also eligible to receive an annual incentive award with a target award opportunity of 50% of his then-current base salary and a maximum bonus opportunity of no less than 75% of such salary based on performance criteria as determined annually by our Compensation Committee. Mr. Viglotti will also receive $11,700 per year for a car allowance and $ 10,000 for financial counseling.
 
Mr. Walczyk. Under the terms of his employment agreement, which was terminated as of January 1, 2010 and replaced with a new agreement as described below, we would employ Mr. Walczyk as our chief operating officer for a period of 3 years, beginning January 2007. Mr. Walczyk received an annual salary of $300,000, which was to be reviewed annually by the Compensation Committee for increase. Mr. Walczyk was also eligible for, but not guaranteed, an annual bonus payment up to 50% of his base salary, as then in effect, based upon his individual performance, profitability of the company and the company’s stock price. The amount of the annual bonus was subject to the discretion of the Compensation Committee and would have been paid in cash, r estricted stock or some combination thereof. Mr. Walczyk would also receive $12,000 per year for a car allowance.
 
On December 30, 2009, we entered into a new employment agreement with Mr. Walczyk, which is effective January 1, 2010, and superseded the employment agreement between us and Mr. Walczyk, dated as of January 1, 2007. Under the terms of this employment agreement, we will employ Mr. Walczyk as our chief operating officer until December 31, 2012, with successive one-year renewals thereafter. Mr. Walczyk will receive an annual salary of $300,000, to be reviewed annually by the Compensation Committee for increase. Mr. Walczyk is also eligible for an annual incentive award with a target award opportunity of 50% of his then-current base salary and a maximum bonus opportunity of 75% of such salary, based upon his individual performance, our profitability and our stock price. The amount of the annual bonus will be subject to the discretion of our Compensation Committee and will be paid in cash, restricted stock or some combination thereof. Mr. Walczyk will also receive $12,000 per year for a car allowance
 
Mr. Polansky. Mr. Polansky had an employment agreement in effect for 2009, which was expired effective January 1, 2010. Under the terms of Mr. Polansky’s employment agreement, we would employ him as our senior vice president of sales and product development for a period of 3 years, beginning in December 2006. Mr. Polansky received an annual base salary of $250,000, which was reviewed annually by our Compensation Committee. Mr. Polansky was also eligible to receive an annual incentive award at the discretion of the Compensation Committee with a target opportunity of 40% of his base salary and a targeted annual grant of restricted common shares having a fair market value equal to 30% of his base salary amount, up to 50% of his base salary amount. Mr. Polansky would also receive $9,000 per year for a car allowance. On November 20, 2009, we and Mr. Polansky mutually agreed that the employment agreement would expire by its terms effective January 1, 2010, and Mr. Polansky continued his employment with us as our chief marketing officer on “at will” basis. However, due to the change in our business direction, we determined that we no longer require a Chief Marketing Officer at the holding company level and have decided to eliminate the position, which will result in the termination of Mr. Polansky’s employment with us effective April 2, 2010. Mr. Polansky has been offered a Severance Agreement under which he will be entitled to receive payment in cash for his accrued but unused paid time off, severance pay equal to $66,250 and a cash payment equal to the fair market value of his 5,755 unvested restricted shares, valued as of the close of trading on April 1, 2010.
 
Mr. Hickey, Jr. Under the terms of Mr. Hickey, Jr.’s employment agreement, which was terminated as of March 13, 2009, we were to employ him as our chief executive officer and a member of our board for a period of 5 years, beginning December 2005. Mr. Hickey, Jr. was entitled to receive an initial base salary of not less than $650,000, which was to be reviewed annually by the Compensation Committee. Mr. Hickey, Jr. was also eligible to receive an annual incentive award with a target award opportunity of 100% of his then-current base salary and a maximum bonus opportunity of no less than 200% of such salary based on performance criteria as determined annually by our Compensation Committee. Mr. Hickey, Jr. was also eligible to receive an additional annual producer incentive bonus of 2.5% of our net income, provided that net income in the year in question is not less than $25,000,000. In addition, Mr. Hickey, Jr. was eligible to participate in our long-term incentive compensation programs, as determined by the Compensation Committee. Pursuant to the provisions of Mr. Hickey, Jr.’s employment agreement, his total compensation package (including base salary, the annual incentive award, the producer incentive bonus and the long-term incentive compensation) was to be targeted at no less than the 75th percentile of an appropriate group of peer companies, as determined by the Compensation Committee. Mr. Hickey, Jr. also had the right to lease a private aircraft for business purposes provided that he determined that such travel was reasonable. Our Compensation Committee had limited the amount of Mr. Hickey, Jr.’s private aircraft use to 200 hours per fiscal year. Mr. Hickey, Jr. would also receive $11,700 per year for a car allowance and $10,000 per year for financial counseling.
 
 
30

 
Effective March 13, 2009, Mr. Hickey, Jr. resigned as a director and officer, and his employment agreement was terminated pursuant to the mutual agreement of the parties. We entered into a separation agreement with Mr. Hickey, Jr. under which we agree to:
 
 
·
pay him a total of $3,300,000 in two payments of $1,500,000 each and one payment of $300,000, all of which payments are subject to Mr. Hickey’s continued compliance with the restrictive covenants described below;
 
 
·
immediately vest and distribute 46,040 unvested shares of restricted shares that were previously granted to Mr. Hickey, Jr. on January 16, 2008; and
 
 
·
continue paying his welfare benefits to which he was entitled under his employment agreement for a period of three years.
 
The separation agreement prohibits Mr. Hickey, Jr. from competing with us in the California self-insured workers compensation market until March 13, 2012 and from soliciting our employees, customers, brokers or agents for a period ending on March 13, 2011. In addition, the separation agreement provides that Mr. Hickey, Jr. shall cooperate reasonably with us and assist us in any litigation until March 13, 2012.
 
Annual Incentive Cash Bonuses
 
The terms of the annual incentive cash bonuses for our executive officers are discussed in our Compensation Discussion and Analysis under the heading “Annual Cash Bonuses.”
 
Restricted Share Awards under Our 2005 Long-Term Incentive Plan
 
Restricted share awards are common shares that are subject to restrictions until they vest, as determined by our Compensation Committee. Our Compensation Committee has the sole discretion under the plan to determine the employees to receive a restricted share award, the number of shares granted, when the shares will be paid to the participant, whether the shares will be issued at the beginning or the end of a restricted period, and any other terms and conditions with respect to vesting, deferral, payment options and other award characteristics. Pursuant to the terms of our grant document, holders of restricted shares do not have the right to vote the restricted shares or to receive dividends. Any award based solely on continued employment or the passage of time generally vests ratably over a minimum three-year perio d, subject to certain exceptions for de minimis awards, death, disability or retirement. In the case of performance based awards, vesting generally occurs over a performance period of not less than one year. Unless our Compensation Committee decides otherwise, or unless an employee’s employment agreement otherwise provides, if a participant’s employment is terminates for any reason, the restricted shares that have not vested are immediately forfeited.
 
In May 2009, we granted restricted shares to Mr. Scardino and Mr. Taylor. The vesting of these awards is based solely on continued employment with us. The restricted shares vest ratably over a three-year period, subject to certain exceptions for death, disability or retirement.
 
 
31

 
Total Mix of Compensation
 
The proportions of our named executive officers’ individual compensation components in relation to their total compensation for 2009 were:
 
Name
 
Salary
 
Stock Awards
 
Non-Equity
Incentive Plan Compensation
 
All Other
Compensation
James J. Scardino
 
73%
 
19%
 
0%
 
8%
Joseph F. Taylor
 
83%
 
9%
 
0%
 
8%
Louis J. Viglotti
 
90%
 
0%
 
0%
 
10%
Chester J. Walczyk
 
89%
 
0%
 
0%
 
11%
Robert V. Polansky
 
89%
 
0%
 
0%
 
11%
Daniel G. Hickey, Jr.
 
91%
 
0%
 
0%
 
9%

2009 Outstanding Equity Awards at Fiscal Year-End
 
The following table shows the amount of outstanding unvested restricted share awards as of December 31, 2009:
 
   
Stock Awards
Name
 
Number of Shares or Units of Stock That Have Not Vested as of December 31, 2009
(#)(1)
 
Market Value of Shares or Units of Stock That Have Not Vested as of December 31, 2009
($)(2)
James J. Scardino                                     
 
106,906
 
36,348
Joseph F. Taylor                                     
 
29,604
 
10,065
Louis J. Viglotti                                     
 
6,906
 
2,348
Chester J. Walczyk                                     
 
6,906
 
2,348
Robert V. Polansky                                     
 
11,510
 
3,913

(1)
The vesting schedule for the restricted share awards is as follows:

Mr. Scardino’s Vesting Schedule
Grant Date
 
Vesting Date
 
Number of
Shares Vesting
1/16/08                                 
 
1/16/10
1/16/11
 
3,453
3,453
5/6/09                                 
 
5/6/10
5/6/11
5/6/12
 
33,334
33,333
33,333

 
32

 
 
Mr. Taylor’s Vesting Schedule
Grant Date
 
Vesting Date
 
Number of
Shares Vesting
1/16/08                                 
 
1/16/10
1/16/11
 
2,302
2,302
5/6/09                                 
 
5/6/10
5/6/11
5/6/12
 
8,334
8,333
8,333


Mr. Viglotti’s Vesting Schedule
Grant Date
 
Vesting Date
 
Number of
Shares Vesting
1/16/08                                 
 
1/16/10
1/16/11
 
3,453
3,453
 

Mr. Walczyk’s Vesting Schedule
Grant Date
 
Vesting Date
 
Number of
Shares Vesting
1/16/08                                 
 
1/16/10
1/16/11
 
3,453
3,453


Mr. Polansky’s Vesting Schedule
Grant Date
 
Vesting Date
 
Number of
Shares Vesting
1/16/08                                 
 
1/16/10
1/16/11
 
5,755
5,755

(2)
The values shown here are based on the closing share price on December 31, 2009 ($0.34).

