<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-
</TABLE>
W.R. Berkley Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
W. R. BERKLEY CORPORATION
165 MASON STREET
P.O. BOX 2518
GREENWICH, CONNECTICUT 06836-2518
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
------------------------------
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
Hyatt Regency, 1800 E. Putnam Ave., Old Greenwich, Connecticut on Tuesday, May
13, 1997 at 2:30 P.M. for the following purposes:
(1) To elect two Directors to serve until their successors are duly elected
and qualify;
(2) To approve the First Amended and Restated W.R. Berkley Corporation 1992
Stock Option Plan;
(3) To approve the W.R. Berkley Corporation Long-Term Incentive
Compensation Plan;
(4) To approve the W.R. Berkley Corporation Annual Incentive Compensation
Plan;
(5) To ratify the selection of KPMG Peat Marwick LLP as independent
certified public accountants for the Company for the fiscal year ending
December 31, 1997; and
(6) 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 19, 1997 as the date for
determining stockholders of record entitled to receive notice of, and to vote
at, the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
You are cordially invited to attend the Annual Meeting. If you do not
expect to attend the Annual Meeting in person, please vote, date, sign and
return the enclosed proxy as promptly as possible in the enclosed reply
envelope.
By Order of the Board of Directors,
ROBERT S. GORIN,
Senior Vice President--
General Counsel and Secretary
Dated: April 2, 1997
<PAGE> 3
W. R. BERKLEY CORPORATION
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
------------------------------
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 Hyatt Regency, 1800 E. Putnam Ave., Old Greenwich, Connecticut on
Tuesday, May 13, 1997 at 2:30 P.M. and at any adjournment thereof. The giving of
a proxy does not preclude a stockholder from voting in person at the Annual
Meeting. The proxy is revocable before its exercise by delivering either written
notice of such revocation or a later dated proxy to the Secretary of the Company
at its executive office at any time prior to voting of the shares represented by
the earlier proxy. In addition, stockholders attending the Annual Meeting may
revoke their proxies by voting at the Annual Meeting. The expense of preparing,
printing and mailing this Proxy Statement will be paid by the Company. The
Company has engaged Georgeson & Company Inc. to assist in the solicitation of
proxies from stockholders. 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 & Company Inc. The
Company will reimburse banks, brokers and other custodians, nominees and
fiduciaries for their costs in sending the proxy materials to the beneficial
owners of the Company's Common Stock, par value $.20 per share (the "Common
Stock"). The total cost of the solicitation of proxies is not expected to exceed
$20,000. The Annual Report of the Company for the fiscal year ended December 31,
1996 is being mailed to all stockholders with this Proxy Statement. The
approximate mailing date is April 2, 1997.
A list of stockholders will be available for inspection for at least ten
days prior to the Annual Meeting at the principal executive offices of the
Company at 165 Mason Street, 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. 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.
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on March 19, 1997 are
entitled to receive notice of and to vote at the Annual Meeting. The number of
shares of voting stock of the Company outstanding on that date and entitled to
vote was 19,647,761 shares of Common Stock. Each such share of Common Stock is
entitled to one vote. It should be noted that officers and Directors of the
Company own or control approximately 14% of the outstanding Common Stock.
Information as to
1
<PAGE> 4
persons beneficially owning 5% or more of the Common Stock may be found under
the heading "Principal Stockholders" herein.
Unless otherwise directed in the proxy, the persons named therein will vote
"FOR" the election of the director nominees listed below, "FOR" the approval of
the First Amended and Restated W.R. Berkley Corporation 1992 Stock Option Plan,
"FOR" the approval of the W.R. Berkley Corporation Long-Term Incentive
Compensation Plan, "FOR" the approval of the W.R. Berkley Corporation Annual
Incentive Compensation Plan and "FOR" the ratification of the appointment of
KPMG Peat Marwick LLP as the Company's independent public accountants for its
fiscal year ending December 31, 1997. If a returned proxy does not specify a
vote for or against a proposal, it will be voted in favor thereof.
All matters to be acted on at the Annual Meeting require the affirmative
vote of a majority of the shares present at the meeting to constitute the action
of the stockholders. In accordance with Delaware law, abstentions will, while
broker nonvotes will not, be treated as present for purposes of the preceding
sentence. A broker nonvote is a proxy submitted by a broker in which the broker
fails to vote on behalf of a client on a particular matter for lack of
instruction when such instruction is required.
As of the date hereof, the Board of Directors knows of no other business
that will be presented for consideration at the Annual Meeting. If other
business shall properly come before the Annual Meeting, the persons named in the
proxy will vote according to their best judgment.
ELECTION OF DIRECTORS
As permitted by Delaware law, the Board is divided into three classes, the
classes being divided as equally as possible and each class having a term of
three years. Each year the term of office of one class expires. This year the
term of a class consisting of two Directors expires. It is the intention of the
Board that the shares represented by proxy, unless otherwise indicated thereon,
will be voted for the re-election of William R. Berkley and Robert B. Hodes as
Directors to hold office for a term of three years until the Annual Meeting of
Stockholders in 2000 and until their respective successors are duly elected and
qualify. Scott M. Cunningham retired at a meeting of the Board on December 3,
1996.
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
two named nominees.
2
<PAGE> 5
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 BUSINESS EXPERIENCE DURING PAST 5
CONTINUOUSLY YEARS,
NAME SINCE AGE AND OTHER INFORMATION
- ----------------------------------------- ------------ -------------------------------------
<S> <C> <C>
Nominees to Serve in Office Until 2000
William R. Berkley(1).................... 1967 Chairman of the Board and Chief
Executive Officer of the Company
since its formation in 1967. He also
served as President at various times
from 1967 to 1995. He also serves as
Chairman of the Board or Director of
a number of public and private
companies. These include Fine Host
Corporation, a contract food service
management company; Pioneer
Companies, Inc., a chemical
manufacturing and marketing company;
Strategic Distribution, Inc., an
industrial products distribution and
services company; and Interlaken
Capital, Inc., a private investment
firm with interests in various busi-
nesses. Mr. Berkley is 51 years of
age.
Robert B. Hodes(2)....................... 1970 Counsel to the New York law firm of
Willkie Farr & Gallagher where he had
previously been a partner for more
than the past five years. He also is
a director of Aerointernational,
Inc.; Crystal Oil Company; Globalstar
Telecommunications, Limited; Loral
Space & Communications Ltd.; Mueller
Industries, Inc.; R.V.I. Guaranty,
Ltd.; LCH Investments N.V.; and
Restructured Capital Holdings, Ltd.
Mr. Hodes is 71 years of age.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR BUSINESS EXPERIENCE DURING PAST 5
CONTINUOUSLY YEARS,
NAME SINCE AGE AND OTHER INFORMATION
- ----------------------------------------- ------------ -------------------------------------
<S> <C> <C>
Directors to Continue in Office Until
1998
Henry Kaufman(3)......................... 1994 President of Henry Kaufman & Co., an
investment management and economic
and financial consulting company,
since its establishment in 1988. He
serves as Chairman of the Board of
Overseers, Stern School of Business
of New York University; Chairman of
the Board of Trustees, Institute of
International Education; member of
the Board of Directors, Federal Home
Loan Mortgage Corp.; member of the
Board of Directors, Lehman Brothers
Holdings Inc.; member of the Board of
Trustees, New York University; and
member of the International Capital
Markets Advisory Committee of the
Federal Reserve Bank of New York. Mr.
Kaufman is 69 years of age.
Martin Stone(2)(3)(4).................... 1990 Chairman of Professional Sports, Inc.
(the Phoenix Firebirds AAA baseball
team) and Chairman of Adirondack Cor-
poration, all for more than the past
five years. He also is a director of
Canyon Ranch, Inc. and a member of
the Advisory Board of Yosemite
National Park. Mr. Stone is 68 years
of age.
John D. Vollaro.......................... 1995 Elected President and Chief Operating
Officer of the Company effective
January 2, 1996 and Director
effective September 13, 1995. Mr.
Vollaro has served as Chief Executive
Officer of Signet Star Holdings,
Inc., an affiliate of the Company,
since July 1993 and President and a
Director of Signet Star Holdings,
Inc. since February 1993. Mr. Vollaro
served as Executive Vice President of
the Company from 1991 until 1993,
Chief Financial Officer and Treasurer
of the Company from 1983 to 1993 and
Senior Vice President of the Company
from 1983 to 1991. Mr. Vollaro is 52
years of age.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR BUSINESS EXPERIENCE DURING PAST 5
CONTINUOUSLY YEARS,
NAME SINCE AGE AND OTHER INFORMATION
- ----------------------------------------- ------------ -------------------------------------
<S> <C> <C>
Directors to Continue in Office Until
1999
Richard G. Merrill(3).................... 1994 Executive Vice President of
Prudential Insurance Company of
America from August 1987 to March
1991 when he retired. Prior thereto,
he served as Chairman and President
of Prudential Asset Management
Company since 1985. He also is a
director of Sysco Corp. Mr. Merrill
is 66 years of age.
Jack H. Nusbaum(1)(4).................... 1967 Chairman of the New York law firm of
Willkie Farr & Gallagher where he has
been a partner for more than the last
five years. He also is a director of
Fine Host Corporation; Pioneer
Companies, Inc.; Prime Hospitality
Corp.; Strategic Distribution, Inc.,
and The Topps Company, Inc. Mr.
Nusbaum is 56 years of age.
Mark L. Shapiro(2)(4).................... 1974 Mr. Shapiro has been associated with
the investment banking firm of
Schroder Wertheim & Co. Incorporated
for more than the past five years.
Mr. Shapiro is 53 years of age.
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation and Stock Option Committee.
(4) Member of Business Ethics Committee.
5
<PAGE> 8
BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board had four standing committees: the Executive
Committee, the Audit Committee, the Compensation and Stock Option Committee and
the Business Ethics Committee. Nominees for Directors are selected by the Board
rather than by any committee of the Board. The Board met four times and held
three telephone meetings during 1996, and action by the Board was taken by
unanimous written consent on one occasion. 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. Berkley and
Nusbaum. The Committee held one telephone meeting during 1996.
The Audit Committee, which during 1996 was composed of Messrs. Hodes,
Shapiro and Stone, advises the Board as to the selection of the Company's
independent public accountants, monitors their performance, reviews all reports
submitted by them and consults with them with regard to the adequacy of internal
controls. During 1996, the Committee held two formal meetings.
The Compensation and Stock Option Committee was, until March 1996, composed
of Messrs. Merrill, Shapiro and Stone. At its meeting in March 1996, Mr. Kaufman
replaced Mr. Shapiro on the Committee. The Committee reviews management
compensation standards and practices and makes such recommendations to the Board
as it deems appropriate. The Committee also administers the 1992 Stock Option
Plan. During 1996, the Committee met one time, held two telephone meetings and
action by the Committee was taken by unanimous written consent on four
occasions.
The Business Ethics Committee, which during 1996 was composed of Messrs.
Nusbaum, Shapiro and Stone, administers the Company-wide Business Ethics
program. During 1996, the Committee held one formal meeting.
