SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
W. R. BERKLEY CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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W. R. BERKLEY CORPORATION
475 STEAMBOAT ROAD
GREENWICH, CONNECTICUT 06830
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 2003
------------------------------
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 20, 2003 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 an amendment and restatement of the First Amended and
Restated W. R. Berkley Corporation 1992 Stock Option Plan in the form
of the W. R. Berkley Corporation 2003 Stock Incentive Plan;
(3) To approve and adopt an amendment to the Company's Restated Certificate
of Incorporation to increase the authorized number of shares of common
stock from 80,000,000 to 150,000,000;
(4) To ratify the appointment of KPMG LLP as independent certified public
accountants for the Company for the fiscal year ending December 31,
2003; and
(5) 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 25, 2003 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 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 14, 2003
W. R. BERKLEY CORPORATION
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 2003
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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 20, 2003 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 offices 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 $6,500. 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. The Annual Report of the Company for the
fiscal year ended December 31, 2002 is being mailed to all stockholders with
this Proxy Statement. The approximate mailing date is April 14, 2003.
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 25, 2003 are
entitled to receive notice of and to vote at the Annual Meeting. The number of
shares of voting stock of the Company outstanding and entitled to vote on that
date was 55,277,226 shares of common stock. Each such share of common stock is
entitled to one vote. Executive officers and directors of the Company own or
control approximately 14% 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" below.
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 amendment and restatement of the First Amended and Restated W. R. Berkley
Corporation 1992 Stock Option Plan in the form of the W. R. Berkley Corporation
2003 Stock Incentive Plan, "FOR" the approval of the amendment to the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of common stock from 80,000,000 to 150,000,000 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, 2003. 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 amendment and restatement of
the First Amended and Restated W. R. Berkley Corporation 1992 Stock Option Plan
in the form of the W. R. Berkley Corporation 2003 Stock Incentive Plan, and the
ratification of the appointment of KPMG LLP require the affirmative vote of a
majority of the shares present at the Annual Meeting to constitute the action of
the stockholders. The approval of the amendment to the Company's Restated
Certificate of Incorporation requires the affirmative vote of a majority of the
shares of common stock outstanding and entitled to vote at the Annual Meeting.
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 of Directors 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 therein, will be voted for the election of William R. Berkley, George
G. Daly and Philip J. Ablove as directors to hold office for a term of three
years until the Annual Meeting of Stockholders in 2006 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 2006 SINCE/AGE AND OTHER INFORMATION
- -------------------------------------- ------------ ------------------------------------------
William R. Berkley(1)(2)........................ 1967 Chairman of the Board and Chief Executive
Age 57 Officer of the Company since its formation
in 1967. He also serves as President and
Chief Operating Officer, positions which
he has held since March 1, 2000 and has
held continuously from 1967, except for
the periods May 1991 to December 1993 and
January 1996 to March 2000. 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 subsidi-
aries, The Greenwich Bank & Trust Company
and Westport National Bank; The First Mar-
blehead Corporation; FLOORgraphics, Inc;
Interlaken Capital, Inc.; Strategic
Distribution, Inc.; and W. R. Berkley
Corporation Charitable Foundation. Mr.
Berkley is the father of William R.
Berkley, Jr.
George G. Daly(3)............................... 1998 Fingerhut Professor and Dean Emeritus,
Age 62 Stern School of Business, New York Univer-
sity, since August 2002. Previously, he
was Dean, Stern School of Business, and
Dean Richard R. West Professor of
Business, New York University, for more
than 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.
Philip J. Ablove(4)............................. 2002 Executive Vice President and Chief
Age 62 Financial Officer of Pioneer Companies,
Inc. from March 1996 to December 2002,
when he retired. Mr. Ablove was Senior
Vice President and Chief Financial Officer
of W. R. Berkley Corporation from July
1973 until April 1983.
</Table>
3
<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 -- Specialty Opera-
Age 30 tions of the Company since January 2003
and Vice Chairman of Berkley
International, LLC since May 2002. Mr.
Berkley served previously as Senior Vice
President of the Company from January
2002, Vice President of the Company from
May 2000, President of Berkley
International, LLC from January 2001 and
Executive Vice President of Berkley
International, LLC from March 2000. He
joined the Company in September 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. and its subsidiary, Westport
National Bank; Interlaken Capital, Inc.;
Strategic Distribution, Inc.; and W. R.
Berkley Corporation Charitable
Foundation. Mr. Berkley is the son of
William R. Berkley.
Ronald E. Blaylock(4)(5)........................ 2001 Founder, Chairman and Chief Executive Of-
Age 43 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.
Mark E. Brockbank(3)............................ 2001 Mr. Brockbank, retired, served from 1995
Age 51 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>
4
<Table>
<Caption>
SERVED AS
DIRECTOR
CONTINUOUSLY BUSINESS EXPERIENCE DURING PAST 5 YEARS
DIRECTORS TO CONTINUE IN OFFICE UNTIL 2005 SINCE/AGE AND OTHER INFORMATION
- ------------------------------------------ ------------ -----------------------------------------
Richard G. Merrill(3)........................... 1994 Executive Vice President of Prudential
Age 72 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 Associated
Community Bancorp, Inc.; and Sysco
Corporation.
Jack H. Nusbaum(1)(2)(5)........................ 1967 Chairman of the New York law firm of
Age 62 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(4)(5)........................... 1974 Age 59 Since September 1998, Mr. Shapiro has
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>
- ------------------------------
(1) Member of Executive Committee.
(2) Member of Pricing Committee.
(3) Member of Compensation and Stock Option Committee.
(4) Member of Audit Committee.
(5) Member of Business Ethics Committee.
5
BOARD OF DIRECTORS AND COMMITTEES
During 2002, the Board had five standing committees: the Executive
Committee, the Pricing Committee, the Compensation and Stock Option Committee,
the Business Ethics Committee, and the Audit Committee.
The Board met four times and held two telephone meetings during 2002. No
director attended fewer than 75% of the total number of meetings of the Board
and all committees on which he served.
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 2002, the Committee met one time and took action by
unanimous written consent on two occasions.
The Pricing Committee, which during 2002 was composed of Messrs. William R.
Berkley and Nusbaum, acts in the event of certain offerings of the Company's
securities. During 2002, the Committee held one meeting.
The Compensation and Stock Option Committee, which during 2002 was composed
of Messrs. Brockbank, Daly, and Merrill, 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
2002, the Committee met three times, held two telephone meetings and took action
by unanimous written consent on two occasions.
The Business Ethics Committee, which during 2002 was composed of Messrs.
Blaylock, Nusbaum, and Shapiro, administers the Company-wide Business Ethics
program. During 2002, the Committee held one meeting and one telephone meeting.
The Audit Committee during 2002 was composed of Messrs. Blaylock, Robert B.
Hodes, and Shapiro until April 10, 2002, when Mr. Hodes retired. On August 6,
2002, Philip J. Ablove was named to fill the vacancy created by Mr. Hodes'
retirement. The Audit Committee 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. During 2002, the
Committee met five times and held one telephone meeting. The Board of Directors
has adopted a written charter for the Audit Committee and all of the members of
the Audit Committee are independent, as independence is defined in Sections
303.01(B)(2)(a) and (3) of the New York Stock Exchange's listing standards.
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, 2002
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, 2002, to be filed with the Securities and Exchange Commission.
Audit Committee
Mark L. Shapiro, Chairman
Ronald E. Blaylock
Philip J. Ablove
March 20, 2003
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 2002, each director received a quarterly retainer of $6,000 and a fee
of $1,500 for each quarterly Board meeting attended. In addition, on May 14,
2002, pursuant to the Company's 1997 Directors Stock Plan, each continuing
director received 192 shares of common stock (adjusted for the 3-for-2 stock
split in July 2002). 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 2002, 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 25, 2003 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(1) OF CLASS
- ------------------------------------------------------ -------------------------- --------
William R. Berkley 7,314,576(2) 13.2%
475 Steamboat Road
Greenwich, CT 06830
Gilder, Gagnon, Howe & Co. LLC 5,563,462(3) 10.0%
1775 Broadway
New York, NY 10019
Janus Capital Management LLC 4,201,860(4) 7.6%
100 Fillmore Street
Denver, CO 80206
</Table>
- ------------------------------
(1) These amounts reflect the 3-for-2 common stock split paid on July 2, 2002 to
all holders of record on June 17, 2002.
(2) Includes 18,874 shares of common stock held by Mr. Berkley's wife, as to
which shares he disclaims beneficial ownership, 5,101 shares held in several
accounts for his children as to which Mr. Berkley is a custodian and
1,391,250 shares which are subject to currently exercisable stock options.
(3) Information obtained from a Schedule 13G, dated February 12, 2003, filed
with the Securities and Exchange Commission on behalf of Gilder, Gagnon,
Howe & Co. LLC ("GGH&C"). The Schedule 13G reported ownership of 5,563,462
shares of common stock then outstanding. The Schedule 13G reported that
GGH&C has sole voting power over 306,771 shares and shared dispositive power
over 5,563,462 shares.
