W. R. BERKLEY CORPORATION
475 STEAMBOAT ROAD
GREENWICH, CONNECTICUT 06830
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 2002
------------------------------
To The Stockholders of
W. R. BERKLEY CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of W. R.
Berkley Corporation, a Delaware corporation (the "Company"), will be held at the
offices of the Company, 475 Steamboat Road, Greenwich, Connecticut, on Tuesday,
May 14, 2002 at 2:30 p.m. for the following purposes:
(1) To elect three directors to serve until their successors are duly
elected and qualify;
(2) To approve the W. R. Berkley Corporation Annual Incentive Compensation
Plan;
(3) To ratify the appointment of KPMG LLP as independent certified public
accountants for the Company for the fiscal year ending December 31,
2002; and
(4) To consider and act upon any other matters which may properly come
before the Annual Meeting or any adjournment thereof.
In accordance with the provisions of the Company's By-Laws, the Board of
Directors has fixed the close of business on March 20, 2002 as the date for
determining stockholders of record entitled to receive notice of, and to vote
at, the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
You are cordially invited to attend the Annual Meeting. If you do not
expect to attend the Annual Meeting in person, please vote, date, sign and
return the enclosed proxy as promptly as possible in the enclosed reply
envelope.
By Order of the Board of Directors,
IRA S. LEDERMAN
Senior Vice President,
General Counsel and Secretary
Dated: April 5, 2002
W. R. BERKLEY CORPORATION
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 2002
------------------------------
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of W. R. Berkley
Corporation (the "Company") for use at the Annual Meeting of Stockholders to be
held at the offices of the Company, 475 Steamboat Road, Greenwich, Connecticut,
on Tuesday, May 14, 2002 at 2:30 p.m. and at any adjournment thereof. The giving
of a proxy does not preclude a stockholder from voting in person at the Annual
Meeting. The proxy is revocable before its exercise by delivering either written
notice of such revocation or a later dated proxy to the Secretary of the Company
at its executive office at any time prior to voting of the shares represented by
the earlier proxy. In addition, stockholders attending the Annual Meeting may
revoke their proxies by voting at the Annual Meeting. The expense of preparing,
printing and mailing this Proxy Statement will be paid by the Company. The
Company has engaged Georgeson Shareholder Communications, Inc. to assist in the
solicitation of proxies from stockholders for a fee estimated at $7,500. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by regular employees of the Company without additional compensation,
as well as by employees of Georgeson Shareholder Communications, Inc. The
Company will reimburse banks, brokers and other custodians, nominees and
fiduciaries for their costs in sending the proxy materials to the beneficial
owners of the Company's Common Stock, par value $.20 per share (the "Common
Stock"). The Annual Report of the Company for the fiscal year ended December 31,
2001 is being mailed to all stockholders with this Proxy Statement. The
approximate mailing date is April 5, 2002.
A list of stockholders will be available for inspection for at least ten
days prior to the Annual Meeting at the principal executive office of the
Company at 475 Steamboat Road, Greenwich, Connecticut 06830.
The matters to be acted upon are described in this Proxy Statement. Proxies
will be voted at the Annual Meeting, or at any adjournment thereof, at which a
quorum is present, in accordance with the directions on the proxy. Votes cast by
proxy or in person at the Annual Meeting will be tabulated by election
inspectors appointed for the Annual Meeting. The election inspectors will also
determine whether a quorum is present. The holders of a majority of the Common
Stock outstanding and entitled to vote who are present either in person or
represented by proxy constitute a quorum for the Annual Meeting. The election
inspectors will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum, but as unvoted for
purposes of determining the approval of any matter submitted. If a broker
indicates on a proxy that it does not have discretionary authority as to certain
shares to vote on a particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter.
1
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on March 20, 2002 are
entitled to receive notice of and to vote at the Annual Meeting. The number of
shares of voting stock of the Company outstanding on that date was 33,498,607
shares of Common Stock, and the number of shares of voting stock of the Company
entitled to vote was 33,328,607 shares of Common Stock. Each such share of
Common Stock is entitled to one vote. The difference between the number of
shares of Common Stock outstanding and the number of shares entitled to vote is
the 170,000 shares of Common Stock that were purchased in 1997 by William R.
Berkley with the proceeds of a recourse promissory note secured by the shares
purchased. See "Transactions with Management and Others." Executive officers and
directors of the Company own or control approximately 15% of the outstanding
Common Stock. Information as to persons beneficially owning 5% or more of the
Common Stock may be found under the heading "Principal Stockholders" herein.
Unless otherwise directed in the proxy, the persons named therein will vote
"FOR" the election of the director nominees listed below, "FOR" the approval of
the W. R. Berkley Corporation Annual Incentive Compensation Plan and "FOR" the
ratification of the appointment of KPMG LLP as the Company's independent
certified public accountants for its fiscal year ending December 31, 2002. If a
returned proxy does not specify a vote for or against a proposal, it will be
voted in favor thereof.
The election of directors, the approval of the W. R. Berkley Corporation
Annual Incentive Compensation Plan and the ratification of the appointment of
KPMG LLP require the affirmative vote of a majority of the shares present at the
meeting to constitute the action of the stockholders.
As of the date hereof, the Board of Directors knows of no other business
that will be presented for consideration at the Annual Meeting. If other
business shall properly come before the Annual Meeting, the persons named in the
proxy will vote according to their best judgment.
ELECTION OF DIRECTORS
As permitted by Delaware law, the Board is divided into three classes, the
classes being divided as equally as possible and each class having a term of
three years. Each year the term of office of one class expires. This year the
term of a class consisting of three directors expires. It is the intention of
the Board that the shares represented by proxy, unless otherwise indicated
thereon, will be voted for the election of Richard G. Merrill, Jack H. Nusbaum
and Mark L. Shapiro as directors to hold office for a term of three years until
the Annual Meeting of Stockholders in 2005 and until their respective successors
are duly elected and qualify.
The persons designated as proxies reserve full discretion to cast votes for
other persons in the event any such nominee is unable to serve. However, the
Board has no reason to believe that any nominee will be unable to serve if
elected. The proxies cannot be voted for a greater number of persons than the
three named nominees.
2
The following table sets forth information regarding each nominee and the
remaining directors who will continue in office after the Annual Meeting.
<Table>
<Caption>
SERVED AS
DIRECTOR
CONTINUOUSLY BUSINESS EXPERIENCE DURING PAST 5 YEARS
NOMINEES TO SERVE IN OFFICE UNTIL 2005 SINCE/AGE AND OTHER INFORMATION
- -------------------------------------- ------------ -----------------------------------------
Richard G. Merrill(1)........................... 1994 Executive Vice President of Prudential
Age 71 Insurance Company of America from August
1987 to March 1991 when he retired. Prior
thereto, Mr. Merrill served as Chairman
and President of Prudential Asset
Management Company since 1985. Mr.
Merrill is also a director of Sysco
Corporation.
Jack H. Nusbaum(2)(3)(5)........................ 1967 Chairman of the New York law firm of
Age 61 Willkie Farr & Gallagher, where he has
been a partner for more than the last
five years. He is also a director of
Associated Community Bancorp, Inc.;
Neuberger Berman Inc.; Prime Hospitality
Corp.; Strategic Distribution, Inc.; and
The Topps Company, Inc.
Mark L. Shapiro(3)(4)........................... 1974 Since September 1998, Mr. Shapiro has
Age 58 been a private investor. From July 1997
through August 1998, Mr. Shapiro was a
Senior Consultant to the Export-Import
Bank of the United States. For more than
five years prior thereto, he was a
Managing Director in the investment
banking firm of Schroder & Co. Inc.
</Table>
3
<Table>
<Caption>
SERVED AS
DIRECTOR
CONTINUOUSLY BUSINESS EXPERIENCE DURING PAST 5 YEARS
DIRECTORS TO CONTINUE IN OFFICE UNTIL 2003 SINCE/AGE AND OTHER INFORMATION
- ------------------------------------------ ------------ -----------------------------------------
William R. Berkley(2)(5)........................ 1967 Chairman of the Board and Chief Executive
Age 56 Officer of the Company since its
formation in 1967. He also serves as
President and Chief Operating Officer, a
position which he has held since March 1,
2000 and has held at various times from
1967 to 1995. Mr. Berkley also serves as
Chairman of the Board or director of a
number of public and private companies.
