DEF 14A
SCHEDULE 14A
INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE
ACT OF 1934 (AMENDMENT
NO. )
Filed by the Registrant þ
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Registrant o
Check the appropriate box:
o Preliminary Proxy
Statement
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Confidential, for Use of the Commission Only
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(as permitted by
Rule 14a-6(e)(2))
þ Definitive Proxy
Statement
o Definitive Additional
Materials
o Soliciting Material
Pursuant to
Section 240.14a-12
W. R. BERKLEY CORPORATION
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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TABLE OF CONTENTS
W. R.
BERKLEY CORPORATION
475 Steamboat Road
Greenwich, Connecticut 06830
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 8, 2007
To The Stockholders of
W. R. Berkley
Corporation:
Notice Is Hereby
Given that the Annual Meeting of Stockholders of W. R.
Berkley Corporation (the Company) will be held at
its executive offices at 475 Steamboat Road, Greenwich,
Connecticut, on Tuesday, May 8, 2007 at 1:00 p.m. for
the following purposes:
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(1)
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To elect four directors to serve until their successors are duly
elected and qualified;
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(2)
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To ratify the appointment of KPMG LLP as the independent
registered public accounting firm for the Company for the fiscal
year ending December 31, 2007; and
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(3)
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To consider and act upon any other matters which may properly
come before the Annual Meeting or any adjournment thereof.
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In accordance with the provisions of the Companys By-Laws,
the Board of Directors has fixed the close of business on
March 19, 2007 as the date for determining stockholders of
record entitled to receive notice of, and to vote at, the Annual
Meeting.
Your attention is directed to the accompanying proxy statement.
You are cordially invited to attend the Annual Meeting. If you
do not expect to attend the Annual Meeting in person, please
date, sign and return the enclosed proxy as promptly as possible
in the enclosed reply envelope.
By Order of the Board of Directors,
IRA S. LEDERMAN
Senior Vice President,
General Counsel and Secretary
Dated: April 9, 2007
W. R.
BERKLEY CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF
STOCKHOLDERS
May 8, 2007
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited on behalf of the Board of
Directors of W. R. Berkley Corporation (the Company)
for use at the Annual Meeting of Stockholders to be held at the
executive offices of the Company, 475 Steamboat Road, Greenwich,
Connecticut, on Tuesday, May 8, 2007 at 1:00 p.m. and
at any adjournment thereof.
The giving of a proxy does not preclude a stockholder from
voting in person at the Annual Meeting. The proxy is revocable
before its exercise by delivering either written notice of such
revocation or a later dated proxy to the Secretary of the
Company at its executive offices at any time prior to voting of
the shares represented by the earlier proxy. In addition,
stockholders attending the Annual Meeting may revoke their
proxies by voting at the Annual Meeting.
The expense of preparing, printing and mailing this proxy
statement will be paid by the Company. The Company has engaged
Georgeson Inc. to assist in the solicitation of proxies from
stockholders for a fee estimated at $7,000, plus expenses. 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 Georgeson
employees. The Company will reimburse banks, brokers and other
custodians, nominees and fiduciaries for their direct costs in
sending the proxy materials to the beneficial owners of the
Companys common stock.
The Annual Report of the Company for the fiscal year ended
December 31, 2006 is being mailed to all stockholders with
this proxy statement. The approximate mailing date is
April 9, 2007.
A list of stockholders will be available for inspection during
business hours for at least ten days prior to the Annual Meeting
at the executive offices of the Company at 475 Steamboat Road,
Greenwich, Connecticut.
The matters to be acted upon are described in this proxy
statement. Proxies will be voted at the Annual Meeting, or at
any adjournment thereof, at which a quorum is present, in
accordance with the directions on the proxy. Votes cast by proxy
or in person at the Annual Meeting will be tabulated by election
inspectors appointed for the Annual Meeting. The election
inspectors will also determine whether a quorum is present. The
holders of a majority of the common stock outstanding and
entitled to vote who are present either in person or represented
by proxy constitute a quorum for the Annual Meeting. The
election inspectors will treat abstentions and broker
non-votes as shares that are present and entitled to vote
for purposes of determining the presence of a quorum, but as
unvoted for purposes of determining the approval of any matter
submitted. A broker non-vote is when a broker
indicates on a proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter
and has not received instructions from the beneficial owner with
respect to that matter.
1
OUTSTANDING
STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on
March 19, 2007 are entitled to receive notice of and to
vote at the Annual Meeting. The number of shares of voting stock
of the Company outstanding and entitled to vote on that date was
193,929,364 shares of common stock. Each such share of
common stock is entitled to one vote. At March 19, 2007,
executive officers and directors of the Company owned or
controlled approximately 16.3% of the outstanding common stock.
Information as to persons beneficially owning 5% or more of the
common stock may be found under the heading Principal
Stockholders below.
Unless otherwise directed in the proxy, the persons named
therein will vote FOR the election of the director
nominees listed below and FOR the ratification of
the appointment of KPMG LLP as the Companys independent
registered public accounting firm for the fiscal year ending
December 31, 2007. If a returned proxy does not specify a
vote for or against a proposal, it will be voted in favor
thereof.
The election of directors and the ratification of the
appointment of KPMG LLP require the affirmative vote of a
majority of the shares present at the meeting to constitute the
action of the stockholders.
As of the date hereof, the Board of Directors knows of no other
business that will be presented for consideration at the Annual
Meeting. If other business shall properly come before the Annual
Meeting, the persons named in the proxy will vote according to
their best judgment.
ELECTION
OF DIRECTORS
As permitted by Delaware law, the Board of Directors is divided
into three classes, the classes being divided as equally as
possible and each class having a term of three years. Each year
the term of office of one class expires. This year the term of a
class consisting of four directors expires. The Board intends
that the shares represented by proxy, unless otherwise indicated
therein, will be voted for the election of W. Robert
Berkley, Jr., Ronald E. Blaylock, Mark E. Brockbank and
Mary C. Farrell as directors to hold office for a term of three
years until the Annual Meeting of Stockholders in 2010 and until
their respective successors are duly elected and qualified.
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 four
named nominees.
Following the recommendation of the Nominating and Corporate
Governance Committee, the Board of Directors unanimously
recommends a vote FOR each of the nominees
for director.
2
The following table sets forth information regarding each
nominee and the remaining directors who will continue in office
after the Annual Meeting.
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Served as
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Director
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Continuously
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Business Experience During Past 5 Years
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Nominees to Serve in Office Until 2010
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Since/Age
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and Other Information
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W. Robert Berkley, Jr.(1)
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2001
Age 34
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Executive Vice President of the
Company since August 2005 and Vice Chairman of Berkley
International, LLC since May 2002. Mr. Berkley, Jr.
served previously as Senior Vice President
Specialty Operations of the Company from January 2003 to August
2005, Senior Vice President of the Company from January 2002 to
January 2003, Vice President of the Company from May 2000 to
January 2002, President of Berkley International, LLC from
January 2001 to May 2002 and Executive Vice President of Berkley
International, LLC from March 2000 to January 2001. He joined
the Company in September 1997. From July 1995 to August 1997,
Mr. Berkley, Jr. was employed in the Corporate Finance
Department of Merrill Lynch Investment Company.
Mr. Berkley, Jr. is also a director of Associated
Community Bancorp, Inc. and its Connecticut Community Bank, N.A.
subsidiary; Interlaken Capital, Inc.; LD Realty Advisors LLC;
NCCI Holdings, Inc.; Kiln plc; and W. R. Berkley Corporation
Charitable Foundation. Mr. Berkley, Jr. is the son of
William R. Berkley.
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Ronald E. Blaylock(2)(3)(4)
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2001
Age 47
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Founder, Chairman and Chief
Executive Officer of Blaylock & Company, Inc., an
investment banking firm. Mr. Blaylock held senior
management positions with PaineWebber Group and Citicorp before
launching Blaylock & Company, Inc. in 1993.
Mr. Blaylock is also a director of Radio One, Inc.
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Served as
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Director
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Continuously
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Business Experience During Past 5 Years
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Nominees to Serve in Office Until 2010
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Since/Age
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and Other Information
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Mark E. Brockbank(2)(5)
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2001
Age 55
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Mr. Brockbank retired from active
employment in November 2000. He served from 1995 to 2000 as
Chief Executive of XL Brockbank LTD, an underwriting management
agency at Lloyds of London. Mr. Brockbank was a
founder of the predecessor firm of XL Brockbank LTD and was a
director of XL Brockbank LTD from 1983 to 2000.
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Mary C. Farrell(2)(5)
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2006
Age 57
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Consultant to the financial
services industry since 2005. Retired in July 2005 from UBS,
where she served as a Managing Director, Chief Investment
Strategist for UBS Wealth Management USA and Co-Head of UBS
Wealth Management Investment Strategy & Research Group.
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Served as
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Director
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Continuously
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Business Experience During Past 5 Years
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Directors to Continue in Office Until 2008
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Since/Age
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and Other Information
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Rodney A. Hawes, Jr.(2)
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2004
Age 69
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Mr. Hawes is the founder of
Insurance Investment Associates (IIA), which
has provided investment banking services to the insurance
industry since 1972. Mr. Hawes was the Chairman of the
Board and Chief Executive Officer of Life Re Corporation from
1988 to 1998.
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Jack H. Nusbaum(1)(2)(4)(6)
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1967
Age 66
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Chairman of the New York law firm
of Willkie Farr & Gallagher LLP, where he has been a
partner for more than the last five years. He is also a director
of The Topps Company, Inc. Willkie Farr & Gallagher LLP
is outside counsel to the Company.
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Mark L. Shapiro(1)(2)(3)(4)
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1974
Age 63
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Since September 1998,
Mr. Shapiro has been a private investor. From July 1997
through August 1998, Mr. Shapiro was a Senior Consultant to
the Export-Import Bank of the United States. Prior thereto, he
was a Managing Director in the investment banking firm of
Schroder & Co. Inc. He is also a director of Boardwalk
Pipeline Partners, LP.
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Served as
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Director
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Continuously
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Business Experience During Past 5 Years
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Directors to Continue in Office Until 2009
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Since/Age
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and Other Information
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William R. Berkley(1)(6)
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1967
Age 61
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Chairman of the Board and Chief
Executive Officer of the Company since its formation in 1967. He
also serves as President and Chief Operating Officer, positions
which he has held since March 1, 2000 and has held at
various times from 1967 to 1995. Mr. Berkley also serves as
Chairman of the Board or director of a number of public and
private companies. These include Associated Community Bancorp,
Inc. and its Connecticut Community Bank, N.A. subsidiary;
Interlaken Capital, Inc.; American Insurance Association; The
First Marblehead Corporation; Forethought Financial Group, Inc.;
HealthEquity, Inc.; Kiln plc; and W. R. Berkley Corporation
Charitable Foundation. Mr. Berkley is the father of W.
Robert Berkley, Jr.
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George G. Daly(2)(3)
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1998
Age 66
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Dean, McDonough School of
Business, Georgetown University. From 2002 to October 2005,
Dr. Daly was Fingerhut Professor and Dean Emeritus, Stern
School of Business, New York University, and previously was
Dean, Stern School of Business, and Dean Richard R. West
Professor of Business, New York University, for more than five
years. In addition to his academic career, Dr. Daly served
as Chief Economist at the U.S. Office of Energy Research
and Development in 1974. He is also a director of The First
Marblehead Corporation.
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Served as
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Director
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Continuously
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Business Experience During Past 5 Years
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Directors to Continue in Office Until 2009
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Since/Age
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and Other Information
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Philip J. Ablove(2)(5)
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2002
Age 66
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Executive Vice President and Chief
Financial Officer of Pioneer Companies, Inc. from March 1996 to
December 2002, when he retired. Mr. Ablove was Senior Vice
President and Chief Financial Officer of W. R. Berkley
Corporation from July 1973 until April 1983.
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(1) |
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Member of Executive Committee |
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Member of Nominating and Corporate Governance Committee |
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Member of Audit Committee |
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Member of Business Ethics Committee |
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Member of Compensation Committee |
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Member of Pricing Committee |
6
EXECUTIVE
OFFICERS
The following provides the name, principal occupation and other
pertinent information concerning the executive officers of the
Company who do not also serve as a director. The executive
officers are elected by the Board of Directors annually and
serve at the pleasure of the Board. There are no arrangements or
understandings between the executive officers and any other
person pursuant to which the executive officers were selected.
The information is provided as of April 9, 2007.
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Name
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Age
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Position
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Eugene G. Ballard
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54
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Senior Vice President
Chief Financial Officer and Treasurer
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Robert P. Cole
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57
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Senior Vice President
Regional Operations
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Robert W. Gosselink
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53
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Senior Vice President
Insurance Risk Management
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Paul J. Hancock
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45
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Senior Vice President
Chief Corporate Actuary
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Robert C. Hewitt
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Senior Vice President
Excess and Surplus Lines
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Peter L. Kamford
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52
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Senior Vice President
Admitted Specialty Lines
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Ira S. Lederman
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53
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Senior Vice President
General Counsel and Secretary
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C. Fred Madsen
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53
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Senior Vice President
Reinsurance Operations
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James G. Shiel
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47
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Senior Vice President
Investments
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Robert D. Stone
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42
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Senior Vice President
Alternative Markets Operations
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Clement P. Patafio
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Vice President
Corporate Controller
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Eugene G. Ballard has been Senior Vice President
Chief Financial Officer and Treasurer of the Company since
June 1, 1999.
Robert P. Cole has been Senior Vice President
Regional Operations of the Company since January 1999. Prior
thereto, he was Senior Vice President from January 1998 and Vice
President from October 1996. He has been in the
insurance/reinsurance business for more than 30 years.
Robert W. Gosselink has been Senior Vice President
Insurance Risk Management of the Company since October 2003.