(4) Information obtained from a Schedule 13G, dated February 14, 2003, filed
with the Securities and Exchange Commission on behalf of Janus Capital
Management LLC ("Janus"). The Schedule 13G reported ownership of 4,201,860
shares of common stock then outstanding. The Schedule 13G reported that
Janus has sole voting power and dispositive power over 4,201,360 shares and
shared voting power and dispositive power over 300 shares.
8
The following table sets forth information as of March 25, 2003 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(1) OF CLASS
- ---------------------------------- --------------------------- --------
All directors and executive
officers as a group 7,880,811(2)(3)(4)(5)(6)(7) 14.3%
Phillip J. Ablove 1,269 *
Eugene G. Ballard 10,875(3) *
William R. Berkley 7,314,576(2)(3) 13.2%
William R. Berkley, Jr. 9,672(3)(8) *
Ronald E. Blaylock 3,192 *
Mark E. Brockbank 150,192 *
George G. Daly 3,368 *
Ira S. Lederman 59,498(3)(4) *
James W. McCleary 62,846(3) *
Richard G. Merrill 19,018(5) *
Jack H. Nusbaum 22,092(6) *
Mark L. Shapiro 5,445 *
James G. Shiel 60,461(3) *
</Table>
- ------------------------------
* less than 1%
(1) These amounts reflect the 3-for-2 common stock split paid on July 2, 2002 to
all holders of record on June 17, 2002.
(2) Includes 18,874 shares of common stock held by Mr. Berkley's wife, as to
which shares he disclaims beneficial ownership, 5,101 shares held in several
accounts for his children as to which Mr. Berkley is a custodian and
1,391,250 shares which are subject to currently exercisable stock options.
(3) The amounts shown for Messrs. Ballard, Berkley, Berkley, Jr., Lederman,
McCleary and Shiel include 9,375, 1,391,250, 6,000, 32,381, 33,937 and
47,249 shares of common stock, respectively, which are subject to currently
exercisable stock options.
(4) The amount shown for Mr. Lederman includes 1,808 shares of common stock held
in accounts for his children as to which Mr. Lederman is a custodian and
32,381 shares of common stock which are subject to currently exercisable
stock options.
(5) The amount shown for Mr. Merrill includes 19,018 shares of common stock held
in a family trust with Mr. Merrill and his spouse as trustees.
(6) The amount shown for Mr. Nusbaum includes 4,500 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.
(7) The amounts shown for all directors and executive officers as a group
include an aggregate of 1,634,942 shares of common stock which are subject
to currently exercisable stock options held by executive officers of the
Company and 2,062 shares of common stock which are held by an executive
officer under the Company's Profit Sharing Plan.
(8) Of the amount shown for Mr. Berkley, Jr., 3,480 shares are 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
9
Company. Under applicable Insurance Holding Company Acts in various states, a
potential owner 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 255,000 shares of common stock
(adjusted for the 3-for-2 stock split in July 2002) purchased by Mr. Berkley
pursuant to the Stock Option Plan and one or more predecessor plans. The loan
was represented by a recourse promissory note which was secured by the 255,000
shares of common stock, matured on December 29, 2002 and bore interest at the
minimum rate which could have been charged without causing the loan to have been
treated as a "below market loan" for purposes of Section 7872 of the Internal
Revenue Code of 1986, as amended (the "Code"). The full amount of the loan,
together with accrued interest thereon, was repaid by Mr. Berkley during 2002.
During 2002, the Company engaged in certain transactions with a company
controlled by its Chairman of the Board, William R. Berkley. The Company paid
such controlled company $400,000 for services performed by certain employees of
the controlled company with respect to the review of certain private equity
transactions. The controlled company was reimbursed by the Company on a time and
expense basis. The controlled company paid rent in the amount of $60,000 to the
Company for separate office space in the Company's premises.
During 2001, certain 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 2004 and
bear interest at a minimum rate of 10% per annum. The obligor is current with
its obligations under the notes in accordance with their terms. During 2002,
approximately $900,000 of the outstanding principal balance of the notes was
pre-paid. In connection with the investment, the subsidiaries received
conditional warrants to purchase common stock of this company.
Jack H. Nusbaum, a director of the Company, is Chairman of 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 the 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 provides 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 enhances stockholder value. The
CEO's compensation is set based on the Committee's subjective evaluation of
these factors and the CEO's individual performance based on specific targets.
The Committee has retained 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 with respect to the compensation of the CEO
for 2002.
Based on the factors stated above and the advice of Ross, the Committee
determined the CEO's salary for 2002 and it remained 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) disallows 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 as
"qualified 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 Annual Incentive
Compensation Plan, Long-Term Incentive Compensation Plan and Stock Option Plan,
each of which was approved by stockholders of the Company 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 be "qualified 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 2002 the Committee approved an annual incentive payment earned by the
CEO under the Annual Incentive Compensation Plan, which is disclosed in the
Summary Compensation Table under the heading "Executive Compensation". This
payment was based upon the Company's performance against the Plan's quantitative
formula (which included earnings per share, net income, net premiums written,
return on equity and combined ratio measures) and the CEO's performance against
predetermined, objective goals.
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 2002 was established by the CEO and
reviewed with the Committee.
LONG-TERM INCENTIVE COMPENSATION PLAN. No new units were awarded in 2002
under the Long-Term Incentive Compensation Plan. The outstanding awards were
adjusted to reflect the 3 for 2 common stock split that occurred in 2002.
STOCK OPTION GRANTS. It has been generally 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 interest. Under the Stock Option Plan,
options are granted to the CEO and to other executives based on an evaluation of
each individual's ability to contribute to the Company's long-term growth and
profitability. The Committee also considers a recipient's annual salary. During
2002, options for 112,500 shares of common stock were granted to the CEO and
options for 239,250 shares of common stock were granted to other executive
officers.
Compensation and Stock Option
Committee
Richard G. Merrill, Chairman
Mark E. Brockbank
George G. Daly
March 31, 2003
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 $100,000 in salary and
bonus.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<Table>
<Caption>
SECURITIES
OTHER UNDERLYING
ANNUAL LTIP OPTIONS ALL OTHER
NAME AND SALARY BONUS COMPENSATION PAYMENTS GRANTED COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#)(1) ($)
- ------------------ ---- --------- ---------- ------------ -------- ---------- ------------
William R. Berkley.......... 2002 1,000,000 5,036,000 269,140(2) -- 112,500 163,821(3)
Chairman of the 2001 1,000,000 2,000,000 257,385(4) 912,000 600,000 140,576
Board and Chief 2000 1,000,000 2,002,550 245,128(5) -- 105,000 149,231
Executive Officer
James G. Shiel.............. 2002 385,000 200,000 -- -- 18,750 67,555(3)
Senior Vice President -- 2001 367,500 175,000 -- 33,600 -- 56,003
Investments 2000 337,500 175,100 -- -- 20,250 56,024
James W. McCleary........... 2002 375,000(6) 200,000 -- -- 22,500 70,150(3)
Senior Vice President -- 2001 293,710 175,000 -- 33,600 -- 33,813
Reinsurance Operations; 2000 263,692 140,000 -- -- 18,750 31,852
President, Facultative
ReSources, Inc.
Eugene G. Ballard........... 2002 360,000 185,000 -- -- 22,500 45,497(3)
Senior Vice President -- 2001 335,000 100,000 -- -- -- 28,984
Chief Financial Officer 2000 315,000 75,000 -- -- 22,500 20,977
and Treasurer
Ira S. Lederman............. 2002 350,000 185,000 -- -- 22,500 51,511(3)
Senior Vice President -- 2001 315,000 100,000 -- 14,400 -- 45,200
General Counsel and 2000 274,231 75,000 -- -- 18,750 43,604
Secretary
</Table>
- ---------------
(1) These amounts reflect the 3-for-2 common stock split paid on July 2, 2002 to
all holders of record on June 17, 2002.
(2) Of this amount, $200,000 represents consulting fees paid by Berkley
International, LLC and $69,140 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 $17,000 each, Benefit
Replacement Plan contributions of $68,000, $15,719, $14,875, $9,342 and
$12,739, respectively, premiums for term life insurance of $2,232, $2,232,
$2,142, $2,232 and $2,232, respectively, and interest on deferred
compensation of $39,115, $32,604, $27,133, $16,923 and $19,540,
respectively. For Mr. Berkley, this amount also includes $30,000 of director
fees and $7,474, representing the grant date value of 192 shares of common
stock awarded to directors, and for Mr. McCleary, this amount also includes
an automobile allowance of $9,000.
(4) Of this amount, $200,000 represents consulting fees paid by Berkley
International, LLC and $57,385 represents personal use of Company and
chartered aircraft.
(5) Of this amount, $200,000 represents consulting fees paid by Berkley
International, LLC and $45,128 represents personal use of Company and
chartered aircraft.
(6) Mr. McCleary's term as an executive officer commenced in August 2001 and his
compensation includes amounts received as President of Facultative
ReSources, Inc.