DIRECTOR COMPENSATION
For the first half of 1996, each Director received a quarterly retainer of
$4,000 and a fee of $1,000 for each Board meeting attended. Effective July 1,
1996, each Director received a quarterly retainer of $6,000 and a fee of $1,500
for each Board meeting attended. The Director fees and the annual retainer are
included in the Summary Compensation Table for Messrs. Berkley and Vollaro.
6
<PAGE> 9
PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 19, 1997 those persons known by
the Company to be the beneficial owners of more than 5% of the Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
----------------------------------------- ----------------------- --------
<S> <C> <C>
William R. Berkley 2,611,253 13.3%
165 Mason Street
Greenwich, CT 06830
Franklin Resources, Inc. 1,772,500(1) 9.0%(5)
777 Mariners Island Blvd.
San Mateo, CA 94404
FMR Corp 1,576,660(2) 8.03%(5)
82 Devonshire Street
Boston, MA 02109-3614
Davis Selected Advisers, L.P. 1,382,900(3) 7.0%(5)
124 East Marcy Street
Santa Fe, NM 87501
Merrill Lynch & Co., Inc. 1,199,955(4) 6.1%(5)
800 Scudders Mill Road
Plainsboro, NJ 08536
</TABLE>
- ------------------------------
(1) Information obtained from a Schedule 13G, dated February 12, 1997, filed
with the Securities and Exchange Commission on behalf of Franklin Resources,
Inc. The Schedule 13G reported ownership of 1,772,500 shares of Common Stock
then outstanding. Templeton Global Advisors Limited has sole voting power
over and sole dispositive power over all shares held.
(2) Information obtained from a Schedule 13G, dated February 14, 1997, filed
with the Securities and Exchange Commission by FMR Corporation. The Schedule
13G reported ownership of 1,576,660 shares of Common Stock then outstanding.
FMR Corporation has sole voting power over 72,700 shares and sole
dispositive power over all shares held.
(3) Information obtained from a Schedule 13G, dated January 29, 1997, filed with
the Securities and Exchange Commission by Davis Selected Advisers, L.P. The
Schedule 13G reported ownership of 1,382,900 shares of Common Stock then
outstanding. Davis Selected Advisers, L.P. has sole voting power and sole
dispositive power over all shares held.
(4) Information obtained from a Schedule 13G, dated February 14, 1997, filed
with the Securities and Exchange Commission by Merrill Lynch & Co., Inc. The
Schedule 13G reported ownership of 1,199,955 shares of Common Stock then
outstanding. Merrill Lynch & Co., Inc. has shared voting power and shared
dispositive power over all shares held.
(5) The percent of class shown was based on the shares of Common Stock reported
on the respective Schedules 13Gs and the total number of shares outstanding
as of December 31, 1996. The difference in the total number of shares
outstanding on December 31, 1996 and March 19, 1997 does not materially
affect the percentage of ownership of the class.
- ------------------------------
7
<PAGE> 10
The following table sets forth information as of March 19, 1997 regarding
ownership by all Directors and executive officers of the Company, as a group,
and each Director and each executive officer named in the Summary Compensation
Table, individually, of the Common Stock. Except as described in the footnotes
below, all amounts reflected in the table represent shares the beneficial owners
of which have sole voting and investment power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
---------------------------- --------------------------- -----------
<S> <C> <C>
All Directors and executive
officers as a group 2,804,479(1)(2)(3)(4)(5)(6) 14.3%
William R. Berkley 2,611,253(1) 13.3%
Sam Daniel, Jr. 19,000(2) *
Anthony J. Del Tufo 4,222(2) *
Robert B. Hodes 20,000 *
Henry Kaufman 20,000(3) *
Richard G. Merrill 4,924(4) *
Jack H. Nusbaum 13,461(5) *
Mark L. Shapiro 1,612 *
Martin Stone 10,000 *
Edward A. Thomas 24,774(2) *
John D. Vollaro 35,000 *
</TABLE>
- ------------------------------
* less than 1%
(1) Includes 8,389 shares held by Mr. Berkley's wife, as to which shares he
disclaims beneficial ownership, 3,405 shares held in several trusts as to
which Mr. Berkley is a custodian, and 91,666 shares of Common Stock which
are subject to currently exercisable stock options held by Mr. Berkley.
(2) The amounts shown for Messrs. Daniel, Del Tufo and Thomas include 19,000,
3,333 and 18,666 shares of Common Stock, respectively, which are subject to
currently exercisable stock options and for Mr. Del Tufo the amount shown
includes 689 shares held under the Company's Profit Sharing Plan.
(3) The amount shown for Mr. Kaufman represents shares of Common Stock held in a
family partnership.
(4) The amount shown for Mr. Merrill includes 1,594 shares held in an individual
retirement account, 2,030 shares held in a KEOGH plan with Mr. Merrill as
trustee and 1,300 shares held in a trust with Mr. Merrill and his spouse as
trustees.
(5) The amounts shown for all Directors and executive officers as a group and
Mr. Nusbaum include 6,450 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 U.S. Trust
Company of New York.
(6) The amounts shown for all Directors and executive officers as a group
include an aggregate of 159,411 shares of Common Stock which are subject to
currently exercisable stock options held by executive officers of the
Company and an aggregate of 3,128 and 153 shares of Common Stock which are
held by executive officers under the Company's Profit Sharing Plan and
Employee Stock Purchase Plan, respectively.
The Company knows of no arrangements, including any pledge by any person of
securities of the Company, the operation of which may at a subsequent date
result in a change of control of the Company. Under applicable Insurance Holding
Company Acts in various states, a potential owner 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.
8
<PAGE> 11
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1996, the Company engaged in several transactions with companies
controlled by or affiliated with its Chairman of the Board, William R. Berkley.
In these transactions, fees paid by the Company consisted primarily of $98,427
of management, storage, maintenance and operation services in connection with
travel on corporate aircraft and fees received by the Company consisted of
$101,610 for rent and other services.
As disclosed in the Company's Proxy Statement for the Company's 1996 Annual
Meeting, during February 1996, the Company purchased the outstanding capital
stock of a corporation owned by William R. Berkley which provides management,
storage, maintenance and operations services for aircraft owned by the Company
and an unaffiliated third party. In connection with the acquisition, the Company
paid Mr. Berkley $100,000 (an amount equal to the acquired corporation's net
asset value on the purchase date) and assumed at cost the obligations incurred
by the acquired corporation in connection with the construction of certain
aircraft facilities.
During 1996, the Company paid $168,500 in consulting fees to a firm owned
by Scott M. Cunningham, a former Director of the Company.
The Company believes that, in each of the transactions with management and
others described above, the amounts paid or received by the Company were
comparable to those that would have been paid to or received from an
unaffiliated party in an arm's-length transaction.
Robert B. Hodes and Jack H. Nusbaum, both Directors of the Company, are
Counsel and Chairman, respectively, of Willkie Farr & Gallagher, outside counsel
to the Company.
9
<PAGE> 12
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
CEO COMPENSATION. The Compensation and Stock Option Committee continues to
believe that the Chief Executive Officer's (the CEO's) compensation should be
heavily influenced by Company performance, as measured by operating, financial
and strategic objectives, viewed both from a short-term and a long-term
perspective. The CEO's compensation is set based on the Committee's general
evaluation of these factors as well as the CEO's individual performance.
The Committee approved the CEO's salary for 1996 at its meeting in January
1996. The Committee considered the Company's financial performance and the
performance of the Company's stock during 1995 as compared with the Peer Group
companies selected for the Company Stock Performance Graph. In evaluating the
Company's financial performance, the Committee reviewed, among other factors,
the Company's return on capital relative to the return on a five (5) year
treasury bond. The Committee noted that the Company's combined ratio was 103 at
September 30, 1995 compared to 117.4 at September 30, 1994. The Committee
further noted the Company's annualized return on stockholders' equity was 9.6%
at September 30, 1995 compared to 5.1% at December 31, 1994. The Committee
evaluated the CEO's individual performance during 1995, and noted Mr. Berkley's
tireless efforts to achieve growth through acquisitions and start-up companies
during 1995 as well as the fact that Mr. Berkley's leadership and dedication
were critical to the Company's long-term success. The Committee also considered
the salaries of the chief executive officers of the companies in the Peer Group,
believing that the CEO's combined salary and anticipated bonus should generally
be within the range of the executive officers of the companies included in the
Peer Group. In view of the foregoing factors, the Committee determined that Mr.
Berkley's salary for 1996 should remain at $985,000.
For purposes of determining incentive compensation for the CEO, the
Committee determined that the Company should consider the limitations on tax
deductibility imposed under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Section 162(m) limits deductions for compensation in
excess of $1 million a year paid by a public corporation to certain of its
executives unless certain criteria are met. Therefore, in order to meet the
criteria, the Committee determined that the CEO's incentive compensation should
be structured to qualify as "performance-based compensation," which is exempt
from the deduction limits. In general, this rule requires that the CEO's
incentive compensation be based on attainment of one or more performance goals
and that the Company's stockholders approve both the performance goals and the
amount to be paid. For these reasons, the Committee recommended that the CEO
should receive incentive compensation for a fiscal year only if the Company's
annual net income available to common stockholders for such fiscal year, as
reported in the Company's audited financial statements for such year, exceeds an
amount (the "Base Amount") calculated by multiplying the Company's average
common stockholders' equity (the average of common stockholders' equity as of
the beginning of the fiscal year and as of the end of each fiscal quarter) by a
percentage rate of return for such fiscal year to be determined by the
Committee, in its discretion. During 1996, the percentage rate of return was
7 3/8% (the rate being paid by the Company on its Depositary Shares (each
representing 1/6 of a share of the Company's 7 3/8% Series A Cumulative
Redeemable Preferred Stock)). Common stockholders' equity represents total
stockholders' equity less the liquidation preference of the Company's
outstanding preferred stock. If the Company's annual net income available to
common stockholders for a fiscal year exceeds the Base
10
<PAGE> 13
Amount for such year, then the CEO's incentive compensation for such year will
be equal to 10% of the excess; provided, however, that in no event will the
CEO's incentive compensation exceed 2% of the Company's net income available to
common stockholders for such year, as reported in the Company's audited
financial statements.
Application of the foregoing performance goals resulted in the maximum
incentive compensation being payable to Mr. Berkley for fiscal year 1996.
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY. The Company has not entered
into employment agreements with any officers. The Committee believes it
continued to be important, therefore, to use compensation to enable the Company
to attract and reward officers 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 1992
Stock Option Plan.
In setting compensation, the Committee considered the individual
performance and past pay levels of all executive officers and the President of
each subsidiary. The Committee also considered the same factors identified above
relating to CEO compensation, although there is no specific quantitative,
formula relationship between these factors and the actual compensation
established for any individual. For 1996, the Committee generally sought to
increase executive salaries to remain in the average range of members of the
Company's Peer Group, while bonus compensation approximated 25% of salary.
The Committee determined that the President and Chief Operating Officer's
incentive compensation should be structured to qualify as "performance-based
compensation." As a result, the Committee recommended that the President and
Chief Operating Officer's incentive compensation should be based upon attainment
of the performance goals described above with respect to the CEO, except that if
the Company's annual net income available to common stockholders for a fiscal
year exceeds the Base Amount for such year, then the President and Chief
Operating Officer's incentive compensation for such year will be equal to 5% of
the excess; provided, however, that in no event will the President and Chief
Operating Officer's incentive compensation exceed 1% of the Company's net income
available to common stockholders for such year, as reported in the Company's
audited financial statements.