These include Associated Community
Bancorp, Inc. and its subsidiaries, The
Greenwich Bank & Trust Company and
Westport National Bank; Strategic
Distribution, Inc.; and Interlaken
Capital, Inc. Mr. Berkley is the father
of William R. Berkley, Jr.
George G. Daly(1)............................... 1998 Dean, Stern School of Business, and Dean
Age 61 Richard R. West Professor of Business,
New York University, for more than the
past five years. In addition to his
academic career, Dr. Daly served as Chief
Economist at the U.S. Office of Energy
Research and Development in 1974.
Robert B. Hodes(4).............................. 1970 Counsel to the New York law firm of
Age 76 Willkie Farr & Gallagher, where prior
thereto he had been a partner for more
than five years. He is also a director of
K&F Industries, Inc.; Loral Space &
Communications, Ltd.; Mueller In-
dustries, Inc.; Leveraged Capital
Holdings, N.V.; and R.V.I. Guaranty, Ltd.
</Table>
4
<Table>
<Caption>
SERVED AS
DIRECTOR
CONTINUOUSLY BUSINESS EXPERIENCE DURING PAST 5 YEARS
DIRECTORS TO CONTINUE IN OFFICE UNTIL 2004 SINCE/AGE AND OTHER INFORMATION
- ------------------------------------------ ------------ -----------------------------------------
William R. Berkley, Jr.......................... 2001 Senior Vice President of the Company
Age 29 since January 2002 and President of
Berkley International, LLC since January
2001. Mr. Berkley served previously as
Vice President of the Company from May
2000 and Executive Vice President of
Berkley International, LLC from March
2000. He joined the Company in Sep-
tember 1997. From July 1995 to August
1997, Mr. Berkley was employed in the
Corporate Finance Department of Merrill
Lynch Investment Company. Mr. Berkley is
also a director of Associated Community
Bancorp, Inc.; Westport National Bank;
Middlesex Bank and Trust Company;
GiftCertificates.com, Inc.; and
Interlaken Capital, Inc. Mr. Berkley is
the son of William R. Berkley.
Ronald E. Blaylock(3)(4)........................ 2001 Founder, Chairman and Chief Executive Of-
Age 42 ficer of Blaylock & Partners, L.P., an
investment banking firm. Mr. Blaylock
held senior management positions with
PaineWebber Group and Citicorp before
launching Blaylock & Partners in 1993.
Mr. Blaylock is also a director of the
American General Life Insurance Company
of New York.
Mark E. Brockbank(1)............................ 2001 Self-employed insurance consultant since
Age 50 November 2000. Prior thereto, Mr.
Brockbank served from 1995 to 2000 as
Chief Executive of XL Brockbank LTD, an
underwriting management agency at Lloyd's
of London. Mr. Brockbank was a founder of
the predecessor firm of XL Brockbank LTD
and was a director of XL Brockbank LTD
from 1983 to 2000.
</Table>
- ------------------------------
(1) Member of Compensation and Stock Option Committee.
(2) Member of Executive Committee.
(3) Member of Business Ethics Committee.
(4) Member of Audit Committee.
(5) Member of Pricing Committee.
5
BOARD OF DIRECTORS AND COMMITTEES
During 2001, the Board had five standing committees: the Compensation and
Stock Option Committee, the Executive Committee, the Business Ethics Committee,
the Audit Committee and the Pricing Committee.
The Board met four times and held three telephone meetings during 2001. No
director attended fewer than 75% of the total number of meetings of the Board
and all committees on which he served.
The Compensation and Stock Option Committee was composed of Messrs. Daly,
Merrill and Henry Kaufman until May 15, 2001, at which time Mr. Brockbank
replaced the retired Mr. Kaufman. The Committee reviews management compensation
standards and practices and makes such recommendations to the Board as it deems
appropriate. The Committee also administers the First Amended and Restated W. R.
Berkley Corporation 1992 Stock Option Plan (the "Stock Option Plan"). During
2001, the Committee met four times and took action by unanimous written consent
on one occasion.
The Executive Committee is authorized to act on behalf of the Board during
periods between Board meetings. The Committee is composed of Messrs. William R.
Berkley and Nusbaum. During 2001, the Committee took action by unanimous written
consent on two occasions.
The Business Ethics Committee, which during 2001 was composed of Messrs.
Nusbaum, Shapiro and Martin Stone until May 15, 2001, at which time Mr. Blaylock
replaced the retired Mr. Stone, administers the Company-wide Business Ethics
program. During 2001, the Committee held one meeting.
The Audit Committee, which during 2001 was composed of Messrs. Hodes,
Shapiro and Stone until May 15, 2001, at which time Mr. Blaylock replaced the
retired Mr. Stone, assists the Board in fulfilling its responsibility relating
to the Company's accounting and reporting practices and the quality and
integrity of its financial reports; advises the Board as to the selection of the
Company's independent public accountants; monitors their performance and reviews
matters relative to their independence; reviews the annual financial statements
and reports submitted by such accountants; and reviews the internal audit
function and consults with the independent accountants with regard to the
adequacy of internal controls. Each of the members of the Audit Committee is
independent within the meaning of the listing standards of the New York Stock
Exchange. During 2001, the Committee met four times and held two telephone
meetings. The Board of Directors has adopted a written charter for the Audit
Committee.
The Pricing Committee, which during 2001 was composed of Messrs. William R.
Berkley and Nusbaum, acts in the event of certain offerings of the Company's
securities. During 2001, the Committee held two telephone meetings.
6
AUDIT COMMITTEE REPORT
To the Board of Directors of W. R. Berkley Corporation:
The Audit Committee of the Board of Directors met with management and the
independent accountants, KPMG LLP, to review and discuss the December 31, 2001
financial statements. The Audit Committee also discussed with the independent
accountants the matters required by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Audit Committee also received written
disclosures from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), and the
Audit Committee discussed with the independent accountants that firm's
independence.
Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the representations
of management and the independent accountants, the Audit 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 fiscal year ended
December 31, 2001, to be filed with the Securities and Exchange Commission.
Audit Committee
Mark L. Shapiro, Chairman
Ronald E. Blaylock
Robert B. Hodes
March 21, 2002
The above report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
DIRECTOR COMPENSATION
For 2001, each director received a quarterly retainer of $6,000 and a fee
of $1,500 for each Board meeting attended. In addition, on May 15, 2001,
pursuant to the Company's 1997 Directors Stock Plan, each continuing director
received 188 shares of Common Stock. The number of shares to be granted to each
director under such Plan for each year is determined by dividing $7,500 by the
closing price of the Common Stock on the trading day preceding the date of the
Annual Meeting of Stockholders for the year in which the grant is made. For
2001, the annual retainer, the fees and the fair market value of such shares of
Common Stock on the date of grant are included in the Summary Compensation Table
for William R. Berkley. These shares of Common Stock are also included in the
tables under "Principal Stockholders."
7
PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 20, 2002 those persons known by
the Company to be the beneficial owners of more than 5% of the Common Stock:
<Table>
<Caption>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------------------ ----------------------- --------
William R. Berkley 4,843,857(1) 14.5%
475 Steamboat Road
Greenwich, CT 06830
Franklin Resources, Inc. 3,115,601(2) 9.4%(5)
777 Mariners Island Boulevard
San Mateo, CA 94404
Gilder, Gagnon, Howe & Co. LLC 2,300,417(3) 6.9%(5)
1775 Broadway
New York, NY 10019
Janus Capital Corporation 2,292,710(4) 6.9%(5)
100 Fillmore Street
Denver, CO 80206
</Table>
- ------------------------------
(1) Includes 12,583 shares of Common Stock held by Mr. Berkley's wife, as to
which shares he disclaims beneficial ownership, 3,401 shares held in several
accounts for his children as to which Mr. Berkley is a custodian and 895,000
shares which are subject to currently exercisable stock options. Also
includes 170,000 shares of Common Stock which were purchased by Mr. Berkley
with the proceeds of a recourse promissory note secured by the shares
purchased. See "Transactions with Management and Others."
(2) Information obtained from a Schedule 13G, dated February 1, 2002, filed with
the Securities and Exchange Commission on behalf of Franklin Resources, Inc.