 
33

 
2009 Option Exercises and Stock Vested
 
The following table shows the number of shares that our executives received in 2009 from the vesting of previously granted restricted share awards, along with the market value realized on the vesting date:

   
Stock Awards
Name
 
Number of Shares
Acquired on Vesting (#)
 
Value Realized
on Vesting ($)
James J. Scardino                                                    
 
7,401
 
8,378
Joseph F. Taylor                                                    
 
4,294
 
5,173
Louis J. Viglotti                                                    
 
6,626
 
7,836
Chester J. Walczyk                                                    
 
5,967
 
7,447
Robert V. Polansky                                                    
 
13,520
 
13,998
Daniel G. Hickey, Jr.                                                    
 
96,972
 
177,262

Potential payments upon termination or change-in-control
 
As part of the employment agreements with each of our executive officers, we have agreed to provide them with certain benefits in the event of termination or a change-in-control. Generally, benefits under these agreements are triggered upon the termination of the executive’s employment by us without “cause” or by employee for “good reason.” Terminations for other reasons, such as retirement, death, disability or a change of control, also trigger enhanced benefits under certain of these arrangements.
 
Circumstances Triggering Payments. “Cause,” “good reason” and “change of control” are generally defined in our executive officers’ employment agreements as follows:
 
“Cause” includes:
 
 
·
breach of any of the material terms or covenants of the employment agreement, specifically including the confidentiality, litigation cooperation, non-disparagement, non-disclosure, non-competition or non-solicitation provisions;
 
 
·
conviction of, or plea of nolo contendre to, any felony, or any act that is materially and demonstrably injurious to our financial condition or our or the executive officer’s reputation;
 
 
·
drug or alcohol use which impairs the executive officer’s ability to perform his duties;
 
 
·
engaging in conduct constituting gross neglect or willful misconduct in carrying out the executive officer’s duties and that is demonstrably injurious to our financial condition or our or the executive officer’s reputation;
 
 
·
act or omission of dishonesty, fraud, misrepresentation, conflict of interest or breach of fiduciary duty;
 
 
·
material failure to diligently, faithfully and competently perform a substantial portion of the executive officer’s responsibilities, duties, or functions;
 
 
·
commission of any act or acts that harm our reputation, standing or credibility within the communities it or he operates or with its clients or suppliers; or
 
 
·
act or series of acts constituting gross neglect and/or willful misconduct resulting in a restatement of our financial statements due to material non-compliance with any financial reporting requirement within the meaning of Section 304 of The Sarbanes-Oxley Act of 2002.
 
 
34

 
“Good reason” includes:
 
 
·
a material diminution or change, materially adverse to the executive officer, in the executive officer’s positions, titles, or offices, status, rank, nature of responsibilities, or authority within the company, or a removal of the executive officer from or any failure to elect or re-elect or, as the case may be, nominate the executive officer to any such positions or offices;
 
 
·
an assignment of duties to the executive which are inconsistent with the executive officer’s respective title and position;
 
 
·
a decrease in either annual base salary or target annual incentive award opportunity below a certain level;
 
 
·
any other failure by us to perform any material obligation under, or breach by us of any material provision of, the employment agreement.
 
A “change of control” occurs where:
 
 
·
any sale, lease, exchange or other transfer (in one or a series of related transactions) of all or substantially all of our assets;
 
 
·
any “person” as such term is used in Section 13(d) and Section 14(d) of the Exchange Act is or becomes, directly or indirectly, the “beneficial owner” as defined in Rule 13d-3 under the Exchange Act of our securities that represent 51% or more of the combined voting power of our then outstanding voting securities;
 
 
·
during any period of two consecutive years, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by the Board whose nomination by the shareholders of the Company was approved by a vote of the Board then still in office who are either directors at the beginning of such period or whose election or nomination for election was so previously approved) cease for any reason to constitute a majority of the Board then in office; or
 
 
·
the Board or our shareholders approve a merger or consolidation of us with any other corporation, other than a merger, amalgamation or consolidation which would result in our voting securities of outstanding immediately prior thereto continuing to represent at least 50% of the total voting power represented by our voting securities immediately after such merger, amalgamation or consolidation, or the Board or our shareholders approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one or a series of transactions) of all or substantially all of the Company’s assets.
 
Summary of Agreements. The following table and footnotes describe and quantify the potential payments upon termination or change in control for each of our executive officers, assuming that termination or change-in-control was effective as of December 31, 2009. The amounts shown in the table below do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment, which include: (1) accrued salary, incentive and vacation pay; and (2) other and additional benefits then due or earned under our applicable plans and programs.
 
 
35

 
Post-Termination and Change of Control Benefits
Mr. Scardino, Chief Executive Officer(1)
 
Executive Benefits and Payments Upon Termination
 
Termination without
Cause or for
Good Reason(2)
   
Change-in-
Control(3)
   
Death(4)
 
Severance Pay
  $ 900,000     $ 1,350,000     $  
Prorated Annual Incentive Award(5)
    225,000       225,000       225,000  
Welfare Benefit Programs
    43,467       28,488        
Vesting of Restricted Share Awards(6)
    36,348       36,348       36,348  
Total Compensation
  $ 1,204,815     $ 1,639,836     $ 261,348  

(1)
On August 31, 2009, we entered into an employment agreement with Mr. Scardino, which operated retroactively with an effective date of May 5, 2009, and supersedes the employment agreement between us and Mr. Scardino, dated as of January 1, 2007. The benefits and amounts in the table above are based on the agreement that was effective May 5, 2009.
 
(2)
If Mr. Scardino’s employment agreement is terminated by us without “cause” or if Mr. Scardino terminates his employment for “good reason,” he will be entitled to receive the following benefits: (i) severance pay equal to 200% of his base salary immediately prior to the termination date (here, $450,000); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, based on actual performance; (iii) the continuation of any welfare benefit programs for 18 months; and (iv) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Scardino’s departure, except for the severance pay which would be paid in 24 equal monthly payments, the welfare benefits which would be paid over the 18-month period and the pro rata unpaid annual incentive award which would be paid at the time annual incenti ve payments are generally paid to employees.
 
(3)
If Mr. Scardino’s employment is terminated by us without “cause” or by Mr. Scardino for “good reason” upon the occurrence of or within six months following a “change in control,” he will be entitled to receive the following benefits: (i) severance pay equal to 300% of his base salary immediately prior to the termination date (here, $450,000); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, based on actual performance; (iii) the continuation of any welfare benefit programs for 12 months; and (iv) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Scardino’s departure, except for the severance pay which would be paid in 24 equal monthly payments, the welfare benefits which would be paid over the 12-month period and the pro rata unpaid annual incentive award which would be paid at the time annual incentive payments are generally paid to employees.
 
(4)
Upon Mr. Scardino’s death, his estate will be entitled to receive: (i) a pro rata unpaid annual incentive award payable for the year in which the death occurs, assuming target performance would have been achieved; and (ii) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Scardino’s departure.
 
(5)
The entire incentive for 2009 is shown here as this table illustrates the effect of such a termination at the end of the year on December 31, 2009 and thus, no pro-ration has been applied. In addition, the incentive assumes that that it would be paid based on the target performance level.
 
(6)
The value of unvested restricted shares is illustrated here by measuring the value of the number of shares payable under unvested awards using the closing share price on December 31, 2009 ($0.34).
 
 
36

 
Post-Termination and Change of Control Benefits
Mr. Taylor, Chief Financial Officer(1)
 
Executive Benefits and Payments Upon Termination
 
Termination without
Cause or for
Good Reason(2)
   
Change-in-
Control(3)
   
Death(4)
 
Severance Pay
  $ 275,000     $ 550,000     $  
Prorated Annual Incentive Award(5)
    137,500       137,500       137,500  
Welfare Benefit Programs
    43,467       28,488        
Vesting of Restricted Share Awards(6)
    10,065       10,065       10,065  
Total Compensation
  $ 466,032     $ 726,053     $ 147,565  

(1)
On November 24, 2009, we entered into an employment agreement with Mr. Taylor, which operated retroactively with an effective date of May 5, 2009, and supersedes an employment agreement between us and Mr. Taylor, dated as of January 1, 2007. The benefits and amounts in the table above are based on the agreement that was effective May 5, 2009.
 
(2)
If Mr. Taylor’s employment agreement is terminated by us without “cause” or if Mr. Taylor terminates his employment for “good reason,” he will be entitled to receive the following benefits: (i) severance pay equal to 100% of his base salary immediately prior to the termination date (here, $275,000); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, based on actual performance; (iii) the continuation of any welfare benefit programs for 18 months; and (iv) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Taylor’s departure, except for the severance pay which would be paid in 12 equal monthly payments, the welfare benefits which would be paid over the 18-month period and the pro rata unpaid annual incentive award which would be paid at the time annual incentive pay ments are generally paid to employees.
 