Before joining the Company, Mr. Gosselink was Senior Vice
President and Manager, Ceded Reinsurance and Portfolio
Management for XL Global Services from 2001.
Paul J. Hancock has been Senior Vice President Chief
Corporate Actuary of the Company since January 2002. He joined
the Company in 1997 and most recently served as a Vice President
in the actuarial department. Mr. Hancock came to the
Company from Berkley Insurance Company, a subsidiary of the
Company.
7
Robert C. Hewitt has been Senior Vice President
Excess and Surplus Lines of the Company since January 2006.
Prior thereto, Mr. Hewitt was Senior Vice
President Alternative Markets Operations from
January 2004, and Senior Vice President Risk
Management from January 2002. Mr. Hewitt has 25 years
of experience in the reinsurance and insurance industries.
Peter L. Kamford has been Senior Vice President
Admitted Specialty Lines of the Company since January 2006. He
has over 25 years of experience in property casualty
insurance and reinsurance with Guy Carpenter & Company,
where he was a Managing Director.
Ira S. Lederman has been Senior Vice President since January
1997 and General Counsel and Corporate Secretary of the Company
since November 2001. Additionally, he has been General Counsel
of Berkley International, LLC since January 1998.
C. Fred Madsen has been Senior Vice President
Reinsurance Operations of the Company since July 2006. Most
recently, he was Executive Vice President of Benfield,
concentrating on the specialty marketplace.
James G. Shiel has been Senior Vice President
Investments of the Company since January 1997. Prior thereto, he
was Vice President Investments of the Company from
January 1992. Since February 1994, Mr. Shiel has been
President of Berkley Dean & Company, Inc., a subsidiary
of the Company, which he joined in 1987.
Robert D. Stone has been Senior Vice President
Alternative Markets Operations of the Company since January
2006. Previously, he was the Managing Director of Berkley
Capital, LLC from its formation in 2002.
Clement P. Patafio has been Vice President Corporate
Controller of the Company since January 1997. Prior thereto, he
was Assistant Vice President Corporate Controller
from July 1994 and Assistant Controller from May 1993.
CORPORATE
GOVERNANCE AND BOARD MATTERS
Our Board of Directors is committed to sound and effective
corporate governance practices. Accordingly, our Board has
adopted written Corporate Governance Guidelines, which address,
among other things, (1) director qualification (including
independence) standards, (2) director responsibilities,
(3) director access to management and, as necessary and
appropriate, independent advisors, (4) director
compensation, (5) director orientation and continuing
education, (6) management succession, and (7) annual
performance evaluation of the Board.
The Board has standing committees including: the Audit
Committee, Compensation Committee, and Nominating and Corporate
Governance Committee. Each of these committees has a written
charter. Our Corporate Governance Guidelines and the charters
for each of these standing committees are available on our
website at www.wrberkley.com.
The Board is currently composed of ten directors, all of whom,
other than Messrs. William R. Berkley and W. Robert
Berkley, Jr., have been determined by the Board to be
independent in accordance with applicable New York Stock
Exchange (NYSE) rules, and not to have a material
relationship with the Company which would impair their
independence from management or otherwise compromise their
ability to act as an independent director.
8
In making its determination with respect to Mr. Nusbaum,
the Board broadly considered the relevant facts and
circumstances of Mr. Nusbaums business and personal
relationships with William R. Berkley, including that
(1) Mr. Nusbaum is the Chairman of Willkie
Farr & Gallagher LLP (Willkie), which
serves as legal counsel to the Company;
(2) Mr. Nusbaums long service on the Board of
Directors of the Company, his previous service on the board of
directors of other companies affiliated with Mr. Berkley,
and his personal relationship with Mr. Berkley over such
time; and (3) Messrs. Nusbaum, Berkley and
Berkley, Jr. (Mr. Berkleys son) until recently
served together on the board of directors of Strategic
Distribution, Inc. (SDI).
The Board unanimously determined that Mr. Nusbaum be
classified as an independent director, based on (1) the
relative insignificance of the Companys annual legal fees
paid to Willkie as a percentage of Willkies total annual
revenue (including that such fees fall below the NYSEs
materiality threshold); (2) the lack of any other
connection between the Company and SDI;
(3) Mr. Nusbaums reputation and professional
background evidencing his independent nature, and particularly
Mr. Nusbaums history of acting independent of Berkley
management; and (4) Mr. Nusbaums personal
financial substance and lack of economic dependence on
Mr. Berkley and the Company. The Board also noted that
Mr. Nusbaum did not have any transaction or other
relationship that violated the specific independence tests
described in Section 303A.02(b) of the NYSE Corporate
Governance Rules.
The Board held four meetings during 2006. No director attended
fewer than 75% of the total number of meetings of the Board and
all committees on which he or she served. The Company encourages
its directors to attend its Annual Meeting of Stockholders, and
last year, seven of the directors were in attendance, either in
person or telephonically, at the Annual Meeting.
Board
Committees
Audit Committee. The Audit Committee is
appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the
Company, (2) the independent auditors qualifications
and independence, (3) the performance of the Companys
internal audit function and independent auditors, and
(4) compliance by the Company with legal and regulatory
requirements. The Audit Committee has also adopted procedures to
receive, retain and treat any good faith complaints received
regarding accounting, internal accounting controls or auditing
matters and provide for the anonymous, confidential submission
of concerns regarding these matters.
The Audit Committee was composed of Messrs. Shapiro,
Blaylock and Daly during 2006. Each member of the Audit
Committee is independent under the rules of the Securities and
Exchange Commission (SEC) and the NYSE.
Mr. Shapiro is the current Chair of the committee. The
Board has identified Mr. Shapiro as a current member of the
Audit Committee who meets the definition of an audit
committee financial expert established by the SEC. During
2006, the Audit Committee held eight meetings.
The Audit Committee has determined to engage KPMG LLP as the
Companys independent registered public accounting firm for
fiscal year 2007 and is recommending that our stockholders
ratify this appointment at our Annual Meeting. The report of our
Audit Committee is found on page 39 of this proxy statement.
9
Compensation Committee. The
Compensation Committee has overall responsibility for
discharging the Boards responsibilities relating to the
compensation of the Companys senior executive officers and
directors.
The Compensation Committee is currently composed of
Ms. Farrell and Messrs. Ablove and Brockbank, and has
been so constituted since May 2, 2006. Each member of the
Compensation Committee is independent under the rules of the
NYSE. Mr. Ablove is the current Chair of the Committee.
During fiscal 2006, the Compensation Committee held six meetings
and took action by unanimous written consent on one occasion.
The report of our Compensation Committee on executive
compensation is found on page 24 of this proxy statement.
The Compensation Committee has retained the services of an
external compensation consultant, Hewitt Associates. The mandate
of the consultant is to serve the Company and work for the
Compensation Committee in its review of executive and director
compensation practices, including the competitiveness of pay
levels, executive compensation design issues, market trends, and
technical considerations. The nature and scope of services
rendered by Hewitt Associates on the Compensation
Committees behalf is described below:
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Competitive market pay analyses, including proxy data studies,
Board of Director pay studies, and market trends;
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Ongoing support with regard to the latest relevant regulatory,
technical,
and/or
accounting considerations impacting compensation and benefit
programs;
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Assistance with the redesign of any compensation or benefit
programs, if desired/needed; and
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Preparation for and attendance at selected Compensation
Committee meetings.
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The Compensation Committee did not direct Hewitt to perform the
above services in any particular manner or under any particular
method. The Compensation Committee has the final authority to
hire and terminate the consultant and the Compensation Committee
evaluates the consultant periodically. The Company does not
engage Hewitt Associates for other services.
Nominating and Corporate Governance
Committee. The Nominating and Corporate
Governance Committee was formed to assist the Board in
(1) identifying individuals qualified to become members of
the Board (consistent with criteria approved by the Board),
(2) recommending that the Board select the director
nominees for the next annual meeting of stockholders or for
other vacancies on the Board, (3) overseeing the evaluation
of the Board and management, (4) reviewing the corporate
governance guidelines and the corporate code of ethics, and
(5) generally advising the Board on corporate governance
and related matters. Our Corporate Governance Guidelines address
director qualification standards.
The Nominating and Corporate Governance Committee will consider
qualified director nominees recommended by stockholders.
Nominations for consideration by the Nominating and Corporate
Governance Committee, together with a description of his or her
qualifications and other relevant information, should be sent to
the attention of the General Counsel, c/o W. R. Berkley
Corporation, 475 Steamboat Road, Greenwich, Connecticut 06830.
Stockholders may also follow the nomination procedures described
under Stockholder Nominations for Board Membership and
Other Proposals for 2008 Annual Meeting below.
10
The Companys Corporate Governance Guidelines set forth
certain qualifications and specific qualities candidates should
possess. In accordance with the Guidelines, the Committee, in
assessing potential candidates, considers their independence,
business, strategic and financial skills and other experience in
the context of the needs of the Board of Directors as a whole,
as well as a directors service on the boards of other
public companies. The Guidelines further state that directors
should demonstrate the following qualities: each director should
(1) bring to the Company a range of experience, knowledge
and judgment; (2) have relevant business or other
appropriate experience; (3) maintain an acceptable level of
attendance, preparedness and participation with respect to
meetings of the Board and its committees; and
(4) demonstrate competence in one or more of the following
areas: accounting or finance, business or management experience,
insurance or investment industry knowledge, crisis management,
or leadership and strategic planning. In identifying and
recommending director nominees, the Committee members may take
into account such factors as they determine appropriate,
including any recommendations made by the Chief Executive
Officer. Due consideration will be given to assessing the
qualifications of potential nominees and any potential conflicts
with the Companys interests. The Committee will also
assess the contributions of the Companys incumbent
directors in connection with their potential re-nomination.
The Nominating and Corporate Governance Committee is currently
composed of Messrs. Ablove, Blaylock, Brockbank, Daly,
Hawes, Jr., Nusbaum and Shapiro, and Ms. Farrell, all
of whom are considered independent under the rules of the NYSE.
The Nominating and Corporate Governance Committee held two
meetings during 2006.
Other Committees. During 2006, the
Board had three other standing committees in addition to the
committees set forth above: the Executive Committee, the Pricing
Committee and the Business Ethics Committee.
The Executive Committee is authorized to act on behalf of the
Board during periods between Board meetings. The Committee was
composed of Messrs. William R. Berkley and Nusbaum in 2006,
and since March 2007 has been composed of Messrs. Berkley,
Berkley, Jr., Nusbaum and Shapiro. During 2006, the
Committee held no meetings.
The Pricing Committee, which during 2006 was composed of
Messrs. William R. Berkley and Nusbaum, acts in the event
of certain offerings of the Companys securities with
respect to such matters as determining the price and terms at
which such securities shall be sold to underwriters and the
public. During 2006, the Committee held no meetings.
The Business Ethics Committee, which during 2006 was composed of
Messrs. Blaylock, Nusbaum and Shapiro, administers the
Company-wide business ethics program. The Committee reviews
disclosures made by Company employees and directors under the
Companys Statement of Business Ethics and Statement of
Business Ethics for the Board of Directors, determines if any
issue presented raises an ethics concern and takes any
appropriate action. During 2006, the Committee held one meeting.
Code of
Ethics
We have had a Statement of Business Ethics in place for many
years. This statement applies to all of our officers and
employees. It is a statement of our high standards for ethical
behavior and legal compliance, and governs the manner in which
we conduct our business. This Statement of Business
11
Ethics covers all areas of professional conduct, including
employment policies, conflicts of interest, anti-competitive
practices, intellectual property and the protection of
confidential information, as well as adherence to the laws and
regulations applicable to the conduct of our business. We have
also adopted a Statement of Business Ethics for the Board of
Directors.
We have adopted a Code of Ethics for Senior Financial Officers.
This Code of Ethics, which applies to our Chief Executive
Officer, Chief Financial Officer and Controller, addresses the
ethical handling of conflicts of interest, the accuracy and
timeliness of SEC disclosure and other public communications and
compliance with law.
A copy of our Statement of Business Ethics, Statement of
Business Ethics for the Board of Directors and Code of Ethics
for Senior Financial Officers can be found on our website at
www.wrberkley.com. We intend to disclose amendments to
these procedures, and waivers of these policies for executive
officers and directors, on our website.
Communications
with Non-Management Directors; Executive Sessions
A stockholder who has an interest in communicating with
management or non-management members of the Board of Directors
may do so by directing the communication to the General Counsel.
Information about the Company, including with respect to its
corporate governance policies and copies of its SEC filings, is
available on our website at www.wrberkley.com. Our
filings with the SEC are also available on the SECs
website at www.sec.gov. Persons who desire to communicate
with the non-management directors should send their
correspondence addressed to the attention of the General
Counsel, c/o W. R. Berkley Corporation, 475 Steamboat Road,
Greenwich, Connecticut 06830. The General Counsel will provide a
summary of all appropriate communications to the addressed
non-management directors and will provide a complete copy of
such communications upon the request of the addressed director.
In accordance with applicable NYSE Rules, the independent
directors meet regularly in executive session. The presiding
director at these executive sessions rotates among the Chairman
of the Audit Committee, the Chairman of the Compensation
Committee and the non-management member of the Executive
Committee who does not already chair another committee.
PRINCIPAL
STOCKHOLDERS
The following table sets forth as of March 19, 2007 (except
as otherwise noted below) those persons known by the Company to
be the beneficial owners of more than 5% of the common stock:
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|
|
|
|
|
|
|
|
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Amount and Nature
|
|
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Percent
|
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Name and Address of Beneficial Owner
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of Beneficial Ownership(1)
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|
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of Class
|
|
|
William R. Berkley
475 Steamboat Road
Greenwich, CT 06830
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|
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28,295,400
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(2)
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|
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14.6
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%
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FMR Corp.
82 Devonshire Street
Boston, MA 02109
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|
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19,132,423
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(3)
|
|
|
9.9
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%(4)
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12
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|
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(1)
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These amounts reflect the
3-for-2
common stock split effected on April 4, 2006.