The Schedule 13G reported ownership of 3,115,601 shares of Common Stock then
outstanding. The Schedule 13G reported that Templeton Global Advisors
Limited has sole voting and dispositive power over 3,108,100 shares and that
Fiduciary Trust Company International Limited has sole voting and
dispositive power over 7,501 shares.
(3) Information obtained from a Schedule 13G, dated February 11, 2002, filed
with the Securities and Exchange Commission on behalf of Gilder, Gagnon,
Howe & Co. LLC ("GGH&C"). The Schedule 13G reported ownership of 2,300,417
shares of Common Stock then outstanding. The Schedule 13G reported that
GGH&C has sole voting power over 7,650 shares and shared dispositive power
over 2,300,417 shares.
(4) Information obtained from a Schedule 13G, dated February 8, 2002, filed with
the Securities and Exchange Commission on behalf of Janus Capital
Corporation ("JCC"). The Schedule 13G reported ownership of 2,292,710 shares
of Common Stock then outstanding. The Schedule 13G reported that JCC has
sole voting power and dispositive power over 2,292,710 shares.
(5) The percent of class shown was based on the shares of Common Stock reported
on the respective Schedules 13G and the total number of shares outstanding
as of December 31, 2001. Assuming the beneficial ownership for these holders
did not change, the percent of class based on the shares of Common Stock
outstanding as of March 20, 2002 would be 9.3%, 6.9% and 6.8%, respectively.
8
The following table sets forth information as of March 20, 2002 regarding
ownership by all directors and executive officers of the Company, as a group,
and each director and each executive officer named in the Summary Compensation
Table, individually, of the Common Stock. Except as described in the footnotes
below, all amounts reflected in the table represent shares the beneficial owners
of which have sole voting and investment power.
<Table>
<Caption>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------- --------------------------- -----------
All directors, and executive
officers as a group 5,119,617(1)(2)(3)(4)(5)(6) 15.3%
Eugene G. Ballard 1,000 *
William R. Berkley 4,843,857(1)(2) 14.5%
William R. Berkley, Jr. 2,320(7) *
Ronald E. Blaylock 2,000 *
Mark E. Brockbank 35,600 *
George G. Daly 1,784 *
Robert B. Hodes 10,934 *
Ira S. Lederman 33,417(2)(3) *
James W. McCleary 36,273(2) *
Richard G. Merrill 12,284(4) *
Jack H. Nusbaum 14,600(5) *
Mark L. Shapiro 3,502 *
James G. Shiel 32,558(2) *
</Table>
- ------------------------------
* less than 1%
(1) Includes 12,583 shares of Common Stock held by Mr. Berkley's wife, as to
which shares he disclaims beneficial ownership, 3,401 shares held in several
accounts for his children as to which Mr. Berkley is a custodian and 895,000
shares which are subject to currently exercisable stock options. Also
includes 170,000 shares of Common Stock which were purchased by Mr. Berkley
with the proceeds of a recourse promissory note secured by the shares
purchased. See "Transactions with Management and Others."
(2) The amounts shown for Messrs. Berkley, Lederman, McCleary and Shiel include
895,000, 15,338, 17,000 and 23,750 shares of Common Stock, respectively,
which are subject to currently exercisable stock options.
(3) The amount shown for Mr. Lederman includes 1,206 shares of Common Stock held
in accounts for his children as to which Mr. Lederman is a custodian and
15,338 shares which are subject to currently exercisable stock options.
(4) The amount shown for Mr. Merrill includes 11,200 shares of Common Stock held
in a family trust with Mr. Merrill and his spouse as trustees.
(5) The amount shown for Mr. Nusbaum includes 3,000 shares of Common Stock held
in several trusts as to which Mr. Nusbaum is a co-trustee with United States
Trust Company of New York and as to which he shares voting and investment
power with United States Trust Company of New York.
(6) The amounts shown for all directors and executive officers as a group
include an aggregate of 1,015,950 shares of Common Stock which are subject
to currently exercisable stock options held by executive officers of the
Company and 1,265 shares of Common Stock which are held by an executive
officer under the Company's Profit Sharing Plan.
(7) The amount shown for Mr. Berkley, Jr. is included in the amount reported by
William R. Berkley.
The Company knows of no arrangements, including any pledge by any person of
securities of the Company, the operation of which may at a subsequent date
result in a change of control of the Company. Under applicable Insurance Holding
Company Acts in various states, a potential owner
9
cannot exercise voting control over an amount in excess of 10% of the Company's
outstanding voting securities (5% in the State of Florida) without obtaining
prior regulatory approval.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1997, the Company loaned William R. Berkley $3,496,050, an amount
equal to the aggregate exercise price of 170,000 shares of Common Stock
purchased by Mr. Berkley pursuant to the Stock Option Plan and one or more
predecessor plans. The loan is represented by a recourse promissory note which
is secured by the 170,000 shares of Common Stock, matures on December 29, 2002
and bears interest at the minimum rate which can be charged without causing the
loan to be treated as a "below market loan" for purposes of Section 7872 of the
Internal Revenue Code of 1986, as amended (the "Code"). Pursuant to the terms of
such plans, Mr. Berkley will have the right to exercise voting rights with
respect to the purchased shares at such time as the purchase price therefor is
paid, and cash dividends on such shares will be payable based on the percentage
of the purchase price received thereon by the Company. As of the date hereof,
the full amount of the loan, together with accrued interest thereon, is
outstanding.
During 2001, the Company loaned William R. Berkley $1,500,000. The loan was
represented by an unsecured recourse promissory note which was due to mature on
June 1, 2002 (its original maturity date of June 1, 2001 was extended) and bore
interest at the minimum rate which could be charged without causing the loan to
be treated as a "below market loan" for purposes of Section 7872 of the Code. As
of the date hereof, the full amount of the loan and interest thereon has been
repaid by Mr. Berkley.
During 2001, the Company engaged in a transaction with a company controlled
by its Chairman of the Board, William R. Berkley. In this transaction, such
company paid $60,000 in rental fees to the Company for space in the Company's
premises.
During 2001, subsidiaries of the Company invested an aggregate of
$5,000,000 in unsecured promissory notes of a company of which William R.
Berkley is a director and in which William R. Berkley and William R. Berkley,
Jr. have, directly or indirectly, equity interests. The notes mature in three
years and bear interest at a minimum rate of 10% per annum. In connection with
the investment, the subsidiaries received conditional warrants to purchase
common stock of this company.
Robert B. Hodes and Jack H. Nusbaum, both directors of the Company, are
Counsel to and Chairman of, respectively, Willkie Farr & Gallagher, outside
counsel to the Company.
10
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
CEO COMPENSATION. The Compensation and Stock Option Committee follows a
compensation philosophy under which a principal determinant is the financial
performance of the Company, together with achievement of non-financial corporate
objectives and individual performance. The Compensation and Stock Option
Committee believes that this approach should provide incentives to the Chief
Executive Officer (the "CEO") and other management personnel to focus on meeting
both financial and non-financial goals that in turn should enhance stockholder
value. The CEO's compensation is set based on the Committee's subjective
evaluation of these factors and the CEO's individual performance.
The Committee has retained the firm of The Ross Companies ("Ross") to
provide advice with respect to executive compensation. Ross advised the
Committee with respect to the plans referred to below and the proposed Annual
Incentive Compensation Plan and with respect to the compensation of the CEO for
2001.
At its meeting on March 13, 2001, based on the factors stated above and the
advice of Ross, the Committee determined that the CEO's salary for 2001 should
remain at $1,000,000.
