PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
þ
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to 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):
þ
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was
determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
o
Fee paid previously with preliminary materials.
o
Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
May 17, 2011
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 17, 2011 at 1:00 p.m. for
the following purposes:
(1)
To elect as directors to serve until their successors are duly
elected and qualified the three nominees named in the
accompanying proxy statement;
(2)
To consider and cast a non-binding advisory vote on a resolution
approving the compensation of the Companys executive
officers pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, or
say-on-pay
vote;
(3)
To consider and cast a non-binding advisory vote on the
frequency with which
say-on-pay
votes should be held in the future;
(4)
To ratify the appointment of KPMG LLP as the independent
registered public accounting firm for the Company for the fiscal
year ending December 31, 2011; and
(5)
To consider and act upon any other matters which may properly
come before the Annual Meeting or any adjournment thereof.
In accordance with the Companys By-Laws, the Board of
Directors has fixed the close of business on March 22, 2011
as the date for determining stockholders of record entitled to
receive notice of, and to vote at, the Annual Meeting.
We are pleased to continue to take advantage of the Securities
and Exchange Commission rule allowing companies to furnish proxy
materials to stockholders over the Internet. We believe that
this e-proxy
process expedites our stockholders receipt of proxy
materials, while also lowering the costs and reducing the
environmental impact of our Annual Meeting. On April 5,
2011, we began mailing to our stockholders a Notice of Internet
Availability of Proxy Materials containing instructions on how
to access our 2011 proxy statement and 2010 annual report and
vote online.
Your attention is directed to the accompanying proxy statement.
You are cordially invited to attend the Annual Meeting.
Your vote is important. Please vote as soon as possible by
using the Internet or by telephone or, if you received a paper
copy of the proxy card by mail, by dating, signing and returning
the enclosed proxy card. Instructions for your voting options
are described on the Notice of Internet Availability of Proxy
Materials or proxy card.
By Order of the Board of Directors,
IRA S.
LEDERMAN
Senior Vice President,
General Counsel and Secretary
Dated: April 5, 2011
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE 2011 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON MAY 17, 2011:
The Proxy Statement and the Companys Annual Report for
the fiscal year ended December 31, 2010 are available free
of charge on the website at
Your proxy is being 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 17, 2011 at 1:00 p.m. and
at any adjournment thereof. On April 5, 2011, we began
mailing to stockholders of record either a Notice of Internet
Availability of Proxy Materials (Notice) or this
proxy statement and proxy card and the Companys Annual
Report for the fiscal year ended December 31, 2010.
Why am
I receiving this proxy statement and proxy card?
You have received these proxy materials because our Board of
Directors is soliciting your proxy to vote your shares of our
common stock at the Annual Meeting. This proxy statement
describes issues on which we would like you to vote at our
Annual Meeting. This proxy statement and the annual report also
give you information on these issues so that you can make an
informed decision.
Our Board of Directors has made this proxy statement, proxy card
and annual report available to you on the Internet because you
own shares of W. R. Berkley Corporation common stock, in
addition to delivering printed versions of this proxy statement,
proxy card and the annual report to certain stockholders by mail.
When you vote by using the Internet, by telephone or, if you
received your proxy card by mail, by dating, signing and
returning the proxy card, you appoint Eugene G. Ballard and Ira
S. Lederman, and either of them, as your representatives at the
Annual Meeting. They will vote your shares at the Annual Meeting
as you have instructed them or, if an issue that is not on the
proxy card comes up for vote, in accordance with their best
judgment. This way, your shares will be voted whether or not you
attend the Annual Meeting. Even if you plan to attend the Annual
Meeting, we encourage you to vote in advance by using the
Internet, by telephone or (if you received your proxy card by
mail) by dating, signing and returning your proxy card.
Why
did I receive a Notice of Internet Availability of Proxy
Materials in the mail instead of a printed set of proxy
materials?