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(2)
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|
Includes 10,635,016 shares of
common stock and 3,845,146 shares of common stock held in
separate limited liability companies of which Mr. Berkley
is the sole member, 4,676,171 shares which are subject to
currently exercisable stock options, 973,125 shares of
common stock underlying restricted stock units (455,625 of which
vest on April 4, 2008, 202,500 of which vest on
May 11, 2009, and 315,000 of which vest on December 5,
2010), and 60,553 shares held by Mr. Berkleys
wife, as to which shares he disclaims beneficial ownership. Of
the 28,295,400 shares, 7,290,105 shares are pledged as
security.
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|
(3)
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|
Information as of December 31,
2006 based on a Schedule 13G, dated February 14, 2007,
filed with the Securities and Exchange Commission on behalf of
FMR Corp. (FMR), Edward C. Johnson 3d and Fidelity
Management & Research Company (Fidelity), a
wholly-owned subsidiary of FMR. Certain of the shares listed
above are beneficially owned by FMR subsidiaries and related
entities. The Schedule 13G discloses that FMR had sole
voting power as to 1,983,757 shares and sole dispositive
power as to all 19,132,423 shares. The Schedule 13G
states that Mr. Johnson and various family members, through
their ownership of FMR voting common stock and the execution of
a shareholders voting agreement, may be deemed to form a
controlling group with respect to FMR. The Schedule 13G
indicates that 17,202,211 shares are beneficially owned by
Fidelity as a result of acting as an investment adviser to
several investment companies (ICs).
Mr. Johnson, FMR, through its control of Fidelity, and the
ICs each had sole dispositive power as to all such shares.
Neither Mr. Johnson nor FMR had sole voting power as to
such shares, as such power resides with the ICs respective
Boards of Trustees and is carried out by Fidelity under written
guidelines established by such Boards. The Schedule 13G
also indicates that 159,867 shares are beneficially owned
by Pyramis Global Advisors, LLC (Pyramis), a wholly
owned subsidiary of FMR, as a result of its serving as
investment manager of certain institutional accounts.
Mr. Johnson and FMR, through its control of Pyramis, each
had sole dispositive power and sole voting power as to all such
shares. The Schedule 13G also indicates that
500,870 shares are beneficially owned by Pyramis Global
Advisors Trust Company (Pyramis Trust), a wholly
owned subsidiary of FMR, as a result of its serving as
investment manager of certain institutional accounts.
Mr. Johnson and FMR, through its control of Pyramis Trust,
each had sole dispositive power and sole voting power as to all
such shares. The Schedule 13G indicates that
168 shares are beneficially owned by Strategic Advisors,
Inc., a wholly-owned subsidiary of FMR, as a result of its
serving as an investment advisor to individuals. The
Schedule 13G indicates that 1,269,307 shares are
beneficially owned by Fidelity International Limited
(FIL), an entity independent of FMR.
Mr. Johnson is Chairman of FIL, and approximately 47% of
the voting power of FIL is held by a partnership controlled by
him and family members. FIL had sole voting and dispositive
power as to all such shares. The Schedule 13G indicates
that FMR and FIL are of the view that they are not required to
attribute to each other shares beneficially owned by the other
corporation.
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(4)
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The percent of class shown was
based on the shares of common stock reported on the
Schedule 13G and the total number of shares outstanding as
of December 31, 2006. Assuming the number of shares
beneficially owned by this holder did not change, the percent of
class based on the shares of common stock outstanding as of
March 19, 2007 remains 9.9%.
|
The following table sets forth information as of March 19,
2007 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 common stock. Except as
13
described in the footnotes below, all amounts reflected in the
table represent shares the beneficial owners of which have sole
voting and investment power.
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Amount and Nature of
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Percent
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Name of Beneficial Owner
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Beneficial Ownership(1)
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of Class
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All directors and executive
officers as a group (21 persons)
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31,555,886
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(2)(3)(4)(5)
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16.3
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%
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Philip J. Ablove
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8,239
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|
|
|
*
|
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Eugene G. Ballard
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211,827
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(3)
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|
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*
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William R. Berkley
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28,295,400
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(2)(3)
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14.6
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%
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W. Robert Berkley, Jr.
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901,725
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(3)
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*
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Ronald E. Blaylock
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7,285
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*
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Mark E. Brockbank
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603,106
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*
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George G. Daly
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15,325
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*
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Mary C. Farrell
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1,500
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*
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Rodney A. Hawes, Jr.
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9,000
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*
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Ira S. Lederman
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270,417
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(3)(4)
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*
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Jack H. Nusbaum
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|
63,327
|
|
|
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*
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Mark L. Shapiro
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|
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22,333
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|
|
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*
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James G. Shiel
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330,803
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(3)
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*
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|
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|
*
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Less than 1%.
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(1)
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|
These amounts reflect the
3-for-2
common stock split effected on April 4, 2006.
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(2)
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|
Includes 10,635,016 shares of
common stock and 3,845,146 shares of common stock held in
separate limited liability companies of which Mr. Berkley
is the sole member, and 60,958 shares held by
Mr. Berkleys wife, as to which shares he disclaims
beneficial ownership.
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(3)
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|
The amounts shown for
Messrs. Ballard, Berkley, Berkley, Jr., Lederman and
Shiel include shares of common stock which are subject to stock
options that are either currently exercisable or are exercisable
within sixty days of March 19, 2007 in the respective
amounts of 88,595; 4,676,171; 739,127; 53,792; and
204,400 shares. This also includes shares of common stock
underlying restricted stock units (RSUs) for the respective
individuals in the following amounts 78,750 (33,750 of which
vest on April 4, 2008, 22,500 of which vest on May 11,
2009, and 22,500 of which vest on December 5, 2010);
973,125 (455,625 of which vest on April 4, 2008, 202,500 of
which vest on May 11, 2009, and 315,000 of which vest on
December 5, 2010); 146,250 (33,750 of which vest on
April 4, 2008, 22,500 of which vest on May 11, 2009,
and 90,000 of which vest on December 5, 2010); 78,750
(33,750 of which vest on April 4, 2008, 22,500 of which
vest on May 11, 2009, and 22,500 of which vest on
December 5, 2010); and 65,813 (25,313 of which vest on
April 4, 2008, 18,000 of which vest on May 11, 2009,
and 22,500 of which vest on December 5, 2010).
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(4)
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|
The amount shown for
Mr. Lederman includes 6,102 shares of common stock
held in accounts for his children, as to which Mr. Lederman
is a custodian.
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(5)
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|
The amounts shown for all directors
and executive officers as a group include an aggregate of
6,202,958 shares of common stock which are subject to stock
options that are either currently exercisable or are exercisable
within sixty days of March 19, 2007 and are held by
executive officers of the Company, 1,605,564 shares of
common stock underlying RSUs, which are subject to forfeiture
until vested, and 15,059 shares of common stock which are
held by executive officers under the Companys Profit
Sharing Plan.
|
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 Companys
outstanding voting securities (5% in the State of Florida)
without obtaining prior regulatory approval.
14
TRANSACTIONS
WITH MANAGEMENT AND OTHERS
As described above, the Company has adopted both a Statement of
Business Ethics that applies to all officers and employees and a
Statement of Business Ethics for the Board of Directors, each of
which is administered by the Business Ethics Committee. The
Statements address, among other things, transactions in which
the Company is or will be a party and in which any employee or
director (or members of his or her immediate family, as such
term is defined by the NYSE Rules) has a direct or indirect
interest. The Statements require full and timely disclosure of
any such transaction to the Company. Company management
initially determines whether a disclosed transaction by an
employee requires review by the Committee. Based on its
consideration of all of the relevant facts and circumstances,
the Committee decides whether or not to approve such a
transaction and approves only those transactions that are not
contrary to the best interests of the Company. If the Company
becomes aware of an existing transaction which has not been
approved, the matter will be referred to the Committee. The
Committee will evaluate all available options, including
ratification, revision or termination of such transaction.
During 2006, the Company engaged the services of Associated
Community Brokers, Inc., an insurance agency owned by Associated
Community Bancorp, Inc. William R. Berkley, the Companys
Chairman of the Board and Chief Executive Officer, serves as
Chairman of the Board of Directors and is the majority
stockholder of Associated Community Bancorp, Inc. During 2006,
Associated Community Brokers, Inc. received commissions (both
directly and indirectly) from the relevant insurance carriers in
the amount of $475,768 in connection with insurance brokerage
services provided to the Company and certain of its subsidiaries.
Also during 2006, a subsidiary of the Company sublet certain
office space from Associated Community Bancorp, Inc. at
prevailing market rates. The sublease expires on
October 31, 2007. The base rental expense under the terms
of the sublease is approximately $127,500 per annum.
These transactions have been approved in accordance with the
procedures described above.
Jack H. Nusbaum, a director of the Company, is Chairman of
Willkie Farr & Gallagher LLP, outside counsel to the
Company.
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
The purpose of this Compensation Discussion & Analysis
is to provide material information about the Companys
executive compensation program, policies, and objectives for the
Companys Named Executive Officers (or NEOs) and to put
into perspective for investors the numbers and narratives that
follow. The following sections are covered:
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Objectives of the executive compensation program;
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|
Design of the total compensation program, including the role and
rationale for each element;
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|
Use of market and peer group data;
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|
Executive compensation decisions during the last fiscal
year; and
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|
Severance and change-of-control benefits.
|
15
The Compensation Discussion & Analysis and the tables
that follow cover the compensation paid to the highest paid
executive officers, including the following five executives:
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|
|
The principal executive officer: William R. Berkley, Chairman
and Chief Executive Officer (or CEO);
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|
|
The principal finance officer: Eugene G. Ballard, Senior Vice
President, Chief Financial Officer and Treasurer;
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|
The next three highest paid executive officers:
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|
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|
W. Robert Berkley, Jr., Executive Vice President (or EVP);
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|
|
|
Ira S. Lederman, Senior Vice President General
Counsel and Secretary; and
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|
|
James G. Shiel, Senior Vice President Investments.
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Objectives
of the Executive Compensation Program
Current and long-term financial performance of the Company,
together with achievement of nonfinancial corporate objectives
and individual performance, are the principal determinants of
compensation at the Company. The Company believes that this
approach provides incentives to the CEO and other NEOs to focus
on meeting key corporate strategic objectives, such as enhancing
returns and driving profitable growth. Focusing on these key
objectives should in turn enhance stockholder value. The Company
also uses compensation to:
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Attract qualified executive talent;
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Motivate executives to work toward corporate goals;
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|
Provide an opportunity for executives to develop a significant
ownership stake in the Company and thus align their interests
with those of our stockholders;
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|
Encourage executive retention; and
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|
|
Reward executives who contribute to the Companys long-term
success by demonstrated, sustained performance.
|
16
Design of
the Total Compensation Program
The Companys executive compensation program with respect
to the NEOs consists of several compensation elements, as shown
in the table below.
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|
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|
|
|
|
Why W. R. Berkley Corporation
|
Pay Element
|
|
Role of the Element
|
|
Uses the Element
|
|
Annual Cash
Compensation
|
Base Salary
|
|
Provide a fixed base
level of compensation for NEO services rendered during the year
|
|
Required by market
practice
|
Annual Incentive Bonus
|
|
Motivate and reward
NEOs to achieve return on capital objectives and individual
objectives
|
|
Representative of market practice
Provide focus on annual goals that are linked to Company and stockholder success
|
|
|
Long-Term Incentive
Compensation
|
Deferred Restricted Stock Units
(RSUs)
|
|
Retain NEOs through 5-year vesting period
Align NEO interests with those of stockholders
|
|
Balance NEO focus and
rewards on both external (share price and dividend yield) and
internal (growth in book value) measures
|
|
|
|
|
|
Long-Term Incentive Plan (LTIP)
|
|
Retain NEOs through 5-year performance period
Focus attention on increasing the book value of the Company
Through Company-wide goal, encourage teamwork and decision-making in the long-term best interests of the Company
|
|
Retain NEOs through use of overlapping 5-year vesting and performance periods
Increase stock ownership among NEOs since RSUs are deferred until retirement
Allow NEOs to realize a portion of long-term compensation prior to retirement through LTIP cash payments
|
|
|
Benefits and
Perquisites
|
Benefit Replacement Plan
|
|
Make up for the limits
imposed by the Internal Revenue Code of 1986, as amended
(or IRC) on Company contributions to the qualified Profit
Sharing Plan
|
|
Treat all employees equally, regardless of IRC limitations
To provide a competitive comprehensive compensation package designed to attract and retain NEOs
|
Deferred Compensation
|
|
Allow NEOs to defer receipt of all or part of their base salary and annual incentive bonus
Provide a strong retention feature through above-market return potential
|
|
Provide additional cash flow to the Company in a cost effective manner
To provide a competitive comprehensive compensation package designed to attract and retain NEOs
|
Supplemental Benefits
|
|
Provide supplemental
coverage for officers, including the NEOs, in the areas of life
insurance, travel accident, and long-term disability
|
|
To provide a
competitive comprehensive compensation package designed to
attract and retain NEOs
|
Personal Use of Company Aircraft
(CEO and EVP)
|
|
Provide secure
transportation
|
|
Ensure security and personal safety of the CEO and EVP
To provide a competitive comprehensive compensation package designed to attract and retain NEOs
|
Supplemental Benefits Agreement
(CEO only)
|
|
Provide competitive retirement income for the CEO
Provide continued health insurance benefits and certain perquisites to the CEO after employment ends
Prohibit the CEO from competing with the Company following termination
|
|
To reward the founding CEO for long-term service to the Company (37 years)
Provide competitive retirement income relative to final average pay for the CEO
Provide consideration in exchange for a noncompete agreement
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|
|
Other
|
Director Fees (CEO & EVP
Only)
|
|
Compensate NEOs who are
also members of the Board for their time spent on Board matters
|
|
To provide compensation
for responsibilities and liabilities that are separate and
distinct from position as officer
|
17
Additional
Design Information
Annual Incentive Bonus. Our Annual
Incentive Compensation Plan for selected participants provides a
performance-based bonus based upon the achievement of pre-tax
net income by the Company. The Compensation Committee (or the
Committee) selected the CEO and EVP as participants for 2006.