For purposes of setting incentive compensation for the CEO, the Committee
has determined that the Company consider the limitations on tax deductibility
imposed under Section 162(m) of the Code. Section 162(m) limits deductions for
compensation in excess of $1,000,000 per year paid by a public corporation to
certain of its executives unless certain criteria are met. In order to meet the
criteria, the Committee has determined that, subject to the matters discussed
below, the CEO's incentive compensation should be structured to qualify as
"performance-based compensation," which is exempt from the deduction limits. In
general, this rule requires that the CEO's incentive compensation be based on
attainment of one or more objective performance goals and that the Company's
stockholders approve both the performance goals and the amount that can be
earned. For these reasons, the incentive compensation for the CEO is generally
payable and/or granted under the Company's Long-Term Incentive Compensation
Plan, Annual Incentive Compensation Plan and Stock Option Plan, each of which
was approved or, in the case of the Stock Option Plan, amended, by stockholders
at the Company's 1997 Annual Meeting, and is designed so that compensation
payable thereunder, or attributable to the exercise of options, will be exempt
from the deduction limits. The Committee may, in its discretion and where deemed
appropriate, pay compensation to the CEO or other executive officers in addition
to compensation earned under these plans. Such additional compensation would not
qualify as "performance-based compensation" and would not be exempt from the
deduction limits. The Committee believes that at times there are circumstances
where the payment of such additional compensation is justified as a means of
furthering the Company's interest in retaining and rewarding its key personnel.
For 2001, because the Company incurred a net loss, no annual incentive
payment for the CEO was earned under the Annual Incentive Compensation Plan.
However, the Committee decided to award the CEO a discretionary bonus of
$2,000,000 in recognition of achievements he made in 2001, some of which were
beyond the criteria set forth in the Annual Incentive Compensation Plan.
Consideration was given in making this award to, among other things, the
increase in stockholder value during the year.
11
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY. The Committee believes that
it continues to be important to use incentive compensation to enable the Company
to attract and reward executives who contribute to the Company's long-term
success by demonstrated, sustained performance. To this end, the Company relies
on cash and individual bonus awards and on equity-based compensation through the
Stock Option Plan. The Company may also award equity-based compensation through
the Long-Term Incentive Compensation Plan. The Company has not entered into
employment agreements with any of its officers.
With respect to base compensation for executive officers other than the
CEO, the Committee considered the Company's performance and past pay levels and
the recommendations of the CEO with respect to such compensation. Incentive
compensation for such executive officers for 2001 was established by the CEO and
reviewed with the Committee.
LONG-TERM INCENTIVE COMPENSATION PLAN. Based on the factors stated above,
awards of 79,500 Units were made for 2001 under the Long-Term Incentive
Compensation Plan, with 40,000 Units awarded to the CEO.
STOCK OPTION GRANTS. It has been the Company's practice to grant stock
options every other year, although the Committee may also grant options from
time to time in its discretion, and the Company may change such practice if it
determines a change to be in its best interests. Under the Stock Option Plan,
options may be granted to the CEO and to other executives based on an evaluation
of each individual's ability to influence the Company's long-term growth and
profitability. The Committee also considers a recipient's annual salary. During,
2001, options for 400,000 shares of Common Stock were granted to the CEO and
options for 140,950 shares of Common Stock were granted to other officers.
Compensation and Stock Option
Committee
Mark E. Brockbank
George G. Daly
Richard G. Merrill
March 21, 2002
The above report of the Compensation and Stock Option Committee shall not
be deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933
or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
12
EXECUTIVE COMPENSATION
The following table sets forth all the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chairman of the
Board and Chief Executive Officer of the Company and the four other highest paid
executive officers of the Company whose earnings exceeded $100,000 in salary and
bonus.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<Table>
<Caption>
SECURITIES
OTHER UNDERLYING
ANNUAL LTIP OPTIONS ALL OTHER
NAME AND SALARY BONUS COMPENSATION PAYMENTS GRANTED COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------------ ---- --------- --------- ------------ -------- ---------- ------------
William R. Berkley.......... 2001 1,030,000(1) 2,000,000 257,385(2) 912,000 400,000 110,576(3)
Chairman of the........... 2000 1,030,000(1) 2,002,550 245,128(4) -- 70,000 119,231
Board and Chief........... 1999 920,000(1) -- 279,443(5) -- -- 97,492
Executive Officer
James G. Shiel.............. 2001 367,500 175,000 -- 33,600 -- 56,003(3)
Senior Vice President..... 2000 337,500 175,100 -- -- 13,500 56,024
Investments............... 1999 320,000 110,000 -- -- -- 45,860
James W. McCleary........... 2001 293,710(6) 175,000 -- 33,600 -- 33,813(3)
Senior Vice President..... 2000 263,692 140,000 -- -- 12,500 31,852
Reinsurance Operations;... 1999 253,550 120,000 -- -- -- 17,130
President, Facultative
ReSources, Inc.
Eugene G. Ballard........... 2001 335,000 100,000 -- -- -- 28,984(3)
Senior Vice President..... 2000 315,000 75,000 -- -- 15,000 20,977
Chief Financial Officer... 1999 168,808(7) 50,000 -- -- 10,000 8,440
Ira S. Lederman............. 2001 315,000 100,000 -- 14,400 -- 45,200(3)
Senior Vice President..... 2000 274,231 75,000 -- -- 12,500 43,604
General Counsel and....... 1999 255,000 45,000 -- -- -- 32,345
Secretary
</Table>
- ---------------
(1) This amount includes director fees of $30,000.
(2) Of this amount, $200,000 represents consulting fees paid by Berkley
International, LLC and $57,385 represents personal use of Company and
chartered aircraft.
(3) For Messrs. Berkley, Shiel, McCleary, Ballard and Lederman, these amounts
include contributions to the Profit Sharing Plan of $8,500, $8,500, $13,600,
$8,500 and $8,500, respectively, Benefit Replacement Plan contributions of
$41,500, $9,875, $9,897, $5,750 and $7,250, respectively, and premiums for
term life insurance of $1,560, $1,560, $2,091, $1,521 and $1,474,
respectively. For Messrs. Berkley, Shiel, Ballard and Lederman, these
amounts include interest on deferred compensation of $51,526, $36,068,
$13,213 and $27,976, respectively. For Mr. Berkley, this amount includes
$7,490, representing the value of 188 shares of Common Stock awarded to
directors, and for Mr. McCleary, this amount includes an automobile
allowance of $8,225.
(4) Of this amount, $200,000 represents consulting fees paid by Berkley
International, LLC and $45,128 represents personal use of Company and
chartered aircraft.
(5) Of this amount, $200,000 represents consulting fees paid by Berkley
International, LLC and $79,443 represents personal use of Company and
chartered aircraft.
(6) Mr. McCleary's term as an executive officer commenced in August 2001 and his
compensation includes amounts received as President of Facultative
ReSources, Inc., as to which his incentive compensation was primarily
related.
(7) Mr. Ballard's employment and term as an executive officer commenced on June
1, 1999.
13
The following table shows for the fiscal year ended December 31, 2001 the
number of stock options granted by the Compensation and Stock Option Committee
to the executive officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
---------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS GRANT DATE
UNDERLYING GRANTED PRESENT
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION VALUE(2)
NAME AND PRINCIPAL POSITION GRANTED(#)(1) IN FISCAL YEAR PRICE($) DATE ($)
- ------------------------------- ---------------- -------------- -------- ---------- ----------
William R. Berkley 400,000 73.9% 47.28125 03/13/2011 6,040,487
Chairman of the Board and
Chief Executive Officer
James G. Shiel -- -- -- -- --
Senior Vice President --
Investments
James W. McCleary -- -- -- -- --
Senior Vice President --
Reinsurance Operations;
President, Facultative
ReSources, Inc.
Eugene G. Ballard -- -- -- -- --
Senior Vice President --
Chief Financial Officer
Ira S. Lederman -- -- -- -- --
Senior Vice President --
General Counsel and Secretary
</Table>
- ------------------------------
(1) These options were granted on March 13, 2001 and become exercisable in
installments with one fourth exercisable on March 13, 2004, an additional
one-fourth on March 13, 2005, an additional one-fourth on March 13, 2006 and
the remaining one-fourth on March 13, 2007.
(2) This estimate of value was developed solely for the purposes of comparative
disclosure in accordance with the rules and regulations of the Securities
and Exchange Commission and is not intended to predict future prices of the
Common Stock. The estimate was developed using the Black-Scholes option
pricing model incorporating the following assumptions: volatility of 20% and
dividend yield of 1%, both based on the historical averages for the
underlying Common Stock; risk-free rate of return of 5.01% based on a 7.5
year zero coupon rate; and time of exercise of 7.5 years, being the expected
duration of the option.