13
The following table shows for the fiscal year ended December 31, 2002 the
number of stock options granted by the Compensation and Stock Option Committee
to the executive officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
---------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED GRANT DATE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME AND PRINCIPAL POSITION GRANTED(#)(1)(2) IN FISCAL YEAR PRICE($) DATE VALUE($)(3)
- ----------------------------- ---------------- -------------- -------- ---------- -----------
William R. Berkley 112,500 8.90% 38.45 04/03/2012 1,605,312
Chairman of the Board and
Chief Executive Officer
James G. Shiel 18,750 1.48% 38.45 04/03/2012 267,552
Senior Vice President --
Investments
James W. McCleary 22,500 1.78% 38.45 04/03/2012 321,062
Senior Vice President --
Reinsurance Operations;
President, Facultative
ReSources, Inc.
Eugene G. Ballard 22,500 1.78% 38.45 04/03/2012 321,062
Senior Vice President --
Chief Financial Officer and
Treasurer
Ira S. Lederman 22,500 1.78% 38.45 04/03/2012 321,062
Senior Vice President --
General Counsel and
Secretary
</Table>
- ------------------------------
(1) These amounts reflect the 3-for-2 common stock split paid on July 2, 2002 to
all holders of record on June 17, 2002.
(2) These options were granted on April 3, 2002 and become exercisable in
installments with one fourth exercisable on April 3, 2005, an additional
one-fourth on April 3, 2006, an additional one-fourth on April 3, 2007 and
the remaining one-fourth on April 3, 2008.
(3) 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 26.8%
and dividend yield of 1%, both based on the historical averages for the
underlying common stock; risk-free rate of return of 5.382% based on a 7.2
year zero coupon rate; and time of exercise of 7.16 years, being the
expected duration of the option.
14
The following table shows for the fiscal year ended December 31, 2002 the
number and value of unexercised options for the executive officers named in the
Summary Compensation Table. None of these executives exercised any options
during 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
12/31/02(#) 12/31/02($)
NAME AND PRINCIPAL POSITION EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------ ------------------------- -------------------------
William R. Berkley 1,342,500/ 23,262,675/
Chairman of the 862,500 8,357,250
Board and Chief Executive Officer
James G. Shiel 35,625/ 519,720/
Senior Vice President -- 52,125 724,755
Investments
James W. McCleary 25,500/ 429,000/
Senior Vice President -- 48,750 639,713
Reinsurance Operations; President,
Facultative ReSources, Inc.
Eugene G. Ballard 3,750/ 89,025/
Senior Vice President -- 56,250 956,025
Chief Financial Officer and Treasurer
Ira S. Lederman 23,007/ 307,919/
Senior Vice President -- 50,625 654,938
General Counsel and Secretary
</Table>
15
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about our common stock that may be
issued upon the exercise of options, warrants and rights under our existing
equity compensation plans as of December 31, 2002. These plans include the First
Amended and Restated W. R. Berkley Corporation 1992 Stock Option Plan, as
amended, the W. R. Berkley Corporation 1997 Long-Term Incentive Compensation
Plan and the Amended and Restated W. R. Berkley Corporation 1997 Directors Stock
Plan.
<Table>
<Caption>
(C) NUMBER OF
SECURITIES REMAINING
(A) NUMBER OF AVAILABLE FOR FUTURE
SECURITIES TO BE ISSUED (B) WEIGHTED-AVERAGE ISSUANCE UNDER EQUITY
UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS(1) WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
- ------------- ----------------------- -------------------- ------------------------
Equity compensation plans
approved by stockholders 6,243,678 $25.97 2,572,354
Equity compensation plans
not approved by
stockholders -- -- --
Total 6,243,678 $25.97 2,572,354
</Table>
- ------------------------------
(1) These amounts reflect the 3-for-2 common stock split paid on July 2, 2002 to
all holders of record on June 17, 2002.
16
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 a Peer Group over the same period
(assuming the investment of $100 in each category on December 31, 1997 and the
reinvestment of all dividends). The Peer Group was selected based upon current
comparable industry criteria.
[Cumulative Total Return Performance Graph]
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
- ----------------------------------------------------------------------------------------------------------------
W. R. Berkley Corporation $100 $ 79 $ 49 $114 $131 $146
S&P 500(R) $100 $129 $156 $141 $125 $ 97
Custom Composite Index (11
Stocks) $100 $ 95 $ 76 $119 $109 $ 93
</Table>
The Custom Composite Index consists of ACE Limited, The Chubb Corporation,
Cincinnati Financial Corp., CNA Financial Corp., Everest Re Group, Ltd., HCC
Insurance Holdings, Inc., Markel Corp., Ohio Casualty Corp., SAFECO Corp., The
St. Paul Companies, Inc. and XL Capital Ltd.
Copyright(C) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved.
17
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
FIRST AMENDED AND RESTATED W. R. BERKLEY CORPORATION
1992 STOCK OPTION PLAN IN THE FORM OF THE
W. R. BERKLEY CORPORATION 2003 STOCK INCENTIVE PLAN
On March 11, 2003, the Board further amended and restated the First Amended
and Restated W. R. Berkley Corporation 1992 Stock Option Plan in the form of the
W. R. Berkley Corporation 2003 Stock Incentive Plan (the "Plan"), subject to
stockholder approval, for the purpose of (i) allowing for the grant of other
equity-based awards, in addition to stock options under the Plan, including
restricted stock awards, restricted stock unit awards and performance-based
awards, and (ii) allowing for the grant of awards to outside consultants to the
Company and its affiliates. As of the date of this Proxy Statement,
approximately 2,385,834 shares of common stock remain available for issuance
under the Plan.
SUMMARY OF THE CURRENT PLAN PRIOR TO THE AMENDMENT
The following is a summary of the material provisions of the Plan prior to
the proposed amendment and restatement (the "Current Plan").
PURPOSE
The Current Plan is intended as an incentive to attract highly qualified
individuals to become key employees of the Company and its subsidiaries and
affiliates and to retain such key employees and encourage stock ownership by
these individuals in order to give them a proprietary interest in the Company's
success and align their interests with those of the stockholders of the Company.
The Company hopes to achieve these goals through the issuance of "incentive
stock options," within the meaning of Section 422 of the Code, as well as
"non-statutory stock options."
ELIGIBILITY
Officers, key employees and directors of the Company or any of its
subsidiaries and affiliates (including directors who are not also employees of
the foregoing) are eligible for grants of stock options under the Current Plan.
Non-employee directors are eligible only for grants of non-statutory stock
options. The approximate number of officers and key employees eligible to
participate in the Current Plan is 321, and the number of non-employee directors
eligible to participate is seven.
STOCK SUBJECT TO THE CURRENT PLAN
10,687,500 shares (as adjusted for stock splits) of the common stock are
currently authorized for issuance pursuant to the Current Plan; provided,
however, that options with respect to no more than 2,250,000 shares (as adjusted
for stock splits) of common stock may be granted to any individual during any
calendar year under the Current Plan.
ADMINISTRATION
The Current Plan is administered by the Compensation and Stock Option
Committee. The Compensation and Stock Option Committee determines, among other
things, the persons to be granted options, the number of shares subject to each
option, the vesting schedule for each option, and the option price and other
terms of each option. The Compensation and Stock Option Committee also has the
authority to accelerate the vesting of any outstanding option, adopt, amend and
rescind such rules and regulations as it may determine are advisable in the
administration of the Current Plan and
18
make all other determinations deemed necessary or advisable for the
administration of the Current Plan.
TERMS OF OPTIONS
Options will vest and become exercisable in accordance with a vesting
schedule set by the Compensation and Stock Option Committee at the time of
grant. Notwithstanding any such vesting schedule, unless otherwise determined by
the Compensation and Stock Option Committee at the time of grant, the options
will vest and become fully exercisable upon the optionee's termination of
employment with the Company and its affiliates by reason of death or disability
or upon a change of control of the Company (as defined in the Current Plan). In
addition, the Compensation and Stock Option Committee may accelerate the vesting
of any option at any time. Once vested, options granted under the Current Plan
are exercisable until the earlier of (i) a date set by the Compensation and
Stock Option Committee at the time of grant or (ii) ten years from their
respective dates of grant. An incentive stock option granted to an individual
who owns, at the time of grant, stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary thereof (a "Ten Percent Stockholder") may not be exercisable for
more than five years after the date of grant. Options may expire earlier upon
the termination of an optionee's employment with the Company and all of its
affiliates. The exercise price of options granted under the Current Plan may not
be less than the fair market value of the shares of common stock covered by the
option on the date of grant; provided, however, that the exercise price of
incentive stock options granted to a Ten Percent Stockholder cannot be less than
110% of such fair market value. The Compensation and Stock Option Committee will
determine the exercise price of each option and the manner in which it may be
exercised. Payment for shares of common stock purchased upon exercise of an
option granted under the Current Plan can be made either (i) in cash, (ii) with
shares of common stock, (iii) through any brokered exercise procedures approved
by the Compensation and Stock Option Committee or, (iv) through any combination
of these methods. In the discretion of the Compensation and Stock Option
Committee, payment for shares of common stock purchased upon exercise of an
option granted under the Current Plan can also be made in installments. Upon the
exercise of any option, the option holder will be required to pay to the Company
an amount sufficient to satisfy all federal, state and local withholding taxes
applicable to the exercise of the option. The Compensation and Stock Option
Committee may allow an optionee to satisfy this withholding obligation by
withholding a number of shares of common stock otherwise deliverable pursuant to
the exercise.