Application of the foregoing performance goals resulted in the maximum
incentive compensation being payable to Mr. Vollaro for fiscal 1996.
STOCK OPTION GRANTS. It has been the Company's practice to grant stock
options every other year. Under the 1992 Stock Option Plan, options may be
granted to the CEO and to the other executives based on an evaluation of such
individual's ability to influence the Company's long-term growth and
profitability. In the case of executives employed by subsidiaries, the
subsidiary's financial performance and potential future contributions to overall
corporate profitability were also taken into
11
<PAGE> 14
account. The Committee also considers a recipient's annual salary. During 1996,
the Committee granted options based upon a subjective application of the
foregoing criteria.
Compensation and Stock Option
Committee
Henry Kaufman
Richard Merrill
Martin Stone
March 11, 1997
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
<PAGE> 15
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 $100,000 in salary and
bonus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
PAYOUTS
ANNUAL COMPENSATION ---------
------------------------------------------ AWARDS LONG
OTHER ----------------------- TERM
ANNUAL RESTRICTED SECURITIES INCENTIVE
COMPEN- STOCK UNDERLYING PLAN ALL OTHER
NAME AND PRINCIPAL SALARY BONUS SATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) # GRANTED ($) ($)
- ---------------------- ----- -------------- ---------- ---------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William R. Berkley.... 1996 1,014,000(1) 1,527,080 274,957(2) -- 50,000 -- 89,750(3)
Chairman of the Board
and 1995 1,022,500(4) 996,000 198,880(5) -- -- -- 75,749
Chief Executive
Officer 1994 986,000(6) 0 226,250(7) -- 40,000 -- 57,846
John D. Vollaro....... 1996 528,000(1) 764,140 -- -- 25,000 -- 36,779(3)
President and
Chief Operating
Officer
Anthony J. Del Tufo... 1996 335,000 62,900 0 -- 10,000 -- 55,913(3)
Senior Vice
President -- 1995 315,000 75,375 0 -- -- -- 21,216
Chief Financial
Officer 1994 300,000 65,000 0 -- 7,500 -- 16,500
Edward A. Thomas...... 1996 275,000 82,650 0 -- 10,000 -- 21,487(3)
Senior Vice
President -- 1995 250,000 75,000 0 -- -- -- 16,665
Specialty Operations 1994 235,000 50,000 0 -- 6,750 -- 12,914
Sam Daniel, Jr. ...... 1996 270,000 66,800 0 -- 10,500 -- 21,022(3)
Senior Vice
President -- 1995 242,500 82,500 0 -- -- -- 16,123
Regional Operations 1994 225,000 50,000 0 -- 7,500 -- 12,364
</TABLE>
- ------------------------------
(1) Mr. Vollaro became an executive officer of the Company on January 2, 1996.
For Messrs. Berkley and Vollaro, these amounts include Director fees of
$29,000 and $28,000, respectively.
(2) Of this amount, $200,000 represents consulting fees paid by Berkley
International, LLC and $74,957 represents personal use of Company and
chartered aircraft.
(3) For Messrs. Berkley, Vollaro, Del Tufo, Thomas and Daniel, these amounts
include contributions to the Profit Sharing Plan of $11,250 each and Benefit
Replacement Plan contributions of $62,625, $25,529, $13,846, $9,339 and
$8,960, respectively. For Messrs. Berkley, Del Tufo, Thomas and Daniel, this
amount includes interest on deferred compensation of $15,875, $1,535, $898
and $812, respectively. For Mr. Del Tufo, this amount includes $29,282 in
relocation payments.
(4) Of this amount, $21,000 represents Directors fees paid by the Company and
$16,500 represents director fees paid by Signet Star Holdings, Inc.
(5) Of this amount, $78,880 represents personal use of Company and chartered
aircraft and $120,000 represents compensation paid to Mr. Berkley by Signet
Star Holdings, Inc. for serving as chairman of its board of directors.
(6) Of this amount, $20,000 represents Directors fees paid by the Company and
$16,000 represents director fees paid by Signet Star Holdings, Inc.
(7) Of this amount, $106,250 represents personal use of Company and chartered
aircraft and $120,000 represents compensation paid to Mr. Berkley by Signet
Star Holdings, Inc. for serving as chairman of its board of directors.
13
<PAGE> 16
The following table shows for the fiscal year ended December 31, 1996 the
number of stock options granted by the Compensation and Stock Option Committee
to the executive officers named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/
OPTIONS/ SARs GRANTED
SARS(1) TO EMPLOYEES GRANT DATE
GRANTED(#) IN FISCAL EXERCISE EXPIRATION VALUE
NAME AND PRINCIPAL POSITION (2) YEAR PRICE DATE (3)
- --------------------------------- ------------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
William R. Berkley 50,000 6.81% $ 43.31 5/21/06 $ 804,315
Chairman of the Board and Chief
Executive Officer
John D. Vollaro 25,000 3.41% 43.31 5/21/06 402,158
President and
Chief Operating Officer
Anthony J. Del Tufo 10,000 1.36% 43.31 5/21/06 160,863
Senior Vice President -- Chief
Financial Officer and Treasurer
Edward A. Thomas 10,000 1.36% 43.31 5/21/06 160,863
Senior Vice President --
Specialty Operations
Sam Daniel, Jr. 10,500 1.36% 43.31 5/21/06 168,906
Senior Vice President --
Regional Operations
</TABLE>
- ------------------------------
(1) The Company does not have a Stock Appreciation Rights Plan ("SAR").
(2) These options were granted on May 21, 1996 and become exercisable in
installments with one third exercisable on May 21, 1999, an additional one
third on May 21, 2000 and the remaining one third on May 21, 2001.
(3) These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of the
Securities and Exchange Commission and are not intended to predict future
prices of the Common Stock. The estimate was developed using the
Black-Scholes option pricing model incorporating the following assumptions:
volatility of 20% and dividend yield of 1%, both based on the historical
averages for the underlying Common Stock; risk-free rate of return of 6.66%
based on a 7.5 year zero coupon rate; and time of exercise of 7.5 years,
being the expected duration of the option. The methodology used in this
model has been revised from the 1996 presentation to conform to the
disclosure requirements of FASB Statement No. 123 "Accounting for
Stock-Based Compensation."
14
<PAGE> 17
The following table shows for the fiscal year ended December 31, 1996 the
number of stock option grants which were exercised during 1996 and the number
and value of unexercised options for the executive officers named in the Summary
Compensation Table:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS/SAR's AT MONEY OPTIONS/SAR's AT
FISCAL YEAR END FISCAL YEAR END
12/31/96(#)(1) 12/31/96($)(1)
SHARES
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME AND PRINCIPAL POSITION ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------- -------------- ----------- -------------------- ---------------------------
<S> <C> <C> <C> <C>
William R. Berkley -- -- 91,666/ 1,990,093/
Chairman of the Board and 98,334 1,038,054
Chief Executive Officer
John D. Vollaro -- -- 0/ 0/
President and 75,000 496,935
Chief Operating Officer
Anthony J. Del Tufo -- -- 3,333/ 13,956/
Senior Vice President -- 24,167 203,858
Chief Financial Officer and
Treasurer
Edward A. Thomas -- -- 18,666/ 398,269/
Senior Vice President -- 18,584 193,722
Specialty Operations
Sam Daniel, Jr. -- -- 19,000/ 486,137/
Senior Vice President -- 20,000 209,941
Regional Operations
</TABLE>
- ------------------------------
(1) The Company does not have a Stock Appreciation Rights Plan.
15
<PAGE> 18
COMPANY STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Common Stock of
the Company 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, 1991 and the
reinvestment of all dividends).
<TABLE>
<CAPTION>
MEASUREMENT PERIOD W.R. BERKLEY
(FISCAL YEAR COVERED) CORPORATION S&P 500 PEER GROUP
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 142.00 108.00 122.00
1993 117.00 118.00 127.00
1994 127.00 120.00 135.00
1995 184.00 165.00 185.00
1996 176.00 203.00 212.00
</TABLE>
The Peer Group includes the following companies:
American International Group, Inc., The Chubb Corporation, The Continental
Corporation(1),
GEICO Corporation(1), General Re Corporation, The Hartford Steam Boiler
Inspection and
Insurance Company. The Ohio Casualty Corporation, The Progressive Corporation,
SAFECO
Corporation, The St. Paul Companies, Inc. and USF&G Corporation
- ---------------
(1) For 1996, the total return for the Peer Group does not include data for The
Continental Corporation and GEICO Corporation. For 1995, the total return
for the Peer Group includes data for The Continental Corporation through
March 31, 1995 and for GEICO Corporation through December 31, 1995. The
Continental Corporation was acquired by another entity during the second
quarter of 1995. GEICO Corporation became a privately held entity after
December 31, 1995.
16
<PAGE> 19
APPROVAL OF THE FIRST AMENDED AND RESTATED
W.R. BERKLEY CORPORATION
1992 STOCK OPTION PLAN
On March 11, 1997, the Board amended and restated the W.R. Berkley
Corporation 1992 Stock Option Plan (the "Stock Option Plan"), subject to
stockholder approval, for the purpose of (i) increasing the number of shares of
Common Stock authorized for issuance under the Stock Option Plan from 1,750,000
to 4,750,000, (ii) limiting to 1,000,000 per calendar year the maximum number of
shares for which options may be granted under the Stock Option Plan to any
single optionee, in order to ensure that such options qualify as "performance
based compensation" for purposes of Section 162(m) of the Code and (iii) making
certain additional changes, which are described below in the section entitled
"Summary of Principal Amendments to the Stock Option Plan." The Stock Option
Plan became effective on March 12, 1992. As of the date of this Proxy Statement,
approximately 277,510 shares of Common Stock remain available for issuance under
the Stock Option Plan.
SUMMARY OF THE STOCK OPTION PLAN PRIOR TO THE AMENDMENT
Eligibility
The Stock Option Plan provides for the issuance of "incentive stock
options," within the meaning of Section 422 of the Code, as well as
"non-statutory stock options." Officers and key employees of the Company and any
of its subsidiaries (including directors who are also employees of the
foregoing) are eligible for grants of stock options under the Stock Option 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 is 340, and the number of non-employee directors eligible to
participate is 6.
Administration
The Stock Option 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 and the option price. Members of the Compensation and Stock Option
Committee are not eligible to receive option grants.
Terms of Options
Any options shall become exercisable in such amounts, at such intervals and
upon such terms and conditions as the Compensation and Stock Option Committee
may provide. Options granted under the Stock Option 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 be exercisable for up to five years after the date of
grant.
Exercise Price of Options
The exercise price of non-statutory stock options granted under the Stock
Option Plan may be less than the fair market value but shall not be less than
85% of the fair market value of the shares of Common Stock covered by the option
on the date of grant. In no event, however, shall the exercise
17
<PAGE> 20
price be less than the par value of the shares covered by the option on the date
of grant. The exercise price of incentive stock options shall not be less than
the fair market value of the shares of Common stock covered by the option on the
date of grant. In the case of an incentive stock option granted to a Ten Percent
Stockholder, the exercise price 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
Payment for shares of Common Stock purchased upon exercise of an option
granted under the Stock Option Plan can be made either (i) in cash, (ii) with
shares of Common Stock, (iii) by use of such loan procedures as may be adopted
by the Compensation and Stock Option Committee from time to time 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 Stock Option 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 pay all federal, state
and local withholding taxes applicable to the exercise of the option.