The Committee established maximum bonus amounts for these two
NEOs at the start of the year in order to ensure the bonus
amounts meet the requirements for performance-based compensation
under Section 162(m) of the Internal Revenue Code of 1986,
as amended (or IRC). For 2006, the CEO was eligible for a
maximum award equal to 4% of pre-tax net income. The EVP was
eligible for a maximum award equal to 1% of pre-tax net income.
Subject to the maximum pay-out value, actual awards are
determined for the CEO and EVP by the Committee through the
evaluation of individual accomplishments and Company results, of
which return on equity is the primary factor. With respect to
the EVP, the Committee takes into account an initial
recommendation from the CEO. The Committee also considers
earnings per share, combined ratio and investment income in
determining the annual incentive compensation award. Aside from
the maximum award limit, the determination of the actual bonus
awards for the CEO and EVP is not formulaic but rather based on
the reasoned subjective determination of the Committee.
The annual incentive bonus for the other NEOs is a discretionary
bonus program based primarily on the achievement of financial
goals for the Company. Actual awards for the other NEOs
(including Messrs. Ballard, Lederman and Shiel) are
determined by the CEO based on a subjective evaluation of each
individuals accomplishments and contributions to the
Companys results. For Mr. Shiel, consideration is
also given to performance of the Companys investment
portfolio. The awards are reviewed by the Committee.
The annual incentive bonus is designed to support the
Companys objectives by allowing the Company to attract and
motivate the NEOs and to reward them for performance.
Long-Term Incentives. The
Companys long-term incentive program consists of a
combination of equity and cash compensation through grants of
RSUs and performance units under our Long-Term Incentive Plan or
LTIP.
RSUs for the NEOs have a five-year vesting period, after which
they are deferred (on a mandatory basis) until 90 days following
termination of employment with the Company. Grants of RSUs are
made periodically; generally twice within a five-year period.
NEOs did not receive an RSU award in 2006, but did so in 2005.
These awards do not meet the requirements for performance-based
compensation under Section 162(m) of the IRC. However,
since the RSUs are deferred until 90 days following
termination of employment, under current law, the Company will
generally receive a tax deduction for the value of the awards
when the value is realized by the executive.
LTIP grants are denominated in units that grow in value based on
one or more performance measures selected by the Committee. The
performance measure for the current LTIP grants is the increase
in book value per share of the Company. The units granted pay
out in cash on the earlier of the end of a five-year performance
period or the date the units reach the maximum value. New LTIP
units are granted periodically, generally twice within a
five-year period. A new LTIP grant was made in 2006. Additional
details on the formula and provisions of this grant can be found
in the Grants of Plan-Based Awards Table and the associated
narrative and footnotes. The units granted were
18
designed to meet the requirements for performance-based
compensation under Section 162(m) of the IRC.
While the Company does not have formal stock ownership
guidelines, stock ownership is strongly encouraged and even
mandated under the RSU program. The founding CEO currently
beneficially owns 14.6% of the Companys outstanding common
stock. Other NEOs also have significant beneficial ownership
positions through outright common stock ownership and deferred
RSU awards.
The long-term incentive program supports the Companys
objectives with a strong retention element created through
multiple overlapping
5-year
cycles of RSUs and LTIP grants. The program also aligns
executives financial interests with those of our
stockholders and rewards executives as our stockholders are
rewarded through the increased value of our stock.
Deferred Compensation. We maintain a
Deferred Compensation Plan for Officers pursuant to which
certain officers, including the NEOs, may elect to defer all or
a portion of their base salary, bonus compensation and excess
profit sharing contribution for any year. Amounts deferred will
accrue a reasonable rate of interest, as annually determined by
the Compensation Committee. At the time of the deferral
election, amounts may be deferred until any date on or before
the officers termination of employment. The Company will
pay the deferred amounts either in a lump sum or in no more than
five annual installments beginning on a date which is prior to
or on the date of the officers termination of employment.
Upon the death of a NEO, the officers deferred account
balance will be distributed within sixty days following death.
The amounts deferred are not secured or funded by the Company.
For 2006, the Compensation Committee agreed to accrue interest
on the deferred amounts at the prime rate of interest reported
by JPMorgan Chase. The Non-Qualified Deferred Compensation for
2006 Table and the associated narrative and footnotes provides
information on the amounts deferred by the NEOs under our
Deferred Compensation Plan for Officers in 2006, earnings in
2006 and the year-end balances.
Benefit Replacement. We maintain a
Benefit Replacement Plan pursuant to which employees
participating in the Companys Profit Sharing Plan will
receive a payment of the amount of Company contribution to the
plan the employee would have otherwise received absent the
limitations imposed by the IRC. This amount is paid in a lump
sum unless deferred by the employee under our Deferred
Compensation Plan for Officers. Additional information
concerning the amounts paid under this plan can be found in the
Summary Compensation Table All Other Compensation
and the associated footnotes.
Supplemental Benefits Agreement with the
CEO. On August 19, 2004, the Company
entered into a Supplemental Benefits Agreement with
Mr. Berkley. The agreement was put into place to recognize
the significant contribution that this founding CEO has made to
the Companys past and ongoing success. The agreement
provides the CEO, or spouse as the case may be, with the
following benefits when he is no longer CEO, is terminated by
the Company, other than for cause, or terminates due
to death:
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An annual retirement benefit equal to the greater of $1,000,000
or 50% of his highest average three-year compensation over the
prior ten fiscal years, but not exceeding 150% of the CEOs
average five-year compensation over the prior five fiscal years;
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19
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Continued health insurance coverage (including coverage for his
wife) for life;
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Continued use of the Company plane and a car and driver for a
period beginning with termination as defined in the agreement
and ending with the later to occur of two years following
termination, the date he ceases to be Chairman of the Board or
the date he ceases to provide consulting services to the Company;
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Office accommodations and secretarial support; and
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Payment of any excise taxes imposed on the CEO under
Section 4999 of the IRC should any of these benefits
trigger such excise taxes.
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The CEO is entitled to these benefits at retirement or when he
voluntarily leaves the Company. The Committee approved this
arrangement in consideration of the CEOs 37 years of
service with the Company. In exchange for the benefits outlined,
the agreement prohibits Mr. Berkley from competing against
the Company for two years following his resignation of
employment other than for good reason, during which
time Mr. Berkley has agreed to be available to provide
consulting services to the Company. Decisions to provide these
benefits were made without regard to other compensation
elements. Likewise, providing these benefits did not influence
compensation levels in other areas; however, providing these
benefits links directly to the Companys objectives. They
motivate the CEO to remain enthusiastic about his work and the
long-term prospects for the Company. The agreement protects the
Company from competitive activities. Additional detail on this
agreement is provided in the Summary Compensation Table (for the
annual accrual value of the retirement benefit), the Pension
Benefits Table, and the Description of Potential Post-Employment
Payments section.
Use of
Market and Peer Group Data
The Committee reviews and analyzes market data annually. Total
direct compensation (defined as salary, annual bonus, and
long-term incentive awards) for the NEOs is compared to that
paid to comparable positions at peer companies.
20
In 2006, the Committee reviewed data from three peer groups, as
shown in the following chart.
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High-Performing Financial
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Insurance Companies
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Financial Services Companies
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Services Companies
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Rationale:
Companies in the property and casualty insurance industry with
whom W. R. Berkley Corporation competes for talent and business.
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Rationale:
Companies of similar size in other financial services areas with
executives who have similar skills.
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Rationale:
Companies who have performance profiles similar to W. R. Berkley
Corporation (i.e., ROE in excess of 20% for the last
3 years).
|
Ace Limited
American Financial Group
Arch Capital Group Ltd
Chubb Corp
CNA Financial Corp
Everest Re Group Ltd
Markel Corp
Ohio Casualty Corp
Old Republic Intl Corp
PartnerRe Ltd
Progressive Corp
RenaissanceRe Holdings Ltd
SAFECO Corp
Transatlantic Holdings Inc.
Travelers
White Mountains Insurance Group Ltd
XL Capital Ltd
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A G Edwards
AmSouth Bancorporation
Cincinnati Financial Corp
Comerica Inc.
Conseco Inc.
E Trade Financial Corp
First American Corp
First Horizon National Corp
Mercury General Corp
Sovereign Bancorp Inc.
Synovus Financial Corp
Torchmark Corp
Unitrin Inc.
Unum
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American Express
Company
Chicago Mercantile Exchange
Federated Investors Inc.
First Horizon National Corp
First Marblehead Corp
Lehman Brothers Holdings Inc.
Nasdaq Stock Market Inc.
Nuveen Investments
Progressive Corp
SLM Corp
T. Rowe Price Group
TCF Financial Corp
TD Ameritrade Holding Corp
U.S. Bancorp
Willis Group Holdings Ltd
|
Market data is reviewed together with performance data for the
peer companies to ensure that actual total direct compensation
paid is in line with relative performance of the peer companies.
However, market data is not the only factor considered in
setting future compensation awards.
Executive
Compensation Decisions During the Last Fiscal Year
General Approach. The Company does not
generally target any particular allocation for base salary,
annual incentive, or long-term incentive as a percent of total
compensation. Rather, pay decisions for NEOs, other than the
CEO, are based on a reasoned subjective assessment by the CEO of
individual performance and future potential. For the CEO, pay
decisions are made by the Committee and generally based on a
reasoned subjective assessment of Company performance and
ensuring that compensation is appropriate based on relative
performance.
Other than the CEO, no executive officer plays a role in
determining compensation for the NEOs.
Base Salary. The CEO has not received a
salary increase since January 1, 2000, since base pay in
excess of the current level is not deductible by the Company for
income tax purposes.
Salary actions taken for other NEOs were based on the CEOs
subjective assessment of individual performance, contribution to
the Company and retention:
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Mr. Berkley, Jr.: 8.34% increase
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Mr. Ballard: 8.7% increase
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21
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Mr. Lederman: 8.7% increase
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Mr. Shiel: 8.7% increase
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All base salary changes were effective January 1, 2006.
Annual Incentive Bonus. For
Messrs. Ballard, Lederman, and Shiel, the CEO determined,
and reviewed with the Committee, the 2006 bonus amounts, as
shown in the Summary Compensation Table, based on a reasoned
subjective assessment of Company performance (primarily ROE) and
individual performance. In addition, for Mr. Shiel,
consideration was given to performance of the Companys
investment portfolio.
For 2006, the CEO and EVP were the only participants in our
Annual Incentive Compensation Plan. For
Mr. Berkley, Jr., the CEO made an initial
recommendation, and the Committee approved, the bonus amount
shown in the Summary Compensation Table. The bonus amount was
based on a reasoned subjective assessment of Company
performance, primarily ROE, as well as earnings per share,
combined ratio and investment income. Consideration was also
given to individual performance. This bonus amount was less than
the maximum bonus amount (1% of pre-tax net income) described
earlier.
For the CEO, the Committee determined the 2006 bonus amount
based on a reasoned subjective assessment of the different
measures established by the Committee. The primary measure was
ROE. The Committee also considered EPS, non-financial
objectives, the Companys combined ratio (relative to the
industry) and investment income. (Combined ratio is a measure of
overall underwriting profitability where a combined ratio of
less than 100 indicates an underwriting profit.) Non-financial
objectives included specific goals in the areas of succession
planning, internal processes and investment opportunities.
While the measures are listed in order of importance, no
particular allocation was applied to the measures. The Committee
also considered:
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Amounts paid in prior years and performance in 2006 relative to
those prior years; and
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Performance relative to industry peers.
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The amount paid was less than the maximum bonus amount (4% of
pre-tax net income) described earlier.
The Companys performance is a critical factor in
determining NEO compensation. W. R. Berkley Corporations
financial performance in 2006 was very strong. The following is
an overview of the Companys 2006 performance:
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Return on stockholders equity was 27.2%
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Combined ratio of 88% was 5.3 points better than the
industrys overall combined ratio
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Net income was $3.46 per share, advancing 27.2% over 2005
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Net investment income grew 45% to $586 million
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Net premiums written increased 5% to $4.8 billion
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Book value per share increased 28.9%
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22
LTIP. During 2006, all NEOs received an
LTIP grant. The CEO recommended, and the Committee approved, the
units granted to Messrs. Ballard, Lederman, and Shiel based
on a reasoned subjective assessment of their individual
performance, contribution to the Company, future potential, and
retention needs. In general, the goal in determining the size of
the long-term grants, including LTIPs and RSUs, is to achieve
the appropriate balance of internal equity among various
officers and deliver to these NEOs between 2.5 and 3.5 times
salary in total direct compensation on average. Although there
is no set formula, the maximum potential value of the LTIP
grants generally range around 200% of base salary for these NEOs.
The Committee also approved LTIP grants for the CEO and EVP. For
the CEO the size of the grant was based on a reasoned subjective
assessment of the following factors:
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Past leadership, which the Committee believes is responsible for
the Companys current financial strength; and
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Expected future contribution to the Companys growth and
success.
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For the EVP, the Committee based the size of the grant on a
recommendation of the CEO and reasoned subjective assessment of
the EVPs performance, future potential and expected future
contribution to the Companys performance.
Additional detail on the units granted and performance criteria
can be found in the Grants of Plan-Based Awards Table and the
associated narrative and footnotes.
Severance
and
Change-of-Control
Benefits
Except as provided for in the Supplemental Benefits Agreement,
the Company does not have a severance program.