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
The aggregate number of shares of common stock which may be purchased
pursuant to options granted under the Current Plan, the number of shares of
common stock covered by each outstanding option, the maximum number of shares of
common stock with respect to which options may be granted to any individual in
any calendar year and the exercise price per share thereof will be appropriately
adjusted for any increase or decrease in the number of outstanding shares of
common stock resulting from a stock split or other subdivision or consolidation
of shares of common stock, or for other increases or decreases in the
outstanding shares of common stock effected without receipt of consideration by
the Company. If the Company is sold, reorganized, consolidated or merged with
another corporation or if all, or substantially all, of the assets of the
Company are sold or exchanged, (i) each optionee shall be entitled to receive
upon the exercise of his option the same number and kind
19
of shares or the same amount of property, cash or other securities as he would
have been entitled to receive as if he had been immediately prior to such event
the holder of the number of shares covered by his option and (ii) if the Company
is not the surviving corporation after such event, the Company will require the
successor corporation or parent thereof to assume such outstanding options;
provided, however, that the Compensation and Stock Option Committee may, in its
discretion provide that all outstanding options will terminate as of the
consummation of such event and accelerate the exercisability of all outstanding
options to any date prior to such event.
MARKET VALUE OF THE COMMON STOCK
On April , 2003, the last reported sale price for the common stock on the
New York Stock Exchange was $[ ].
TRANSFERABILITY OF OPTIONS
No award of options, or any right or interest therein, is assignable or
transferable except by will or the laws of descent and distribution; provided,
however, that if the Compensation and Stock Option Committee so determines,
options may be transferred to the optionee's immediate family members or a trust
established for their benefit.
TERMINATION OR AMENDMENT OF THE CURRENT PLAN
The Board may amend or terminate the Current Plan at any time without the
approval of stockholders, provided that any amendment to (a) increase the total
number of shares of common stock for which options may be granted under the
Current Plan (except in connection with certain capital adjustments described
above in the section herein entitled "Adjustment for Recapitalization, Merger,
Etc.") or (b) expand the class of persons eligible to receive options, must be
approved by the stockholders of the Company.
SUMMARY OF MATERIAL AMENDMENTS TO THE CURRENT PLAN
The following is a summary of the material amendments to the Current Plan
proposed for stockholder approval.
ELIGIBILITY OF CONSULTANTS
The Plan would allow for the grant of awards to outside consultants to the
Company and its affiliates.
RESTRICTED STOCK AWARDS
Shares of restricted stock may be granted subject to certain restrictions
on transferability and forfeiture provisions and such other terms and conditions
as determined by the Compensation and Stock Option Committee. Recipients of
restricted stock will generally have all the rights and privileges of a
stockholder including the right to vote such restricted stock. The Compensation
and Stock Option Committee has discretion to determine whether any shares of the
restricted stock will be entitled to dividends and, if so, whether they will be
currently paid or held by the Company during the restricted period and whether
any dividends held by the Company will bear interest. Unless otherwise
determined by the Compensation and Stock Option Committee, any dividends held by
the Company will be subject to forfeiture to the same degree as the related
restricted stock. To the extent such shares are forfeited, the stock
certificates will be canceled and all rights of the holder to such shares and as
a stockholder will terminate. The restricted period for restricted stock, during
which time
20
shares are non-transferable and subject to forfeiture, will commence on the date
of grant and will expire from time to time as to that part of the restricted
stock award indicated in a schedule established by the Compensation and Stock
Option Committee and set forth in the award agreement. Subject to a minimum
three-year vesting period, the Compensation and Stock Option Committee, in its
discretion, may remove any or all restrictions on the restricted stock whenever
it determines that such action is appropriate. In addition, all restrictions on
the restricted stock will immediately lapse upon a change of control.
The following forfeiture provisions will apply to awards of restricted
stock. In the event the recipient of such award resigns or is discharged from
employment with the Company or its affiliate for any reason other than death,
disability or retirement, the non-vested portion of the award will be completely
forfeited. Upon the termination of employment of a recipient of a restricted
stock award on account of death, disability or retirement, the non-vested
portion of the award will be prorated for service during the restricted period
and paid as soon as practicable after termination and the remainder shall be
forfeited. Upon the expiration of the restricted period with respect to any
shares of restricted stock, a stock certificate evidencing the shares of common
stock will be delivered without charge to the participant, or his beneficiary,
free of all restrictions under the Plan.
RESTRICTED STOCK UNIT AWARDS
Restricted stock unit awards may be granted under the Plan subject to
certain forfeiture provisions. The terms and conditions of an award of
restricted stock units will be reflected in a written award agreement. No shares
of common stock will be issued at the time a restricted stock unit award is
made, and the Company will not be required to set aside a fund for the payment
of any such award. The Compensation and Stock Option Committee will determine
whether recipients of restricted stock units will be entitled to dividend
equivalents with respect to the restricted stock units credited to such
recipient's account. To the extent that an award of restricted stock units is
entitled to dividend equivalents, the Compensation and Stock Option Committee
will determine whether to credit to the account of, or to currently pay to, such
recipient such dividend equivalents and whether any dividend equivalents
credited to a recipient's account will bear interest. Unless otherwise
determined by the Compensation and Stock Option Committee, dividend equivalents
credited to a recipient's account will be subject to forfeiture on the same
basis as the related restricted stock units.
Restricted stock units awarded to any eligible individual will be subject
to forfeiture until the expiration of a restricted period and such other terms
and conditions as determined by the Compensation and Stock Option Committee.
Except to the extent determined by the Compensation and Stock Option Committee,
in the event the recipient of such award resigns or is discharged from
employment with the Company or its affiliate for any reason other than death,
disability or retirement, the non-vested portion of the award will be forfeited.
Upon the termination of employment of a recipient of a restricted stock unit
award on account of death, disability or retirement, the non-vested portion of
the award will be prorated for service during the restricted period and paid as
soon as practicable after termination.
Upon such date or dates as determined by the Compensation and Stock Option
Committee (the "Settlement Date(s)") on or following the expiration of the
restricted period, as set forth in the award agreement, unless earlier
forfeited, the Company shall settle the restricted stock unit award by
delivering (i) a number of shares of common stock equal to the number of
restricted stock units then vested and not otherwise forfeited and (ii) a number
of shares of common stock having a value equal
21
to any unpaid dividend equivalents, plus interest, if any, accrued with respect
to the restricted stock units. The Company may settle a restricted stock unit
award in cash in lieu of the delivery of shares of common stock or partially in
cash and partially in shares of common stock. A settlement in cash shall be
based on the value of the shares of common stock otherwise to be delivered on
the Settlement Date.
Subject to a minimum three-year vesting period, the Compensation and Stock
Option Committee will have the authority to remove any or all of the
restrictions on the restricted stock units and/or accelerate the settlement of
any such award whenever it may determine that, by reason of changes in
applicable laws or other changes in circumstances arising after the date of the
restricted stock unit award, such action is appropriate. In addition, all
restrictions on the restricted stock units will immediately lapse upon a change
of control.
PERFORMANCE-BASED AWARDS
Certain awards of restricted stock and restricted stock units granted under
the Plan may be granted in a manner constituting "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code. Such awards may
be based upon one or more of the following factors: stock price, earnings per
share, net earnings, operating earnings, return on assets, shareholder return,
return on equity, growth in assets, sales, cash flow, market share, relative
performance to a group of companies comparable to the Company and strategic
business criteria consisting of one or more objectives based on the Company's
meeting specified goals relating to revenue, market penetration, business
expansion, costs or acquisitions or divestitures. With respect to
performance-based awards, (i) the Compensation and Stock Option Committee will
establish in writing the objective performance-based goals applicable to a given
performance period no later than 90 days after the commencement of such
performance period (but in no event after 25% of such period has elapsed) and
(ii) no performance-based awards will be payable to any recipient for a given
performance period until the Compensation and Stock Option Committee certifies
in writing that the objective performance goals (and any other material terms)
applicable to such period have been satisfied. The maximum number of shares of
common stock underlying (or that relate to) a performance-based restricted stock
or restricted stock unit award granted to any individual in any performance
period cannot exceed 1,500,000 shares.
MINIMUM VESTING REQUIREMENT FOR RESTRICTED STOCK AND RESTRICTED STOCK UNITS
All restricted stock and restricted stock unit awards granted under the
Plan will be subject to a minimum three-year vesting requirement except in the
event of the termination of the award recipient's employment on account of
death, disability or retirement and in the event of a change of control of the
Company in which case vesting will be fully or partially accelerated as
described above.
MAXIMUM NUMBER OF SHARES AUTHORIZED FOR RESTRICTED STOCK AND RESTRICTED UNITS
No more than five percent of the Company's outstanding common stock may be
awarded under the Plan in the form of restricted stock or restricted stock
units. Restricted stock units settled in cash are not subject to this limit.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief discussion of the Federal income tax consequences
of option transactions under the Plan based on the Code, as in effect as of the
date hereof. The Plan is not qualified under
22
Section 401(a) of the Code. This discussion is not intended to be exhaustive and
does not describe state or local tax consequences.