Pursuant to rules adopted by the Securities and Exchange
Commission, we are permitted to furnish our proxy materials over
the Internet to our stockholders by delivering a Notice in the
mail. We are sending the Notice to certain record stockholders.
If you received a Notice by mail, you will not receive a printed
copy of the proxy materials in the mail. Instead, the Notice
instructs you on how to access and review the proxy statement
and annual report over the Internet at
www.proxyvote.com. The Notice also instructs you
on how you may submit your proxy over the Internet. If you
received a Notice by mail and would like to receive a printed
copy of our proxy materials, you should follow the instructions
for requesting these materials contained in the Notice.
Stockholders who receive a
printed set of proxy materials will not receive the Notice, but
may still access our proxy materials and submit their proxies
over the Internet at www.proxyvote.com.
If you received a paper copy of this proxy statement by mail and
you wish to receive a notice of availability of next years
proxy statement either in paper form or electronically via
e-mail, you
can elect to receive a paper notice of availability by mail or
an e-mail
message that will provide a link to these documents on our
website. By opting to receive the notice of availability and
accessing your proxy materials online, you will save the Company
the cost of producing and mailing documents to you, reduce the
amount of mail you receive and help preserve environmental
resources. Registered stockholders may elect to receive
electronic proxy and annual report access or a paper notice of
availability for future annual meetings by registering online at
www.proxyvote.com. If you received electronic or
paper notice of availability of these proxy materials and wish
to receive paper delivery of a full set of future proxy
materials, you may do so at the same location. Beneficial or
street name stockholders who wish to elect one of
these options may also do so at www.proxyvote.com.
Who is
entitled to vote?
Holders of our common stock at the close of business on
March 22, 2011 are entitled to vote. We refer to
March 22, 2011 as the record date.
In accordance with Delaware law, a list of stockholders entitled
to vote at the Annual Meeting will be available at the place of
the Annual Meeting on May 17, 2011 and will be accessible
for ten days prior to the meeting at our principal place of
business, 475 Steamboat Road, Greenwich, Connecticut, between
the hours of 9:00 a.m. and 5:00 p.m.
How do
I vote?
Stockholders of record may vote by using the Internet, by
telephone or, if you received a proxy card by mail, by mail as
described below. Stockholders also may attend the meeting and
vote in person. If you hold shares of our common stock through a
bank or broker, please refer to your proxy card, Notice or other
information forwarded by your bank or broker to see which voting
options are available to you.
You may vote by using the Internet. The
address of the website for Internet voting is
www.proxyvote.com. Internet voting is available
24 hours a day and will be accessible until 11:59 p.m.
Eastern Time on May 16, 2011. Easy to follow instructions
allow you to vote your shares and confirm that your instructions
have been properly recorded.
You may vote by telephone. The toll-free
telephone number is noted on your proxy card. Telephone voting
is available 24 hours a day and will be accessible until
11:59 p.m. Eastern Time on May 16, 2011. Easy to
follow voice prompts allow you to vote your shares and confirm
that your instructions have been properly recorded.
You may vote by mail. If you received a proxy
card by mail and choose to vote by mail, simply mark your proxy
card, date and sign it, and return it in the postage-paid
envelope.
The method you use to vote will not limit your right to vote at
the Annual Meeting if you decide to attend in person. Written
ballots will be provided to anyone who wants to vote at the
Annual Meeting.
If you hold your shares in street name, you must
obtain a proxy, executed in your favor, from the holder of
record to be able to vote in person at the Annual Meeting.
What
if I change my mind after I return my proxy?
You may revoke your proxy and change your vote at any time prior
to voting of the shares represented by your proxy. You may do
this by:
submitting a subsequent proxy by using the Internet, by
telephone or by mail with a later date;
sending written notice of revocation to our Corporate Secretary
at 475 Steamboat Road, Greenwich, Connecticut 06830; or
voting in person at the Annual Meeting.
Attendance at the Annual Meeting will not by itself revoke a
proxy.
How
are the votes counted?