14
The following table shows for the fiscal year ended December 31, 2001 the
number of stock options which were exercised during 2001 and the number and
value of unexercised options for the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN
UNEXERCISED THE MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED 12/31/01(#) 12/31/01($)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME AND PRINCIPAL POSITION EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- ----------- --------------- ---------------
William R. Berkley -- -- 880,000/ 17,897,725
Chairman of the 515,000 2,671,550
Board and Chief Executive Officer
James G. Shiel 15,375 429,549 17,125/ 312,335
Senior Vice President -- 28,875 555,356
Investments
James W. McCleary -- -- 14,500/ 313,265
Senior Vice President -- 20,000 477,063
Reinsurance Operations; President,
Facultative ReSources, Inc.
Eugene G. Ballard -- -- --/ --
Senior Vice President -- 25,000 869,750
Chief Financial Officer
Ira S. Lederman 17,537 440,630 9,963/ 157,884
Senior Vice President -- 24,125 517,191
General Counsel and Secretary
</Table>
In 1997 the Company adopted and the stockholders approved the W. R. Berkley
Corporation 1997 Long-Term Incentive Compensation Plan (the "LTIP") to provide
for incentive compensation to certain key executives of the Company based on
performance tied to stockholder value. The following table shows for the fiscal
year ended December 31, 2001 the number of units granted by the Compensation and
Stock Option Committee to the executive officers named in the Summary
Compensation Table.
15
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<Table>
<Caption>
ESTIMATED FUTURE
PAYOUTS UNDER
LONG-TERM
INCENTIVE
COMPENSATION
PERFORMANCE PLAN(2)
PERIOD UNTIL ----------------
NUMBER OF MATURATION OR 5 YEARS
NAME AND PRINCIPAL POSITION UNITS AWARDED(#) PAYOUT(1) MAXIMUM($)(3)
- ------------------------------------------ ---------------- ------------- -------------
William R. Berkley 40,000 5 years $10,000,000
Chairman of the Board and
Chief Executive Officer
James G. Shiel 2,000 5 years $ 500,000
Senior Vice President --
Investments
James W. McCleary 2,000 5 years $ 500,000
Senior Vice President --
Reinsurance Operations; President,
Facultative ReSources, Inc.
Eugene G. Ballard 2,000 5 years $ 500,000
Senior Vice President --
Chief Financial Officer
Ira S. Lederman 2,000 5 years $ 500,000
Senior Vice President --
General Counsel and Secretary
</Table>
- ------------------------------
(1) Each unit vests on the Valuation Date (the last day of a fiscal year)
immediately preceding the fifth anniversary of the date of its award, except
that a unit will become fully vested earlier upon the attainment of the
unit's Maximum Cumulative Unit Value (as defined below), or upon the
termination of a participant's employment with the Company (i) by the
Company without Cause (as defined in the LTIP), (ii) upon retirement at or
after age 65, or (iii) upon a participant's death or disability.
(2) The value of an outstanding unit (the "Incremental Unit Value") at any time
depends on the degree of increase in the Company's Earning Per Share (as
defined below). For purposes of the LTIP, Earnings Per Share for any fiscal
year is the Company's Earnings (as defined below) divided by the number of
shares of Common Stock used to determine the Company's basic earnings per
share for that fiscal year, as reported in the Company's audited
consolidated financial statements for the fiscal year.
The Company's Earnings for any fiscal year is the consolidated net income of
the Company available to Common Stockholders, prepared in accordance with
generally accepted accounting principles, as reported in the Company's
audited consolidated financial statements for that fiscal year, adjusted on
an after-tax basis to (a) exclude (i) in its entirety any item of
nonrecurring gain or loss in excess of $5,000,000, and (ii) any accruals for
the LTIP and (b) to add back for write-offs required in connection with any
acquisition in the year of acquisition.
16
The Incremental Unit Value for any fiscal year is equal to the product of
(i) the unit's Measuring Price (as defined below) and (ii) 85% of the
percentage by which Earnings Per Share for such fiscal year exceeds the Base
Year EPS (as defined below). The Measuring Price for each unit awarded is
the closing price of the Company's Common Stock as reported on the New York
Stock Exchange on the last day of the fiscal year preceding award of the
unit. The Measuring Price for units granted in 2001 is $47.19. Base Year EPS
for units awarded in 2001 is $1.39, which is Earnings Per Share for the
fiscal year ended December 31, 2000. For units awarded in subsequent fiscal
years, Base Year EPS will be equal to Earnings Per Share for the immediately
preceding fiscal year.
Each unit's Incremental Unit Value for each of the five years from the date
of award is cumulated to obtain the Unit's cumulative value, which is capped
at an amount determined by the Compensation and Stock Option Committee at
the time units are granted (the "Maximum Cumulative Unit Value"). The
Maximum Cumulative Unit Value set by the Compensation and Stock Option
Committee for units awarded in 2001 is $250.00 per unit.
(3) No amounts are shown in the table as "target" or "threshold" future payments
because no such payment levels are set or contemplated under the LTIP.
17
COMPANY STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Company's
Common Stock for the last five fiscal years with the cumulative total return on
the Standard & Poor's (S&P) 500 Index and two Peer Groups over the same period
(assuming the investment of $100 in each category on December 31, 1996 and the
reinvestment of all dividends). The first Peer Group (covered in the graph by
the "Old Peer Group") was selected based upon comparable industry criteria and
has been used in Company stock performance graphs in prior proxy statements of
the Company. A number of companies in the Old Peer Group are no longer
stand-alone public companies or have been placed under regulatory supervision
such that the Company believes that they are no longer comparable for purposes
of the Company's performance graph. Therefore, the Company has selected a new
Peer Group (covered in the graph by the "New Peer Group") based upon current
comparable industry criteria, and the Company expects in future years to compare
the cumulative total return on the Company's Common Stock with the cumulative
total return on shares of companies in the New Peer Group instead of shares of
companies in the Old Peer Group.
[Cumulative Total Return Performance Graph]
18
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01
- ----------------------------------------------------------------------------------------------------------------
W. R. Berkley Corporation $100 $131 $103 $ 65 $149 $172
S&P 500(R) $100 $133 $171 $208 $189 $166
New Peer Group (11 Stocks) $100 $148 $140 $112 $176 $161
Old Peer Group (9 Stocks) $100 $153 $148 $109 $156 $152
</Table>
The New Peer Group consists of ACE Limited, The Chubb Corporation,
Cincinnati Financial Corp., CNA Financial Corp., Everest Re Group, Ltd., HCC
Insurance Holdings, Inc., Markel Corp., The Ohio Casualty Corporation, SAFECO
Corp., The St. Paul Companies, Inc. and XL Capital Ltd.
The Old Peer Group consists of The Chubb Corporation, Cincinnati Financial
Corp., Frontier Insurance Group Inc., HSB Group Inc. (formerly known as Hartford
Steam Boiler Inspection & Insurance Co.) (1), The Ohio Casualty Corporation, The
Progressive Corporation (Ohio), Reliance Group Holdings, Inc., SAFECO
Corporation and The St. Paul Companies, Inc.
- ---------------
(1) The total return for the Old Peer Group includes data for HSB Group Inc.
through November 22, 2000.
19
APPROVAL OF THE W.R. BERKLEY CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
The Board submits to the stockholders for approval the W. R. Berkley
Corporation Annual Incentive Compensation Plan (the "Annual Plan"). The Board
believes that it is in the best interest of the Company and the stockholders to
adopt a plan which provides for incentive compensation in the form of an annual
bonus to key executives responsible for the success of the Company and which
attracts talented new executives. Compensation payable under the Annual Plan is
based on corporate performance and is tied to an increase in stockholder value.
The Annual Plan is designed so that all compensation payable thereunder will be
fully deductible by the Company under Section 162(m) of the Code. The Annual
Plan is intended to replace the Company's previous annual incentive compensation
plan for William R. Berkley (as described under "Compensation and Stock Option
Committee Report on Executive Compensation") and is subject to stockholder
approval.
The following summary of the material features of the Annual Plan is
qualified in its entirety by the terms of the Plan as filed with the Securities
and Exchange Commission.