INCENTIVE STOCK OPTIONS
No taxable income is realized by the optionee upon the grant or exercise of
an incentive stock option. If common stock is issued to an optionee pursuant to
the exercise of an incentive stock option, and if no disqualifying disposition
of such shares is made by such optionee within two years after the date of grant
or within one year after the transfer of such shares to such optionee, then (i)
upon sale of such shares, any amount realized in excess of the exercise price
will be taxed to such optionee as a long-term capital gain and any loss
sustained will be a long-term capital loss and (ii) no deduction will be allowed
to the optionee's employer for Federal income tax purposes. If the common stock
acquired upon the exercise of an incentive stock option is disposed of prior to
the expiration of either holding period described above, generally (i) the
optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of such shares at exercise
(or, if less, the amount realized on the disposition of such shares) over the
exercise price paid for such shares and (ii) the optionee's employer will be
entitled to deduct such amount for Federal income tax purposes if the amount
represents an ordinary and necessary business expense. Any further gain (or
loss) realized by the optionee will be taxed as short-term or long-term capital
gain (or loss), as the case may be, and will not result in any deduction by the
employer. Subject to certain exceptions for disability or death, if an incentive
stock option is exercised more than three months following the termination of
employment, the exercise of the option will generally be taxed as the exercise
of a non-statutory stock option.
For purposes of determining whether an optionee is subject to any
alternative minimum tax liability, an optionee who exercises an incentive stock
option generally would be required to increase his or her alternative minimum
taxable income, and compute the tax basis in the stock so acquired, in the same
manner as if the optionee had exercised a non-qualified stock option. Each
optionee is potentially subject to the alternative minimum tax. In substance, a
taxpayer is required to pay the higher of the optionee's alternative minimum tax
liability or the optionee's "regular" income tax liability. As a result, a
taxpayer has to determine the taxpayer's potential liability under the
alternative minimum tax.
NON-STATUTORY STOCK OPTIONS
Except as noted below, with respect to non-statutory stock options, (i) no
income is realized by the optionee at the time the option is granted; (ii)
generally, at exercise, ordinary income is realized by the optionee in an amount
equal to the difference between the exercise price paid for the shares and the
fair market value of the shares on the date of exercise, and the optionee's
employer is generally entitled to a tax deduction in the same amount subject to
applicable tax withholding requirements; and (iii) at sale, the amount of
appreciation (or depreciation) after the date as of which amounts are includable
in income is treated as either short-term or long-term capital gain (or loss),
depending on how long the shares have been held.
OPTIONS TRANSFERS
Although options are generally nontransferable, the following tax
consequences will apply if a non-statutory option is transferred pursuant to the
applicable provisions of the Plan allowing for option transfers.
23
If the transfer is for less than full and adequate consideration, unless
the gift is an annual exclusion gift, i.e., a gift that qualifies for the gift
tax annual exclusion, or the individual has not used up his or her lifetime gift
exemption, the optionee will be making a taxable gift based on the value of the
option in the year that the gift is complete. Gifts of options are deemed to be
complete when vested. Under the gift tax annual exclusion, each calendar year an
individual can transfer up to $11,000 ($22,000 combined between the individual
and his or her spouse) of cash and/or property per transferee free from any
federal gift tax. Under the lifetime gift exemption, in addition to an
individual's annual exclusion, an individual may transfer a certain amount of
cash and/or property during his or her lifetime without paying any federal gift
tax. This amount is currently $1,000,000. Optionees should consult with their
tax advisor as to the amount of the gift tax annual exclusion and lifetime gift
exemption for any year subsequent to 2003.
When the transferee exercises the option, the optionee will realize
ordinary income in the year of exercise equal to the excess (if any) of the fair
market value of the shares exercised over the option exercise price paid by the
transferee for such shares. It is unclear at this time what the tax results
would be if the optionee is deceased at the time of the option exercise by the
transferee.
Upon subsequent disposition of the shares by the transferee, the transferee
will realize long-term or short-term capital gain (or loss), as the case may be,
based on the difference between the sale price for the shares and the fair
market value of the shares when the option was exercised.
SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS
As a result of the rules under Section 16(b) of the Securities Exchange Act
of 1934 (the "Exchange Act"), "insiders" (as defined in the Exchange Act),
depending upon the particular exemption from the provisions of Section 16(b) of
the Exchange Act utilized, may not receive the same tax treatment as set forth
above with respect to the grant and/or exercise of options. Generally, insiders
will not be subject to taxation until the expiration of any period during which
they are subject to the liability provisions of Section 16(b) with respect to
any particular option.
NEW PLAN BENEFITS
The grant of awards under the Plan is entirely within the discretion of the
Compensation and Stock Option Committee. Because the Company cannot forecast the
extent of awards that will be made in the future, the Company has omitted the
tabular disclosure relating to future grants of awards under the Plan.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT
AND RESTATEMENT OF THE FIRST AMENDED AND RESTATED W. R. BERKLEY CORPORATION 1992
STOCK OPTION PLAN IN THE FORM OF THE W. R. BERKLEY CORPORATION 2003 STOCK
INCENTIVE PLAN.
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has unanimously voted to recommend that the
stockholders adopt an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock from
80,000,000 shares to 150,000,000 shares. If the amendment is approved, the
shares may be issued from time to time by the Board of Directors. It is not
expected that further authorization from stockholders will be solicited for the
issuance of any shares of common
24
stock, except to the extent such authorization is required by law or by the
rules of the New York Stock Exchange. Currently, there is no agreement,
arrangement or understanding relating to the issuance and sale of the additional
shares of common stock which would be authorized by the proposed amendment.
Stockholders do not have, and the proposed amendment would not create, any
preemptive rights.
The Company currently has 80,000,000 shares of common stock authorized. The
Board believes that it is desirable to have a sufficient number of shares of
common stock available, as the occasion may arise, for possible future
financings and acquisition transactions, stock dividends or splits, stock
issuances pursuant to employee benefit plans and other proper corporate
purposes. Having such additional shares available for issuance in the future
would give the Company greater flexibility by allowing shares to be issued
without incurring the delay and expense of a special stockholders' meeting.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE RESTATED
CERTIFICATE OF INCORPORATION.
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, 2003. 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 2003 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.
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.
The aggregate amount of the fees billed or expected to be billed by KPMG
for its professional services in 2002 and 2001 were as follows:
<Table>
<Caption>
TYPE OF FEES 2002($) 2001($)(1)
- ------------ --------- ----------
Audit Fees(2).............................................. 1,964,400 1,945,300
Audit-Related Fees......................................... -- --
Tax Fees(3)................................................ 85,025 91,600
All Other Fees(4).......................................... 29,750 26,000
Total Fees................................................. 2,079,175 2,062,900
</Table>
- ------------------------------
(1) Certain amounts for fiscal year 2001 have been reclassified to conform to
the current year presentation.
(2) Audit fees consist of fees the Company paid to KPMG for professional
services for the audit of the Company's consolidated financial statements
included in its Form 10-K and review of financial statements included in its
Forms 10-Q, or for services that are normally provided by the
25
accountant in connection with statutory and regulatory filings or
engagements and public offerings of securities.
(3) Tax fees consist of fees for tax consultations and tax compliance services.
(4) All other fees include fees for health and benefit plan audits.
THE BOARD UNANIMOUSLY 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 therein 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, 2002.
26
STOCKHOLDER NOMINATIONS FOR BOARD MEMBERSHIP
AND OTHER PROPOSALS FOR 2004 ANNUAL MEETING
It is anticipated that the next Annual Meeting of Stockholders after the
one scheduled for May 20, 2003 will be held on or about May 11, 2004. 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 2004 no earlier than February 11, 2004 and no later than March 13,
2004. 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 2003 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 2004, such proposal must be received by the Secretary of the
Company by December 16, 2003 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, 2002 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
27
ANNEX A
W. R. BERKLEY CORPORATION
2003 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE
This W. R. Berkley Corporation 2003 Stock Incentive Plan (the "Plan") is
intended as an incentive to attract highly qualified individuals to become key
employees of W. R. Berkley Corporation (the "Company") and its subsidiaries and
affiliates and to retain such key employees and encourage stock ownership by
these individuals in order to give them a proprietary interest in the Company's
success and align their interest with those of the shareholders of the Company.
The Company intends to accomplish this through the grant of equity-based awards,
including stock options ("Options"), restricted stock ("Restricted Stock"),
restricted stock units ("Restricted Stock Units") and other equity-based awards
(Options, Restricted Stock, Restricted Stock Units and other equity-based awards
are hereafter collectively and individually referred to as "Awards"). The Plan
is an amendment and restatement of the First Amended and Restated W. R. Berkley
Corporation 1992 Stock Option Plan and the provisions of the Plan, as so amended
and restated, shall apply to all currently outstanding options under the Plan,
as well as Awards granted prospectively under the Plan.
The word "Company" when used in the Plan with reference to employment shall
include subsidiaries of the Company. The word "subsidiary" when used in the Plan
shall mean any subsidiary of the Company within the meaning of Section 424(f) of
the Internal Revenue Code of 1986, as amended ("Code"). The word "affiliate"
when used in the Plan shall mean any entity in which the Company has a direct or
indirect controlling interest.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") appointed
by the Board of Directors of the Company (the "Board") from among its members,
which shall consist of not less than two members thereof, provided that the full
Board may, in its discretion, from time to time exercise the power and authority
of the Committee under the Plan.