(3)
If Mr. Taylor’s employment is terminated by us without “cause” or by Mr. Taylor for “good reason” upon the occurrence of or within six months following a “change in control,” he will be entitled to receive the following benefits: (i) severance pay equal to 200% of his base salary immediately prior to the termination date (here, $275,000); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, based on actual performance; (iii) the continuation of any welfare benefit programs for 12 months; and (iv) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Taylor’s departure, except for the severance pay which would be paid in 24 equal monthly payments, the welfare benefits which would be paid over the 12-month period and the pro rata unpaid annual incentive award which would be paid at the time annual incentive payments are generally paid to employees.
 
(4)
Upon Mr. Taylor’s death, his estate will be entitled to receive: (i) a pro rata unpaid annual incentive award payable for the year in which the death occurs, assuming target performance would have been achieved; and (ii) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Taylor’s departure.
 
(5)
The entire incentive for 2009 is shown here as this table illustrates the effect of such a termination at the end of the year on December 31, 2009 and thus, no pro-ration has been applied. In addition, the incentive assumes that that it would be paid based on the target performance level.
 
(6)
The value of unvested restricted shares is illustrated here by measuring the value of the number of shares payable under unvested awards using the closing share price on December 31, 2009 ($0.34).
 
 
37

 

 
Post-Termination and Change of Control Benefits
Mr. Viglotti, General Counsel & Secretary
 
Executive Benefits and Payments Upon Termination
 
Termination without Cause or for Good Reason, Change-in-Control, or Non-Renewal prior to Retirement(1)
   
Death(2)
   
Retirement(3)
 
Severance Pay
  $ 450,000     $     $  
Prorated Annual Incentive Award(4)
    150,000       150,000       150,000  
Welfare Benefit Programs
    28,488       19,122       97,846  
Vesting of Restricted Stock Awards(5)
    2,348       2,348       2,348  
Total Compensation
  $ 630,836     $ 171,470     $ 250,194  

(1)
If we terminate Mr. Viglotti’s employment agreement without “cause” or if Mr. Viglotti terminates his employment for “good reason,” he will be entitled to receive: (i) severance pay equal to the sum of (A) his base salary immediately prior to the termination date (here, $300,000) and (B) the higher of (x) the annual incentive opportunity for the year in which the termination occurs assuming target performance would have been achieved (here, $150,000) and (y) the average annual incentive payment received over the prior two years (here, $0); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, assuming target performance would have been achieved; (iii) the continuation of any welfare benefit programs for 12 months; and (iv) the immediate vesting of all unvested restricted shares. The amounts in this column also reflect “change-in-contro l” payments which are the amounts Mr. Viglotti would receive upon a termination by us without “cause” or a termination by Mr. Viglotti for “good reason” that occurs within the two-year period following a “change of control.” In addition, if we choose not to renew Mr. Viglotti’s employment agreement and the term of the agreement expires before Mr. Viglotti’s 62nd birthday, such non-renewal shall be treated as a termination by us without “cause.” All payments would be made in a lump sum payment following Mr. Viglotti’s departure, except for the welfare benefits which would be paid over the 12-month period.
 
(2)
Upon Mr.Viglotti’s death, his estate will be entitled to receive: (i) a pro rata unpaid annual incentive award payable for the year in which his death occurs assuming target performance would have been achieved; (ii) the continuation of any welfare benefit programs for 12 months; and (iii) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment to Mr. Viglotti’s estate, except for the welfare benefits which would be paid over the 12-month period.
 
(3)
Upon Mr. Viglotti’s retirement at or after age 62, he will be entitled receive: (i) a pro rata unpaid annual incentive award payable for the year in which termination occurs, assuming target performance would have been achieved; and (ii) the continuation of any welfare benefit programs for him and his spouse for the longer of twelve months or his 65th birthday. In addition, if Mr. Viglotti retires at or after age 65, he will be entitled to receive, under our 2005 Long-Term Incentive Plan, the immediate vesting of all unvested restricted shares. The table above assumes a retirement age at or after age 65. All payments would be made in a lump sum payment following Mr. Viglotti’s retirement, except for the welfare benefits which would be paid over the specified period of time.
 
(4)
The entire incentive for 2009 is shown here as this table illustrates the effect of such a termination at the end of the year on December 31, 2009 and thus, no pro-ration has been applied.
 
(5)
The value of unvested restricted shares is illustrated here by measuring the value of the number of shares payable under unvested awards using the closing share price on December 31, 2009 ($0.34).
 
 
38

 
Post-Termination and Change of Control Benefits
Mr. Walczyk, Chief Operating Officer(1)
 
Executive Benefits and Payments Upon Termination
 
Termination without Cause or for Good Reason, or Change-in-Control(2)
   
Death(3)
   
Retirement(4)
 
Severance Pay
  $ 450,000     $     $  
Prorated Annual Incentive Award(5)
    150,000       150,000        
Welfare Benefit Programs
    28,488              
Vesting of Restricted Share Awards(6)
    2,348       2,348       2,348  
Total Compensation
  $ 630,836     $ 152,348     $ 2,348  

(1)
On December 30, 2009, we entered into a new employment agreement with Mr. Walczyk, which is effective January 1, 2010, and superseded the employment agreement between us and Mr. Walczyk, dated as of January 1, 2007. The benefits and amounts in the table above are based on the agreement dated as of January 1, 2007, which was effective as of December 31, 2009. The severance payments under the new employment agreement are substantially similar, except where noted below.
 
(2)
If Mr. Walczyk’s employment agreement is terminated by us without “cause” or if Mr. Walczyk terminates his employment for “good reason,” he would have been entitled to receive the following benefits: (i) severance pay equal to the sum of (A) his base salary immediately prior to the termination date (here, $300,000) and (B) the annual incentive opportunity for the year in which the termination occurs assuming target performance would have been achieved (here, $150,000); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, assuming target performance would have been achieved; (iii) the continuation of any welfare benefit programs for 12 months; and (iv) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Walczyk’s departure, except for the welfare benefits which would b e paid over the 12-month period.
 
Under his new agreement, Mr. Walczyk will be entitled to receive the following benefits: (i) severance pay equal to 100% of his base salary immediately prior to the termination date; (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, based on actual performance; (iii) the continuation of any welfare benefit programs for 18 months; and (iv) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Walczyk’s departure, except for the severance pay which would be paid in 12 equal monthly payments, the welfare benefits which would be paid over the 12-month period and the pro rata unpaid annual incentive award which would be paid at the time annual incentive payments are generally paid to employees.
 
In addition, under his new agreement, if Mr. Walczyk’s employment is terminated by us without “cause” or by Mr. Walczyk for “good reason” upon the occurrence of or within six months following a “change in control,” he will be entitled to receive the following benefits: (i) severance pay equal to 200% of his base salary immediately prior to the termination date (here, $300,000); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurs, based on actual performance; (iii) the continuation of any welfare benefit programs for 12 months; and (iv) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment following Mr. Walczyk’s departure, except for the severance pay which would be paid in 2 4 equal monthly payments, the welfare benefits which would be paid over the 12-month period and the pro rata unpaid annual incentive award which would be paid at the time annual incentive payments are generally paid to employees.
 
(3)
Upon Mr. Walczyk’s death, his estate would be entitled to receive: (i) a pro rata unpaid annual incentive award payable for the year in which termination occurs, assuming target performance would have been achieved; and (ii) the immediate vesting of all unvested restricted shares. All payments would be made in a lump sum payment to Mr. Walczyk’s estate.
 
 
39

 
(4)
Upon Mr. Walczyk’s retirement at or after age 65, he will be entitled to receive, under our 2005 Long-Term Incentive Plan, the immediate vesting of all unvested restricted shares.
 
(5)
The entire incentive for 2009 is shown here as this table illustrates the effect of such a termination at the end of the year on December 31, 2009 and thus, no pro-ration has been applied.
 
(6)
The value of unvested restricted shares is illustrated here by measuring the value of the number of shares payable under unvested awards using the closing share price on December 31, 2009 ($0.34).
 
Post-Termination and Change of Control Benefits
Robert V. Polansky, Chief Marketing Officer(1)
 
Executive Benefits and Payments Upon Termination
 
Termination without Cause or for Good Reason(2)
   
Death(3)
   
Retirement(4)
 
Severance Pay
  $ 350,000     $     $  
Prorated Annual Incentive Award(5)
    100,000       100,000        
Welfare Benefit Programs
    28,488              
Vesting of Restricted Share Awards(6)
          3,913       3,913  
Total Compensation
  $ 478,488     $ 103,913     $ 3,913  

(1)
On November 20, 2009, we and Mr. Polansky mutually agreed that his employment agreement would expire by its terms effective January 1, 2010. The benefits and amounts in the table above are based on his prior employment agreement, which was terminated effective as of December 31, 2009. On March 11, 2010, we announced that Mr. Polansky’s employment with us would be terminated as of April 2, 2010.  In connection therewith, Mr. Polansky was offered a Severance Agreement under which he will be entitled to receive a payment in cash equal to his accrued but unused paid time off, severance pay equal to $66,250 and a cash payment equal to the fair market value of his 5,755 unvested restricted shares, valued as of the close of tradin g on April 1, 2010.
 
(2)
If Mr. Polansky’s employment agreement was terminated by us without “cause” or if Mr. Polansky terminated his employment for “good reason,” he would have been entitled to receive the following benefits: (i) severance pay equal to the sum of (A) his base salary immediately prior to the termination date (here, $250,000) and (B) the annual incentive opportunity for the year in which the termination occurred assuming target performance would have been achieved (here, $100,000); (ii) a pro rata unpaid annual incentive award payable for the year in which termination occurred, assuming target performance would have been achieved; and (iii) the continuation of any welfare benefit programs for 12 months. All payments would have been made in a lump sum payment following Mr. Polansky’s departure, except for the welfare benefits which would have been paid over the 12-month period.< /div>
 
(3)
Upon Mr. Polansky’s death, his estate would have been entitled to receive: (i) a pro rata unpaid annual incentive award payable for the year in which the death occurred, assuming target performance would have been achieved; and (ii) the immediate vesting of all unvested restricted shares. All payments would have been made in a lump sum payment.
 