Upon a Change of Control as described in the various plan
documents:
1. Stock options become fully vested and immediately
exercisable in full as of the date immediately preceding the
date of the Change of Control, or such other date as determined
by the Committee, but no later than the date of the Change of
Control.
2. RSUs become fully vested and settled in full as of the
date immediately before the date of the Change of Control, or
such other date as determined by the Committee, but no later
than the date of the Change of Control.
3. The value of all LTIP awards shall be determined and
fixed as of the end of the fiscal year that occurred immediately
before the Change of Control. The value will be paid to the
participant within 90 days following the last day of the
performance period.
For additional detail, see Potential Payments Upon Termination
or Change of Control below.
23
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion & Analysis shown
above. Based on this review and discussion, the Compensation
Committee recommended to the Board of Directors that this
Compensation Discussion & Analysis be included in this
Proxy Statement and the Annual Report on
Form 10-K
for the year ended December 31, 2006.
Compensation Committee
Philip J. Ablove, Chairman
Mark E. Brockbank
Mary C. Farrell
April 3, 2007
The above report of the Compensation 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.
24
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth the cash and non-cash
compensation awarded to or earned by the Chairman of the Board
and Chief Executive Officer of the Company, the Chief Financial
Officer of the Company and the three other highest paid
executive officers of the Company whose earnings exceeded
$100,000 in salary and bonus for the last fiscal year.
Summary
Compensation Table
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Change in
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Pension Value
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and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Name and
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Principal Position
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Year
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($)(1)
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($)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)
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($)
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William R. Berkley
Chairman of the Board and Chief Executive Officer
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2006
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1,000,000
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(6)
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3,846,958
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103,023
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14,931,200
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3,528,851
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338,304
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(7)(8)
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23,748,336
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W. Robert Berkley, Jr.
Executive Vice President
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2006
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650,000
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(6)
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731,780
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45,110
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2,388,800
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179,575
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(7)(8)
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3,995,264
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Ira S. Lederman
Senior Vice President General Counsel and Secretary
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2006
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500,000
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400,000
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305,990
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13,663
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476,120
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28,316
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59,240
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(8)
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1,783,329
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Eugene G. Ballard
Senior Vice President Chief Financial Officer and
Treasurer
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2006
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500,000
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400,000
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305,990
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13,660
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476,120
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20,007
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59,240
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(8)
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1,775,017
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James G. Shiel
Senior Vice President Investments
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2006
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500,000
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400,000
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268,919
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11,381
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408,230
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19,394
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59,240
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(8)
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1,667,164
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(1)
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Messrs. William R. Berkley and
Lederman each deferred a portion of his compensation under the
W. R. Berkley Corporation Deferred Compensation Plan for
Officers, which is included in the Non-Qualified Deferred
Compensation for 2006 Table on page 32.
Messrs. Lederman, Ballard and Shiel each also contributed a
portion of his salary to the companys 401(k) savings plan.
Such amounts are included in the Salary column.
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(2)
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This column represents the dollar
amount recognized for financial statement reporting purposes
with respect to the 2006 fiscal year for the fair value of RSUs
granted in fiscal years prior to 2006 (none were granted in
2006), in accordance with SFAS 123R. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For RSUs, fair
value is calculated using the closing price of the
Companys common stock on the date of grant. The RSUs vest
in one installment on the fifth anniversary of the grant date,
provided the recipient remains employed with the Company
and/or its
subsidiaries on such vesting date. If a recipient terminates
employment prior to such vesting date on account of death,
disability or, in some cases, retirement, a pro rata share of
the number of RSUs granted to the recipient shall vest and be
distributed to the recipient as of such termination date. Upon
termination of employment for any other reason prior to vesting,
all RSUs held by the recipient will expire and be forfeited. For
additional information, refer to note 18 of the
Companys financial statements in the
Form 10-K
for the year ended December 31, 2006, as filed with the
SEC. These amounts reflect the Companys accounting expense
for these awards, and do not necessarily correspond to the
actual value that will be recognized by the named executives.
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(3)
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This column represents the dollar
amount recognized for financial statement reporting purposes
with respect to the 2006 fiscal year for the fair value of stock
options granted to each of the named executives in fiscal years
prior to 2006 (none granted in 2006) in accordance with
SFAS 123R. Pursuant to SEC rules, the amounts shown exclude
the impact of estimated forfeitures related to service-based
vesting conditions. For additional information on the valuation
assumptions with respect to the 2006 grants, refer to
note 18 of the Companys financial statements in the
Form 10-K
for the year ended December 31, 2006, as filed with the
SEC. These amounts reflect the Companys accounting expense
for these awards, and do not necessarily correspond to the
actual value that will be recognized by the named executives.
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25
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(4)
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This column includes the dollar
amount of bonus awards earned by Messrs. Berkley and
Berkley, Jr. for performance during 2006 under our Annual
Incentive Compensation Plan of $9,500,000 and $1,500,000,
respectively. These awards were paid in February 2007. This
column also includes the dollar amounts contingently earned
during the 2006 fiscal year with respect to awards granted to
each of the named executives in 2006 and prior fiscal years
pursuant to our LTIP, subject to the terms and conditions of the
LTIP agreements. See the Grants of Plan-Based Awards Table on
page 27 for additional information relating to these plans.
For additional information on the LTIP, refer to note 19 of the
Companys financial statements in the
Form 10-K
for the year ended December 31, 2006, as filed with the SEC.
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(5)
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For Mr. Berkley, the amount in
this column represents the sum of the change in pension value
($3,498,804) under the Supplemental Benefits Agreement and the
preferential or above-market earnings on non-qualified deferred
compensation ($30,047) under the Deferred Compensation Plan for
Officers in 2006. See the Pension Benefits Table on page 31
for additional information about the Supplemental Benefits
Agreement. For each of the other named executives, the amounts
represent the preferential or above-market earnings on
non-qualified deferred compensation under the Deferred
Compensation Plan for Officers in 2006. The preferential or
above-market earnings are equal to the difference between market
interest rates as determined pursuant to SEC rules (120% of the
applicable federal long term rate) and the interest rate
contingently credited by the Company under the Deferred
Compensation Plan for Officers (the prime rate). See the
Nonqualified Deferred Compensation Table on page 32 for
additional information about the Deferred Compensation Plan for
Officers.
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(6)
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The bonus awards earned by
Messrs. Berkley and Berkley, Jr. for performance
during 2006 and paid in February 2007 under our Annual Incentive
Compensation Plan are reported in the Non-Equity Incentive Plan
Compensation column of this Summary Compensation Table.
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(7)
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This amount includes:
(i) Company director fees of $50,000 and 1,500 shares
of the Companys common stock awarded to directors on
May 16, 2006 having a value of $53,085, for
Messrs. Berkley and Berkley, Jr., but does not include
outside director fees of £35,000 (approximately $68,000 at
the current exchange rate) paid directly by Kiln plc to such
persons for serving (as appointed by the Company) in their
individual capacity as directors thereof; (ii) the
incremental cost to the Company related to personal use of
Company-owned or chartered aircraft by Mr. Berkley
($90,515); and (iii) secretarial and administrative
assistant expenses of $27,964 for Mr. Berkley. For reasons
of security and personal safety, the Board has required
Messrs. Berkley and Berkley, Jr. to use Company-owned
aircraft or non-commercial aircraft for all air travel. The
methodology used to calculate the cost to the Company is based
on the aggregate incremental variable trip-related costs,
including the cost of fuel, on-board catering, landing and
parking fees, flight crew travel expenses and ground
transportation costs. Since the corporate aircraft are used
primarily for business travel, the methodology excludes fixed
costs which do not change based on usage, such as pilots
and other employees salaries, purchase costs of the
aircraft, aircraft maintenance and hangar expenses.
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(8)
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For Messrs. Berkley,
Berkley, Jr., Lederman, Ballard and Shiel, these amounts
include Company contributions to the Profit Sharing Plan of
$25,300 each, attributed premiums for term life insurance of
$1,740 each, and Benefit Replacement Plan contributions of
$89,700, $49,450, $32,200, $32,200 and $32,200, respectively.
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26
Plan-Based
Awards
In 2002, we adopted and our stockholders approved our Annual
Incentive Compensation Plan. The Annual Incentive Compensation
Plan is a cash-based plan that does not provide for the payment
of any equity compensation. It is designed to foster the
achievement of our annual goals, to reward these employees with
pay that relates to our performance and to provide a means
through which we may attract, motivate and retain talented
individuals who can assist us in achieving our annual goals.
Compensation payable under this plan is based on an increase in
our pre-tax income. During the fiscal year ended
December 31, 2006, our Compensation Committee granted new
awards under the Annual Incentive Compensation Plan to certain
of our NEOs.
In 2004, we adopted and our stockholders approved our LTIP. The
LTIP is a cash-based plan that does not provide for the payment
of any equity compensation. It is designed to encourage teamwork
among certain of our key employees, including the named
executive officers to foster the achievement of our long-term
goals, to reward these employees with pay that relates to our
performance and to provide a means through which we may attract,
motivate and retain talented individuals who can assist us in
achieving our long-term goals. Compensation payable under the
LTIP is based on long-term corporate performance and is tied to
an increase in stockholder value. During the fiscal year ended
December 31, 2006, our Compensation Committee granted new
awards under the LTIP to our NEOs.
The following table shows information regarding such awards
granted to each of such officers (portions of which are
reflected to the extent required in the Summary Compensation
Table):
2006
GRANTS OF PLAN-BASED AWARDS
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Estimated Possible
|
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and Future Payouts
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Under Non-Equity
|
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Incentive Plan
|
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Awards
|
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Name
|
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Grant Date
|
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Units(#)
|
|
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Plan Name
|
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Maximum($)
|
|
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William R. Berkley
|
|
March 30, 2006
|
|
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40,000
|
|
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Long-Term Incentive Compensation
Plan
|
|
|
10,000,000
|
(1)
|
|
|
March 7, 2006
|
|
|
|
|
|
Annual Incentive Compensation Plan
|
|
|
39,545,000
|
(2)
|
W. Robert Berkley, Jr.
|
|
March 30, 2006
|
|
|
10,000
|
|
|
Long-Term Incentive Compensation
Plan
|
|
|
2,500,000
|
(1)
|
|
|
March 7, 2006
|
|
|
|
|
|
Annual Incentive Compensation Plan
|
|
|
9,886,000
|
(2)
|
Ira S. Lederman
|
|
March 30, 2006
|
|
|
4,000
|
|
|
Long-Term Incentive Compensation
Plan
|
|
|
1,000,000
|
(1)
|
Eugene G. Ballard
|
|
March 30, 2006
|
|
|
4,000
|
|
|
Long-Term Incentive Compensation
Plan
|
|
|
1,000,000
|
(1)
|
James G. Shiel
|
|
March 30, 2006
|
|
|
3,500
|
|
|
Long-Term Incentive Compensation
Plan
|
|
|
875,000
|
(1)
|
27
|
|
|
(1) |
|
On March 30, 2006, we granted LTIP units to our NEOs under
our long-term incentive program. These grants are denominated in
units and have a five year performance period until maturation
or payout, subject to earlier payout upon a termination of
employment on account of death, disability, retirement or a
termination by the Company not for cause, upon a change of
control of the Company or the achievement of the grants
maximum payout value of $250 per unit. Each unit had a $0
value at the time of grant. The future payout value for each
unit is determined by multiplying the aggregate
year-to-year
increase in the per-share book value of the Companys
common stock over the five-year performance period by a factor
of 19. The dollar value of the award to each NEO is the product
of that
per-unit
value and the number of units granted to each such NEO. The
dollar value of the grants will be paid to the NEOs at the end
of the five-year performance period, subject to earlier payout
noted above. The units are subject to forfeiture if certain
continued employment conditions are not satisfied through the
end of the performance period. The units are also subject to
forfeiture or recapture in the event the NEO violates certain
non-competition provisions required by the grant during the
performance period and for two years following the end of the
performance period. Because of the nature of these LTIP grants,
there is no target and the threshold is the achievement of any
increase in the per-share book value of our common stock over
the prior year. As such, we have excluded the
Threshold and Target columns. |
|
(2) |
|
These amounts represented the potential maximum value of the
annual bonus awards for 2006 under our Annual Incentive
Compensation Plan for Messrs. Berkley and Berkley, Jr.
The actual amount of bonus awards paid to Messrs. Berkley
and Berkley, Jr. for performance during 2006 under our
Annual Incentive Compensation Plan of $9,500,000 and $1,500,000,
respectively, are reported in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table. Our
Annual Incentive Compensation Plan provides a performance-based
bonus based upon our achievement of pre-tax net income. The
Compensation Committee established maximum bonus amounts for
these two NEOs at the start of the year in order to ensure the
bonus amounts meet the requirements for performance-based
compensation under Section 162(m) of the Internal Revenue
Code of 1986, as amended. For 2006, Mr. Berkley was
eligible for a maximum bonus award equal to 4% of pre-tax net
income and Mr. Berkley, Jr. was eligible for a maximum
bonus award equal to 1% of pre-tax net income. Because of the
nature of these bonus awards, there is no target and the
threshold is the achievement of any pre-tax net income. As such,
we have excluded the Threshold and
Target columns. Subject to these maximum limits,
actual bonus pay-out amounts are determined by the Compensation
Committee based on its evaluation of the these NEOs
individual accomplishments and our financial results, of which
return on equity is the primary factor. The Committee also
considers earnings per share, combined ratio and investment
income in determining the annual incentive compensation award.
Aside from the maximum award limit, the determination of the
actual bonus amounts is not formulaic but rather based on the
reasoned subjective determination of the Committee. |
28
Outstanding
Equity Awards
The following table provides information on the current holdings
of stock option and stock awards by the named executives. This
table includes unexercised and unvested option awards and
unvested RSUs. Each equity grant is shown separately for each
named executive. The market value of the stock awards is based
on the closing market price of the Companys stock as of
December 31, 2006, which was $34.51.