Subject to the provisions of the Plan, the Committee shall have authority,
in its discretion: (a) to determine which of the eligible employees of the
Company and its subsidiaries and affiliates shall be granted Awards under the
Plan; (b) to authorize the granting of Awards and designate the nature of such
Awards including whether such Awards shall be Options in the form of "incentive
stock options" under Section 422 of the Code or "non-statutory stock options" or
in the form of Restricted Stock, Restricted Stock Units or other equity-based
awards; (c) to determine the times when Awards shall be granted and the number
of shares subject to such Awards; (d) to determine the exercise price of the
shares subject to each Option, which price shall be not less than the minimum
specified in ARTICLE VI; (e) to determine the time or times when each Award
becomes exercisable, and the duration of the exercise period; (f) to determine
the number and terms of any Restricted Stock and Restricted Stock
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Units to be awarded, (g) subject to the minimum three-year vesting requirement
for Restricted Stock and Restricted Stock Units, to accelerate the vesting,
exercisability and/or settlement of any outstanding Awards; (h) to prescribe the
form or forms of the Award agreements under the Plan (which forms shall be
consistent with the Plan but need not be identical); (i) to determine the terms
and conditions of any other equity-based award under the Plan; (j) to adopt,
amend, and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the Plan; and (k) to construe and interpret
the Plan, the rules and regulations and the Award agreements under the Plan and
to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations and interpretations of
the Committee shall be final and binding on all award recipients under the Plan.
ARTICLE III
STOCK
Awards may be settled in shares of authorized but unissued common stock of
the Company, par value $.20 per share (the "Stock"), or previously issued shares
of Stock reacquired by the Company. The total number of shares of Stock which
may be issued pursuant to Awards granted under the Plan shall not exceed, in the
aggregate, 10,687,500 shares, except as such number of shares shall be adjusted
in accordance with the provisions of ARTICLE XIII hereof; provided, however,
that no more than five percent (5%) of the Company's outstanding Stock may be
granted under the Plan in the form of Restricted Stock and Restricted Stock
Units settled in Stock. The maximum number of shares of Stock with respect to
which Options may be granted under the Plan to any single optionee during any
calendar year shall not exceed 2,250,000 shares, except as such number shall be
adjusted in accordance with the provisions of ARTICLE XIII hereof.
In the event that any outstanding Award under the Plan for any reason
expires or is terminated prior to the end of the period during which Awards may
be granted, the shares of Stock subject to the unexercised portion of such Award
may again be subject to Awards granted under the Plan.
ARTICLE IV
ELIGIBILITY OF PARTICIPANTS;
LIMITATION OF GRANTS OF OPTIONS
(a) Officers and key employees of the Company or any of its subsidiaries
(including directors who are also employees of the foregoing) are eligible for
grants of incentive stock options which meet the requirements of Section 422 of
the Code.
(b) Officers, key employees, consultants and directors (including directors
who are not employees) of the Company or any of its subsidiaries or affiliates
are eligible for grants of other Awards, including "non-statutory stock
options". For purposes of the Plan, a "non-statutory stock option" means an
Option which, at the time of grant, is not designated as an "incentive stock
option" within the meaning of Section 422 of the Code.
(c) With respect to incentive stock options, if the aggregate fair market
value (determined as of the time the Option is granted) of the Stock with
respect to which any incentive stock option becomes
A-2
exercisable for the first time by an optionee in any calendar year (under the
Plan or any other stock option plan of the Company or any parent or subsidiary
thereof) exceeds $100,000, such Options shall be treated as non-statutory stock
options to the extent of such excess.
ARTICLE V
AWARDS
Awards granted pursuant to the Plan shall be evidenced by agreements in
such form as the Committee shall from time to time approve, which agreements
need not contain uniform terms and conditions but shall comply with and be
subject to all the mandatory terms and conditions of the Plan and the applicable
provisions of the Code. More than one Award may be granted to any eligible
individual.
ARTICLE VI
EXERCISE PRICE
In the case of each Option granted under the Plan, the exercise price shall
be not less than the fair market value of the Stock on the date of grant of such
option, such fair market value to be determined by the Committee in its
discretion; provided, however that in the case of an incentive stock option
granted to an individual who owns, at the time the incentive stock option is
granted, stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or any parent or subsidiary thereof
(a "Ten Percent Shareholder"), the exercise price shall not be less than 110% of
such fair market value. In no event, however, shall the exercise price be less
than an amount equal to the par value of the Stock.
ARTICLE VII
OPTIONS
The Committee shall have the authority to grant one or more Options to any
eligible individual under the Plan. The Option agreement may specify periods of
time during which Options may not be exercised in whole or in part. Except as
may be so specified, any Option may be exercised in whole at any time or in part
from time to time during the applicable Option period. The Committee, in its
discretion, may accelerate the vesting and/or exercisability of any outstanding
Option. Unless otherwise determined by the Committee at the time of grant, the
vesting and exercisability of an optionee's outstanding Options shall accelerate
upon a termination of employment by reason of the optionee's death or
disability. The Committee shall have the authority to define the term
"disability" for this purpose and/or to determine whether an optionee's
employment has terminated by reason of disability.
Any other provision of the Plan to the contrary notwithstanding, no Option
may be exercised after the date ten years from the date of grant of such Option
or, in the case of an incentive stock option granted to a Ten Percent
Shareholder, five years from the date of grant of such Option.
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The Committee, in its discretion, may, with the consent of any optionee,
cancel any outstanding Option.
Except as provided in the next succeeding paragraph, payment for shares of
Stock purchased upon exercise of an Option granted hereunder shall be made in
full (i) in cash or cash equivalents, (ii) in shares of Stock which have been
held by the optionee for at least six months prior to the date of such exercise,
or (iii) in any combination of these two methods. In addition, the Committee
may, in its discretion, allow for the exercise of Options in accordance with
broker-assisted exercise procedures adopted by the Committee from time to time.
If the Committee shall so determine, payment for shares of stock purchased
upon exercise of an option granted hereunder may be made by delivery of one or
more promissory notes or otherwise on an installment basis, with terms and
conditions as provided in the applicable option agreement; provided, however,
that in no event shall any such promissory note or installment obligation be due
and payable later than five years from the date of purchase. The optionee shall
have full voting rights and shall receive all dividends with respect to the
shares so purchased. Certificates for shares so purchased shall, immediately
upon issue, be delivered to the Company, endorsed in blank by the optionee or
accompanied by a separate stock power so endorsed, in pledge as security for the
payment of the unpaid balance of the purchase price. The certificates issued to
represent paid shares shall state thereon the total amount of the consideration
to be paid therefor and the amount paid thereon. Notwithstanding anything herein
to the contrary, the Company shall not directly or indirectly extend or maintain
credit, or arrange for the extension of credit, in the form of a personal loan
to or for any director or executive officer of the Company through the Plan in
violation of Section 402 of the Sarbanes-Oxley Act of 2002.
ARTICLE VIII
RESTRICTED STOCK
The Committee shall have the authority (1) to grant Restricted Stock, (2)
to issue or transfer Restricted Stock to any eligible individual, and (3) to
establish terms, conditions and restrictions applicable to such Restricted
Stock, including the restricted period, which may differ with respect to each
grantee, the time or times at which Restricted Stock shall be granted or become
vested and the number of shares to be covered by each grant; provided, however,
that no award of Restricted Stock shall become fully or partially vested (except
in the event of a termination of employment on account of death, disability or
retirement or upon a Change of Control, as described below) prior to the third
anniversary of the date of grant.
The recipient of a Restricted Stock Award shall execute and deliver to the
Company an Award agreement with respect to the Restricted Stock setting forth
the restrictions applicable to such Restricted Stock. If the Committee
determines that the Restricted Stock shall be held in escrow by the Company
rather than delivered to the recipient pending the release of the applicable
restrictions, the recipient additionally shall execute and deliver to the
Company the appropriate blank stock powers with respect to the Restricted Stock
covered by such agreements. If a recipient shall fail to execute a Restricted
Stock agreement and, if applicable, stock powers, the Award shall be null and
void. Subject to the restrictions set forth below, the recipient shall generally
have the rights and privileges of a stockholder as to such Restricted Stock,
including the right to vote such Restricted Stock, but not the
A-4
right to receive dividends, if any, on such shares. The Committee may determine
whether a Restricted Stock Award shall be entitled to receive dividends. If the
Committee determines that a Restricted Stock Award shall be entitled to
dividends, any such cash dividends and/or stock dividends, with respect to the
Restricted Stock may be either currently paid to the recipient or withheld by
the Company for the recipient's account, as determined by the Committee in its
sole discretion. Unless otherwise determined by the Committee no interest will
accrue or be paid on the amount of any cash dividends withheld. Unless otherwise
determined by the Committee, cash dividends or stock dividends so withheld by
the Committee shall be subject to forfeiture to the same degree as the shares of
Restricted Stock to which they relate.
Upon the Award of Restricted Stock, the Committee shall cause a stock
certificate registered in the name of the recipient to be issued and, if it so
determines, held in escrow by the Company. If the Company retains the stock
certificate, the Company shall notify the recipient that a stock certificate
registered in the name of the recipient is being held by it.