(4)
Upon Mr. Polansky’s retirement at or after age 65, he will be entitled to receive, under our 2005 Long-Term Incentive Plan, the immediate vesting of all unvested restricted shares.
 
(5)
The entire incentive for 2009 is shown here as this table illustrates the effect of such a termination at the end of the year on December 31, 2009 and thus, no pro-ration has been applied.
 
(6)
The value of unvested restricted shares is illustrated here by measuring the value of the number of shares payable under unvested awards using the closing share price on December 31, 2009 ($0.34).
 
 
40

 
Change-In-Control Payments on Restricted Shares. Under the terms of our grant document, all restrictions on unvested restricted share awards issued to our executives will immediately lapse upon a change-in-control. A change-in-control for this purpose occurs where:
 
 
·
A person or group acquires beneficial ownership, directly or indirectly, of our securities representing 40% or more of the combined voting power in the election of directors of our then-outstanding securities or of any successor to us;
 
 
·
The members of our Board when our 2005 Long-Term Incentive Plan was adopted or who were appointed thereafter by at least two-thirds of the Board at the time of the appointment no longer constitute two-thirds of the Board;
 
 
·
We complete a merger, consolidation or amalgamation wherein our voting securities immediately prior thereto do not constitute at least 60% of the combined voting securities after the merger, consolidation or amalgamation; or
 
 
·
Our shareholders approve a plan of complete liquidation or winding-up or an agreement for the sale or disposition of all or substantially all of our assets.
 
The estimated payment amounts are reflected in the tables above, assuming a change-in-control on December 31, 2009.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
No member of our Board’s Compensation Committee has served as one of our officers or employees at any time. None of our executive officers serve as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors. None of our executive officers serve as a member of the board of directors of any other company that has an executive officer serving as a member of our Board’s Compensation Committee.
 
RELATED PARTY TRANSACTIONS
 
Our Related Party Transactions
 
During 2009, we conducted business with Hickey-Finn and Company, Inc. (Hickey-Finn), an insurance broker whose owners include Daniel G. Hickey, Sr., one of our directors, an existing shareholder and the father of Daniel G. Hickey, Jr., who served as our chief executive officer and chairman of the Board during 2009. David M. Birsner, another of our directors and an existing shareholder, is also an employee of Hickey-Finn. We pay broker commissions to Hickey-Finn for business placed with Majestic, our primary insurance company. For the year ended December 31, 2009, we paid Hickey-Finn $88,919 as commissions for placing business with Majestic. Mr. Hickey, Sr.’s corresponding interest in these transactions, without regard to profit or loss, was approximately $44,460.
 
Effective March 13, 2009, Mr. Hickey, Jr. resigned as a director and officer, and his employment agreement was terminated pursuant to the mutual agreement of the parties. We entered into a separation agreement with Mr. Hickey, Jr. under which we agreed to:
 
 
·
pay him a total of $3,300,000 in two payments of $1,500,000 each and one payment of $300,000, all of which payments are subject to Mr. Hickey’s continued compliance with the restrictive covenants described below;
 
 
·
immediately vest and distribute 46,040 unvested shares of restricted shares that were previously granted to Mr. Hickey, Jr. on January 16, 2008; and
 
 
·
continue paying his welfare benefits to which he was entitled under his employment agreement for a period of three years.
 
The separation agreement prohibits Mr. Hickey, Jr. from competing with us in the California self-insured workers compensation market until March 13, 2012 and from soliciting our employees, customers, brokers or agents for a period ending on March 13, 2011. In addition, the separation agreement provides that Mr. Hickey, Jr. shall cooperate reasonably with us and assist us in any litigation until March 13, 2012.
 
 
41

 
Our Related Party Review, Approval or Ratification Process
 
Under its charter, the Audit Committee is responsible for reviewing and approving the terms and conditions of all related party transactions. The Audit Committee recognizes that related party transactions present a heightened risk of conflicts of interest and improper valuation (or at least the perception thereof) and therefore adopted a written policy concerning all related party transactions involving CRM Holdings and subsidiaries. The policy applies to any transactions involving an amount greater than $5,000 between us and any executive officer or director, shareholder owning greater than five percent of our outstanding shares, a person who is an immediate family member of an executive officer or director or shareholder owning greater than five percent of our outstanding shares, or an entity which is owned or con trolled by any of these individuals. Under the policy, any related party transaction will be consummated or continued only if:
 
 
·
the Audit Committee approves or ratifies the transaction in accordance with the guidelines set forth in the policy and if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party; or
 
 
·
the transaction is approved by the disinterested members of the Board of Directors; or
 
 
·
the transaction involves compensation approved by the Compensation Committee.
 
 
42

 
SHARE OWNERSHIP INFORMATION
 
Principal Shareholders Table
 
The following table sets forth the total number and percentage of our voting common shares beneficially owned on March 3, 2010 by: (1) each person known to us to be the beneficial owner of more than 5% of any class of our outstanding voting common shares; (2) each director; (3) each of our Named Executive Officers; and (4) all executive officers and directors as a group.
 
   
Shares Beneficially Owned
Beneficial Owner(1)
 
 
Number(2)
 
Percent(3)
Wells Fargo & Company                     
420 Montgomery Street
San Francisco, CA 94104
 
 1,979,893
(4)  
 12.0
Daniel G. Hickey, Jr.                
70 Pond Hills Court
Pleasant Valley, New York 12569
 
 1,925,220
(5)  
 9.3(5)
Mendon Capital Advisors Corp             
150 Allens Creek Road
Rochester, NY 14618
 
 1,611,730
(6)  
 9.7
Whitebox Advisors, LLC                
3033 Excelsior Boulevard, Suite 300
Minneapolis, MN 55416
 
 1,233,603
(7)  
 7.5
Burnham Asset Management Corp
Burnham Securities Inc.                      
1325 Avenue of the Americas
New York, NY 10019
 
 1,069,931
(8)  
 6.5
Mihaljevic Partners LP.
        235 East 95th Street, Suite 14J
        New York, New York 10128
  924,239 (9)     5.6
James J. Scardino           
 
46,360
   
 *
Joseph F. Taylor        
 
26,414
   
 *
Louis J. Viglotti                 
 
54,225
   
 *
Chester J. Walczyk       
 
68,991
   
 *
Robert V. Polansky              
 
41,962
   
 *
David M. Birsner              
 
301,471
   
 1.8
Daniel G. Hickey, Sr.       
 
1,771,237
   
 10.7
Keith S. Hynes             
 
31,114
   
 *
Charles I. Johnston      
 
11,705
   
 *
Philip J. Magnarella    
 
10,416
   
 *
Salvatore A. Patafio   
 
17,316
   
 *
Louis Rosner  
 
15,991
   
 *
Named Executive Officers and Directors as a group 
 
2,363,473
   
 14.3(10)

(1)
Unless otherwise stated, the address of each of the persons in the table is c/o CRM Holdings Ltd., FB Perry Building, 40 Church Street, P.O. Box HM 2062, Hamilton HM HX, Bermuda.
 
(2)
Does not include the issuance of restricted common shares to certain of our executive officers and non-employee directors that will vest in either two or three equal annual installments, beginning on the first anniversary of the respective grant dates. Such restricted common shares are not deemed to be outstanding under the laws of Bermuda until they vest. The amounts of shares granted are set forth in greater detail in the sections entitled “Compensation Discussion & Analysis,” “Executive Compensation – 2008 Outstanding Equity Awards at Fiscal Year End” and “The Board and Board Committees – Director Compensation.”
 
(3)
Computed on the basis of 16,535,206 common shares outstanding as of March 23, 2009. This amount does not include grants of restricted shares to certain of our employees and non-employee directors or 395,000 Class B non-voting chares. Our Bye-Laws reduce the total voting power of any shareholder owning, directly or indirectly, beneficially or otherwise, as described in our Bye-Laws, 9.9% or more of the common shares to less than 9.9% of the total voting power of our common shares. As a result of the application of our Bye-Laws, the combined voting power of each of Wells Fargo & Company and Daniel G. Hickey, Sr. is limited to less than 9.9%, which results in the increase of the voting power of other shareholders. Pursuant to our Bye-Laws, the voting power of other shareholders, in aggregate, is increased by the same number of votes held by Wells Fargo & Company and Daniel G. Hickey, Sr. that are subject to the voting limitation. Such increase applies to each of the other shareholders in proportion to its voting power as determined on any applicable record date, provided that such increase will be limited to the extent necessary to avoid causing any shareholder to have 9.9% or more voting power.
 
 
43

 
(4)
Based upon most recently available Schedule 13G/A filed with the SEC on January 22, 2009, includes 1,979,893 shares held by a group, consisting of Wells Fargo & Company and certain of its subsidiaries and Wells Capital Management Incorporated. The address of Wells Fargo & Company and its subsidiaries is 420 Montgomery Street, San Francisco, California 94104 and the address for Wells Capital Management Incorporated is 525 Market Street, San Francisco, California 94105.
 