OUTSTANDING
EQUITY AWARDS AT FISCAL 2006 YEAR-END
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
|
|
|
|
Number of
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares
|
|
|
|
|
|
|
Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
Units of
|
|
|
or Units
|
|
|
|
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock
|
|
|
Stock That
|
|
|
of Stock
|
|
|
|
Option
|
|
|
Unexercised
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Option
|
|
|
Award
|
|
|
Have Not
|
|
|
That Have
|
|
|
|
Grant
|
|
|
Options (#)
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
Grant
|
|
|
Vested
|
|
|
Not Vested
|
|
Name
|
|
Date
|
|
|
Exercisable(1)
|
|
|
(1)(2)
|
|
|
($)(1)
|
|
|
Date
|
|
|
Date
|
|
|
(#)(1)(3)
|
|
|
($)
|
|
|
William R. Berkley
|
|
|
05/13/1997
|
|
|
|
2,796,875
|
|
|
|
|
|
|
|
6.70
|
|
|
|
05/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/12/1998
|
|
|
|
303,750
|
|
|
|
|
|
|
|
9.35
|
|
|
|
05/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/16/2000
|
|
|
|
265,780
|
|
|
|
|
|
|
|
3.06
|
|
|
|
03/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/13/2001
|
|
|
|
1,518,750
|
|
|
|
506,250
|
|
|
|
9.34
|
|
|
|
03/13/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/03/2002
|
|
|
|
189,844
|
|
|
|
189,844
|
|
|
|
11.39
|
|
|
|
04/03/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/04/2003
|
|
|
|
455,625
|
|
|
|
15,723,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/11/2004
|
|
|
|
202,500
|
|
|
|
6,988,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/05/2005
|
|
|
|
315,000
|
|
|
|
10,870,650
|
|
W. Robert Berkley, Jr.
|
|
|
03/16/2000
|
|
|
|
81,000
|
|
|
|
|
|
|
|
3.06
|
|
|
|
03/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/13/2001
|
|
|
|
379,686
|
|
|
|
126,566
|
|
|
|
9.34
|
|
|
|
03/13/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/03/2002
|
|
|
|
101,250
|
|
|
|
101,252
|
|
|
|
11.39
|
|
|
|
04/03/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/04/2003
|
|
|
|
33,750
|
|
|
|
1,164,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/11/2004
|
|
|
|
22,500
|
|
|
|
776,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/05/2005
|
|
|
|
90,000
|
|
|
|
3,105,900
|
|
Ira S. Lederman
|
|
|
03/16/2000
|
|
|
|
15,822
|
|
|
|
|
|
|
|
3.06
|
|
|
|
03/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/03/2002
|
|
|
|
18,984
|
|
|
|
37,970
|
|
|
|
11.39
|
|
|
|
04/03/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/04/2003
|
|
|
|
33,750
|
|
|
|
1,164,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/11/2004
|
|
|
|
22,500
|
|
|
|
776,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/05/2005
|
|
|
|
22,500
|
|
|
|
776,475
|
|
Eugene G. Ballard
|
|
|
08/10/1999
|
|
|
|
12,657
|
|
|
|
|
|
|
|
4.73
|
|
|
|
08/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/16/2000
|
|
|
|
18,985
|
|
|
|
|
|
|
|
3.06
|
|
|
|
03/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/03/2002
|
|
|
|
37,970
|
|
|
|
37,970
|
|
|
|
11.39
|
|
|
|
04/03/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/04/2003
|
|
|
|
33,750
|
|
|
|
1,164,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/11/2004
|
|
|
|
22,500
|
|
|
|
776,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/05/2005
|
|
|
|
22,500
|
|
|
|
776,475
|
|
James G. Shiel
|
|
|
05/12/1998
|
|
|
|
88,595
|
|
|
|
|
|
|
|
9.35
|
|
|
|
05/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/16/2000
|
|
|
|
68,345
|
|
|
|
|
|
|
|
3.06
|
|
|
|
03/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/03/2002
|
|
|
|
31,643
|
|
|
|
31,639
|
|
|
|
11.39
|
|
|
|
04/03/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/04/2003
|
|
|
|
25,313
|
|
|
|
873,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/11/2004
|
|
|
|
18,000
|
|
|
|
621,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/05/2005
|
|
|
|
22,500
|
|
|
|
776,475
|
|
29
|
|
|
(1)
|
|
These amounts have been adjusted to
reflect all subsequent common stock splits through
December 31, 2006.
|
|
(2)
|
|
The unexercisable options are
unvested options that are subject to forfeiture in the event the
NEO voluntarily terminates employment with us prior to vesting.
In addition, all outstanding options, whether exercisable or
not, are subject to forfeiture in the event the NEOs
employment is terminated for cause, and the value of options
that have already been exercised may be subject to recapture by
us in certain circumstances. As such, the NEOs may never realize
the full value of these options if such forfeiture or recapture
occurs. All stock options vest according to a graded schedule of
25%, 50%, 75% and 100% on the third, fourth, fifth and sixth
anniversary of grant date.
|
|
(3)
|
|
Represents restricted stock units
(RSUs), each of which represents the right to
receive one share of common stock, subject to vesting and
continued employment requirements. These respective RSUs will
vest in full in one installment on the fifth anniversary of
their respective grant dates, provided the NEO remains in our
employ on the vesting date. If a NEO terminates employment prior
to the vesting date on account of death or disability (or, with
respect to 2003 awards only, retirement), a pro rata share of
the number of RSUs granted to him shall vest and be distributed
to him as of such termination date. Upon termination of
employment for any other reason prior to vesting, all RSUs will
expire and be forfeited. As such, the NEOs may never realize the
full value of these RSUs if such forfeiture or recapture occurs.
In the event of a Change of Control of the Company (as defined
in the RSU Agreements) all RSUs will vest in full and the shares
of common stock underlying each RSU will be delivered to the
NEOs. Our Compensation Committee may accelerate the vesting of
any or all RSUs at any time, for any reason.
|
Option
Exercises
The following table shows for the fiscal year ended
December 31, 2006 information concerning the exercise of
stock options by our named executive officers and the pre-tax
value realized upon such exercises. No stock awards (RSUs)
vested during 2006.
OPTION
EXERCISES IN 2006
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
|
Number of Shares
|
|
|
Pre-Tax Value
|
|
|
|
Acquired on Exercise
|
|
|
Realized on Exercise
|
|
Name
|
|
(#)(1)
|
|
|
($)
|
|
|
William R. Berkley
|
|
|
1,379,688
|
(2)
|
|
|
38,330,716
|
|
W. Robert Berkley, Jr.
|
|
|
|
|
|
|
|
|
Ira S. Lederman
|
|
|
|
|
|
|
|
|
Eugene G. Ballard
|
|
|
|
|
|
|
|
|
James G. Shiel
|
|
|
34,175
|
(3)
|
|
|
990,392
|
|
|
|
|
(1) |
|
These amounts have been adjusted to reflect all subsequent
common stock splits through December 31, 2006. |
|
(2) |
|
Mr. Berkley exercised: (i) 379,688 stock options with
an exercise price of $5.70 per share on February 10,
2006 when the market price of our stock was $32.25 per
share, and; (ii) 1,000,000 stock options with an exercise
price of $6.70 per share on December 26, 2006 when the
market price of our stock was $34.95 per share. |
|
(3) |
|
Mr. Shiel exercised 34,175 stock options with an exercise
price of $7.08 per share on November 7, 2006 when the
market price of our stock was $36.06 per share. |
30
Pension
Benefits
The following table shows for the fiscal year ended
December 31, 2006 information relating to the retirement
benefits provided to Mr. Berkley under the Supplemental
Benefits Agreement:
PENSION
BENEFITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present
|
|
|
Payments
|
|
|
|
|
|
Years
|
|
|
Value of
|
|
|
During
|
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
|
Last Fiscal
|
|
|
|
|
|
Service
|
|
|
Benefit
|
|
|
Year
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)(1)
|
|
|
($)
|
|
|
William R. Berkley
|
|
Supplemental Benefits Agreement(1)
|
|
|
|
|
|
|
28,774,860
|
|
|
|
|
|
|
|
|
(1) |
|
For additional information on the key actuarial assumptions used
to derive the projected benefit obligation and related
retirement expenses with respect to the Supplemental Benefits
Agreement, refer to note 20 of the Companys financial
statements in the
Form 10-K
for the year ended December 31, 2006, as filed with the SEC. |
Pursuant to the Supplemental Benefits Agreement,
Mr. Berkley will be entitled to an annual retirement
benefit, upon termination as defined in the Agreement, equal to
the greater of (1) $1,000,000, or (2) fifty percent
(50%) of his highest average three-year compensation over the
prior ten fiscal years, but not exceeding one hundred fifty
percent (150%) of his average five-year compensation over the
prior five fiscal years. If such termination occurs following
Mr. Berkleys 72nd birthday, he will be entitled
to an enhanced retirement benefit, actuarially increased to
reflect the passage of time from the date Mr. Berkley
attained age 72 until the date of such termination.
The retirement benefit will be paid annually for the remainder
of Mr. Berkleys life, and if he predeceases his
spouse, fifty percent (50%) of such benefit will be paid
annually to his spouse for the remainder of her life.
Mr. Berkley may elect to have his spouse receive one
hundred percent (100%) of the retirement benefit following his
death, provided, that, in such event, the retirement benefit
will be reduced by an amount such that the payments made to
Mr. Berkley and his spouse following such election will be
the actuarial equivalent to the payments that would otherwise
have been made had no such election occurred.
Non-Qualified
Deferred Compensation
We maintain a Deferred Compensation Plan for Officers pursuant
to which certain officers, including the named executive
officers may elect to defer all or a portion of their base
salary, bonus compensation and excess profit sharing
contribution for any year. Amounts deferred will accrue a
reasonable rate of interest, as annually determined by the
Compensation Committee. At the time of the deferral election,
amounts may be deferred until any date on or before the
officers termination of employment. The Company will pay
the deferred amounts either in a lump sum or in no more than
five annual installments beginning on a date which is prior to
or on the date of the officers termination of employment.
Upon the death of a NEO, the officers deferred account
balance will be distributed within sixty days following death.
The amounts deferred are not secured or funded by the Company.
For 2006, the Compensation Committee agreed to accrue interest
on the deferred amounts at the prime rate of interest reported
by JPMorgan Chase. The table below provides
31
information on the amounts deferred by the named executives
under our Deferred Compensation Plan for Officers in 2006 and
the year-end balances.
NON-QUALIFIED
DEFERRED COMPENSATION FOR 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
Balance at
|
|
|
|
Last FY
|
|
|
Last FY
|
|
|
Last FY
|
|
|
Distributions
|
|
|
Last FYE
|
|
Name
|
|
($)(1)
|
|
|
($)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)(2)
|
|
|
William R. Berkley
|
|
|
90,850
|
|
|
|
|
|
|
|
111,885
|
|
|
|
|
|
|
|
1,472,802
|
|
W. Robert Berkley, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira S. Lederman
|
|
|
300,750
|
|
|
|
|
|
|
|
105,409
|
|
|
|
|
|
|
|
1,424,803
|
|
Eugene G. Ballard
|
|
|
|
|
|
|
|
|
|
|
74,508
|
|
|
|
|
|
|
|
970,314
|
|
James G. Shiel
|
|
|
|
|
|
|
|
|
|
|
72,225
|
|
|
|
|
|
|
|
940,581
|
|
|
|
|
(1) |
|
Such amounts are included in the Summary Compensation Table. |
|
(2) |
|
Such amounts are accrued, and are not secured or funded by the
Company. |
Potential
Payments Upon Termination or Change of Control
Supplemental Benefits Agreement with CEO
On August 19, 2004, the Company entered into a Supplemental
Benefits Agreement with William R. Berkley, the Companys
Chairman and Chief Executive Officer. Under the agreement, upon
the earliest to occur of: (a) Mr. Berkleys
resignation from employment as Chief Executive Officer for any
reason; (b) any termination of his employment by the
Company other than for cause; or
(c) termination of his employment by reason of his death,
Mr. Berkley will be entitled to an annual retirement
benefit equal to the greater of (1) $1,000,000, or
(2) fifty percent (50%) of his highest average three-year
compensation (salary and regular annual bonus) over the prior
ten fiscal years, but not exceeding one hundred fifty percent
(150%) of his average five-year compensation over the prior five
fiscal years. If such termination occurs following
Mr. Berkleys 72nd birthday, he will be entitled
to an enhanced retirement benefit, actuarially increased to
reflect the passage of time from the date Mr. Berkley
attained age 72 until the date of such termination.
The retirement benefit will be paid annually for the remainder
of Mr. Berkleys life, and if he predeceases his
spouse, fifty percent (50%) of such benefit will be paid
annually to his spouse for the remainder of her life.
Mr. Berkley may elect to have his spouse receive one
hundred percent (100%) of the retirement benefit following his
death, provided, that, in such event, the retirement benefit
will be reduced by an amount such that the payments made to
Mr. Berkley and his spouse following such election will be
the actuarial equivalent to the payments that would otherwise
have been made had no such election occurred.
Under the agreement, Mr. Berkley and his spouse will also
be entitled to receive continued health insurance coverage for
the remainder of their respective lives. During the two-year
period following his termination as defined in the agreement or,
if longer, the period that Mr. Berkley performs consulting
services to the Company or remains Chairman of the Board, he
will be entitled to continue to receive certain perquisites,
including continued use of the Company plane and a car and
32
driver, in a manner consistent with his prior use of such
perquisites. Additionally, for so long as Mr. Berkley
requests, following such termination, the Company is required to
provide him with office accommodations and support, including
secretarial support, in a manner consistent with that provided
prior to such termination. To the extent that any benefits under
the agreement or otherwise result in the imposition of an excise
tax under Section 4999 of the Internal Revenue Code,
Mr. Berkley will receive an additional payment to hold him
harmless against such excise tax. The Company estimates the cost
associated with the benefits that are to be provided during the
two-year period set forth above to be $600,000 to $800,000 per
annum, and that the cost associated with the benefits to be
provided upon request would be $200,000 per annum. In
addition, if a change of control were to occur at the end of
2006, Mr. Berkley would not be subject to the excise tax under
Section 4999 of the Internal Revenue Code. Therefore, no
additional payment from the Company would be required.