Adjustment for Recapitalization, Merger, Etc.
The aggregate number of shares of Common Stock which may be purchased
pursuant to options granted under the Stock Option Plan, the number of shares of
Common Stock covered by each outstanding option 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.
Subject to any required action by the stockholders, if the Company were the
surviving corporation in any merger or consolidation, any option granted under
the Stock Option Plan would cover the securities to which a holder of the number
of shares of Common Stock covered by the unexercised portion of the option would
have been entitled pursuant to the terms of the merger or consolidation, but a
dissolution or liquidation of the Company or a merger or consolidation in which
the Company were not the surviving corporation would cause all options
outstanding under the Stock Option Plan to terminate.
The foregoing adjustments and the manner of application of the foregoing
provisions are determined by the Compensation and Stock Option Committee in its
sole discretion.
Market Value
On March 19, 1997, the last reported sale price for the Common Stock on the
NASDAQ National Market System was $51.
18
<PAGE> 21
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. During the
lifetime of an option holder, options are exercisable only by the option holder
or the holder's guardian or legal representative.
Termination or Amendment of the Stock Option Plan
The Board may amend or terminate the Stock Option Plan at any time without
the approval of stockholders, provided that no such action will adversely affect
options already granted thereunder, and further provided that no such action
will (a) increase the total number of shares of Common Stock for which options
may be granted under the Stock Option Plan (except in connection with certain
capital adjustments described above in the section herein entitled "Adjustment
for Recapitalization, Merger, Etc."), (b) expand the class of persons eligible
to receive options, (c) decrease the minimum option price, (d) extend the
maximum term of options or (e) extend the period during which options may be
granted.
SUMMARY OF PRINCIPAL AMENDMENTS TO THE STOCK OPTION PLAN
Eligibility
Under the amended Stock Option Plan, the eligibility provisions will be
expanded to allow options to be granted to employees and directors of the
Company's affiliates, and to allow options to be granted to members of the
Compensation and Stock Option Committee.
Administration
The minimum number of directors serving on the committee administering the
Stock Option Plan will be reduced from three to two. Under the amended Stock
Option Plan, the Compensation and Stock Option Committee's authority will be
expanded to include the discretionary power to accelerate the vesting and/or
exercisability of any outstanding option. Also, unless otherwise determined by
the Compensation and Stock Option Committee, vesting of outstanding options will
be accelerated in the event an optionee's employment terminates by reason of
death or disability.
Adjustment for Recapitalization, Merger, Etc.
The amended Stock Option Plan provides that, upon the occurrence of a
"Corporate Event" (as defined in the amended Stock Option Plan), (i) appropriate
adjustments will be made to ensure that each optionee will be entitled to
receive upon the exercise of such optionee's option the same number of shares of
Common Stock, cash or other securities as the optionee would have been entitled
to receive upon the occurrence of the Corporate Event, if the optionee had been,
immediately prior to the date of such event, the holder of the number of shares
of Common Stock covered by such option, or (ii) if the Company is not the
surviving corporation, it may either accelerate exercisability of the
outstanding options to the date preceding the date of the Corporate Event or
require the successor corporation to assume such options.
19
<PAGE> 22
Change in Control
The amended Stock Option Plan provides that, upon the occurrence of a
"Change in Control" (as defined in the amended Stock Option Plan), all
outstanding options will become immediately exercisable in full.
Transferability of Options
The amended Stock Option Plan provides that the Compensation and Stock
Option Committee, in its sole discretion, may permit an optionee to transfer a
non-qualified option to the optionee's spouse, children or grandchildren, or to
a trust or a partnership established for the benefit of any such persons.
Termination or Amendment
The Board may amend or terminate the amended Stock Option Plan at any time
without the approval of stockholders, provided that no such action shall deprive
any optionee of the optionee's rights under any outstanding option, without the
consent of such optionee, and further provided that no such action will, unless
approved by stockholders (i) increase the total number of shares of Common Stock
which may be purchased pursuant to options granted under the Stock Option Plan
(except in connection with certain capital adjustments, as described above) or
(ii) change the class of employees eligible to receive incentive stock options
under the Stock Option Plan.
Federal Income Tax Consequences
The following is a brief discussion of the Federal income tax consequences
of transactions under the Stock Option Plan based on the Code, as in effect as
of the date hereof. The Stock Option Plan is not qualified under 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.
20
<PAGE> 23
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.
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.
Insiders should check with their individual tax advisers to ascertain the
appropriate tax treatment for any particular option.
New Plan Benefits
The grant of options under the Stock Option Plan is entirely within the
discretion of the Compensation and Stock Option Committee. The Company cannot
forecast the extent of option grants that will be made in the future.
21
<PAGE> 24
The following table sets forth the number of options granted subject to
stockholder approval of the amended Stock Option Plan.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF OPTIONS(2)
- ------------------------------------ --------------- ------------------------------------
<S> <C> <C>
William R. Berkley -- Options with respect to 500,000
shares of Common Stock
John D. Vollaro -- Options with respect to 150,000
shares of Common Stock
All Executive Officers as a Group -- Options with respect to 650,000
shares of Common Stock
</TABLE>
- ------------------------------
(1) The options have an exercise price equal to the fair market value of the
Common Stock as of the date of the Annual Meeting. Accordingly, the value of
the options was not determinable as of the date of this Proxy Statement.
(2) These options have a term of ten years and are scheduled to vest 100% on the
date that is nine years and six months from the date of grant, subject to
accelerated vesting in the event that the price of the Common Stock on the
NASDAQ National Market System closes above $80 for at least 10 out of 15
consecutive trading days. In that event, the option would become fully
vested on the later of (i) the date that such closing price conditions are
satisfied and (ii) the third anniversary of the date of grant.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE FIRST AMENDED
AND RESTATED W.R. BERKLEY CORPORATION 1992 STOCK OPTION PLAN.
APPROVAL OF THE W.R. BERKLEY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
The Board submits to the stockholders for approval the W.R. Berkley
Corporation Long-Term Incentive Compensation Plan (the "LTIP"). The Board
believes that it is in the best interest of the Company and the stockholders to
adopt a plan which provides for incentive compensation to key executives
responsible for the success of the Company and which attracts talented new
executives. Compensation payable under the LTIP is based on long-term corporate
performance and is tied to an increase in stockholder value. The LTIP is
designed so that all compensation payable thereunder will be fully deductible by
the Company under Section 162(m) of the Code.
The following summary of the material features of the LTIP is qualified in
its entirety by the terms of the LTIP as filed with the Securities and Exchange
Commission.
ELIGIBILITY
Participation in the LTIP will be limited to key employees of the Company
designated by the Compensation and Stock Option Committee. There are currently
only two employees who have been designated by the Compensation and Stock Option
Committee for participation in the LTIP.
PLAN OF ADMINISTRATION
The LTIP will be administered by the Compensation and Stock Option
Committee, which has full power and authority to determine which key employees
of the Company will receive awards under the
22
<PAGE> 25
LTIP, to interpret and construe the terms of the LTIP, and to make all
determinations it deems necessary in the administration of the LTIP.
AWARD OF UNITS
The LTIP allows for the award of participation units ("Units") to key
employees as determined by the Compensation and Stock Option Committee. Subject
to stockholder approval, Units may be awarded as of the effective date of the
LTIP, which is January 1, 1997 (the "Effective Date"), and thereafter as of the
first day of any fiscal year of the Company through 2006. Units generally vest
and become exercisable over a maximum term of five years from the date of their
award. A maximum of 750,000 Units may be awarded under the LTIP, and no more
than 250,000 Units may be awarded to any one participant.
VESTING OF UNITS
Each Unit vests over five years at the rate of 40% on the second
anniversary of the date of award and thereafter at the rate of 20% on each of
the next three consecutive anniversaries thereof, except that a Unit will become
fully vested earlier upon the attainment of the Unit's Maximum Cumulative Unit
Value (as defined below), or upon the termination of a participant's employment
with the Company (i) by the Company without Cause (as defined in the LTIP), (ii)
upon retirement at or after age 65, or (iii) upon a participant's death or
disability.
VALUE OF UNITS
The value of an outstanding Unit (the "Incremental Unit Value") at any time
depends on the degree of increase in the Company's Earning Per Share (as defined
below). For purposes of the LTIP, Earnings Per Share for any fiscal year is the
Company's Earnings (as defined below) divided by the number of shares of Common
Stock used to determine the Company's basic earnings per share for that fiscal
year, as reported in the Company's audited consolidated financial statements for
the fiscal year.
The Company's Earnings for any fiscal year is the consolidated income of
the Company from continuing operations before income taxes, as reported in the
Company's audited consolidated financial statements for the fiscal year,
adjusted to (a) exclude (i) any item of nonrecurring gain or loss in excess of
$5,000,000, (ii) extraordinary items and (iii) any accruals for the LTIP and (b)
to adjust for write-offs required in connection with any acquisition in the year
of acquisition.
The Incremental Unit Value for any fiscal year is equal to the product of
(i) the Unit's Measuring Price (as defined below), and (ii) 85% of the
percentage by which Earnings Per Share for such fiscal year exceeds the Base
Year EPS (as defined below). The Measuring Price for each Unit awarded is the
closing price of the Company's Common Stock as reported on the NASDAQ National
Market System on the last day of the fiscal year preceding award of the Unit.
The Measuring Price for Units granted as of the Effective Date is $50.75. Base
Year EPS for Units awarded in 1997 is $3.84, which is Earnings Per Share for the
fiscal year ended December 31, 1996. For Units awarded in subsequent fiscal
years, Base Year EPS will be equal to Earnings Per Share for the immediately
preceding fiscal year.
Each Unit's Incremental Unit Value for each of the five years from the date
of award is cumulated to obtain the Unit's cumulative value ("Cumulative Unit
Value"), which is capped at an amount
23
<PAGE> 26
determined by the Compensation and Stock Option Committee at the time Units are
granted (the "Maximum Cumulative Unit Value"). The Maximum Cumulative Unit Value
set by the Compensation and Stock Option Committee for Units awarded in 1997 is
$100 per Unit.
PAYMENT OF UNITS
A Unit may be exercised to the degree vested at any time. A partially
vested Unit may be exercised to the extent vested but, if exercised, the
unvested portion is forfeited. Upon exercise, a participant will receive the
Unit's Cumulative Unit Value (but not more than the Maximum Cumulative Unit
Value) to the extent vested. Upon exercise, not less than 50% of the amount due
will be paid in cash, and the balance, as determined by the Compensation and
Stock Option Committee in its discretion, may be paid in cash, in Common Stock,
or any combination thereof.
TERMINATION OF UNITS
A Unit will expire upon the earlier of (i) the Unit's exercise or (ii) the
termination of the participant's employment with the Company; provided, however,
that if such termination occurs by reason of retirement, death, disability,
termination by the Company without Cause, or for any other reason specifically
approved in advance by the Compensation and Stock Option Committee, the term of
the Unit will be extended for a period of 14 months from the date of termination
(the "Extended Term"). In the event of an Extended Term, the Cumulative Unit
Value will be determined as of the last day of the fiscal year which ends
concurrent with or immediately preceding the end of the Extended Term, or any
earlier exercise date, whichever is applicable. A Unit which has an Extended
Term will be deemed to be automatically exercised as of the last day of such
fiscal year within the Extended Term unless sooner exercised.