(5)
Mr. Hickey, Jr.’s share holdings include 395,000 Class B shares that are exchangeable at Mr. Hickey, Jr.’s option to common shares, unless (a) the Board reasonably determines that such exchange of all or any part of the Class B shares may cause adverse tax consequences or (b) the common shares held by Mr. Hickey, Jr. after such an exchange would not have voting power greater than the common shares held by Mr. Hickey, Jr. before such an exchange. In accordance with our Bye-Laws, upon such a conversion, Mr. Hickey, Jr.’s voting percentage would be reduced to 9.9%. The percentage of shares owned by Mr. Hickey, Jr. shown in table excludes the Class B shares as Mr. Hickey, Jr. has not elected to exchange such shares.
 
(6)
Based upon most recently available Schedule 13G/A filed with the SEC on February 16, 2010. The address of Mendon Capital Advisors Corp. is 150 Allens Creek Road, Rochester, New York 14618.
 
(7)
Based upon most recently available Schedule 13G/A filed with the SEC on February 8, 2010, includes 1,233,603 shares held by a group, consisting of Whitebox Advisors, LLC and certain affiliated entities. The address of Whitebox Advisors, LLC and its affiliated entities is 3033 Excelsior Boulevard, Suite 300 Minneapolis, MN 55416.
 
(8)
Based upon most recently available Schedule 13G filed with the SEC on February 16, 2010, includes 1,069,931 shares held by a Burnham Asset Management and Burnham Securities Inc. The address of Burnham Asset Management and Burnham Securities Inc. is 1325 Avenue of the Americas, New York, NY 10019.
 
(9)
Based upon most recently available Schedule 13G filed with the SEC on March 17, 2010. The address of Mihaljevic Partners LP is 235 East 95th Street, Suite 14J, New York, New York 10128.
 
(10)
The amount shown reflects the total shares beneficially owned by our executive officers and directors as a group and does not take into account any possible reductions of voting power under our Bye-Laws, as discussed in note 3 directly above. Assuming Mr. Hickey, Sr.’s total voting power is reduced to 9.9%, then the total combined voting power of our executive officers and directors as a group would be 13.6%.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, as well as beneficial owners of 10% or more of our outstanding common shares, to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on our review of the copies of the forms received by us, or written representations from our executive officers and directors, we believe that during fiscal 2009 all of our executive officers and directors and beneficial owners of 10% or more of our outstanding common shares filed the required reports under Section 16(a) on a timely basis, except for the Form 4 report filed by Joseph F. Taylor on May 12, 2009, which was submitted late due to the unavailability of SEC EDGAR codes for Mr. Taylor.
 
 
44

 
PROPOSAL NO. 2
 
ELECTION OF DIRECTOR DESIGNEES OF TWIN BRIDGES (BERMUDA) LTD.
 
Pursuant to Bye-Law 154, the Board of Twin Bridges, our wholly-owned Bermuda-based reinsurance subsidiary, must be comprised of persons (1) a majority of whom are directors of CRM Holdings and (2) who have been elected as director designees by our shareholders (collectively referred to as the Twin Bridges Directors). If elected, the proposed Twin Bridges Directors will hold office until their successors are duly elected and qualified at the 2011 Annual General Meeting or, if earlier, their death, resignation or removal.
 
Your approval of the proposed Twin Bridges Directors shall constitute a direction to us to cause us to vote CRM Holdings’ shares at the Twin Bridges Annual General Meeting to ensure that Twin Bridges’ Board is comprised of the proposed Twin Bridges Directors. Proxies cannot be voted for a greater number of persons than the proposed Twin Bridges Directors named. Each of the proposed Twin Bridges Directors is a director of the CRM Holdings and does not receive any additional fees or payments for serving on the Twin Bridges Board. If any of the proposed Twin Bridges Directors should become unavailable for election for any presently unforeseen reason, the persons named in the accompanying proxy card have the right to use their discretion to vote for a substitute nominee to be determined by our Board. The ele ction of each of the proposed Twin Bridges Directors requires the affirmative vote of a majority of the votes cast at the Annual General Meeting.
 
The approval of this proposal requires the affirmative vote of a majority of the votes cast at the Annual General Meeting, provided there is a quorum.
 
Nominees for Election of Twin Bridges Director:
 
The following persons constitute the Twin Bridges Directors:
 
Name(1)
Age
Director of Twin Bridges since:
David M. Birsner                                                       
42
September 2005
Daniel G. Hickey, Sr.                                                       
65
September 2005
Keith S. Hynes                                                       
57
November 2005
Charles I. Johnston                                                       
55
May 2006
Philip J. Magnarella                                                       
72
September 2005
Salvatore A. Patafio                                                       
65
September 2005
Louis Rosner, Esq.                                                       
61
September 2005
James J. Scardino                                                       
56
May 2009

(1)
The biographical information for the nominees is described earlier in this Proxy Statement under the section entitled “Proposal No. 1 – Election of Directors.”
 
Board of Directors’ Recommendation
 
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF THE TWIN BRIDGES DIRECTORS. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
 
 
45

 
PROPOSAL NO. 3.
 
APPROVAL OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION OF THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO SET THE FEES FOR THE INDEPENDENT AUDITORS
 
Under Bermuda law, our shareholders have the responsibility to appoint our auditor and independent registered public accounting firm to hold office until the close of the next annual general meeting and to authorize the Audit Committee of the Board of Directors to set the auditors’ remuneration.
 
The Audit Committee of the Board has recommended to the shareholders to appoint Ernst & Young LLP (Ernst & Young) to serve as our independent registered public accounting firm for the fiscal year ended December 31, 2010. We have been advised by Ernst & Young that it is a registered public accounting firm with the Public Company Accounting Oversight Board (the PCAOB) and complies with the auditing, quality control and independence standards and rules of the PCAOB and the Securities and Exchange Commission. Johnson Lambert & Co. LLP (Johnson Lambert) served as our independent registered public accounting firm prior to 2009. Ernst & Young was engaged effective as of the close of our Annual General Meeting held on May 5, 2009 and audited our financial statements for the fiscal year ended December 31, 2009. Johnson Lambert’s report on the financial statements for the fiscal year ended December 31, 2008 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. The change in independent registered public accounting firms was not the result of any disagreement with Johnson Lambert. Johnson Lambert was dismissed by recommendation of our Audit Committee. Our Audit Committee made the decision to recommend the change of independent accountants at its meeting on March 3, 2009, acting under authority delegated to it by our Board of Directors.
 
An Ernst & Young representative is expected to attend the Annual General Meeting. The representative will have the opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate shareholder questions.
 
The approval of this proposal requires the affirmative vote of a majority of the votes cast at the Annual General Meeting, provided there is a quorum. If the shareholders do not approve this appointment by the affirmative vote of a majority of shares present in person or represented by proxy at the meeting, another independent registered public accounting firm will be considered by our Board of Directors.
 
Board of Directors’ Recommendation
 
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
 
Independent Registered Public Accountants’ Fees
 
The aggregate fees billed for professional services by Ernst & Young and Johnson Lambert & Co. in 2009 and 2008, respectively, for the following services were:
 
Type of Fees
 
2009
   
2008
 
Audit Fees(1)                                                                                          
  $ 1,298,000     $ 1,393,455  
Audit-Related Fees(2)                                                                                          
    31,000       9,800  
Tax Fees(3)                                                                                          
    175,698        
All Other Fees                                                                                          
           
Total                                                                                          
  $ 1,504,698     $ 1,403,255  

(1)
“Audit Fees” includes fees that we pay to our auditors for the audit of our annual financial statements included in our annual report on Form 10-K and review of quarterly financial statements included in our quarterly reports on Form 10-Q, and for the audit of our internal control over financial reporting and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements, including the audit work required for statutory audits for Majestic and Twin Bridges.
 
 
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(2)
“Audit-related fees” includes fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and internal controls over financial reporting, including the work related to the consolidated audit of CRM USA Holdings Inc. and its subsidiaries to fulfill requirements related to debt covenants and the actuarial opinions for Majestic and Twin Bridges.
 
(3)
“Tax Fees” comprise fees billed for tax return assistance and preparation, tax examination assistance, tax strategy and any other tax services.
 
Pre-Approval Policy for Services of the Independent Registered Public Accounting Firm
 
Our Audit Committee has a policy of approving the engagement of the independent registered accounting firm to perform all audit and non-audit services on behalf of CRM Holdings. The Audit Committee did not rely on the waiver from the pre-approval requirement available under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X with respect to any of the services provided by the independent auditor. The Audit Committee has determined that the provision of services covered by Ernst & Young’s fees was compatible with maintaining the principal accountant’s independence.
 
In 2009, the percentage of fees (other than audit fees) billed for professional services that were approved by the Audit Committee was 100%.
 
Audit Committee Report
 
The Audit Committee has been appointed by the Board of Directors to assist the Board of Directors in fulfilling its responsibility to oversee the financial affairs, risk management, accounting and financial reporting processes and audits of the financial statements of CRM Holdings. The Committee operates under a written charter adopted by the Board of Directors and reviewed annually by the Committee. The Committee has furnished the following report for 2009.
 
The Committee has reviewed and discussed the Company’s consolidated audited financial statements as of and for the year ended December 31, 2009 with management and the independent registered public accounting firm. The Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 114, The Auditor’s Communication with those Charged with Governance, as currently in effect.
 
The Audit Committee has received the written disclosures and the letter from the independent accountant required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.
 
Based on the Committee’s reviews and discussions referred to above, the Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2009 for filing with the Securities and Exchange Commission.
 