Votes cast by proxy will be tabulated by Broadridge Financial
Solutions, Inc. Votes cast in person at the Annual Meeting will
be tabulated by the inspectors of election appointed at the
Annual Meeting, who will also determine whether a quorum is
present.
How
many votes do you need to hold the Annual Meeting?
The holders of a majority of our 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 inspector 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.
On
what items am I voting?
You are being asked to vote on four items:
the election of three directors nominated by the Board of
Directors and named in the proxy statement to hold office, for
two of the nominees, for a term of three years until the Annual
Meeting of Stockholders in 2014 and, for the other nominee, for
a term of one year until the Annual Meeting of Stockholders in
2012, in each case until their respective successors are duly
elected and qualified;
a resolution approving the compensation of the Companys
executive officers as disclosed in this proxy statement pursuant
to the compensation disclosure rules of the Securities and
Exchange Commission, or
say-on-pay
vote, which vote shall be on a non-binding advisory basis;
the frequency with which
say-on-pay
votes should be held in the future, which vote shall be on a
non-binding advisory basis; and
the ratification of the appointment of KPMG LLP as our
independent registered public accountants for the fiscal year
ending December 31, 2011.
How
may I vote for the nominees for director, and how many votes
must the nominees receive to be elected?
With respect to the election of nominees for director, you may:
vote FOR the election of the three nominees for director;
WITHHOLD AUTHORITY to vote for one or more of the nominees and
vote FOR the remaining nominees; or
WITHHOLD AUTHORITY to vote for the three nominees.
The three nominees receiving the highest number of affirmative
votes will be elected as directors. If you hold shares of our
common stock through a bank or broker, your bank or broker will
vote your shares for you if you provide instructions on how to
vote the shares. In the absence of instructions, however, banks
and brokers do not have the authority to vote your shares for
the election of directors. Accordingly, it is important that
you provide voting instructions to your bank or broker, so that
your shares may be voted in the election of directors.
What
happens if a nominee is unable to serve if
elected?
The persons designated as proxies reserve full discretion to
cast votes for other persons in the event any such nominee is
unable to serve. However, the Board has no reason to believe
that any nominee will be unable to serve if elected. The proxies
cannot be voted for a greater number of persons than the three
named nominees.
How
may I vote for the
say-on-pay
proposal and the proposal regarding the frequency with which
say-on-pay
votes should be held in the future?
With respect to the
say-on-pay
vote, you may, on a non-binding advisory basis:
vote FOR the adoption of the resolution approving the
compensation of the Companys executive officers;
vote AGAINST the adoption of the resolution approving the
compensation of the Companys executive officers; or
ABSTAIN from voting on the resolution.
With respect to the frequency of
say-on-pay
vote, you may, on a non-binding advisory basis:
vote for holding the
say-on-pay
vote ONCE EVERY YEAR;
vote for holding the
say-on-pay
vote ONCE EVERY TWO YEARS;
vote for holding the
say-on-pay
vote ONCE EVERY THREE YEARS; or
As with the vote for nominees for director described above, if
you hold shares of our common stock through a bank or broker,
your bank or broker will vote your shares for you if you provide
instructions on how to vote the shares. In the absence of
instructions, however, banks and brokers do not have the
authority to vote your shares for the
say-on-pay
proposal and the proposal regarding the frequency with which
say-on-pay
votes should be held in the future. Accordingly, it is
important that you provide voting instructions to your bank or
broker, so that your shares may be voted in the
say-on-pay
proposal and the proposal regarding the frequency with which
say-on-pay
votes should be held in the future.
How
may I vote for the ratification of the appointment of our
independent registered public accountants, and how many votes
must the proposal receive to pass?
With respect to the proposal to ratify the appointment of our
independent registered public accountants, you may:
vote FOR the proposal;
vote AGAINST the proposal; or
ABSTAIN from voting on the proposal.
The ratification of the appointment of our independent
registered public accountants must receive the affirmative vote
of a majority of the votes that could be cast at the Annual
Meeting by the holders who are present in person or by proxy to
pass. If you abstain from voting on the proposal, it will have
the same effect as a vote against the proposal.