The agreement prohibits Mr. Berkley from competing against
the Company for two years following his resignation of
employment other than for good reason, during which
time Mr. Berkley has agreed to be available to provide
consulting services to the Company.
Potential Payments Other Than Under Supplemental Benefits
Agreement with CEO
None of the other named executives have employment, severance or
change of control agreements with us. The information below
describes and quantifies certain compensation that would become
payable under existing plans and arrangements if the named
executives employment had terminated on December 31,
2006.
Due to the number of factors that affect the nature and amount
of any benefits provided upon the events discussed below, any
actual amounts paid or distributed may be different. Factors
that could affect these amounts include the timing during the
year of any such event and the Companys stock price.
Mr. Berkley is the only named executive who was eligible to
receive immediate retirement benefits as of December 31,
2006, which benefits are described above and quantified in the
Pension Benefits Table on page 31.
As described in the Compensation Discussion and Analysis above,
upon a Change of Control as described in the various plan
documents:
1. Stock options become fully vested and immediately
exercisable in full as of the date immediately preceding the
date of the Change of Control, or such other date as determined
by the Committee, but no later than the date of the Change of
Control.
2. RSUs become fully vested and settled in full as of the
date immediately before the date of the Change of Control, or
such other date as determined by the Committee, but no later
than the date of the Change of Control.
3. The value of all LTIP awards shall be determined and
fixed as of the end of the fiscal year that occurred immediately
before the Change of Control. The value will be paid to the
participant within 90 days following the last day of the
performance period.
In addition, if one of the NEOs were to die or become disabled:
(1) any of their unexercisable stock options would become
exercisable, and remain exercisable for one year from the date
of death or disability; and (2) RSUs would vest pro-rata.
With respect to LTIP awards, if one of the NEOs, prior to the
maximum value date of the award, were to terminate employment
due to death, disability,
33
qualified retirement or termination by the Company for a reason
other than cause, subject to the terms and conditions of the
LTIP agreements, the cash value of the LTIP awards shall be
determined and fixed as of the end of the fiscal year that
occurred immediately before the fiscal year in which the
termination occurred and paid 90 days following the
termination.
The following table provides the intrinsic value (that is, the
value based upon the Companys stock price, and, in the
case of options, less the exercise price) of options and RSUs
that would become exercisable or vested, as well as the value of
all performance units awarded under the LTIP, upon: (A) a
change in control; or (B) if the named executive had died
or become disabled, in each case as of December 31, 2006.
POTENTIAL
TERMINATION OR CHANGE OF CONTROL PAYMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
RSUs
|
|
|
LTIP
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
William R. Berkley
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control
|
|
|
17,131,505
|
|
|
|
33,582,544
|
|
|
|
10,751,200
|
|
Death or Disability
|
|
|
17,131,505
|
|
|
|
17,797,977
|
(2)
|
|
|
10,751,200
|
(3)
|
W. Robert Berkley, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control
|
|
|
5,526,612
|
|
|
|
5,047,088
|
|
|
|
1,287,800
|
|
Death or Disability
|
|
|
5,526,612
|
|
|
|
1,947,995
|
(2)
|
|
|
1,287,800
|
(3)
|
Ira S. Lederman
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control
|
|
|
877,866
|
|
|
|
2,717,663
|
|
|
|
875,120
|
|
Death or Disability
|
|
|
877,866
|
|
|
|
1,448,924
|
(2)
|
|
|
875,120
|
(3)
|
Eugene G. Ballard
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control
|
|
|
877,866
|
|
|
|
2,717,663
|
|
|
|
875,120
|
|
Death or Disability
|
|
|
877,866
|
|
|
|
1,448,924
|
(2)
|
|
|
875,120
|
(3)
|
James G. Shiel
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control
|
|
|
731,494
|
|
|
|
2,271,207
|
|
|
|
740,730
|
|
Death or Disability
|
|
|
731,494
|
|
|
|
1,148,802
|
(2)
|
|
|
740,730
|
(3)
|
|
|
|
(1) |
|
Assumes termination or change of control on January 1, 2007
so as to include the LTIP value earned during 2006. |
|
(2) |
|
The RSUs awarded on April 4, 2003 would also vest pro-rata
in the event of retirement. For Messrs. Berkley,
Berkley, Jr., Lederman, Ballard and Shiel, the amount that
would so vest equals $11,777,637, $872,418, $872,418, $872,418,
and $654,326, respectively. |
|
(3) |
|
In addition, LTIP awards are valued and paid in the event of
qualified retirement or termination by the Company for other
than cause. |
Certain of the NEOs participate in our deferred compensation
plan that permits the deferral of their base salary, bonus
compensation and excess profit sharing contribution for any
year. The last column of the Nonqualified Deferred Compensation
Table for 2006 on page 32 reports each NEOs aggregate
balance at December 31, 2006. The NEOs are entitled to
receive the amount in their
34
deferred compensation account in the event of termination of
employment. The account balances continue to accrue interest
income between the termination event and the date distributions
are made, and therefore amounts payable to the NEOs, assuming a
termination on December 31, 2006, would differ from those
shown in the Nonqualified Deferred Compensation Table for 2006
to some small degree to account for such interest.
Director
Compensation
For 2006, each director received a quarterly stipend of $10,000
through June 30, 2006 and $12,000 thereafter, and a fee of
$1,500 for each Board meeting attended. In addition, on
May 16, 2006, pursuant to our 1997 Directors Stock
Plan, as amended, each continuing director received a grant of
1,500 shares of common stock. Members of our Audit
Committee and the Compensation Committee, which are both
comprised solely of directors who are independent under the
rules of the NYSE, each receive an annual stipend of $5,000,
with the Chairman of each receiving an additional annual stipend
of $25,000 and $10,000, respectively. Members of our Audit
Committee and the Compensation Committee also each receive
$1,000 for each substantive meeting attended. In accordance with
our guidelines, each of our directors, within 12 months of
becoming a director, is required to own an amount of common
stock of the Company equal to three times the annual stipend
paid to the director. We also maintain a Deferred Compensation
Plan for Directors pursuant to which directors may elect to
defer all or a portion of their retainer
and/or
meeting fees for any year. Amounts deferred may, at the election
of the director, (1) be deemed invested in our common
stock, or (2) accrue a reasonable rate of interest,
determined annually by us. At the time of the deferral election,
amounts may be deferred until any date on or before the
directors termination of service with the Board. The
Company will pay the deferred amounts either in a lump sum or in
no more than five annual installments beginning on a date which
is prior to or on the date of the directors termination of
service with the Board. Upon the death of a director, the
directors deferred account balance will be distributed
within sixty days following death. For 2006, we agreed to accrue
interest on the deferred amounts at the prime rate of interest
reported by JPMorgan Chase.
35
The following table shows for the fiscal year ended
December 31, 2006 information concerning the compensation
of our directors who are not named in the Summary Compensation
Table:
2006
DIRECTOR COMPENSATION
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
and Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock
|
|
|
Compensation
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Awards
|
|
|
Earnings
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
Philip J. Ablove
|
|
|
67,000
|
|
|
|
53,085
|
|
|
|
|
|
|
|
120,085
|
|
Ronald E. Blaylock
|
|
|
55,000
|
|
|
|
53,085
|
|
|
|
|
|
|
|
108,085
|
|
Mark E. Brockbank
|
|
|
57,000
|
|
|
|
53,085
|
|
|
|
4,768
|
|
|
|
114,853
|
|
George G. Daly
|
|
|
55,000
|
|
|
|
53,085
|
|
|
|
5,050
|
|
|
|
113,135
|
|
Mary C. Farrell
|
|
|
46,000
|
|
|
|
53,085
|
|
|
|
|
|
|
|
99,085
|
|
Rodney A. Hawes, Jr.
|
|
|
50,000
|
|
|
|
53,085
|
|
|
|
|
|
|
|
103,085
|
|
Jack H. Nusbaum
|
|
|
50,000
|
|
|
|
53,085
|
|
|
|
|
|
|
|
103,085
|
|
Mark L. Shapiro
|
|
|
80,000
|
|
|
|
53,085
|
|
|
|
11,553
|
|
|
|
144,638
|
|
|
|
|
(1) |
|
Represents the fair value of 1,500 shares of our common
stock on May 16, 2006, the date of grant ($35.39 per
share). |
|
(2) |
|
Represents above market earnings on amounts deferred under the
Deferred Compensation Plan for Directors. |
EQUITY
COMPENSATION PLAN INFORMATION
The following table gives information about our common stock
that may be issued upon the exercise of options, warrants and
rights under our existing equity compensation plans and
arrangements as of December 31, 2006. These plans include
the W. R. Berkley Corporation 2003 Stock Incentive Plan and the
Amended and Restated W. R. Berkley Corporation
1997 Directors Stock Plan. The table also includes
information regarding 1,012,500 restricted stock units
(RSUs) awarded to
36
officers of the Company and its subsidiaries on April 4,
2003 (as adjusted for subsequent stock splits) under a plan not
approved by stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
(a)
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
(b)
|
|
|
Remaining Available
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Under Equity Compensation
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Plans (Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
|
Equity compensation plans approved
by stockholders
|
|
|
16,165,683
|
|
|
$
|
11.79
|
|
|
|
5,881,981
|
|
Equity compensation plans not
approved by stockholders
|
|
|
1,012,500
|
(1)
|
|
$
|
12.62
|
|
|
|
|
|
Total
|
|
|
17,178,183
|
|
|
$
|
11.84
|
|
|
|
5,881,981
|
|
|
|
|
(1) |
|
Represents restricted stock units (RSUs), each of
which represents the right to receive one share of common stock,
subject to vesting requirements and continued employment,
following the recipients termination of employment with
the Company and its subsidiaries. Delivery of shares of common
stock to the RSU recipients in satisfaction of the settlement of
RSUs will be satisfied exclusively from treasury shares held by
the Company. These RSUs held by any recipient will vest in full
in one installment on April 4, 2008 (the Vesting
Date), provided the recipient remains employed with the
Company
and/or its
subsidiaries on the Vesting Date. If a recipient terminates
employment prior to the Vesting Date on account of death,
disability or retirement, a pro rata share of the number of RSUs
granted to the recipient shall vest and be distributed to the
recipient as of such termination date. Upon termination of
employment for any other reason prior to vesting, all RSUs held
by the recipient will expire and be forfeited. In the event of a
Change of Control of the Company (as defined in the RSU
Agreements) all RSUs will vest in full and the shares of common
stock underlying each RSU will be delivered to the RSU
recipients. The Compensation Committee of the Board retains the
right to accelerate the vesting of any or all RSUs at any time,
for any reason. The following list sets forth the names of the
executive officers of the Company who received such RSUs on
April 4, 2003 and the number of RSUs each individual
received: William R. Berkley 455,625; W. Robert
Berkley, Jr. 33,750; Eugene G.
Ballard 33,750; Robert P. Cole 25,313;
Paul J. Hancock 16,875; Robert C. Hewitt
16,875; Ira S. Lederman 33,750; Clement P.
Patafio 8,438; and James G. Shiel
25,313; and an aggregate of 337,500 RSUs were granted to 24
other officers of the Company and its subsidiaries. |
APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP has been appointed by the Board of Directors as the
independent registered public accounting firm to audit the
financial statements of the Company for the fiscal year ending
December 31, 2007. 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 LLP is not
ratified, the Board will reconsider its action and will
37
appoint auditors for the 2007 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 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.
The Board of Directors unanimously recommends a vote
FOR the ratification of the appointment of
KPMG LLP.
Audit and
Non-Audit Fees
The aggregate amount of the fees billed or expected to be billed
by KPMG for its professional services in 2006 and 2005 were as
follows:
|
|
|
|
|
|
|
|
|
Type of Fees
|
|
2006($)
|
|
|
2005($)
|
|
|
Audit Fees(1)
|
|
|
4,599,250
|
|
|
|
4,393,000
|
|
Audit-Related Fees(2)
|
|
|
105,400
|
|
|
|
154,600
|
|
Tax Fees(3)
|
|
|
73,411
|
|
|
|
83,160
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
|
4,778,061
|
|
|
|
4,630,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees consist of fees the Company paid to KPMG for
professional services for the audit of the Companys
consolidated financial statements included in its
Form 10-K
and review of financial statements included in its
Forms 10-Q,
or for services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements
and public offerings of securities. |
|
(2) |
|
Fees associated with a SAS 70 review, actuarial services and the
audit of health and benefit plans. |
|
(3) |
|
Tax fees consist of fees for tax consultations and tax
compliance services. |
Pre-Approval
Policies
Consistent with SEC policies regarding auditor independence, the
Audit Committee has adopted a policy regarding the pre-approval
of services of the Companys independent auditors. Pursuant
to this policy, such services may be generally pre-approved on
an annual basis; other services, or services exceeding the
pre-approved cost levels, must be specifically pre-approved by
the Audit Committee. The Audit Committee may also delegate
pre-approval authority to one or more of its members. All of
such fees for 2006 were approved by the Audit Committee in
accordance with this policy.
38
AUDIT
COMMITTEE REPORT
To the Board of Directors of W. R. Berkley Corporation:
The Audit Committee reviews the Companys financial
reporting process on behalf of the Board. Management has the
primary responsibility for establishing and maintaining adequate
internal financial controls, for preparing the financial
statements and for the public reporting process. KPMG LLP, our
Companys independent registered public accounting firm for
2006, is responsible for expressing opinions on the conformity
of the Companys audited financial statements with
accounting principles generally accepted in the United States of
America and on managements assessment of the effectiveness
of the Companys internal control over financial reporting.