 
  Audit Committee
  Charles I. Johnston, Chairman
  Keith S. Hynes
  Salvatore A. Patafio
 
 
47

 
PROPOSAL NO. 4.
 
CHANGE OF NAME FROM CRM HOLDINGS, LTD. TO MAJESTIC CAPITAL, LTD.
 
On March 3, 2009, the Board approved a resolution (attached hereto as Appendix A) for shareholder approval at the meeting to change our name from “CRM Holdings, Ltd.” to “Majestic Capital, Ltd.”
 
We believe that the corporate name change will better reflect our corporate identity. The current name of “CRM Holdings” reflects the business of our operating subsidiaries, Compensation Risk Managers, LLC and Compensation Risk Managers of California, LLC, which provided group management and third party administration services to self-insured groups in New York and California. Our self-insured group operations in New York were discontinued as of September 8, 2008, and we have only one active group under management in California.
 
We acquired Majestic Insurance Company in November 2006. Following the acquisition and the closure of our self-insured group operations, revenue from Majestic and its primary insurance products soon constituted substantially all of our revenues. Consequently, our business at this point is almost entirely focused on our primary insurance segment which includes the underwriting of workers’ compensation insurance products offered through Majestic. Therefore, we believe that the name “Majestic Capital, Ltd.” better reflects our current business and strategy.
 
The change of our name to “Majestic Capital, Ltd.” will not by itself affect in any way the validity of currently outstanding share certificates or the trading of our securities. Our shareholders will not be required to surrender or exchange any of our share certificates that they currently hold. Shareholders with certificated shares may continue to hold their existing certificates or receive without charge new certificates reflecting the name change upon tendering the old certificates to our transfer agent.
 
If the shareholders approve the change to our name, we intend to apply for a change to our NASDAQ ticker symbol from “CRMH” to “MAJC”.
 
The approval of this proposal requires the affirmative vote of a majority of the votes cast at the Annual General Meeting, provided there is a quorum.
 
Board of Directors’ Recommendation
 
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE CHANGE OF CRM HOLDINGS NAME FROM CRM HOLDINGS, LTD. TO MAJESTIC CAPITAL, LTD.
 
 
48

 
PROPOSAL NO. 5.
 
APPROVAL OF AMENDED AND RESTATED BYE-LAWS
 
Shareholders are being asked to consider and approve the adoption of Amended and Restated Bye-Laws.
 
With a view to modernizing the Companies Act 1981 (the Companies Act) to take into account various company law reform initiatives in various jurisdictions, the Companies Amendment Act 2006 (the Amendment Act), which came into force on December 29, 2006, made a number of important changes to Bermuda’s primary company legislation. The Board of Directors has approved the Amended and Restated Bye-laws (the Amended Bye-Laws) in light of the changes to the Companies Act which incorporate the following principal changes to our existing Bye-Laws (the Bye-Laws). In addition to the changes arising from the Amendment Act, the Board is proposing certain other amendments to the Bye-Laws as set forth below.
 
Under Section 153 of our Bye-Laws, any amendment to our Bye-Laws (excluding amendments to Bye-Laws 143-150 which relate to indemnification) requires a majority of the votes cast at an annual general meeting, provided there is a quorum. If this proposal is not approved at the Annual General Meeting, our current Bye-laws will continue to govern our corporate actions.
 
Electronic Delivery of Documents
 
The Amendment Act makes it possible for a Bermuda company to deliver an “electronic record” of documents to its shareholders and others via electronic mode such as e-mail or website postings. Previously we were required to deliver a hard copy of any such documents. The proposed Amended Bye-laws, if approved, will permit us to take advantage of the SEC’s “notice and access” rules to post notices of shareholder meetings and proxy statements and other documents to be sent by electronic means. These mechanisms could help us save printing and postage costs and may be found to be more convenient for certain of our shareholders.
 
Treasury Shares
 
The Amendment Act makes it possible for a Bermuda company to acquire its own shares, to be held as treasury shares in lieu of cancellation. Treasury shares generally represent shares that were once traded in the market but which have since been reacquired by the issuing company and are available for retirement or later reissuance. Treasury shares are considered to be issued but not outstanding, cannot be voted and accrue no dividends. Under the Amendment Act, a company continues to be able to purchase its own shares for cancellation so long as its constitutional documents so permit. The proposed Amended Bye-Laws, if approved, will permit the Company to hold reacquired shares in treasury rather than canceling them following a repurchase.
 
Execution of Instruments without Seal
 
The Amendment Act makes it possible for a Bermuda company to execute deeds and other instruments without a seal using the signature of an authorized person. Previously the execution of any such documents required a corporate seal. The proposed Amended Bye-Laws, if approved, will permit us to take advantage of this flexibility to execute documents without a seal by allowing any director, corporate secretary or other person authorized by the Board of Directors to sign instruments on behalf of the Company.
 
Flexibility in Titles and Identities of Officers
 
The Amendment Act removes the requirement for a Bermuda company to appoint a President/Vice President or Chairman/Deputy Chairman and also eliminates the requirement that officers be directors. The proposed Amended Bye-Laws, if approved, will permit us to take advantage of this flexibility.
 
Directors’ Authority
 
The Amendment Act clarifies the position regarding the scope of the board of directors’ authority. Prior to the enactment of the Amendment Act, there was doubt as to whether a board of directors’ authority was proscribed in certain circumstances (e.g. in transactions relating to the disposal of all of the company’s assets) and required shareholder approval. The Amendment Act removes any doubt about the scope of directors’ authority in relation to the shareholders, by providing that directors can exercise all of the powers of the company except those powers that are required by the Companies Act or the bye-laws to be exercised by the shareholders. The current Bye-Laws include a non-exhaustive list of the powers of the company which the Board may exercise. The proposed Amended Bye-Laws, if appr oved, will reflect the wording of the Amendment Act to provide that the Board may exercise all the powers of the Company except those that are required by the Act or the Bye-Laws to be exercised by shareholders.
 
 
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Size of the Board
 
Our Bye-Laws currently provide that the size our Board of Directors shall be not less than 2 nor more than 20 directors, with the exact number to be determined from time to time by a vote of the shareholders. If the shareholders have not voted, then the size of our Board will be fixed at 9 directors. The proposed Amended Bye-Laws, if approved, will change the authority to set the exact size of our Board from the shareholders to our Board of Directors.
 
Capitalization of Profits
 
Our Bye-Laws currently provide that any amount standing to the credit of a share premium account may only be applied in crediting as fully paid shares of the same class as that from which the relevant share premium was derived. The proposed Amended Bye-Laws, if approved, will remove the restriction that the amount must be credited to the same class of shares and will allow a credit of a share premium account to be applied to any class of shares.
 
Poll Voting
 
Our Bye-Laws currently provide that matters to be considered at an annual general meeting will be voted on by a show of hands unless poll voting is demanded by the chairman of the meeting. The proposed Amended Bye-Laws, if approved, will conform our Bye-Laws to our practice of using poll voting at annual general meetings, by providing that all items put to the vote at an annual general meeting will be decided on a poll.
 
Name Change
 
As discussed above in Proposal No. 4, we are proposing to change the name of the CRM Holdings, Ltd. to Majestic Capital, Ltd. The proposed Amended Bye-Laws, if approved, will effect the change of our name in our Bye-Laws.
 
Text of the Proposed Amended and Restated Bye-laws
 
The full text of the proposed Amended and Restated Bye-laws, with the proposed changes reflected therein, is attached to this proxy statement as Appendix B. The summaries of the amendments are qualified in their entirety by reference to the text set forth in Appendix B, which text is hereby incorporated herein by reference.
 
Board of Directors’ Recommendation
 
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED BYE-LAWS.
 
 
50

 
PROPOSAL NO. 6.
 
APPROVE AND AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE SHARE SPLIT OF OUR COMMON AND CLASS B SHARES
 
We are requesting shareholder approval to authorize the Board of Directors, in its discretion, to effect a reverse share split of our common and Class B shares within a range of 1-for-5 shares to 1-for-10 shares, at any time prior to November 5, 2010.
 
Under Section 46(1) of the Companies Act and Section 46 of our Bye-Laws, we may, from time to time, by shareholder vote consolidate and divide all or any of our share capital into shares of larger par value than our existing shares. Shareholder approval of this proposal gives the Board of Directors, in its sole discretion, the ability to implement a reverse share split of our common and Class B Shares within a range of 1-for-5 shares to 1-for-10 shares at any time prior to November 5, 2010.
 
Under Section 3(2)(a) of our Bye-Laws, shareholder approval of this proposal, followed by a subsequent decision by the Board of Directors to implement a reverse share split of our common shares within a range of 1-for-5 to 1-for-10 shares will result in the automatic implementation of the same reverse share split to our Class B shares.
 
However, notwithstanding shareholder approval of this proposal, the Board may, in its sole discretion, determine not to effect, and abandon, the reverse share split without further action by shareholders. Except for adjustments that may result from the treatment of fractional shares as described below, each shareholder will hold the same percentage of common shares outstanding immediately following the reverse share split as that shareholder held immediately before the reverse share split.
 
Purposes of Reverse Share Split
 
The primary purpose of the reverse share split is to increase the per share trading price of our common shares. We believe a reverse share split will increase the price of our common shares to satisfy the Nasdaq $1.00 minimum bid price requirement, and thus help the continued listing of our common shares on the Nasdaq. However, there can be no assurance that the reverse share split, if implemented, will have the desired effect of sufficiently raising the common share price. The effect of a reverse share split upon the market price of the common shares cannot be predicted with any certainty. The market price of the common shares may vary based on other factors that are unrelated to the number of shares outstanding, including our historical and anticipated performance. We also cannot assure you that the common shares will not be delisted due to a failure to meet other continued listing requirements even if after the reverse share split the market price per share of the common shares remains in excess of $1.00. If a delisting from NASDAQ were to occur, we may seek to have the common shares traded on the OTC Bulletin Board or in the “pink sheets.” These alternative markets are generally considered to be less efficient and liquid than the Nasdaq stock market, where our shares are now listed.
 