TERMINATION AND AMENDMENT
The Compensation and Stock Option Committee may amend or terminate the LTIP
at any time, provided that no amendment will be effective prior to approval by
the Company's stockholders to the extent such approval is required by Section
162(m) of the Code or is otherwise required by law.
NEW PLAN BENEFITS
Because the award of Units is within the discretion of the Compensation and
Stock Option Committee, the Company cannot determine the number and value of
Units to be granted in the future. The following table sets forth the number of
Units granted to the executive group as of the date of this Proxy Statement.
These Units are granted subject to stockholder approval of the LTIP.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF UNITS
-------------------------------------------------- --------------- ---------------
<S> <C> <C>
William R. Berkley -- 95,000
John D. Vollaro -- 35,000
All Executive Officers as a Group -- 130,000
</TABLE>
- ------------------------------
(1) The dollar value of Units granted in 1997 is not presently determinable.
Further, because the Base Year EPS for 1997 awards is the Earnings Per Share
for fiscal 1996, the value of the benefits
24
<PAGE> 27
that would have been allocated to participants in the last fiscal year is
zero. If these Units had been granted in 1996 using 1995 Earnings Per Share
as Base Year EPS, the dollar value of each Unit for fiscal 1996, based on
the increase in the Earnings Per Share from 1995 to 1996, would have been
$15.65. Based on this number, the Cumulative Unit Value of the 95,000 Units
granted to Mr. Berkley would have been $1,486,750, and the Cumulative Unit
Value of the 35,000 Units granted to Mr. Vollaro would have been $547,750.
The Units are subject to the vesting conditions described above, and the
Cumulative Unit Values will be payable only to the extent such vesting
conditions are satisfied.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE W.R. BERKLEY
CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN.
APPROVAL OF THE W.R. BERKLEY CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
The Board submits to the stockholders for approval the W.R. Berkley
Corporation Annual Incentive Compensation Plan (the "Annual Plan"). The Board
believes that it is in the best interest of the Company and the stockholders to
adopt a plan which provides for incentive compensation in the form of an annual
bonus to key executives responsible for the success of the Company and which
attracts talented new executives. Compensation payable under the Annual Plan is
based on annual corporate performance and is tied to an increase in stockholder
value. The Annual Plan is designed so that all compensation payable thereunder
will be fully deductible by the Company under Section 162(m) of the Code. The
Annual Plan is intended to replace the Company's current annual bonus plan for
Messrs. Berkley and Vollaro (as described under "Compensation and Stock Option
Committee Report on Executive Compensation"), and is subject to stockholder
approval. In the event that the Annual Plan is not approved by stockholders, the
Company's existing annual bonus plan for Messrs. Berkley and Vollaro will
continue in effect.
The following summary of the material features of the Annual Plan is
qualified in its entirety by the terms of the Annual Plan as filed with the
Securities and Exchange Commission.
ELIGIBILITY
Participation in the Annual Plan will be limited to key employees of the
Company designated by the Compensation and Stock Option Committee. There are
currently only two employees who have been designated by the Compensation and
Stock Option Committee for participation in the Annual Plan. Employees who have
not been designated for participation in the Annual Plan may be entitled to
incentive compensation in the discretion of the Compensation and Stock Option
Committee.
PLAN ADMINISTRATION
The Annual Plan will be administered by the Compensation and Stock Option
Committee, which has full power and authority to determine which key employees
of the Company will receive awards under the Annual Plan, to set performance
goals and bonus targets as of the commencement of any fiscal year, to interpret
and construe the terms of the Annual Plan, and to make all determinations it
deems necessary in the administration of the Annual Plan, including the
determination with respect to the achievement of performance goals and the
application of such achievement to the bonus targets.
25
<PAGE> 28
BONUS FORMULA
The Annual Plan is structured to pay out an annual bonus equal to a
percentage of certain bonus targets, based on the degree of achievement of
predetermined performance goals with respect to specific business criteria. The
Annual Plan has three categories of business criteria upon any one or a
combination of which performance goals may be based. The business criteria
measures within each category are assigned weightings based upon their relative
degree of importance as determined by the Compensation and Stock Option
Committee. The business criteria in the first category are (i) the Company's
earnings per share, (ii) the Company's net income and (iii) the amount of
premiums written by the Company during the course of the year. The second
category of business criteria consists of (i) return on common stockholders'
equity and (ii) a measure of the Company's relative underwriting performance
defined as the sum of the Company's statutory loss ratio and statutory expense
ratio (the "Combined Ratio"). The third category of business criteria is based
on individual goals and objectives set by the Compensation and Stock Option
Committee. The performance goals with respect to each category of business
criteria are established by the Compensation and Stock Option Committee at the
commencement of each fiscal year for which annual bonus awards may be earned.
For 1997, awards will be based on business criteria in categories one and two.
The payment of the annual bonus for any fiscal year will not be made unless
the Company's consolidated net income available to common stockholders, as
reported in the Company's audited financial statements ("Net Income"), is at
least 85% of budgeted Net Income for that year, as set by the Compensation and
Stock Option Committee.
BONUS TARGETS
The annual bonus targets for each category are expressed as a percentage of
current salary. The Compensation and Stock Option Committee determines the
target percentages annually with respect to each individual participating in the
Annual Plan at the commencement of the fiscal year.
26
<PAGE> 29
BONUS PAYOUTS
At the end of every fiscal year for which bonus amounts can be earned, the
Compensation and Stock Option Committee makes a determination with respect to
each participant as to the level of achievement of the performance goals. The
percentage of achievement is then applied to the bonus targets to determine the
amount of bonus to each participant. However, the maximum bonus amount that any
individual may receive for any fiscal year is 5% of Net Income for such year.
TERMINATION AND AMENDMENT
The Compensation and Stock Option Committee may amend or terminate the
Annual Plan at any time, provided that no amendment will be effective prior to
approval by the Company's stockholders to the extent such approval is required
by Section 162(m) of the Code or otherwise required by law.
NEW PLAN BENEFITS
Because the payment of an annual bonus under the Annual Plan for any fiscal
year is contingent on the achievement of the performance goals as of the end of
the fiscal year, the Company cannot determine the amounts that will be payable
or allocable for fiscal year 1997 or in the future. Consequently, the amounts
listed in the table below are based on the 1997 performance goals and bonus
targets for the individuals shown as applied to performance during fiscal year
1996, determined as if the Compensation and Stock Option Committee's designated
criteria and targets for 1997 had been in place during 1996.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF UNITS
-------------------------------------------------- --------------- ---------------
<S> <C> <C>
William R. Berkley $ 2,800,000 N/A
John D. Vollaro $ 1,200,000 N/A
All Executive Officers as a Group $ 4,000,000 N/A
</TABLE>
- ------------------------------
(1) These amounts are based on the achievement of approximately 110% of the
combined 1997 performance goals set by the Compensation and Stock Option
Committee for category one and category two business criteria and the
Company's performance in 1996. The current combined bonus targets for Mr.
Berkley and Mr. Vollaro are 300% and 200% of base salary, respectively,
divided equally (i.e., 150% and 100%, respectively) between the first and
second category of business criteria. In connection with the implementation
of the Annual Plan, Mr. Berkley's annual salary was reduced to $850,000 for
fiscal 1997. The amounts shown are based on this base salary amount as if it
had been effect for fiscal 1996. The base salary amount for Mr. Vollaro is
$550,000 for fiscal 1997.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE W.R. BERKLEY
CORPORATION ANNUAL INCENTIVE COMPENSATION PLAN.
27
<PAGE> 30
APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP 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, 1997. 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 Peat Marwick LLP is not ratified, the Board will reconsider
its action and will appoint auditors for the 1997 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 Peat Marwick LLP 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.
It is the intention of the persons named on the enclosed form of proxy to
vote "FOR" ratification of the selection of KPMG Peat Marwick LLP unless
otherwise directed.
OTHER MATTERS TO COME BEFORE THE MEETING
Management is not aware of any matters to come before the Annual Meeting
other than as set forth above. However, since matters of which Management is not
now aware may come before the Annual Meeting or any adjournment thereof, the
proxies intend to vote, act and consent in accordance with their best judgment
with respect thereto. Upon receipt of such proxies (in the form enclosed and
properly signed) in time for voting, the shares represented thereby will be
voted as indicated thereon and in this Proxy Statement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of the copies of Forms 3 and 4 received by it,
or written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that, during the period from
January 1, 1996 until December 1996, all filing requirements under Section 16(a)
of the Exchange Act applicable to its officers, directors and ten-percent
stockholders were complied with, except that Jack H. Nusbaum, a Director of the
Company, failed to file a timely Form 4 with respect to the sale of 1,500 shares
of Common Stock by a trust for which he was a trustee.
28
<PAGE> 31
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
It is anticipated that the next Annual Meeting after the one scheduled for
May 13, 1997 will be held on or about May 13, 1998. All stockholder proposals
relating to a proper subject for action at the 1998 Annual Meeting to be
included in the Company's Proxy Statement and form of proxy relating to that
meeting must be received by the Company for its consideration at its principal
executive offices no later than December 3, 1997. Any such proposal should be
submitted by certified mail, return receipt requested.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K 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, 165 MASON STREET, P.O. BOX 2518, GREENWICH, CONNECTICUT
06836-2518.
By Order of the Board of Directors,
WILLIAM R. BERKLEY
Chairman of the Board and
Chief Executive Officer
29
<PAGE> 32
PROXY
W.R. BERKLEY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of W.R. BERKLEY CORPORATION hereby
appoints ROBERT S. GORIN and JACK H. NUSBAUM, and either of them, the true and
lawful attorneys, agents and proxies of the undersigned, with full power of
substitution to each of them, to vote all the shares of Common Stock which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders to
be held at the Hyatt Regency, 1800 E. Putnam Ave, Old Greenwich, Connecticut on
May 13, 1997, and at any adjournment of such meeting.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 33
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1, 2, 3 AND 4.
Please mark your votes as
indicated in this example. /X/
FOR all nominees WITHHOLD
listed above (except AUTHORITY
as marked to the to vote for all
contrary on the right) nominees listed
above
1. ELECTION OF DIRECTORS: / / / /
William R. Berkley and
Robert B. Hodes
INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.
________________________________________________
2. To approve the First FOR AGAINST ABSTAIN
Amended and Restated
W.R. Berkley Corporation / / / / / /
1992 Stock Option Plan.
3. To approve the W.R. Berkley FOR AGAINST ABSTAIN
Corporation Long-Term
Incentive Compensation Plan. / / / / / /
4. To approve the W.R. Berkley FOR AGAINST ABSTAIN
Corporation Annual
Incentive Compensation Plan. / / / / / /
5. To ratify the selection of KPMG FOR AGAINST ABSTAIN
Peat Marwick LLP as independent
certified public accountants for / / / / / /
the company for the fiscal year
ending December 31, 1997.
6. 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 1997 Annual Meeting and
the Annual Report for the fiscal year ended
December 31, 1996.