Any Restricted Stock awarded hereunder shall be subject to the following
restrictions until the expiration of the restricted period, and to such other
terms and conditions as may be set forth in the applicable Award agreement: (1)
if an escrow arrangement is used, the recipient shall not be entitled to
delivery of the stock certificate; (2) the shares shall be subject to the
restrictions on transferability set forth in the Award agreement; (3) the shares
shall be subject to forfeiture to the extent provided below and the Award
agreement and, to the extent such shares are forfeited, the stock certificates
shall be returned to the Company, and all rights of the recipient to such shares
and as a shareholder shall terminate without further obligation on the part of
the Company.
Subject to the minimum three-year vesting requirement, the Committee shall
have the authority to remove any or all of the restrictions on the Restricted
Stock whenever it may determine that, by reason of changes in applicable laws or
other changes in circumstances arising after the date of the Restricted Stock
Award, such action is appropriate.
The restricted period of Restricted Stock shall commence on the date of
grant and shall expire from time to time as to that part of the Restricted Stock
indicated in a schedule established by the Committee and set forth in a written
Award agreement; provided, however, that the earliest date the restricted period
may expire shall be at least three years from the date of grant.
Except to the extent determined by the Committee and reflected in the
underlying Award agreement, in the event a recipient terminates employment with
the Company during a restricted period, that portion of the Award with respect
to which restrictions have not expired (the "Non-Vested Portion") shall be
treated as follows: (a) upon the voluntary resignation of a Restricted Stock
recipient or discharge by the Company, in either case, for reasons other than
death, disability or retirement, the Non-Vested Portion of the Award shall be
completely forfeited; and (b) upon termination of employment on account of
death, disability or retirement, a pro-rata portion of the Non-Vested Portion of
the Award shall immediately become fully vested and paid to the recipient or his
beneficiary, as applicable, as soon as practicable following such termination.
The pro-rata portion of the Non-Vested Portion of the Award that shall vest
immediately upon such termination shall be a portion that represents the amount
of time the recipient was employed from the date of grant of the Award through
the date of such termination as compared with the entire restricted period, as
determined by the Committee. The Committee shall have the authority to define
the term "disability"
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and "retirement" for this purpose and/or to determine whether a recipient's
employment has terminated by reason of disability or retirement.
Upon the expiration of the restricted period with respect to any shares of
Stock covered by a Restricted Stock Award, the transfer restrictions and forfeit
provisions applicable to the Restricted Stock shall be of no further force or
effect with respect to shares of Restricted Stock which have not then been
forfeited. If an escrow arrangement is used, upon such expiration, the Company
shall deliver to the recipient, or his beneficiary, without charge, the stock
certificate evidencing the shares of Restricted Stock which have not then been
forfeited and with respect to which the restricted period has expired (to the
nearest full share) and any cash dividends or stock dividends credited to the
recipient's account with respect to such Restricted Stock and the interest
thereon, if any.
Each certificate representing Restricted Stock awarded under the Plan shall
bear the following legend until the end of the restricted period with respect to
such Stock:
"Transfer of this certificate and the shares represented hereby is
restricted pursuant to the terms of a Restricted Stock Agreement, dated as of
, between W. R. Berkley Corporation and . A copy of such
Agreement is on file at the offices of W. R. Berkley Corporation."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
ARTICLE IX
RESTRICTED STOCK UNITS
The Committee shall have the authority (1) to grant Restricted Stock Units,
(2) to issue or transfer Stock in settlement of such Restricted Stock Units to
any eligible individual, and (3) to establish terms, conditions and restrictions
applicable to such Restricted Stock Units, including the restricted period,
which may differ with respect to each grantee, the time or times at which
Restricted Stock Units shall be granted or become vested and the number of
Restricted Stock Units to be covered by each grant; provided, however, that no
award of Restricted Stock Units shall become fully or partially vested (except
in the event of a termination of employment on account of death, disability or
retirement or upon a Change of Control, as described below) prior to the third
anniversary of the date of grant.
The terms and conditions of an Award of Restricted Stock Units shall be
reflected in a written Award agreement. No shares of Stock shall be issued at
the time a Restricted Stock Unit Award is made, and the Company will not be
required to set aside a fund for the payment of any such Award. Recipients of
Restricted Stock Units may, in the sole discretion of the Committee, be entitled
to an amount equal to the cash dividends paid by the Company upon one share of
Stock for each Restricted Stock Unit then credited to such recipient's account
("Dividend Equivalents"). To the extent an Award of Restricted Stock Units is
entitled to Dividend Equivalents, the Committee shall, in its sole discretion,
determine whether to credit to the account of, or to currently pay to, such
recipient of an Award of Restricted Stock Units such Dividend Equivalents.
Unless otherwise determined by the Committee, no interest will accrue or be paid
on Dividend Equivalents credited to a recipient's account. Unless otherwise
determined by the Committee, Dividend Equivalents credited to a recipi-
A-6
ent's account shall be subject to forfeiture on the same basis as the related
Restricted Stock Units, and may bear interest at a rate and subject to such
terms as are determined by the Committee.
Restricted Stock Units awarded to any eligible individual shall be subject
to (1) forfeiture until the expiration of the restricted period, to the extent
provided in the Award agreement, and to the extent such Awards are forfeited,
all rights of the recipient to such Awards shall terminate without further
obligation on the part of the Company and (2) such other terms and conditions as
may be set forth in the applicable Award agreement.
Except to the extent determined by the Committee and reflected in the
underlying Award agreement, in the event a Restricted Stock Unit recipient
terminates employment with the Company during a restricted period, the
Non-Vested Portion of such Award shall be treated as follows: (a) upon the
voluntary resignation of a Restricted Stock Unit recipient or discharge by the
Company, in either case, for reasons other than death, disability or retirement,
the Non-Vested Portion of the Award shall be completely forfeited; and (b) upon
termination of employment on account of death, disability or retirement, a
pro-rata portion of the Non-Vested Portion of the Award shall immediately become
fully vested. The pro-rata portion of the Non-Vested Portion of the Award that
shall vest immediately upon such termination shall be a portion that represents
the amount of time the recipient was employed from the date of grant of the
Award through the date of such termination as compared with the entire
restricted period, as determined by the Committee. The Committee shall have the
authority to define the term "disability" and "retirement" for this purpose
and/or to determine whether a recipient's employment has terminated by reason of
disability or retirement.
Upon such date or dates as determined by the Committee (the "Settlement
Date(s)") on or following the expiration of the restricted period, as set forth
in the Award agreement, unless earlier forfeited, the Company shall settle the
Restricted Stock Unit Award by delivering (i) a number of shares of Stock equal
to the number of Restricted Stock Units then vested and not otherwise forfeited
and (ii) if applicable, a number of shares of Stock having a value equal to any
unpaid Dividend Equivalents, plus interest if any, accrued with respect to the
Restricted Stock Units. The Company may, in the Committee's sole discretion,
settle a Restricted Stock Unit Award in cash in lieu of the delivery of shares
of Stock or partially in cash and partially in shares of Stock. A settlement in
cash shall be based on the value of the shares of Stock otherwise to be
delivered on the Settlement Date.
Subject to the minimum three-year vesting requirement, the Committee shall
have the authority to remove any or all of the restrictions on the Restricted
Stock Units and/or accelerate the settlement of any such Award whenever it may
determine that, by reason of changes in applicable laws or other changes in
circumstances arising after the date of the Restricted Stock Unit Award, such
action is appropriate.
ARTICLE X
PERFORMANCE-BASED AWARDS
Certain Awards of Restricted Stock and Restricted Stock Units granted under
the Plan may be granted, in sole discretion of the Committee, in a manner
constituting "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code. Such Awards (the "Performance-Based Awards") shall
be based upon one or more of the following factors: stock price, earnings per
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share, net earnings, operating earnings, return on assets, shareholder return,
return on equity, growth in assets, sales, cash flow, market share, relative
performance to a group of companies comparable to the Company, and strategic
business criteria consisting of one or more objectives based on the Company's
meeting specified goals relating to revenue, market penetration, business
expansion, costs or acquisitions or divestitures. With respect to
Performance-Based Awards, (i) the Committee shall establish in writing the
objective performance-based goals applicable to a given performance period no
later than 90 days after the commencement of such performance period (but in no
event after 25% of such period has elapsed) and (ii) no Performance-Based Awards
shall be payable to any recipient for a given performance period until the
Committee certifies in writing that the objective performance goals (and any
other material terms) applicable to such period have been satisfied. The maximum
number of shares of Stock underlying (or that relate to) a performance-based
restricted stock or restricted stock unit award granted to any individual in any
performance period cannot exceed 1,500,000 shares.