ELIGIBILITY
Participation in the Annual Plan will be limited to key employees of the
Company determined by the Compensation and Stock Option Committee to have
contributed to the successful performance of the Company or be in a position to
substantially contribute to the Company's success. There is currently only one
employee, William R. Berkley, who has been designated by the Compensation and
Stock Option Committee for participation in the Annual Plan. The Compensation
and Stock Option Committee may in the future designate additional or different
employees for participation in the Annual Plan.
PLAN ADMINISTRATION
The Annual Plan will be administered by the Compensation and Stock Option
Committee, which has full power and authority to determine which key employees
of the Company will receive awards under the Annual Plan, to set performance
goals and bonus targets, to interpret and construe the terms of the Annual Plan
and to make all determinations it deems necessary in the administration of the
Annual Plan, including determinations with respect to the achievement of
performance goals and the application of such achievement to the bonus targets.
BONUS FORMULA
The Annual Plan is structured to pay out a bonus equal to a percentage of a
designated participant's base salary, based on the degree of achievement of
predetermined performance goals with respect to specific business criteria. The
Annual Plan has several business criteria, any one or a combination of which may
form the basis of the performance goals for a performance period. Performance
will be measured over a performance period which may be shorter than or equal to
one year. The business criteria are (i) the Company's earnings per share, (ii)
the Company's net income, (iii) the Company's operating income, (iv) the amount
of insurance premiums written by the Company during the course of any
performance period, (v) the return on common stockholders' equity and (vi) a
measure of the Company's relative underwriting performance defined as the sum of
the Company's statutory loss ratio and statutory expense ratio (the "Combined
Ratio"). The Compensation and Stock Option Committee may also set and determine
objective individual performance goals relating to corporate performance for
each designated participant. The performance goals
20
will be established by the Compensation and Stock Option Committee at the
commencement of each period for which annual bonus awards may be earned.
BONUS TARGETS
At the same time the performance goals for each participant are determined,
the Compensation and Stock Option Committee will set the level of achievement
for each performance goal as it corresponds to the potential bonus award. These
bonus targets are expressed as a percentage of current salary. The Compensation
and Stock Option Committee will assign a percentage of current salary to be
payable upon a minimum level of achievement, a target level of achievement and
achievement in excess of the target level for each performance goal.
BONUS PAYOUTS
After the end of every performance period for which bonus amounts can be
earned, the Compensation and Stock Option Committee will make a determination
with respect to each participant as to the level of achievement of the
performance goals. The percentage of achievement is then applied to the bonus
targets to determine the amount of bonus to be paid to each participant. The
maximum amount of a bonus award that may be paid to any participant for any year
cannot exceed the greater of (i) two times base salary (not to exceed
$3,000,000) or (ii) five percent of the Company's earnings before income taxes
for the year as reported in the Company's audited consolidated financial
statements but before taking into account (a) any losses from discontinued
operations, (b) extraordinary gains and losses and (c) the cumulative effect of
accounting changes.
TERMINATION AND AMENDMENT
The Compensation and Stock Option Committee may amend or terminate the
Annual Plan at any time, provided that no amendment will be effective prior to
approval by the Company's stockholders to the extent such approval is required
by Section 162(m) of the Code or otherwise required by law.
NEW PLAN BENEFITS
Because the payment of an annual bonus under the Annual Plan for any fiscal
year is contingent on the achievement of the performance goals as of the end of
the fiscal year, the Company cannot determine the amounts that will be payable
or allocable for fiscal year 2002 or in the future. If the Annual Plan had been
in effect for the fiscal year 2001, the CEO would have received an incentive
payment of $2,000,000 (two times salary) for the year.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE W. R. BERKLEY
CORPORATION ANNUAL INCENTIVE COMPENSATION PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
KPMG LLP ("KPMG") has been appointed by the Board as independent certified
public accountants to audit the financial statements of the Company for the
fiscal year ending December 31, 2002. The appointment of this firm was
recommended to the Board by the Audit Committee. The Board is submitting this
matter to a vote of stockholders in order to ascertain their views. If the
appointment of KPMG is not ratified, the Board will reconsider its action and
will appoint auditors for the 2002 fiscal year without further stockholder
action. Further, even if the appointment is ratified by stockholder action, the
Board may at any time in the future in its discretion reconsider the appointment
without submitting the matter to a vote of stockholders.
21
It is expected that representatives of KPMG will attend the Annual Meeting,
will have the opportunity to make a statement if they desire to do so and will
be available to respond to appropriate stockholder questions.
AUDIT FEES
The aggregate amount of the fees billed or expected to be billed by KPMG
for its audit of the Company's consolidated financial statements for 2001 and
for its reviews of the Company's unaudited interim financial statements included
in reports filed by the Company during 2001 under the Securities Exchange Act of
1934 was $1,560,300.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
During 2001, the Company did not pay any fees to KPMG for financial
information systems design and implementation services.
ALL OTHER FEES
The aggregate amount of fees billed by KPMG for all other services rendered
by KPMG to the Company during 2001 was $502,600. These fees were primarily
attributable to issuances of letters to underwriters, reviews of registration
statements, issuance of consent letters, audits of financial statements of
employee benefit plans and tax services.
The Audit Committee of the Board of Directors considered the compatibility
of the non-audit services provided to the Company, and referred to in the two
preceding paragraphs, by KPMG in 2001 on the independence of KPMG from the
Company in evaluating whether to appoint KPMG to perform the audit of the
Company's financial statements for the year ending December 31, 2002.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG.
OTHER MATTERS TO COME BEFORE THE MEETING
Management is not aware of any matters to come before the Annual Meeting
other than as set forth above. However, since matters of which management is not
now aware may come before the Annual Meeting or any adjournment thereof, the
proxies intend to vote, act and consent in accordance with their best judgment
with respect thereto. Upon receipt of such proxies (in the form enclosed and
properly signed) in time for voting, the shares represented thereby will be
voted as indicated thereon and in this Proxy Statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of the copies of Forms 3, 4 and 5 received by
it, or written representations from certain reporting persons that no Forms 5
were required for such persons, the Company believes that all filing
requirements under Section 16(a) of the Exchange Act applicable to its officers,
directors and ten-percent stockholders were complied with during the fiscal year
ended December 31, 2001, except that Henry Kaufman, a former Director of the
Company, failed to file a timely Form 4 with respect to the sale of 20,000
shares of Common Stock, and James G. Shiel, a Senior Vice President of the
Company, failed to file a timely Form 4 with respect to the simultaneous
purchase of 7,500 shares of Common Stock and sale of 3,329 shares of Common
Stock in connection with the exercise of employee stock options.
22
STOCKHOLDER NOMINATIONS FOR BOARD MEMBERSHIP
AND OTHER PROPOSALS FOR 2002 ANNUAL MEETING
It is anticipated that the next Annual Meeting of Stockholders after the
one scheduled for May 14, 2002 will be held on or about May 13, 2003. The
Company's By-Laws require that, for nominations of directors or other business
to be properly brought before an Annual Meeting of Stockholders, written notice
of such nomination or proposal for other business must be furnished to the
Company. Such notice must contain certain information concerning the nominating
or proposing stockholder and information concerning the nominee and must be
furnished by the stockholder (who must be entitled to vote at the meeting) to
the Secretary of the Company, in the case of the Annual Meeting of Stockholders
to be held in 2003 no earlier than February 13, 2003 and no later than March 14,
2003. A copy of the applicable provisions of the By-Laws may be obtained by any
stockholder, without charge, upon written request to the Secretary of the
Company at the address set forth below.
Since the Company did not receive timely notice of any stockholder proposal
for the 2002 Annual Meeting, it will have discretionary authority to vote on any
stockholder proposals presented at such meeting.
In addition to the foregoing, and in accordance with the rules of the
Securities and Exchange Commission, in order for a stockholder proposal,
relating to a proper subject, to be considered for inclusion in the Company's
proxy statement and form of proxy relating to the Annual Meeting of Stockholders
to be held in 2003, such proposal must be received by the Secretary of the
Company by December 6, 2002 in the form required under and subject to the other
requirements of the applicable rules of the Securities and Exchange Commission.