DATE, VOTE, SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
Signature(s)_______________________________________ Dated:______________, 1997
Please sign your name or names exactly as printed opposite. When signing as
attorney, executor, administrator, trustee, guardian or corporate officer,
please give your full title as such. Joint owners should each sign. DATE, VOTE,
SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 34
FIRST AMENDED AND RESTATED
W. R. BERKLEY CORPORATION
1992 STOCK OPTION PLAN
* * * * * *
ARTICLE I.
Purpose
This First Amended and Restated W. R. Berkley Corporation 1992
Stock Option Plan (the "Plan") is intended as an incentive and to encourage
stock ownership by certain employees of W. R. Berkley Corporation (the
"Company") and of its subsidiaries and affiliates in order to increase their
proprietary interest in the Company's success. The Plan is the first amendment
and restatement of the Company's 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 options 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.
<PAGE> 35
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
options; (b) to authorize the granting of options and designate whether such
options shall be "incentive stock options" under Section 422 of the Code or
"non-statutory stock options"; (c) to determine the times when options shall be
granted and the number of shares subject to such options; (d) to determine the
option 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 option becomes exercisable, and the duration of the exercise period;
(f) to accelerate the vesting and/or exercisability of any outstanding options;
(g) to prescribe the form or forms of the option agreements under the Plan
(which forms shall be consistent with the Plan but need not be identical); (h)
to adopt, amend, and rescind such rules and regulations as, in its opinion, may
be advisable in the administration of the Plan; and (i) to construe and
interpret the Plan, the rules and regulations
-2-
<PAGE> 36
and the option 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 Optionees.
ARTICLE III.
Stock
The stock to be optioned under the Plan shall be shares of
authorized but unissued Common Stock of the Company, par value $.20 per share,
or previously issued shares of Common Stock reacquired by the Company (the
"Stock"). The total number of shares of Stock which may be purchased pursuant to
options granted under the Plan shall not exceed, in the aggregate, 4,750,000
shares, except as such number of shares shall be adjusted in accordance with the
provisions of ARTICLE X hereof. 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 1,000,000 shares, except as such
number shall be adjusted in accordance with the provisions of ARTICLE X hereof.
In the event that any outstanding option under the Plan for
any reason expires or is terminated prior to the end of the period during which
options may be granted, the shares of Stock subject to the unexercised portion
of such option may again be subject to options granted under the Plan.
-3-
<PAGE> 37
ARTICLE IV.
Eligibility of Participants;
Limitation on 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 and directors (including directors
who are not employees) of the Company or any of its subsidiaries or affiliates
are eligible for grants of 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 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.
-4-
<PAGE> 38
ARTICLE V.
Options
Options 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 terms and conditions of the Plan and the applicable
provisions of the Code. More than one option may be granted to any optionee.
ARTICLE VI.
Option Price
In the case of each option granted under the Plan, the option
price shall be not less than 85%, in the case of non-statutory stock options, or
100%, in the case of incentive stock options, of 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 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 option price shall not be
less than 110% of such fair market value. In no event, however, shall the option
price be less than an amount equal to the par value of the Stock.
-5-
<PAGE> 39
ARTICLE VII.
Exercise and Term of Options
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.
The Committee, in its discretion, may, with the consent of any
optionee, cancel any outstanding option.
-6-
<PAGE> 40
ARTICLE VIII.
Payment for Shares
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-loan procedures adopted by the Committee from time to
time.
If the Committee shall so determine and at the election of the
optionee, payment for shares of Stock purchased upon exercise of an option
granted hereunder shall be made in installments, as shall be provided in the
applicable option agreement. If payment is made in installments, the optionee
shall deliver to the Company his promissory note payable to the Company for an
amount equal to the difference between the full purchase price of the shares
then being purchased and the amount of any down payment. The optionee shall pay
the balance of the purchase price, together with interest thereon (if the
Committee shall provide in the applicable option agreement for the payment of
interest thereon) as provided by the Committee in the applicable option
agreement; provided, however, that in any event the entire amount of the
purchase price shall be due and payable by the end of five years from the date
of purchase. Dividends on partly paid shares issued to such optionee (other than
dividends
-7-
<PAGE> 41
in Stock) shall be declared and paid only upon the basis of the percentage of
the purchase price actually received thereon by the Company, and, if so provided
in the option agreement, any such dividends paid prior to final payment for the
shares shall be applied by the Company against installments of the purchase
price in the order of their maturity. The optionee shall not have the right to
exercise any voting rights with respect to the shares until such time as the
purchase price therefor is fully paid. Certificates for partly paid shares
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 partly paid shares shall state thereon the
total amount of the consideration to be paid therefor and the amount paid
thereon.
At the time of exercise of any option, the Committee shall
require the optionee 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 of such option, and the optionee's right to exercise
shall be contingent upon such payment. Such payment to the Company may be
effected through (a) payment by the optionee 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 of the option, a
number of shares of Stock with an aggregate fair market value on the date of
-8-
<PAGE> 42
exercise (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 IX.
Non-Transferability of Option Rights
(a) Except as provided in paragraph (b) below, an option
granted under the Plan may not be transferred except by will or the laws of
descent and distribution and, during the lifetime of the optionee, may be
exercised only by the optionee.
(b) Notwithstanding paragraph (a) above, at the discretion of
the Committee, an option, other than an incentive stock option, may be
transferred by the optionee to one or more members of the optionee's immediate
family, or to a trust or a partnership established for the benefit of one or
more members of the optionee's immediate family. For the purposes of this
paragraph (b), "immediate family" means an optionee's spouse, children and
grandchildren, whether natural or adopted.
ARTICLE X.
Adjustment for Recapitalization, Merger, Etc.
The aggregate number of shares of Stock which may be purchased
pursuant to options granted hereunder, the maximum number of shares of Stock
with respect to which options may be granted to any single optionee during any
calendar year, the number of shares of Stock covered by each outstanding option
and the price per share thereof shall be appropriately adjusted for
-9-
<PAGE> 43
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 optionee
shall, at the time of such Corporate Event, be entitled to receive upon the
exercise of his option 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 option, 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 options; provided, however, that the
Committee may, in its discretion and in lieu of requiring such assumption,
provide that all outstanding options shall terminate as of the consummation of
such Corporate Event, and accelerate the exercisability of all outstanding
options to any date prior to the date of such Corporate Event.
-10-
<PAGE> 44
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 option.
ARTICLE XI.
Change of Control
In the event of a Change of Control, each outstanding option
under the Plan (including options granted prior to this first amendment and
restatement) shall vest and become immediately exercisable 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 "Outstanding Company Voting Securities"); provided,
however, that for purposes of this
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<PAGE> 45
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 XI
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
-12-
<PAGE> 46
(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,
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<PAGE> 47
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.
ARTICLE XII.
No Obligation to Exercise Option
Granting of an option shall impose no obligation on the
recipient to exercise such option.
ARTICLE XIII.
Use of Proceeds
The proceeds received from the sale of Stock pursuant to the
Plan shall be used for general corporate purposes.
ARTICLE XIV.
Rights as a Stockholder
An optionee or a transferee of an option shall have no rights
as a stockholder with respect to any shares covered by his option 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.
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<PAGE> 48
ARTICLE XV.
Compliance with the Law
The Company shall have no liability for failure to (or delay
in) issue or transfer any shares of Stock subject to options under the Plan
resulting from its inability to obtain (or any delay in obtaining) all requisite
regulatory authority, if counsel for the Company deems such authority necessary
for lawful issuance or transfer of any such shares. Appropriate legends may be
placed on the Stock certificates evidencing shares issued upon exercise of
options to reflect such transfer restrictions.
ARTICLE XVI.
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.
ARTICLE XVII.
Amendment or Discontinuance of Plan
The Board may, without the consent of the optionees, 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 option
theretofore granted hereunder without the consent of the applicable optionee,
and provided further that no such action by the Board, without approval of the
stockholders, may (a) increase the total number of shares of
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<PAGE> 49
Stock which may be purchased pursuant to options granted under the Plan, except
as contemplated in ARTICLE X; or (b) change the class of employees eligible to
receive incentive stock options under the Plan.
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<PAGE> 50
W.R. BERKLEY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of the Long-Term Incentive Compensation Plan (the "Plan") is to
promote the interests of W.R. Berkley Corporation (the "Company") and its
stockholders by (i) helping the Company to attract and retain outstanding
management, (ii) stimulating management's efforts on behalf of the Company by
giving participants a direct interest in the performance of the Company and
(iii) suitably rewarding participants' contributions to the success of the
Company.
The Company intends that compensation payable under the Plan will qualify for
deduction under Section 162(m) of the Internal Revenue Code of 1986, as amended.
ARTICLE II
DEFINITIONS
2.1 Award Certificate: A written instrument evidencing the award of
Units to a Participant.
2.2 Base Year EPS: Earnings Per Share for the Fiscal Year ended
December 31, 1996, which is $3.84, or, for Units awarded as of any date
subsequent to the Effective Date, Earnings Per Share for the Fiscal Year
immediately preceding such date.
2.3 Beneficiary: The person or persons designated by a Participant,
in accordance with Section 9.1, to receive any amount payable under the Plan
upon the Participant's death.
2.4 Board: The Board of Directors of the Company.
2.5 Code: The Internal Revenue Code of 1986, as amended from time to
time.
2.6 Committee: The Compensation and Stock Option Committee of the
Board, which is comprised solely of two or more "outside directors" within the
meaning of Section 162(m) of the Code.
2.7 Common Shares: Shares of common stock ($.20 par value) of the
Company.
2.8 Company: W.R. Berkley Corporation, a Delaware corporation and its
consolidated subsidiaries or any successors thereto.
2.9 Cumulative Unit Value: The amount determined in accordance with
Section 7.2.
<PAGE> 51
2.10 Disability: Disability, as defined in a Participant's employment
agreement with the Company, or, absent an agreement, in the Company's group
disability insurance contract.
2.11 Earnings: For any Fiscal Year, the consolidated income of the
Company from continuing operations before income taxes, prepared in accordance
with generally accepted accounting principles, as reported in the Company's
audited consolidated financial statements for that Fiscal Year; adjusted to (a)
exclude (i) in its entirety any item of nonrecurring gain or loss in excess of
$5,000,000, (ii) extraordinary items and (iii) any accruals for this Plan and
(b) to add back write-offs required in connection with any acquisition in the
year of acquisition.
2.12 Earnings Per Share: For any Fiscal Year, Earnings divided by the
number of Common Shares used to determine the Company's basic earnings per
share for that Fiscal Year, as reported in the Company's audited consolidated
financial statements for that Fiscal Year.
2.13 Effective Date: The effective date of the Plan, which is January
1, 1997.
2.14 Fiscal Year: Any calendar year during the term of the Plan.
2.15 Incremental Unit Value: The amount determined in accordance with
Section 7.1.
2.16 Maximum Cumulative Unit Value: For all Units awarded as of the
beginning of any Fiscal Year, the amount determined by the Committee for those
Units when they are awarded.
2.17 Measuring Price: For each Unit awarded as of the Effective Date,
$50.75; for each Unit awarded thereafter, the closing price of a Common Share as
reported on the NASDAQ National Market System on the last day of the Fiscal Year
preceding the date as of which the Unit is awarded.