NASDAQ Listing
 
The Board of Directors’ primary objective in proposing the reverse share split is to raise the per share trading price of our common shares to better enable us to maintain the listing of our common shares on NASDAQ. Our common shares are currently listed on the NASDAQ Global Select Market. On November 10, 2009, we received notice from the NASDAQ Stock Market stating that for 30 consecutive business days, the bid price of our common shares had closed below the minimum $1.00 per share requirement for continued inclusion on the NASDAQ Global Select Market under Marketplace Rule 5450(a)(1). The bid price of our common shares has remained below the minimum $1.00 per share since November 10, 2009.
 
We have until May 10, 2010 to regain compliance with the minimum closing bid price requirement. To regain compliance, the closing bid price of our common shares must meet or exceed $1.00 per share for at least ten consecutive business days. However, under NASDAQ rules, NASDAQ may, in its discretion, require us to maintain a bid price of at least $1.00 per share for a period in excess of 10 consecutive business days, but generally not more than 20 consecutive business days, before determining that we have demonstrated an ability to maintain long-term compliance with the minimum bid price requirement.
 
 
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If we do not regain compliance with the minimum bid price rule by May 10, 2010, Nasdaq will provide notice to us that our common shares will be delisted. At that time, we may appeal Nasdaq’s delisting determination to a Nasdaq Listing Qualifications Panel. Alternatively, we may apply to transfer the listing of our common shares to the NASDAQ Capital Market if we satisfy all criteria for initial listing on the NASDAQ Capital Market, other than compliance with the minimum bid price requirement. One of the criteria for initial listing on the Nasdaq Capital requires that the market value of our publicly held shares total at least $5 million (“publicly held shares” are defined as total shares outstanding, less any shares held directly or indirectly by officers, directors or any person who is the beneficial owner of more than 10% of the total shares outstanding of the company). As of the date of this proxy statement and in the past, the market value of our publicly held shares has been below $5 million. We cannot assure that we will meet all the listing requirements of the Nasdaq Capital Market at the time of our application. If such application to the NASDAQ Capital Market is approved, however, then we may be eligible for an additional 180 day grace period.
 
The reverse share split is intended to raise the bid price of the common shares to satisfy the $1.00 minimum bid price requirement. However, there can be no assurance that the reverse share split, if implemented, will have the desired effect of sufficiently raising the common share price. The effect of a reverse share split upon the market price of the common shares cannot be predicted with any certainty. The market price of the common shares may vary based on other factors that are unrelated to the number of shares outstanding, including our future performance. We also cannot assure you that the common shares will not be delisted due to a failure to meet other continued listing requirements even if after the reverse share split the market price per share of the common shares remains in excess of $1.00. If a delisti ng from NASDAQ were to occur, we may seek to have the common shares traded on the OTC Bulletin Board or in the “pink sheets.” These alternative markets are generally considered to be less efficient and liquid than the Nasdaq stock market, where our shares are now listed.
 
A delisting from NASDAQ could also significantly impact the transferability and issuance of our common under Bermuda law. Specific permission is required from the Bermuda Monetary Authority, pursuant to the provisions of the Exchange Control Act 1972 and related regulations, for all issuances and transfers of securities of Bermuda companies, other than in cases where the Bermuda Monetary Authority has granted a general permission. The Bermuda Monetary Authority has advised that where any equity securities, which would include our common shares, of a Bermuda company are listed on an appointed stock exchange, general permission is given for the issue and subsequent transfer of any securities of a company from and/or to a non-resident, for as long as any equities securities of such company remain so listed. The Nasdaq Stock Market, Inc. is deemed to be an appointed stock exchange under Bermuda law. However, the OTC Bulletin Board and the “pink sheets” are not considered to be appointed stock exchanges. As an alternative, we could seek to apply for listing on the Bermuda Stock Exchange, which is considered an appointed stock exchange, although we cannot assure you that such a listing can be obtained. Consequently, if our common shares are delisted from the Nasdaq and we do not obtain a listing on the Bermuda Stock Exchange, we would no longer qualify for the Bermuda Monetary Authority’s grant of general permission.  As such, the transfer and issuance of our common shares would subject to specific permission of the Bermuda Monetary Authority under the Exchange Control Act 1972.
 
Even if the closing bid price of the common shares satisfies the minimum closing bid price rule prior to the Annual General Meeting or the expiration of additional grace period as a result of a change to the NASDAQ Capital Market, we may still effect the reverse share split if shareholders approve this proposal and the Board of Directors determines that effecting the reverse share split would be in the best interests of the Company and our shareholders.
 
Capital Formation and Ability to Use Form S-3
 
We believe that the failure to effect the reverse share split could impede any future efforts by us to raise capital. We may need to raise additional capital from time to time and may elect to do so through the issuance of equity securities. If our shares are delisted from the NASDAQ stock market, we may find it more difficult to raise capital, even if the shares trade on the OTC Bulletin Board or pink sheets. Further, if our common shares are delisted from NASDAQ, we will be ineligible to use SEC Form S-3 to register additional shares of our common shares in certain circumstances or for resale by others. This will make it more difficult and more expensive for us to register any additional securities, which may adversely affect our ability to raise additional funds.
 
Anticipated Effects of Reverse Share Split
 
Effect on the Market Price of the Common Shares
 
Although we expect that the reverse share split will result in an increase in the market price of our common shares, the reverse share split may not increase the market price of our common shares in proportion to the reduction in the number of shares of common shares outstanding or result in a permanent increase in the market price. For example, based on the closing price of our common shares on March 3, 2010 of $0.51 per share, if the shareholders approve, and the Board of Directors implements, a 1-for-10 reverse share split, there can be no assurance that the post-split market price of the common shares would be $5.10 (10 times this current price) per share or greater. The market price is dependent upon many factors, including our performance, prospects and other factors. If the reverse share split is accomplished and the market price of our common shares declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse share split. In many cases, the market price of a company’s shares declines after a reverse shares split.
 
 
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Effect on the Market for the Common Shares
 
If we are able to maintain the listing of our common shares on NASDAQ, we would not suffer the potential loss of liquidity resulting from delisting. Although we believe that a higher share price may help generate investor interest, there can be no assurance that the reverse share split will result in a per share price that will attract institutional investors or investment funds or that the share price will satisfy the investing guidelines of institutional investors or investment funds. In addition, the reduced number of outstanding common shares resulting from the reverse share split will decrease significantly the number of common shares available for purchase in the market. As a result, the trading liquidity of the common shares may be adversely affected by the reverse share split.
 
Effect on Outstanding Shares
 
Currently, we are authorized to issue up to a total of 50,000,000 shares of common shares, of which 16,518,833 shares were outstanding as of March 3, 2010. In addition, we have 395,000 shares of Class B shares outstanding as of March 3, 2010. The following table contains approximate information relating to the common and Class B Shares under the proposed reverse share split ratios, without giving effect to any adjustments for fractional shares of common shares, as of March 3, 2010:
 
Ratio of Reverse Share Split
 
Approximate
Percentage
Reduction in
Outstanding
Shares
 
Approximate
Outstanding
Common Shares
After Reverse
Stock Split
 
Approximate
Outstanding
Class B Shares
After Reverse
Stock Split
1-for-5
 
80%
 
3,303,767
 
79,000
1-for-6
 
83%
 
2,753,139
 
65,833
1-for-7
 
86%
 
2,359,833
 
56,429
1-for-8
 
88%
 
2,064,854
 
49,375
1-for-9
 
89%
 
1,835,426
 
43,889
1-for-10
 
90%
 
1,651,883
 
39,500

The reverse share split will result in a corresponding change to the par value of our common and Class B shares. The par value of our common and Class B shares will change from $0.01 to within a rage of $0.05 to $0.10, depending on the reverse share split ratio selected by the Board of Directors.

Effect on Outstanding Share Awards
 
The reverse share split, when implemented, will affect our outstanding restricted share awards. Our 2005 Long-Term Incentive Plan (the Plan) includes provisions for appropriate adjustments to the number of shares of common shares covered by the Plan and to grants of share-based awards under the Plan. If shareholders approve the reverse share split and Board implements it, an outstanding restricted share award of shares of common shares would thereafter evidence the right to receive a number of common shares consistent with the reverse share split ratio.
 
Effect on Existing Shareholders; Fractional Shares
 
The number of common shares held by each shareholder will be reduced as a result of the reverse share split. For example, if the Board effects a 1-for-10 reverse share split, a shareholder holding 10,000 common shares before the reverse share split would hold 1,000 common shares, with a par value of $0.10 per share, immediately after the reverse share split.
 
 
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We will not issue fractional shares of common shares. Where a shareholder would have been entitled to a fractional share, we will round up fractional shares to the next whole share. Each shareholder’s proportionate ownership of outstanding of common shares would remain the same, except for minor differences resulting from the rounding up of fractional shares. A reverse share split may leave certain shareholders with one or more “odd lots,” which are shares holdings in amounts of fewer than 100 common shares. These odd lots may be more difficult to sell than common shares in even multiples of 100. Shareholders selling odd lots created by the reverse share split may incur increased brokerage commissions in selling such shares.
 