Any such proposal should be submitted by certified mail, return receipt
requested, or other means, including electronic means, that allow the
stockholder to prove the date of delivery.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2001 IS AVAILABLE WITHOUT CHARGE TO ANY STOCKHOLDER OF THE
COMPANY WHO REQUESTS A COPY IN WRITING. REQUESTS FOR COPIES OF THIS REPORT
SHOULD BE DIRECTED TO THE SECRETARY, W. R. BERKLEY CORPORATION, 475 STEAMBOAT
ROAD, GREENWICH, CONNECTICUT 06830.
By Order of the Board of Directors,
WILLIAM R. BERKLEY
Chairman of the Board and
Chief Executive Officer
23
ANNEX A
W. R. BERKLEY CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of the W. R. Berkley Corporation Annual Incentive Compensation
Plan (the "Plan") is to benefit and advance the interests of W. R. Berkley
Corporation (the "Company") by providing incentive compensation to selected
executives of the Company in recognition of their significant contributions to
the growth, profitability and success of the Company from year to year.
The Company intends that compensation payable under the Plan will
constitute "qualified performance-based compensation" under Section 162(m) of
the Internal Revenue Code of 1986, as amended from time to time. The Plan shall
be administratively interpreted and construed in a manner consistent with such
intent.
Subject to approval by the Company's stockholders, the Plan is effective as
of January 1, 2002.
ARTICLE II
DEFINITIONS
2.1 BASE SALARY PERCENTAGE. For any Year or other applicable Performance
Period, a percentage, determined by the Committee, of a Participant's base
salary as in effect immediately prior to the establishment of the Performance
Goals, pursuant to Section 5.1, for the Year or applicable Performance Period.
2.2 BOARD. The Board of Directors of the Company.
2.3 CODE. The Internal Revenue Code of 1986, as amended from time to
time.
2.4 COMMITTEE. The Compensation and Stock Option Committee of the Board,
which shall be comprised solely of two or more "outside directors" within the
meaning of Treasury Regulation Section 1.162-27(e)(3) or any successor
provision.
2.5 COMPANY. W. R. Berkley Corporation, a Delaware corporation, and its
consolidated subsidiaries, or any successors thereto.
2.6 DISABILITY. Disability, as defined in a Participant's employment
agreement with the Company, or, absent an agreement, in the Company's group
disability insurance contract.
2.7 INCENTIVE AWARD. For any Year, the amount of incentive compensation
payable under the Plan to a Participant, determined by the Committee in
accordance with Section 6.4.
2.8 INDIVIDUAL PERFORMANCE THRESHOLD. The minimum level of satisfaction
of a Participant's Performance Goals for any Year or other applicable
Performance Period that he or she must achieve in order to receive an Incentive
Award, as determined by the Committee in accordance with Article VI.
A-1
2.9 PARTICIPANT. For any Year, an executive of the Company designated by
the Committee to participate in the Plan.
2.10 PERFORMANCE GOALS. For any Performance Period, the objective
performance measures applicable to a Participant, established by the Committee
in accordance with Article V.
2.11 PERFORMANCE PERIOD. The period of time, of such length as the
Committee shall determine in accordance with Section 5.1, over which a
Participant's Individual Performance Threshold is to be attained; provided,
however, that the Performance Period need not be identical for all Participants,
and within any one Year the Committee may establish multiple Performance Periods
for any Participant.
2.12 PLAN. The W. R. Berkley Corporation Annual Incentive Plan, as herein
set forth and as it may be amended from time to time.
2.13 TARGET ALLOCATION. For any Year or other applicable Performance
Period, the minimum, at-target and maximum amounts that a Participant may
receive as an Incentive Award for partially achieving, fully achieving or
exceeding his or her Performance Goals for the Year or other Performance Period,
all as determined by the Committee in accordance with Section 6.1.
2.14 TERMINATION WITHOUT CAUSE. Termination of a Participant's employment
by the Company without "Cause," as defined in the Participant's employment
agreement with the Company, or, absent an agreement defining "Cause,"
termination of the Participant's employment by the Company for any reason other
than (i) continuing and material failure to fulfill his or her employment
obligations or willful misconduct or gross neglect in the performance of such
duties, (ii) commission of fraud, misappropriation or embezzlement in the
performance of such duties, or (iii) conviction of a felony, which, as
determined in good faith by the Board, constitutes a crime involving moral
turpitude and may result in material harm to the Company.
2.15 YEAR. The calendar year, which is the fiscal year of the Company.
ARTICLE III
ADMINISTRATION
3.1 The Plan shall be administered by the Committee. For any Year, the
Committee shall designate the executives of the Company who shall participate in
the Plan and establish Performance Periods. For each Year or other Performance
Period, the Committee shall (i) determine Performance Goals and Individual
Performance Thresholds for each Participant and certify the extent of their
achievement and (ii) determine each Participant's Target Allocation and
Incentive Award, all as provided in Articles V and VI below.
3.2 Subject to the provisions of the Plan, the Committee shall have full
power and authority to (i) interpret the Plan, (ii) adopt rules and regulations
relating to the conduct of its business and to the Plan and (iii) make all
determinations necessary or advisable for the administration of the Plan.
Determinations of the Committee in the administration of the Plan shall be
conclusive and binding on the Participants and all other parties concerned.
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3.3 The Committee may employ attorneys, consultants, accountants or other
persons, and the Committee, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons. No
member of the Committee shall be personally liable for any action, determination
or interpretation taken or made in good faith by the Committee with respect to
the Plan or Incentive Awards granted hereunder, and all members of the Committee
shall be fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.
ARTICLE IV
PARTICIPATION
4.1 Only executives of the Company who, in the Committee's judgment, have
contributed to the successful performance of the Company, or who have the
capacity to contribute in a substantial measure to the successful performance of
the Company for a given Year or Performance Period within such Year, shall be
eligible to participate in the Plan for that Year.
4.2 In selecting Participants for any Year, the Committee shall take into
account such factors as the individual's position, experience, knowledge,
responsibilities, advancement potential and past and anticipated contribution to
the Company's performance.
4.3 An individual shall be deemed an employee for purposes of the Plan
only if such individual receives compensation from the Company for services
performed as an employee of the Company for any period during a Performance
Period.
ARTICLE V
PERFORMANCE GOALS
5.1 Prior to the beginning of each Performance Period or any later date
described in Treasury Regulation Section 1.162-27(e)(2) or any successor
provision, the Committee shall establish Performance Goals in writing for each
Participant for such Performance Period.
5.2 Performance Goals established by the Committee for any Performance
Period may differ among Participants. The Performance Goals of an individual
Participant shall represent the desired level or levels of satisfaction for the
Performance Period of any one or a combination of the following business
criteria on an absolute or relative basis (including comparisons of results for
the Performance Period either to results for a prior Performance Period or to
the Company's business plan or forecast for the Performance Period), measured by
excluding any extraordinary items and special items as determined by the
Company, in accordance with generally accepted accounting principles, all as
derived from the Company's audited financial statements: (i) earnings per share
of common stock, (ii) net income, (iii) operating income, (iv) insurance
premiums written, (v) return on common stockholders' equity, (vi) the Company's
combined ratio compared to the property and casualty industry combined ratio as
calculated by A.M. Best Company and (vii) objective individual performance,
taking into account individual goals and objectives.
5.3 In establishing Performance Goals for any Performance Period, the
Committee shall determine, in its discretion, from among the categories
specified in Section 5.2, the categories and
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criteria to be used in measuring each Participant's performance and the
percentage allocation for each of the categories and each of the criteria, the
sum of which allocations, respectively, shall equal 100 percent. The Committee
shall also determine for each Participant for the same Performance Period an
Individual Performance Threshold and a maximum incentive opportunity.
ARTICLE VI
TARGET ALLOCATION AND INCENTIVE AWARD
6.1 Prior to the beginning of each Performance Period or any later date
described in Treasury Regulation Section 1.162-27(e)(2) or any successor
provision, the Committee shall establish in writing each Participant's Target
Allocation for that Performance Period as Base Salary Percentages, calculated on
the assumption that his or her Performance Goals are (i) partially met, (ii)
fully met and (iii) exceeded. A Participant's Performance Goals and Target
Allocation shall preclude discretion on the part of the Committee to increase
the amount payable under the Plan to the Participant to the extent that such
discretion would be inconsistent with the requirements for "qualified
performance-based compensation" under Section 162(m) of the Code.