How
does the Board of Directors recommend that I vote?
The board recommends a vote:
FOR all three director nominees;
FOR the resolution approving the compensation of the
Companys executive officers;
FOR holding the
say-on-pay
vote once every three years; and
FOR the ratification of the appointment of our independent
registered public accountants.
What
happens if I sign and return my proxy card but do not provide
voting instructions?
If you return a signed card but do not provide voting
instructions, your shares will be voted FOR all three director
nominees, FOR the resolution approving the compensation of the
Companys executive officers, FOR holding the
say-on-pay
vote once every three years and FOR the ratification of the
appointment of our independent registered public accountants.
Will
my shares be voted if I do not vote by using the Internet, by
telephone or by signing and returning my proxy
card?
If you own shares of our common stock and you do not vote by
using the Internet, by telephone or, if you received a proxy
card by mail, by signing and returning your proxy card by mail,
then your
shares will not be voted and will not count in deciding
non-routine matters presented for stockholder consideration at
the Annual Meeting.
If your shares of our common stock are held in street name
through a bank or broker, your bank or broker may vote your
shares under certain limited circumstances if you do not provide
voting instructions before the Annual Meeting, in accordance
with New York Stock Exchange (NYSE) rules that
govern the banks and brokers. These circumstances include voting
your shares on routine matters, such as the
ratification of the appointment of our independent registered
public accountants described in this proxy statement. With
respect to this proposal, therefore, if you do not vote your
shares, your bank or broker may vote your shares on your behalf
or leave your shares unvoted.
The election of directors and the proposals regarding
say-on-pay
and the frequency with which
say-on-pay
votes should be held in the future are not considered routine
matters under NYSE rules relating to voting by banks and
brokers. Accordingly, if a bank or brokerage firm has not
received voting instructions from the beneficial owner of the
shares with respect to these proposals, the brokerage firm
cannot vote the shares on that matter. These broker
non-votes that are represented at the Annual Meeting will
be counted for purposes of establishing a quorum, but not for
determining the number of shares voted for or against the
non-routine matters.
We encourage you to provide instructions to your bank or
brokerage firm by voting your proxy. This action ensures your
shares will be voted at the meeting in accordance with your
wishes.
What
do I need to show to attend the Annual Meeting in
person?
You will need proof of your share ownership (such as a recent
brokerage statement or letter from your broker showing that you
owned shares of W. R. Berkley Corporation common stock as of the
close of business on March 22, 2011) and a form of photo
identification. If you do not have proof of ownership and valid
photo identification, you may not be admitted to the Annual
Meeting.
Who
pays for the solicitation of proxies and how are they
solicited?
Proxies are being solicited on behalf of our Board of Directors.
The expense of the solicitation of the proxies on behalf of the
Board of Directors 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 $7,500, plus expenses.
In addition to the use of the mails, proxies may be solicited in
person or by mail, telephone, facsimile or electronic
transmission 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, including the Notice, to the beneficial owners
of the Companys common stock.
Only stockholders of record at the close of business on
March 22, 2011 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
141,590,202 shares of common stock. Each such share of
common stock is entitled to one vote. At March 22, 2011,
executive officers and directors of the Company owned or
controlled approximately 20.6% of the outstanding common stock.
Information as to persons beneficially owning 5% or more of the
common stock may be found under the heading Principal
Stockholders below.
Unless otherwise directed in the proxy, the persons named
therein will vote FOR the election of the director
nominees listed below, FOR the resolution approving
the compensation of the Companys executive officers,
FOR holding the
say-on-pay
vote ONCE EVERY THREE YEARS 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, 2011. If a submitted
proxy does not specify a vote for or against a proposal, it will
be voted as described in the preceding sentence.
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, each class having a term of three years.
Each year the term of office of one class expires. This year the
term of a class consisting of three directors expires. The Board
intends that the shares represented by proxy, unless otherwise
indicated therein, will be voted for the election of Rodney A.