Effect on the Company
 
We expect our business and operations to continue as they are currently being conducted and the reverse share split is not anticipated to have any effect upon the conduct of our business. We expect to incur expenses of approximately $5,000 to effect the reverse share split.
 
Effect on Registration under the Securities Exchange Act of 1934
 
Our common shares are currently registered under Section 12(b) of the Securities Exchange Act of 1934, and we are subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934. The proposed reverse share split will not affect the registration of the common shares under the Securities Exchange Act of 1934 or our periodic reporting requirements. If the proposed reverse share split is implemented, we currently expect that the common shares will continue to be traded on the NASDAQ stock market, provided that we meet the continued listing requirements (although NASDAQ would likely add the letter “D” to the end of the trading symbol for a period of 20 trading days to indicate that the reverse share split has occurred).
 
Accounting Effects
 
Net earnings/loss per share and book value per share will be increased as a result of the reverse share split because there will be fewer shares of common shares outstanding, although the reverse share split will have no effect on our aggregate earnings or book value. Appropriate adjustments will be made to the shareholders equity account on our balance sheet to reflect the decrease in issued and outstanding shares.
 
Exchange of Certificates
 
Shareholders holding shares in certificate form will be sent a transmittal letter by the transfer agent after the effectiveness of the reverse share split. The letter of transmittal will contain instructions on how a shareholder should surrender its, his or her certificate(s) to the transfer agent in exchange for certificates representing the appropriate number of whole shares post-reverse share split. No new certificates will be issued to a shareholder until such shareholder has surrendered all old certificates, together with a properly completed and executed letter of transmittal, to the transfer agent. No shareholder will be required to pay a transfer or other fee to exchange his, her or its old certificates for new certificates registered in the same name.
 
Upon surrendering all old certificates together with a properly completed and executed letter of transmittal, shareholders will receive a new certificate(s) representing the number of whole common shares or Class B shares which they are entitled as a result of the reverse share split. Until surrendered, we will deem outstanding old certificates held by shareholders to represent the number of whole shares of post-reverse share split common shares or Class B shares to which these shareholders are entitled.
 
If an old certificate has a restrictive legend on the back of the old certificate, the new certificate will be issued with the same restrictive legend that is on the back of the old certificate. Any shareholder whose old certificate has been lost, destroyed or stolen will be entitled to a new certificate only after complying with the requirements that the Company and the transfer agent customarily apply in connection with lost, stolen or destroyed certificates.
 
Shareholders who hold un-certificated shares, either as direct or beneficial owners, will have their holdings electronically adjusted by the transfer agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the reverse share split.
 
 
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Upon the reverse share split, we intend to treat common shares held by shareholders in “street name,” that is, through a bank, broker or other nominee, in the same manner as shareholders whose common shares are registered in their names. Banks, brokers or other nominees will be asked to effect the reverse share split for their beneficial holders holding the common shares in “street name.” However, these banks, brokers or other nominees may have different procedures than registered shareholders for processing the reverse share split. If a shareholder holds shares of common shares with a bank, broker or other nominee and has any questions in this regard, the shareholder is encouraged to contact the shareholder’s bank, broker or other nominee.
 
Shareholders should not destroy any shares certificate(s) and should not submit any shares certificate(s) until requested to do so.
 
United States Federal Income Tax Consequences
 
The following summary of certain United States federal income tax consequences of the reverse share split is based on current law, including the Internal Revenue Code of 1986, as amended, and is for general information only. The tax consequences of the reverse share split to a shareholder may vary depending upon the particular facts and circumstances of such shareholder.  In addition, the discussion below does not address all the tax consequences that may apply to a particular shareholder. For example, the discussion does not address United States state and local tax consequences and non-United States tax consequences of the reverse shares split. The summary does not address the tax consequences to shareholders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, non-United States entities, individuals who are nonresident aliens of the United States, broker-dealers and tax-exempt entities. Accordingly, each shareholder should consult his, her or its tax advisor to determine the particular tax consequences to him, her or it of the reverse share split, including the application and effect of United States federal, state, local and/or non-United States income tax and other laws. The following summary assumes that shares of common shares are held as “capital assets” within the meaning of the Internal Revenue Code of 1986, as amended.
 
Generally, the reverse share split should not result in the recognition of gain or loss for federal income tax purposes. The aggregate adjusted basis of the post-reverse share split common shares held by a shareholder will be the same as the aggregate adjusted basis of pre-reverse share split common shares exchanged therefor. The adjusted basis for each post split share will be the aggregate adjusted basis of the pre-reverse share split common shares divided by the number of post-reverse share split common shares held by such shareholder. The holding period of the post-reverse share split common shares will include the shareholder’s holding period for the pre-reverse share split common shares exchanged therefor.
 
Board of Directors Discretion
 
Although the Board of Directors requests shareholder approval of the proposed reverse share split, the Board reserves the authority to decide, in its discretion, to abandon or delay the reverse share split after such vote and before the effectiveness of the reverse share split. For example, the Board may decide in its discretion to abandon or delay the reverse share split if we are in compliance with the NASDAQ Global Select Market continued listing requirements at the time of the Annual General Meeting. Further, the Board may decide in its discretion to abandon or delay the revere share split if we are approved for listing on the NASDAQ Capital Select Market and are entitled to an additional 180-day grace period to regain compliance with the continued listing requirements. If the Board fails to effect the reverse s hare split on or before November 5, 2010, shareholder approval again would be required prior to implementing any subsequent reverse share split.
 
In determining the ratio of the reverse stock split, the Board will assess numerous factors including but not limited to analysis of our most recent financial results as well as general economic conditions, and will place emphasis on the closing price of our common shares on the days immediately preceding the day on which the reverse share split is implemented. The judgment of the Board as to whether to implement the reverse share split, or the ratio if implemented, shall be conclusive.
 
No Dissenters Rights
 
The holders of common shares will have no dissenters’ rights of appraisal under Bermuda law, the Memorandum of Association or the Bye-Laws with respect to the proposed reverse share split.
 
 
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Approval Required
 
The approval of this proposal requires the affirmative vote of a majority of the votes cast at the Annual General Meeting, provided there is a quorum.
 
Board of Directors’ Recommendation
 
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF A REVERSE SHARE SPLIT WITHIN A RANGE OF 1-FOR-5 SHARES TO 1-FOR-10 SHARES AT ANY TIME PRIOR TO NOVEMBER 5, 2010, AND THE AUTHORITY FOR THE BOARD OF DIRECTORS TO EFFECT SUCH SHARE SPLIT IN ITS DISCRETION.
 
 
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OTHER MATTERS
 
Shareholder Proposals
 
To be considered for inclusion in next year’s proxy statement, shareholder proposals should be received at our principal executive offices no later than the close of business on December 1, 2010. Proposals should be addressed to: Louis J. Viglotti, Esq., General Counsel and Secretary, PO Box HM 2062, Hamilton HM HX, Bermuda. The proposal should comply in all respects with the rules and regulations of the Securities and Exchange Commission and our Bye-Laws.
 
If a shareholder would like to nominate one or more individuals for election as a director at the 2011 Annual General Meeting, written notice of the proposal must be received at our registered office no earlier than November 1, 2010 nor later than December 1, 2010. Any notice for a director nomination shall include the information described above under the section entitled “The Board and Board Committees – Nominating and Corporate Governance Committee.”
 
Future Electronic Delivery of Documents to Our Shareholders
 
 We are pleased to offer electronic delivery of documents to our shareholders. This initiative is intended to make future shareholder communications more convenient and timely for you, provide benefits for our environment and reduce our costs.
 
Electronic Access to Shareholder
 
This initiative provides our shareholders with the ability to access electronically the following important company documents quickly and easily:
 
 
·
annual report, including financial statements;
 
 
·
quarterly reports, including financial statements;
 
 
·
notice of future shareholder meetings; and
 
 
·
proxy circular and proxy statement and proxy-related materials.
 
While we believe that many shareholders prefer electronic access, we understand that this approach may not be accessible or suitable for everyone. Accordingly, we continue to provide paper copies of our documents for those shareholders who prefer documents in paper format. If this is your preference, you do not need to do anything further to continue to receive our documents.
 
How to Enroll for Electronic Access of Documents
 
Please visit our website, www.crmholdingsltd.bm, for an opportunity to enroll for electronic delivery of proxy related documents and other shareholder information as they become available. Enter “News and Events” under the “Shareholder Services” link. Enrollment is easy. Select the documents which you would like to receive electronically and you will be prompted to enter your name and email address. You will receive an email confirming receipt of your online registration. This will authorize us to notify you by e-mail as these mailings become available on the Internet, so you can view them online, eliminating the mailing of paper copies to your home.
 
Your enrollment for electronic access will remain in effect until you cancel it. You may cancel your enrollment or change your email address at any time by accessing our website at www.crmholdingsltd.bm. You will see a link to unsubscribe at the bottom of the “News and Events” page of the “Shareholder Services” link. We hope that you will take advantage of this online service.
 
 
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APPENDIX A
 
RESOLVED:
 
That the name of CRM Holdings, Ltd. be changed from “CRM HOLDINGS, LTD.” to “MAJESTIC CAPITAL, LTD.”
 

 
 
 
 
 
 
 
 
 
 
 
 

 
APPENDIX B
 
 
 
 
 
 
 
 

 
AMENDED AND RESTATED BYE-LAWS

of

CRM HOLDINGS, LTD.MAJESTIC CAPITAL, LTD.