6.2 When the Committee has determined the Target Allocation for a
Participant for any Performance Period and the performance categories and
criteria that establish his or her Performance Goals, it shall communicate this
information to the Participant.
6.3 As soon as practicable following (i) verification by the Company's
independent public accountants of the level of applicable performance measures
specified in Section 5.2 for any Performance Period and (ii) receipt of
information regarding the actual performance of Participants against their
respective Performance Goals for the Performance Period, the Committee shall
certify the level of achievement of each Participant of his or her Performance
Goals for the Performance Period.
6.4 Based on the information certified in accordance with Section 6.3, the
Committee shall determine and certify in writing each Participant's Incentive
Award for the Performance Period by translating his or her Target Allocation for
the Performance Period, representing the aggregate level of achievement of his
or her Performance Goals for the Performance Period, into the applicable Base
Salary Percentage.
6.5 Notwithstanding the provisions of Section 6.4, the Committee may, in
its discretion, reduce or eliminate a Participant's Incentive Allocation for any
Year based on such objective or subjective criteria as it deems appropriate to
take into account circumstances that could not have been anticipated when it
established the Participant's Performance Goals for the Year. The amount of a
Participant's Incentive Allocation as finally determined by the Committee shall
constitute his or her Incentive Award for the Year; provided, however, that no
Incentive Award for any Participant for any Year shall exceed the greater of 2
times base salary (not to exceed $3,000,000) or 5 percent of the Company's
earnings before income taxes as reported in the Company's audited consolidated
financial statements but before taking into account, (a) any losses from
discontinued operations; (b) extraordinary gains and losses; and (c) the
cumulative effect of accounting changes.
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ARTICLE VII
PAYMENT OF INCENTIVE AWARDS
7.1 Except as provided in Section 7.2 and subject to the limitation of
Section 6.5, a Participant's Incentive Award for any Performance Period shall be
paid in a cash lump sum as soon as practicable following the Committee's
determination of the amount in accordance with Article VI.
7.2 From time to time the Committee, in its discretion (under uniform
rules applicable to all Participants), may offer Participants the opportunity to
defer receipt of all or a portion of the Incentive Award for any Performance
Period. Any election to defer shall be made prior to commencement of the
applicable Performance Period.
Deferred amounts are not forfeitable and shall be paid to a Participant
after termination of his or her employment with the Company. They constitute
unfunded general obligations of the Company.
Deferred amounts shall be credited with an interest equivalent amount until
the time of final payment at a rate determined by the Committee from time to
time. The sum of the amount deferred for any Year plus all interest equivalents
shall be paid in a single sum or in up to 15 installments, as specified by the
Participant when making the deferral election.
7.3 Each Participant shall designate, in a manner prescribed by the
Committee, a beneficiary to receive payments due under the Plan in the event of
his or her death. If a Participant dies prior to the date of payment of his or
her Incentive Award for any Performance Period or to receipt of all amounts, if
any, that were deferred, and if no properly designated beneficiary survives the
Participant, the Incentive Award or any other amount due shall be paid to his or
her estate or personal representative.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
8.1 If a Participant's employment with the Company terminates by reason of
retirement on or after attainment of age 65, death, Disability or Termination
Without Cause, or for any other reason specifically approved in advance by the
Committee, the Committee shall determine the Participant's Incentive Award as if
he or she were employed for the entire Year, and the Participant shall be
entitled to receive the Incentive Award prorated to the date of his or her
termination of employment.
8.2 If a Participant's employment with the Company terminates for any
reason other than as provided in Section 8.1, he or she shall forfeit any right
to receive an Incentive Award for the Performance Period in which the
termination occurs.
ARTICLE IX
TERMINATION AND AMENDMENT OF THE PLAN
9.1 The Company reserves the right, by action of the Committee, to
terminate the Plan at any time. Subject to such earlier termination, the Plan
shall have a term of five years from its effective date and shall expire on
December 31, 2006. Notwithstanding the immediately preceding sentence, any
Incentive Award earned by a Participant during the Company's 2006 fiscal year
shall be calculated
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and certified by the Committee in due course after the Plan's expiration and,
unless deferred by the Participant, paid to each applicable Participant in a
lump sum as soon as practicable following such determination. To the extent that
Incentive Awards are deferred hereunder, such amounts will continue to be
deferred in accordance with the rules and procedures established by the
Committee for Incentive Award deferrals beyond the expiration of the Plan.
9.2 The Committee may, at any time and from time to time, alter, amend or
suspend the Plan in whole or in part by a written document adopted by the
Committee. No amendment shall be effective prior to approval by the Company's
stockholders to the extent that such approval is required by Section 162(m) of
the Code or is otherwise required by law.
ARTICLE X
GENERAL PROVISIONS
10.1 Nothing in the Plan shall confer upon any employee a right to
continue in the employment of the Company or affect any right of the Company to
terminate a Participant's employment.
10.2 Except as provided in Section 7.3, a Participant may not alienate,
assign, pledge, encumber, transfer, sell or otherwise dispose of any rights or
benefits awarded hereunder prior to the actual receipt thereof; and any attempt
to alienate, assign, pledge, sell, transfer or assign prior to such receipt, or
any levy, attachment, execution or similar process upon any such rights or
benefits shall be null and void.
10.3 The Plan shall at all times be entirely unfunded, and no provision
shall at any time be made to segregate assets of the Company for payment of any
amounts hereunder. No Participant, beneficiary or other person shall have any
interest in any particular assets of the Company by reason of the right to
receive incentive compensation under the Plan. Participants and beneficiaries
shall have only the rights of a general unsecured creditor of the Company.
10.4 The Plan shall be governed by and construed in accordance with the
laws of the State of Delaware without reference to principles of conflict of
laws.
10.5 The Company shall be authorized to withhold from any award or payment
it makes under the Plan to a Participant the amount of withholding taxes due
with respect to such award or payment and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes.
10.6 Nothing in the Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to stockholder approval as may be
necessary, and such arrangements may be either generally applicable or
applicable only in specific cases.
10.7 Participants shall not be required to make any payment or provide any
consideration for awards under the Plan other than the rendering of services.
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PROXY
W. R. BERKLEY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of W. R. BERKLEY CORPORATION hereby appoints
IRA S. LEDERMAN and EDWARD A. THOMAS, and either of them, the true and lawful
agents and proxies of the undersigned, with full power of substitution to each
of them, to vote all shares of Common Stock which the undersigned may be
entitled to vote at the Annual Meeting of Stockholders to be held at the offices
of the Company, 475 Steamboat Road, Greenwich, Connecticut on May 14, 2002, and
at any adjournment of such meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- FOLD AND DETACH HERE -
THIS PROXY WHEN PROPERLY EXECUTED WILL Please mark [X]
BE VOTED IN THE MANNER DIRECTED HEREIN your votes as
BY THE UNDERSIGNED STOCKHOLDER. IF NO indicated in
DIRECTION IS MADE, THIS PROXY WILL BE this example.
VOTED FOR PROPOSALS 1, 2 AND 3.
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to the to vote for all
contrary on the left) nominees listed
1. ELECTION OF DIRECTORS: Richard G. [ ] [ ]
Merrill, Jack H. Nusbaum and Mark L.
Shapiro
INSTRUCTION: To withhold authority to
vote for any individual nominee write
that nominee's name on the space
provided below
- ------------------------------------------
FOR AGAINST ABSTAIN
2. To approve the W. R. Berkley Corporation [ ] [ ] [ ]
Annual Incentive Compensation Plan.
FOR AGAINST ABSTAIN
3. To ratify the appointment of KPMG LLP as [ ] [ ] [ ]
independent certified public accountants
for the company for the fiscal year
ending December 31, 2002.
4. In their discretion, the proxies are
authorized to vote upon such other
matters as may properly come before the
meeting.
The undersigned hereby acknowledges
receipt of the Notice of Annual Meeting
and Proxy Statement for the 2002 Annual
Meeting and the Annual Report for the
fiscal year ended December 31, 2001.
Signature(s)_____________________________________________ Dated:__________, 2002
Please sign your name or names exactly as printed opposite. When signing as
attorney, executor, administrator, trustee, guardian or corporate officer,
please give your full title as such. Joint owners should each sign.DATE, VOTE,
SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
- FOLD AND DETACH HERE -