ARTICLE XI
WITHHOLDING
At the time of exercise, vesting or settlement of any Award, as applicable,
the Committee shall require the recipient to pay to the Company an amount
sufficient to pay all federal, state and local withholding taxes applicable, in
the Committee's judgment, to the exercise, vesting or settlement of such Award,
and the recipient's right to exercise, vesting or settlement shall be contingent
upon such payment. Such payment to the Company may be effected through (a)
payment by the recipient to the Company of the aggregate withholding taxes in
cash or cash equivalents; (b) at the discretion of the Committee, the Company's
withholding from the number of shares of Stock that would otherwise be delivered
to the optionee upon exercise, vesting or settlement of the Award, a number of
shares of Stock with an aggregate fair market value on the date of exercise or
vesting (as determined by the Committee) equal to the aggregate amount of
withholding taxes; or (c) at the discretion of the Committee, any combination of
these two methods.
ARTICLE XII
NON-TRANSFERABILITY OF RIGHTS
(a) Except as provided in paragraph (b) below, an Award granted under the
Plan may not be transferred except by will or the laws of descent and
distribution and, during the lifetime of the recipient, may be exercised only by
and vested only in the recipient.
(b) Notwithstanding paragraph (a) above, at the discretion of the
Committee, an Award, other than an incentive stock option, may be transferred by
the recipient to one or more members of the recipient's immediate family, or to
a trust or a partnership established for the benefit of one or more members of
the recipient's immediate family. For the purposes of this paragraph (b),
"immediate family" means a recipient's spouse, children and grandchildren,
whether natural or adopted.
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ARTICLE XIII
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
The aggregate number of shares of Stock which may be issued pursuant to
Awards granted hereunder, the maximum number of shares of Stock with respect to
which options may be granted to any single individual during any calendar year,
the number of shares of Stock covered by each outstanding Award and the price
per share thereof shall be appropriately adjusted for any increase or decrease
in the number of outstanding shares of Stock resulting from a stock split or
other subdivision or consolidation of shares of Stock, or for other capital
adjustments or payments of stock dividends or distributions or other increases
or decreases in the outstanding shares of Stock effected without receipt of
consideration by the Company.
If the Company shall be sold, reorganized, consolidated, or merged with
another corporation, or if all or substantially all of the assets of the Company
shall be sold or exchanged (a "Corporate Event"), (i) each Award recipient
shall, at the time of such Corporate Event, be entitled to receive upon the
exercise, vesting or settlement of his Award the same number and kind of shares
of common stock or the same amount of property, cash or other securities as he
would have been entitled to receive upon the occurrence of such Corporate Event
as if he had been, immediately prior to such event, the holder of the number of
shares of Stock covered by his Award, and (ii) if the Company is not the
surviving corporation in such Corporate Event, the Company shall require the
successor corporation or parent thereof to assume such outstanding Awards;
provided, however, that the Committee may, in its discretion and in lieu of
requiring such assumption, provide that all outstanding Awards shall terminate
as of the consummation of such Corporate Event, and accelerate the
exercisability and vesting of all outstanding Awards to any date prior to the
date of such Corporate Event.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of any fractional share which might
otherwise become subject to an Award.
ARTICLE XIV
CHANGE OF CONTROL
In the event of a Change of Control, each outstanding Award under the Plan
(including options granted prior to this amendment and restatement) shall fully
vest and/or become immediately exercisable or settled in full as of the date
immediately preceding the date of such Change of Control, or such other date,
not later than the date of such Change of Control, as shall be established by
the Committee in its discretion.
For purposes of the Plan, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of Stock (the
"Outstanding Company Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the
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"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company, (iv) any acquisition by William R. Berkley or any entity directly
or indirectly controlled by William R. Berkley, (v) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i),
(ii), and (iii) of subsection (c) of this ARTICLE XIV or (vi) any
acquisition that is approved in advance by the Board at a time when the
Incumbent Board (as hereinafter defined) constitutes at least a majority of
the Board (an "Approved Acquisition"); or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a Corporate Event, unless, following such
Corporate Event, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Stock and Outstanding Company Voting Securities immediately prior
to such Corporate Event beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Event (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Corporate Event, of the
Outstanding Company Stock and Outstanding Company Voting Securities, as the
case may be, (ii) no Person other than (1) William R. Berkley or any entity
directly or indirectly controlled by William R. Berkley, (2) any
corporation resulting from such Corporate Event, or (3) any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Corporate Event, beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Corporate Event or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Corporate Event, or was acquired pursuant to an Approved Acquisition and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Event were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Corporate Event; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
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ARTICLE XV
USE OF PROCEEDS
The proceeds received from the sale of Stock pursuant to the Plan shall be
used for general corporate purposes.
ARTICLE XVI
RIGHTS AS A STOCKHOLDER
Except as otherwise set forth herein or in the Award agreement, an Award
recipient or a transferee of an Award shall have no rights as a stockholder with
respect to any shares covered by his Award until he shall have become the holder
of record of such shares, and he shall not be entitled to any dividends or
distributions or other rights in respect of such shares for which the record
date is prior to the date on which he shall have become the holder of record
thereof.
ARTICLE XVII
COMPLIANCE WITH THE LAW
The obligation of the Company to make payment of Awards in Stock or
otherwise shall be subject to all applicable laws, rules, and regulations, and
to such approvals by governmental agencies as may be required. Notwithstanding
any terms or conditions of any Award to the contrary, the Company shall be under
no obligation to offer to sell or to sell and shall be prohibited from offering
to sell or selling any shares of Stock pursuant to an Award unless such offer or
sale has been properly registered pursuant to the Securities Act of 1933 (the
"Securities Act") with the Securities and Exchange Commission or unless the
Company has received an opinion of counsel, satisfactory to the Company, that
such shares may be offered or sold without such registration pursuant to an
available exemption therefrom and the terms and conditions of such exemption
have been fully complied with. The Company shall be under no obligation to
register for sale under the Securities Act any of the shares of Stock to be
offered or sold under the Plan. If the shares of Stock offered for sale or sold
under the Plan are offered or sold pursuant to an exemption from registration
under the Securities Act, the Company may restrict the transfer of such shares
and may legend the Stock certificates representing such shares in such manner as
it deems advisable to ensure the availability of any such exemption.
ARTICLE XVIII
GRANT LIMITATION FOR INCENTIVE STOCK OPTIONS
No incentive stock option shall be granted hereunder after the date which
is ten years from the earlier of (i) the date the Plan, as amended and restated,
is adopted by the Board, and (ii) the date the Plan, as amended and restated, is
approved by the Company's stockholders.
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ARTICLE XIX
NONCOMPETITION RESTRICTIONS
The Committee may make any Award, or the cash value thereof, subject to
forfeiture or repayment in the event the Award recipient competes with the
business of the Company or solicits employees or clients of the Company.
ARTICLE XX
AMENDMENT OR DISCONTINUANCE OF PLAN
The Board may, without the consent of the Award recipients, at any time
terminate the Plan entirely and at any time or from time to time amend or modify
the Plan, provided that no such action shall adversely affect any Award
theretofore granted hereunder without the consent of the applicable Award
recipient, and provided further that no such action by the Board, without
approval of the stockholders, may (a) increase the total number of shares of
Stock which may be issued pursuant to Awards granted under the Plan, except as
contemplated in ARTICLE XIII; or (b) change the class of employees eligible to
receive incentive stock options under the Plan.
* * *
As amended as of May 14, 1997,
and further amended effective
as of March 9, 2000, and further amended
and restated effective as of March 11, 2003.
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
W. R. BERKLEY CORPORATION
The undersigned stockholder of W. R. BERKLEY CORPORATION hereby appoints
IRA S. LEDERMAN and EUGENE G. BALLARD, 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 20, 2003, and
at any adjournment of such meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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- FOLD AND DETACH HERE -
THIS PROXY WHEN PROPERLY EXECUTED WILL Mark Here
BE VOTED IN THE MANNER DIRECTED HEREIN for Address
BY THE UNDERSIGNED STOCKHOLDER. IF NO Change or
DIRECTION IS MADE, THIS PROXY WILL BE Comments [ ]
VOTED FOR PROPOSALS 1, 2, 3 AND 4. PLEASE SEE REVERSE SIDE
FOR all nominees listed WITHHOLD AUTHORITY
except as marked to the to vote for
contrary below all nominees listed
1. Election of Directors: [ ] [ ]
01 William R. Berkley
02 George D. Daly
03 Philip J. Ablove
INSTRUCTION: To withhold
authority to vote for any
individual nominee write
that nominee's name on
the space provided below
FOR AGAINST ABSTAIN
ITEM 2 - To approve the Amendment and [ ] [ ] [ ]
Restatement of the First Amended
and Restated W. R. Berkley
Corporation 1992 Stock Option
Plan in the form of the W. R.
Berkley Corporation 2003 Stock
Incentive Plan.
ITEM 3 - To approve the Amendment to the [ ] [ ] [ ]
Restated Certificate of
Incorporation of W. R. Berkley
Corporation.
ITEM 4 - To ratify the appointment of [ ] [ ] [ ]
KPMG LLP as independent
certified public accountants for
W. R. Berkley Corporation for
the fiscal year ending December
31, 2003.
ITEM 5 - 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 2003
Annual Meeting and the Annual
Report for the fiscal year
ended December 31, 2002.
DATE, SIGN AND MAIL PROMPTLY
IN THE ENCLOSED ENVELOPE.
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, SIGN,
AND MAIL PROMPTLY IN THE
ENCLOSED ENVELOPE.
SIGNATURE ____________________ SIGNATURE ___________________ DATED: _______,2003
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