Hawes, Jr. as director to hold office for a term of one
year until the Annual Meeting of Stockholders in 2012 and until
his successor is duly elected and qualified, and for Jack H.
Nusbaum and Mark L. Shapiro as directors to hold office for a
term of three years until the Annual Meeting of Stockholders in
2014 and until their respective successors are duly elected and
qualified. There are no arrangements or understandings between
the nominees for director and any other person pursuant to which
the nominees were selected.
The persons designated as proxies reserve full discretion to
cast votes for other persons in the event any such nominee is
unable to serve. However, the Board has no reason to believe
that any nominee will be unable to serve if elected. The proxies
cannot be voted for a greater number of persons than the three
named nominees.
Following the recommendation of the Nominating and Corporate
Governance Committee, the Board of Directors unanimously
recommends a vote FOR all of the nominees for
director.
The following table sets forth biographical and other
information regarding each nominee and the remaining directors
who will continue in office after the Annual Meeting. Following
each persons biographical information, certain information
is provided concerning the particular experience,
qualifications, attributes or skills that led the Nominating and
Corporate Governance Committee and the Board of Directors
(together with the qualities described in Corporate
Governance and Board Matters Board
Committees Nominating and Corporate Governance
Committee below) to determine that each nominee or
continuing director should serve as a director.
Served as Director
Continuously
Business Experience During Past 5 Years
Nominee to Serve in Office Until 2012
Since/Age
and Other Information
Rodney A. Hawes, Jr.(1)(2)
2004
Age 73
Mr. Hawes, Jr. is the founder of Insurance Investment
Associates, which has provided investment banking services to
the insurance industry since 1972. Mr. Hawes, Jr. was the
Chairman of the Board and Chief Executive Officer of Life Re
Corporation from 1988 to 1998.
Key Experience, Qualifications, Attributes or Skills:
With 10 years of experience as Chairman and Chief Executive
Officer of Life Re Corporation, a leading life reinsurance
company, and over 38 years as an investment banker to the
insurance industry, Mr. Hawes, Jr. has valuable business,
leadership and management experience, including significant
financial acumen, experience in mergers and acquisitions of
insurance companies and executive compensation, and a
longstanding working knowledge of the Company.
Served as Director
Continuously
Business Experience During Past 5 Years
Nominees to Serve in Office Until 2014
Since/Age
and Other Information
Jack H. Nusbaum(3)(4)
1967
Age 70
Senior Partner in the New York law firm of Willkie Farr &
Gallagher LLP, where he has been a partner and had been Chairman
of the firm for more than the last five years. Willkie Farr
& Gallagher LLP is outside counsel to the Company. Mr.
Nusbaum is presently a director of Cowen Group, Inc. and during
the past five years he was a director of Strategic Distribution
Inc. (until April 2007) and The Topps Company, Inc. (until
October 2007).
Key Experience, Qualifications, Attributes or Skills:
Mr. Nusbaum brings leadership, extensive legal, regulatory,
financial and other broad-based business experience to the
Board. In addition, Mr. Nusbaums service on the
Companys Board of Directors since its founding affords him
extensive knowledge of the Companys business, operations
and culture.
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.
Key Experience, Qualifications, Attributes or Skills:
Mr. Shapiros career in investment banking and finance
provides valuable broad-based business experience and insights
on the Companys business. In addition, Mr. Shapiro brings
considerable financial expertise to the Board, providing an
understanding of accounting, financial statements and corporate
finance. In addition, Mr. Shapiro has a professional working
knowledge of the Company and its operations since the
Companys initial public offering in 1973 and his extensive
service on the Companys Board of Directors affords him a
depth of understanding of the Companys business,
operations and culture.
Served as Director
Continuously
Business Experience During Past 5 Years
Directors to Continue in Office Until 2012
Since/Age
and Other Information
William R. Berkley(3)
1967
Age 65
Chairman of the Board and Chief Executive Officer of the Company
since its formation in 1967. He also served as President and
Chief Operating Officer from March 2000 to November 2009 and
held such positions 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; VaporStream,
Incorporated; and W. R. Berkley Corporation Charitable
Foundation. Mr. Berkley is the father of W. Robert Berkley, Jr.