2.18 Participant: A key employee of the Company designated by the
Committee to participate in the Plan.
2.19 Plan: The W.R. Berkley Corporation Long-Term Incentive
Compensation Plan, as herein set forth and as it may be amended from time to
time.
2.20 Term of the Plan: The period commencing on the Effective Date
and ending five years after the final award of Units, in accordance with
Section 5.1, or on such earlier date as the Maximum Cumulative Unit Value of
such Units may be achieved.
2.21 Termination Without Cause: Termination of a Participant's
employment by the Company without "Cause," as defined in the Participant's
employment agreement with the Company, or, absent an agreement defining Cause,
termination of the Participant's employment by the Company for any reason other
than (i) continuing and material failure to fulfill his or her employment
obligations or willful misconduct or gross neglect in the performance of such
duties,
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<PAGE> 52
(ii) commission of fraud, misappropriation or embezzlement in the performance
of such duties, or (iii) conviction of a felony, which, as determined in good
faith by the Board, constitutes a crime involving moral turpitude and may
result in material harm to the Company.
22.22 Unit: A unit of participation in the Plan awarded to a
Participant in accordance with Article V.
22.23 Valuation Date: The last day of any Fiscal Year.
ARTICLE III
ADMINISTRATION
3.1 The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum. Committee decisions and determinations
shall be made by a majority of its members present at a meeting at which a
quorum is present, and they shall be final. The actions of the Committee with
respect to the Plan shall be binding on all affected Participants. Any
decision or determination reduced to writing and signed by all of the members
of the Committee shall be fully effective as if it had been made by a vote at a
meeting duly called and held. The Committee shall keep minutes of its meetings
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
3.2 The Committee shall have full authority, subject to the provisions
of the Plan (i) to select Participants and determine the extent and terms of
their participation; (ii) to adopt, amend and rescind such rules and regulations
as, in its opinion, may be advisable in the administration of the Plan, (iii) to
construe and interpret the Plan, the rules and regulations adopted thereunder
and any notice or Award Certificate given to a Participant; and (iv) to make all
other determinations that it deems necessary or advisable in the administration
of the Plan. The Committee may request advice or assistance or employ such
persons as it deems necessary for the proper administration of the Plan and may
rely on such advice or assistance; provided, however, that in making any
determinations with respect to the administration of the Plan, the Committee
shall at all times be obligated to act in good faith and in conformity with the
terms of the Plan.
3.3 In the event of any stock split, stock dividend, reclassification,
recapitalization or other change that affects the character or amount of
outstanding Common Shares and Earnings Per Share, the Committee shall make such
adjustments in the number of Units (whether authorized or outstanding and
unexercised), the Measuring Price or both as shall, in the sole judgment of the
Committee, be equitable and appropriate in order to make the value of such
Units, as nearly as may be practicable, equivalent to the value of Units
outstanding and unexercised immediately prior to such change. In no event,
however, shall any such adjustment give any Participant any additional benefits.
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<PAGE> 53
3.4 The Committee shall be precluded from increasing compensation
payable under the Plan to a Participant, including acceleration of payment and
increase of any amount payable, unless specifically provided for by the Plan.
ARTICLE IV
PARTICIPATION
4.1 Only key employees of the Company who, in the Committee's judgment,
will have a significant impact on the success of the business shall be eligible
to participate in the Plan. The Committee, in its sole discretion, shall select
the Participants.
4.2 In selecting Participants and in determining the number of Units to
be awarded to each Participant for any Fiscal Year, the Committee shall take
into account such factors as the individual's position, experience, knowledge,
responsibilities, advancement potential and past and anticipated contribution
to Company performance.
ARTICLE V
AWARD OF UNITS
5.1 Subject to adjustment as provided in Section 3.3, a maximum of
750,000 Units may be awarded under the Plan. A Participant who has been awarded
Units may be awarded additional Units from time to time and new Participants may
be awarded Units, both in the discretion of the Committee; provided, however,
that no Units shall be awarded after 2006.
5.2 Units shall be awarded solely by the Committee and shall be
evidenced by an Award Certificate, as provided in Article X.
5.3 Subject to adjustment as provided in Section 3.3, the maximum number
of Units awarded to any one individual shall not exceed 250,000 during the Term
of the Plan.
ARTICLE VI
TERM AND VESTING OF UNITS
6.1 Each Unit shall have a term of five years from the date of award,
subject to earlier termination (i) upon exercise by a Participant, (ii) as
provided in Article XI or (iii) upon achievement before five years of the
Unit's Maximum Cumulative Unit Value. Units shall be deemed to be awarded as of
the Effective Date or the first day of any subsequent Fiscal Year through 2006,
as the case may be.
4
<PAGE> 54
6.2 Units shall become vested as follows:
<TABLE>
<CAPTION>
Vested Fiscal Years
Percentage of from
Units Awarded Date of Award
------------- -------------
<S> <C>
40% 2
60% 3
80% 4
100% 5
</TABLE>
6.3 Notwithstanding Section 6.2, each Unit shall immediately become
fully vested in the event of (i) attainment of its Maximum Cumulative Unit
Value, (ii) a Participant's Termination Without Cause or (iii) termination of a
Participant's employment with the Company by reason of retirement on or after
attainment of age 65, death or Disability.
ARTICLE VII
DETERMINATION OF VALUE OF A UNIT
7.1 For any Fiscal Year, the Incremental Unit Value of a Unit shall be
equal to the product of (i) the Measuring Price, multiplied by (ii) .85 of the
percentage by which Earnings Per Share for the Fiscal Year exceeds Base Year
EPS. In the event Base Year EPS exceeds Earnings Per Share for any Fiscal Year,
the Incremental Unit Value for the Fiscal Year shall be zero. The Committee
shall notify each Participant of the Incremental Unit Value of his or her Units
for each Fiscal Year as soon as practicable after the Valuation Date for the
Fiscal Year.
7.2 The Incremental Unit Value of each Unit for any Fiscal Year shall
be cumulated with the Incremental Unit Value of the Unit for all prior Fiscal
Years from the date of the Unit's award. The cumulative amount thus determined
shall be the then Cumulative Unit Value of such Unit.
ARTICLE VIII
PAYMENT OF UNITS
8.1 A Unit may be exercised, to the extent that it is vested, at any
time prior to becoming fully vested; provided, however, that upon exercise any
partially vested Unit shall be canceled and its nonvested portion forfeited.
Except as provided in Article XI, a Unit that is fully vested, in accordance
with Article VI, shall thereupon be exercised.
8.2 In order to exercise a partially or fully vested outstanding Unit,
a Participant (i) shall give written notice of exercise, as provided in Section
8.3, specifying the number of Units being exercised, and (ii) shall deliver his
or her Award Certificate to the Secretary of the
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<PAGE> 55
Company, who shall endorse thereon a notation of such exercise and return the
same to the Participant. The date of exercise of a Unit shall be the date on
which the Company receives the required documentation. Upon exercise of a Unit,
the Participant shall be entitled to receive the Cumulative Unit Value of the
Vested Units being exercised, determined as of the concurrent or immediately
preceding Valuation Date, but not in excess of the Maximum Cumulative Unit
Value.
8.3 Notice of exercise of a partially or fully vested Unit shall be
in writing addressed to the Secretary of the Company. Payment of the amount due
under the Plan shall be made not later than five days following the date of
exercise or the date of such other event as shall entitle the Participant to
payment; provided, however, that, before any payment may be made, the Committee
must certify in writing that all performance criteria under the Plan have been
met. Not less than 50 percent of any amount due shall be paid in cash, and the
balance shall be paid in cash or in Common Shares or both, as determined by the
Committee in its discretion.
ARTICLE IX
LIMITS ON TRANSFERABILITY OF UNITS
9.1 Each Participant shall file with the Committee a written
designation of one or more persons as the Beneficiary who shall be entitled to
receive any amount or any Common Shares payable under the Plan upon his or her
death. A Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no event
shall it be effective as of a date prior to such receipt. If at the date of a
Participant's death, there is no designation of a Beneficiary in effect for the
Participant, or if no Beneficiary survives to receive any amount payable under
the Plan by reason of the Participant's death, the Participant's estate shall
be treated as the Beneficiary for purposes of the Plan.
9.2 A Unit may be exercised only by the Participant to whom it was
awarded, except in the event of the Participant's death, when a Unit may be
exercised by his or her Beneficiary. Except as provided in Section 9.1, a
Participant may not transfer, assign, alienate or hypothecate any benefits
under the Plan.
ARTICLE X
AWARD CERTIFICATE
Promptly following the making of an award, the Company shall deliver to
the recipient an Award Certificate, specifying the terms and conditions of the
Unit. This writing shall be in such form and contain such provisions not
inconsistent with the Plan as the Committee shall prescribe.
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<PAGE> 56
ARTICLE XI
TERMINATION OF UNITS
11.1 An outstanding Unit awarded to a Participant shall be canceled
and all rights with respect thereto shall expire upon the earlier to occur of
(i) its exercise as provided in Section 8.1 or (ii) termination of the
Participant's employment with the Company; provided, however, that if such
termination occurs by reason of retirement on or after attainment of age 65,
death, Disability or Termination Without Cause, or for any other reason
specifically approved in advance by the Committee, the term of such Unit shall
continue for a period of 14 months from the date of termination (the "Extended
Term"). For purposes of this Section 11.1, the Cumulative Unit Value of such
Unit shall be determined as of the Valuation Date concurrent with or
immediately preceding the end of the Extended Term or any earlier exercise
date, whichever is applicable. A Unit whose term is continued for an Extended
Term shall be deemed to be automatically exercised as of the last Valuation
Date within the Extended Term, unless sooner exercised by the Participant or
his or her legal representative.
11.2 Nothing contained in Section 11.1 shall be deemed to extend the
term of any Unit beyond the end of the Term of the Plan.
ARTICLE XII
TERMINATION AND AMENDMENT OF THE PLAN
The Company reserves the right to amend or terminate the Plan at any
time, by action of the Committee, but no such amendment or termination shall
adversely affect the rights of any Participant with respect to outstanding
Units held by the Participant without his or her written consent. No amendment
will be effective prior to approval by the Company's stockholders to the extent
such approval is required by Section 162(m) of the Code or otherwise required
by law.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Nothing in the Plan, nor the award of any Unit, shall confer a
right to continue in the employment of the Company or affect any right of the
Company to terminate a Participant's employment.
13.2 The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware without reference to principles of conflict
of laws.
13.3 The Company shall be authorized to withhold from any award or
payment it makes under the Plan to a Participant the amount of withholding
taxes due with respect to such award
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<PAGE> 57
or payment and to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for the payment of such taxes.
13.4 Nothing in the Plan shall prevent the Board from adopting other
or additional compensation arrangements, subject to stockholder approval as may
be necessary, and such arrangements may be either generally applicable or
applicable only in specific cases.
13.5 Participants shall not be required to make any payment or
provide any consideration for awards under the Plan other than the rendering of
services.
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<PAGE> 58
W.R. BERKLEY CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of the Annual Incentive Compensation Plan (the "Plan") is to
provide incentive compensation to senior executives of W.R. Berkley Corporation
(the "Company") in recognition of their significant contributions to the
growth, profitability and success of the Company from year to year.