In addition, KPMG is responsible for expressing its own opinion
on the effectiveness of the Companys internal control over
financial reporting.
In this context, the Audit Committee has reviewed and discussed
with management and KPMG the audited financial statements for
the year ended December 31, 2006, managements
assessment of the effectiveness of the Companys internal
control over financial reporting and KPMGs evaluation of
the Companys internal control over financial reporting.
The Audit Committee has discussed with KPMG the matters that are
required to be discussed by Statement on Auditing Standards
No. 61 (Communication With Audit Committees). KPMG has
provided to the Audit Committee the written disclosures and the
letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and
the Audit Committee has discussed with KPMG that firms
independence. The Audit Committee has concluded that KPMGs
provision of audit and non-audit services to the Company and its
affiliates are compatible with KPMGs independence.
Based on the considerations and discussions referred to above,
the Audit Committee recommended to our Board of Directors that
the audited financial statements for the year ended
December 31, 2006 be included in our Annual Report on
Form 10-K
for 2006. The Audit Committee has selected, and the Board of
Directors has ratified the selection of KPMG LLP as the
Companys independent registered public accounting firm for
the fiscal year ending December 31, 2007.
Audit Committee
Mark L. Shapiro, Chairman
Ronald E. Blaylock
George G. Daly
April 3, 2007
The above report of the Audit Committee shall not be deemed
incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
39
OTHER
MATTERS TO COME BEFORE THE MEETING
Management is not aware of any matters to come before the Annual
Meeting other than as set forth above. However, since matters of
which management is not now aware may come before the Annual
Meeting or any adjournment thereof, the proxies intend to vote,
act and consent in accordance with their best judgment with
respect thereto. Upon receipt of such proxies (in the form
enclosed and properly signed) in time for voting, the shares
represented thereby will be voted as indicated therein and in
this proxy statement.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of the copies of Forms 3, 4 and
5 received by it, or written representations from certain
reporting persons that no Forms 5 were required for such
persons, the Company believes that all filing requirements under
Section 16(a) of the Exchange Act applicable to its
officers, directors and ten-percent stockholders were complied
with during the fiscal year ended December 31, 2006.
40
STOCKHOLDER
NOMINATIONS FOR BOARD MEMBERSHIP
AND OTHER PROPOSALS FOR 2008 ANNUAL MEETING
It is anticipated that the next Annual Meeting of Stockholders
after the one scheduled for May 8, 2007 will be held on or
about May 20, 2008. The Companys By-Laws require
that, for nominations of directors or other business to be
properly brought before an Annual Meeting of Stockholders,
written notice of such nomination or proposal for other business
must be furnished to the Company. Such notice must contain
certain information concerning the nominating or proposing
stockholder and information concerning the nominee and must be
furnished by the stockholder (who must be entitled to vote at
the meeting) to the Secretary of the Company, in the case of the
Annual Meeting of Stockholders to be held in 2008 no earlier
than February 20, 2008 and no later than March 21,
2008. A copy of the applicable provisions of the By-Laws may be
obtained by any stockholder, without charge, upon written
request to the Secretary of the Company at the address set forth
below.
Since the Company did not receive notice of any stockholder
proposal for the 2007 Annual Meeting, it will have discretionary
authority to vote on any stockholder proposals presented at such
meeting.
In addition to the foregoing, and in accordance with the rules
of the Securities and Exchange Commission, in order for a
stockholder proposal, relating to a proper subject, to be
considered for inclusion in the Companys proxy statement
and form of proxy relating to the Annual Meeting of Stockholders
to be held in 2008, such proposal must be received by the
Secretary of the Company by December 23, 2007 in the form
required under and subject to the other requirements of the
applicable rules of the Securities and Exchange Commission. Any
such proposal should be submitted by certified mail, return
receipt requested, or other means, including electronic means,
that allow the stockholder to prove the date of delivery.
A copy of any or all of the Companys (i) Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006;
(ii) Corporate Governance Guidelines; (iii) Statement
of Business Ethics; (iv) Statement of Business Ethics for
the Board of Directors; (v) Code of Ethics for Senior
Financial Officers; (vi) Audit Committee Charter;
(vii) Compensation Committee Charter; and
(viii) Nominating and Corporate Governance Committee
Charter is available on our website at www.wrberkley.com and is
also available without charge to any stockholder of the Company
who requests a copy in writing. Requests for copies of any or
all of these documents should be directed to the Secretary, W.
R. Berkley Corporation, 475 Steamboat Road, Greenwich,
Connecticut 06830.
By Order of the Board of Directors,
William R. Berkley
Chairman of the Board and
Chief Executive Officer
41
ANNEX A
W. R.
BERKLEY CORPORATION
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee is appointed by the Board to assist the
Board in monitoring (1) the integrity of the financial
statements of the Company, (2) the independent
auditors qualifications and independence, (3) the
performance of the Companys internal audit function and
independent auditors, and (4) the compliance by the Company
with legal and regulatory requirements.
The Audit Committee shall prepare the report required by the
rules of the Securities and Exchange Commission (the
Commission) to be included in the Companys
annual proxy statement.
Committee
Membership
The Audit Committee shall consist of no fewer than three
members. The members of the Audit Committee shall meet the
independence and experience requirements of the New York Stock
Exchange, Section 10A(m)(3) of the Securities Exchange Act
of 1934 (the Exchange Act) and the rules and
regulations of the Commission. At least one member of the Audit
Committee shall be an audit committee financial expert as
defined by the Commission. Audit Committee members shall not
simultaneously serve on the audit committees of more than two
public companies.
The members of the Audit Committee shall be appointed by the
Board. Audit Committee members may be replaced by the Board.
Meetings
The Audit Committee shall meet as often as it determines, but
not less frequently than quarterly. The Audit Committee shall
meet periodically with management, the internal auditors and the
independent auditor in separate executive sessions. The Audit
Committee may request any officer or employee of the Company or
the Companys outside counsel or independent auditor to
attend a meeting of the Committee or to meet with any members
of, or consultants to, the Committee.
Committee
Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or
replace the independent auditor (subject, if applicable, to
shareholder ratification). The Audit Committee shall be directly
responsible for the compensation and oversight of the work of
the independent auditor (including resolution of disagreements
between management and the independent auditor regarding
financial reporting) for the purpose of preparing or issuing an
audit or related work. The independent auditor shall report
directly to the Audit Committee.
The Audit Committee shall pre-approve all auditing services and
permitted non-audit services (including the fees and terms
thereof) to be performed for the Company by its independent
auditor, subject to the de minimus exceptions for non-audit
services described in Section 10A(i)(1)(B) of the Exchange
Act which are approved by the Audit Committee prior to the
completion of the audit.
A-1
The Audit Committee may form and delegate authority to
subcommittees consisting of one or more members when
appropriate, including the authority to grant pre-approvals of
audit and permitted non-audit services, provided that the
decisions of such subcommittee to grant pre-approvals shall be
presented to the full Audit Committee at its next scheduled
meeting.
The Audit Committee shall have the authority, to the extent it
deems necessary or appropriate, to retain independent legal,
accounting or other advisors. The Company shall provide for
appropriate funding, as determined by the Audit Committee, for
payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any
advisors employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board. It
shall review with the full board any issues that arise with
respect to the quality or integrity of the Companys
financial statements, the Companys compliance with legal
or regulatory requirements, the performance and independence of
the Companys independent auditors, or the performance of
the internal audit function. The Audit Committee shall review
and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval. The Audit
Committee shall review its own performance annually and confirm
to the Board that all responsibilities outlined in the charter
have been carried out.
The Audit Committee, to the extent it deems necessary or
appropriate, shall:
Financial
Statement and Disclosure Matters
1. Review and discuss with management and the independent
auditor the annual audited financial statements, including
disclosures made in managements discussion and analysis,
and recommend to the Board whether the audited financial
statements should be included in the Companys
Form 10-K.
2. Review and discuss with management and the independent
auditor the Companys quarterly financial statements prior
to the filing of its
Form 10-Q,
including Management Discussion and Analysis and the results of
the independent auditors reviews of the quarterly
financial statements.
3. Discuss with management and the independent auditor
significant financial reporting issues and judgments made in
connection with the preparation of the Companys financial
statements, including any significant changes in the
Companys selection or application of accounting
principles, discussions with the national office of the
independent auditor, any major issues as to the adequacy of the
Companys internal controls and any special steps adopted
in light of material control deficiencies.
4. Review and discuss quarterly reports from the
independent auditors on:
(a) All critical accounting policies and practices to be
used.
(b) All alternative treatments of financial information
within generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent auditor.
A-2
(c) Other material written communications between the
independent auditor and management, such as any management
letter or schedule of unadjusted differences.
5. Discuss with management the Companys earnings
press releases, including the use of pro forma or
adjusted non-GAAP information, as well as financial
information and earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be
disclosed and the types of presentations to be made).
6. Discuss with management and the independent auditor the
effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Companys financial
statements.
7. Discuss with management the Companys major
financial risk exposures and the steps management has taken to
monitor and control such exposures, including the Companys
risk assessment and risk management policies.
8. Discuss with the independent auditor the matters
required to be discussed by Statement on Auditing Standards
No. 61 relating to the conduct of the audit, including any
difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to requested information, and any significant disagreements with
management.
9. Review disclosures made to the Audit Committee by the
Companys CEO and CFO during their certification process
for the
Form 10-K
and Form
10-Q about
any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant
role in the Companys internal controls.
Oversight
of the Companys Relationship with the Independent
Auditor
1. Review and evaluate the lead partner of the independent
auditor team.
2. Obtain and review a report from the independent auditor
at least annually regarding (a) the independent
auditors internal quality-control procedures,
(b) material issues raised by internal-control reviews,
peer reviews or governmental or professional investigations of
the firm, or by any inquiry or investigation by governmental or
professional authorities within the preceding five years
respecting one or more audits carried out by the firm,
(c) any steps taken to deal with such issues, and
(d) all relationships between the independent auditor and
the Company. Evaluate the qualifications, performance and
independence of the independent auditor, including considering
whether the provision of permitted non-audit services is
compatible with maintaining the auditors independence, and
taking into account the opinions of management and internal
auditors. The Audit Committee shall present its conclusions with
respect to the independent auditor to the Board.
3. Ensure the rotation of the lead audit partner having
primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law.
4. Recommend to the Board policies for the Companys
hiring of employees or former employees of the independent
auditor who participated in any capacity in the audit of the
Company.
5. Meet with the independent auditor prior to the audit to
discuss the planning and staffing of the audit.
A-3
Oversight
of the Companys Internal Audit Function
1. Ensure the Company maintains an internal audit function
to provide management and the committee with ongoing assessments
of the Companys risk management process and systems of
internal control.
2. Review the appointment and replacement of the senior
internal auditing executive.
3. Review the significant reports to management prepared by
the internal auditing department and managements responses.
4. Discuss with the independent auditor and management the
internal audit department responsibilities, budget and staffing
and any recommended changes in the planned scope of the internal
audit.
Compliance
Oversight Responsibilities
1. Obtain from the independent auditor assurance that
Section 10A(b) of the Exchange Act has not been implicated.
2. Obtain reports from management, the Companys
senior internal auditing executive and the independent auditor
that the Company and its subsidiary/foreign affiliated entities
are in conformity with applicable laws and regulations. Advise
the Board with respect to the Companys policies and
procedures regarding compliance with applicable laws and
regulations.
3. Establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters,
and the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
4. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
employee complaints or published reports which raise material
issues regarding the Companys financial statements or
accounting policies.
5. Discuss with the Companys General Counsel legal
matters that may have a material impact on the financial
statements or the Companys compliance policies.
Limitation
of Audit Committees Role
While the Audit Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Audit
Committee to plan or conduct audits or to determine that the
Companys financial statements and disclosures are complete
and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations.
These are the responsibilities of management and the independent
auditor.
As
amended March 9, 2004
A-4
W. R. BERKLEY CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
W. R. BERKLEY CORPORATION
The undersigned stockholder of W. R. BERKLEY CORPORATION hereby appoints EUGENE G. BALLARD and
IRA S. LEDERMAN, and either of them, the true and lawful agents and proxies of the undersigned,
with full power of substitution to each of them, to vote all shares of common stock which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders to be held at the
executive offices of the Company, 475 Steamboat Road, Greenwich, Connecticut, on May 8, 2007 at
1:00 p.m., and at any adjournment of such meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
See reverse for voting instructions.
PLEASE DETACH HERE
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 PROPOSALS 1 and 2.
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ELECTION OF DIRECTORS: |
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01 W. Robert Berkley, Jr. |
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03 Ronald E. Blaylock |
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02 Mark E. Brockbank |
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04 Mary C. Farrell |
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FOR all nominees listed
except as marked to the
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WITHHOLD AUTHORITY
to vote for all
nominees listed
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INSTRUCTION: To withhold authority to vote for any indicated nominee, write the number(s) of the
nominee(s) in the box provided to the right o
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FOR
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2. To ratify the appointment of KPMG
LLP as the independent registered public
accounting firm for W. R. Berkley Corporation for
the fiscal year ending December 31, 2007
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In their discretion, the proxies are authorized to vote upon such other matters as may properly
come before the meeting.
Address
change? Mark box o
Indicate changes below:
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and Proxy Statement for
the 2007 Annual Meeting and the Annual Report for the fiscal year ended December 31, 2006.
DATE, SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
[ ]
Signature(s) in Box
Please sign your name or names exactly as printed opposite.
When signing as attorney, executor, administrator, trustee, guardian or corporate officer, please
give your full title as such. Joint owners should each sign. DATE, SIGN AND MAIL PROMPTLY IN THE
ENCLOSED ENVELOPE.