The Company intends that compensation payable under the Plan will constitute
"qualified performance-based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended. The Plan shall be administratively
interpreted and construed in a manner consistent with such intent.
Subject to approval by the Company's stockholders, the Plan is effective as of
January 1, 1997.
ARTICLE II
DEFINITIONS
2.1 Annual Incentive Pool: For any Year, the amount equal to the
percentage of Earnings determined by the Board at the beginning of the Year,
subject to the condition that earnings meet the Corporate Threshold for that
Year.
2.2 Board: The Board of Directors of the Company.
2.3 Code: The Internal Revenue Code of 1986, as amended from time to
time.
2.4 Committee: The Compensation and Stock Option Committee of the
Board, which is comprised solely of two or more "outside directors" within the
meaning of Section 162(m) of the Code.
2.5 Company: W.R. Berkley Corporation, a Delaware corporation, and
its consolidated subsidiaries, or any successors thereto.
2.6 Corporate Threshold: For any Year, 85 percent of budgeted
Earnings, which is the minimum amount of Earnings that the Company must achieve
in order to establish an Annual Incentive Pool for that Year.
2.7 Disability: Disability, as defined in a Participant's employment
agreement with the Company, or, absent an agreement, in the Company's group
disability insurance contract.
<PAGE> 59
2.8 Earnings: For any Year, net income of the Company available to
common stockholders, on a consolidated basis, determined in accordance with
generally accepted accounting principles, as reported in the Company's audited
consolidated financial statements for that Year.
2.9 Incentive Allocation: For any Year, a Participant's formulated
share of the Annual Incentive Pool, determined by the Committee in accordance
with Sections 6.3 and 6.4.
2.10 Incentive Award: For any Year, the amount of compensation
payable under the Plan to a Participant, determined by the Committee in
accordance with Section 6.5.
2.11 Participant: For any Year, an executive of the Company
designated by the Committee to participate in the Plan.
2.12 Performance Goals: For any Year, the performance measures
applicable to a Participant, established by the Committee in accordance with
Article V.
2.13 Plan: The W.R. Berkley Corporation Annual Incentive
Compensation Plan, as herein set forth and as it may be amended from time
to time.
2.14 Target Allocation: For any Year, a Participant's share of the
Annual Incentive Pool for achievement of his or her Performance Goals for that
Year, determined by the Committee in accordance with Section 6.1.
2.15 Termination Without Cause: Termination of a Participant's
employment by the Company without "Cause," as defined in the Participant's
employment agreement with the Company, or, absent an agreement defining
"Cause," termination of the Participant's employment by the Company for any
reason other than (i) continuing and material failure to fulfill his or her
employment obligations or willful misconduct or gross neglect in the
performance of such duties, (ii) commission of fraud, misappropriation or
embezzlement in the performance of such duties, or (iii) conviction of a
felony, which, as determined in good faith by the Board, constitutes a crime
involving moral turpitude and may result in material harm to the Company.
2.16 Year: The calendar year, which is the fiscal year of the
Company.
ARTICLE III
ADMINISTRATION
3.1 The Plan shall be administered by the Committee. For any Year,
the Committee shall (i) designate the senior executives of the Company who
shall participate in the Plan, (ii) establish Performance Goals for each
Participant and certify the extent of their achievement and (iii) determine
each Participant's Target Allocation, Incentive Allocation and Incentive Award.
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<PAGE> 60
3.2 Subject to the provisions of the Plan, the Committee shall have full
power and authority to (i) interpret the Plan, (ii) adopt rules and regulations
relating to the conduct of its business and to the Plan and (iii) make all
determinations necessary or advisable for the administration of the Plan.
Determinations of the Committee in the administration of the Plan shall be
conclusive and binding on the Participants and all other parties concerned.
ARTICLE IV
PARTICIPATION
4.1 Only executives of the Company who, in the Committee's judgment, have
contributed, or have the capacity to contribute, in a substantial measure to the
successful performance of the Company for a given Year, shall be eligible to
participate in the Plan for that Year.
4.2 In selecting Participants for any Year, the Committee shall take into
account such factors as the individual's position, experience, knowledge,
responsibilities, advancement potential and past and anticipated contribution to
Company performance.
ARTICLE V
PERFORMANCE GOALS
5.1 Not later than 90 days after the beginning of any Year, the Committee
shall establish Performance Goals for each Participant for that Year.
5.2 Performance Goals established by the Committee for any Year may
differ among Participants. The Performance Goals of individual Participants
shall be based on criteria in one or more of the following categories, as may be
applicable: (i) Earnings per share of common stock, net income and insurance
premiums written, (ii) return on common stockholders' equity and the Company's
combined ratio compared to the combined ratios of a selected group of property
and casualty insurance companies, and (iii) individual performance, taking into
account individual goals and objectives.
5.3 In establishing Performance Goals for any Year, the Committee shall
determine, in its discretion, from among the categories specified in Section
5.2, the categories and criteria to be used in measuring each Participant's
performance and the percentage allocation for each of the categories and each of
the criteria, the sum of which allocations, respectively, shall equal 100
percent. The Committee shall also determine for each Participant for the same
Year a threshold level of performance below which no Incentive Award will be
payable and a maximum incentive opportunity.
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<PAGE> 61
ARTICLE VI
TARGET ALLOCATION, INCENTIVE ALLOCATION AND INCENTIVE AWARD
6.1 Not later than 90 days after the beginning of any Year, the
Committee shall determine each Participant's Target Allocation for that Year as
a percentage of his or her salary for the Year, assuming that the Performance
Goals for the Participant are fully met. A Participant's Performance Goals and
Target Allocation shall preclude discretion on the part of the Committee to
increase the amount payable under the Plan to the Participant to the extent
that such discretion would be inconsistent with the requirements for "qualified
performance-based compensation" under Section 162(m) of the Code.
6.2 When the Committee has determined the Target Allocation for a
Participant for any Year and the performance categories and criteria that
establish his or her Performance Goals, it shall communicate this information
to the Participant.
6.3 As soon as practicable following verification by the Company's
independent public accountants of Earnings for any Year and receipt of
information regarding the actual performance of Participants against their
respective Performance Goals for the Year, the Committee shall certify (i) the
amount, if any, by which Earnings for the Year exceeded the Corporate Threshold
for the Year and (ii) the extent to which each Participant achieved his or her
Performance Goals for the Year.
6.4 Based on the information certified in accordance with Section
6.3, the Committee shall determine each Participant's Incentive Allocation for
the Year by multiplying his or her Target Allocation for the Year by the
percentage representing the extent of achievement of his or her Performance
Goals for the Year.
6.5 Notwithstanding the provisions of Section 6.4, the Committee
may, in its discretion, reduce or eliminate a Participant's Incentive
Allocation for any Year based on such objective or subjective criteria as it
deems appropriate to take into account circumstances that could not have been
anticipated when it established the Participant's Performance Goals for the
Year. The amount of a Participant's Incentive Allocation as finally determined
by the Committee shall constitute his or her Incentive Award for the Year;
provided, however, that no Incentive Award for any Participant for any Year
shall exceed 5 percent of Earnings for that Year.
6.6 The Committee shall not be obligated to apply the entire Annual
Incentive Pool for any Year to Participants' Incentive Awards. Any amount not
so applied shall remain part of the general assets of the Company and shall not
be carried over to the Annual Incentive Pool for any subsequent Year.
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<PAGE> 62
ARTICLE VII
PAYMENT OF INCENTIVE AWARDS
7.1 Except as provided in Section 7.2, a Participant's Incentive Award
for any Year shall be paid in a cash lump sum as soon as practicable following
the Committee's determination of the amount in accordance with Article VI.
7.2 From time to time, the Committee, in its discretion (under uniform
rules applicable to all Participants), may offer Participants the opportunity
to defer receipt of all or a portion of the Incentive Award for any Year. Any
election to defer shall be made prior to the beginning of the Year except for
the first Year that the Plan is in effect. Deferrals shall be in increments of
10 percent of the Participant's Target Allocation for the Year.
Deferred amounts are not forfeitable and shall be paid after
termination of employment with the Company. They constitute unfunded general
obligations of the Company.
Deferred amounts shall be credited with an interest equivalent
amount until the time of final payment at a rate determined by the Committee
from time to time. The sum of the amount deferred for any Year plus all
interest equivalents shall be paid in a single sum or in up to 15 installments,
as specified by the Participant when making the deferral election.
7.3 Each Participant shall designate, in a manner prescribed by the
Committee, a beneficiary to receive payments due under the Plan in the event of
his or her death. If a Participant dies prior to the date of payment of his or
her Incentive Award for any Year or to receipt of all amounts, if any, that
were deferred, and if no properly designated beneficiary survives the
Participant, the Incentive Award or any other amount due shall be paid to his
or her estate or personal representative.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
8.1 If a Participant's employment with the Company terminates by
reason of retirement on or after attainment of age 65, death, Disability or
Termination Without Cause, or for any other reason specifically approved in
advance by the Committee, the Committee shall determine the Participant's
Incentive Award as if he or she were employed for the entire Year, and the
Participant shall be entitled to receive the Incentive Award prorated to the
date of his or her termination of employment.
8.2 If a Participant's employment with the Company terminates for any
reason other than as provided in Section 8.1, he or she forfeits any right to
receive an Incentive Award for the Year in which the termination occurs.
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ARTICLE IX
TERMINATION AND AMENDMENT OF THE PLAN
9.1 The Company reserves the right, by action of the Committee, to
terminate the Plan at any time. Subject to such earlier termination, the Plan
shall have a term of five years from its effective date.
9.2 The Plan may be amended at any time, and from time to time, by a
written document adopted by the Committee. No amendment shall be effective prior
to approval by the Company's stockholders to the extent that such approval is
required by Section 162(m) of the Code or is otherwise required by law.
ARTICLE X
GENERAL PROVISIONS
10.1 Nothing in the Plan shall confer upon any employee a right to
continue in the employment of the Company or affect any right of the Company to
terminate a Participant's employment.
10.2 A Participant may not alienate, assign, pledge, encumber,
transfer, sell or otherwise dispose of any rights or benefits awarded hereunder
prior to the actual receipt thereof; and any attempt to alienate, assign,
pledge, sell, transfer or assign prior to such receipt, or any levy,
attachment, execution or similar process upon any such rights or benefits shall
be null and void.
10.3 The Plan shall at all times be entirely unfunded, and no
provision shall at any time be made to segregate assets of the Company for
payment of any amounts hereunder. No Participant, beneficiary or other person
shall have any interest in any particular assets of the Company by reason of the
right to receive incentive compensation under the Plan. Participants and
beneficiaries shall have only the rights of a general unsecured creditor of the
Company.
10.4 The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware without reference to principles of conflict
of laws.
10.5 The Company shall be authorized to withhold from any award or
payment it makes under the Plan to a Participant the amount of withholding
taxes due with respect to such award or payment and to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations
for the payment of such taxes.
10.6 Nothing in the Plan shall prevent the Board from adopting other
or additional compensation arrangements, subject to stockholder approval as may
be necessary, and such arrangements may be either generally applicable or
applicable only in specific cases.
10.7 Participants shall not be required to make any payment or
provide any consideration for awards under the Plan other than the rendering of
services.
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