Key Experience, Qualifications, Attributes or Skills:
The founder, Chairman of the Board and Chief Executive Officer
of Company, Mr. Berkley is widely regarded as one of the most
distinguished leaders of the insurance industry, including
having previously served as Chairman of the American Insurance
Association (the countrys leading property-casualty
insurance trade association). Mr. Berkley provides the Company
strategic leadership, bringing to the Board deep and
comprehensive knowledge of, and experience with, the Company and
all facets of the insurance and reinsurance businesses. Mr.
Berkleys service as both Chairman of the Board and Chief
Executive Officer of the Company creates a vital link between
management and the Board, enabling the Board to perform its
oversight function with the benefit of managements insight
on the business. In addition, Mr. Berkleys service on the
Board provides the Company with effective, ethical and
responsible leadership.
George G. Daly(1)(5)
1998
Age 70
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.
Key Experience, Qualifications, Attributes or Skills:
Dr. Daly has strong leadership skills, valuable business
acumen and insights on strategy and operations and has served as
Dean of two of the countrys leading business schools. In
addition, Dr. Dalys years of service on the
Companys Board of Directors afford him extensive knowledge
of the Companys business, operations and culture and his
academic career provides the Board with a different perspective.
President and Chief Operating Officer of the Company since
November 2009 and Vice Chairman and President of Berkley
International, LLC since May 2002 and April 2008, respectively.
Mr. Berkley, Jr. served previously as Executive Vice President
of the Company from August 2005 to November 2009, 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.; VaporStream, Incorporated; and W. R.
Berkley Corporation Charitable Foundation. Mr. Berkley, Jr. is
the son of William R. Berkley.
Key Experience, Qualifications, Attributes or Skills:
Mr. Berkley, Jr. has been significantly involved with the
Company for most of his career, including working initially at
several of the Companys operating subsidiaries. His
substantial experience in all areas of the Companys
operations, as well as his prior service as Chairman of the
Board of NCCI Holdings, Inc. (the nations largest provider
of workers compensation and employee injury data and
statistics) and prior investment banking experience, enable him
to bring to the Board insightful, working knowledge of the
Companys business and the insurance industry.
Ronald E. Blaylock(1)(4)(5)
2001
Age 51
Founder and Managing Partner of GenNx360 Capital Partners, a
private equity buy out firm, since 2006. Mr. Blaylock was the
Founder, Chairman and Chief Executive Officer of Blaylock &
Company, Inc., an investment banking firm, and held senior
management positions with PaineWebber Group and Citicorp before
launching Blaylock & Company, Inc. in 1993. Mr. Blaylock is
also a director of CarMax, Inc. and Radio One, Inc.
Key Experience, Qualifications, Attributes or Skills:
Mr. Blaylocks founding and management of two financial
services companies has provided him with valuable business,
leadership and management experience. As a result, Mr. Blaylock
brings substantial financial expertise to the Board. In
addition, Mr. Blaylocks experience on the boards of
directors of other public companies enables him to bring other
perspectives and experience to the Board.
Mark E. Brockbank(1)(2)
2001
Age 59
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.
Key Experience, Qualifications, Attributes or Skills:
Mr. Brockbanks service as Chief Executive of XL Brockbank
Ltd., an underwriting management agency at Lloyds of
London, provided him with valuable entrepreneurial business,
leadership and management experience, and particular knowledge
of the insurance industry. Mr. Brockbank also brings significant
business acumen to the Board, including a strong understanding
of insurance and reinsurance risk evaluation, executive
compensation and related areas.
Mary C. Farrell(1)(2)
2006
Age 61
President of the Howard Gilman Foundation since September 2009
and 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.
Key Experience, Qualifications, Attributes or Skills:
Ms. Farrells career in investment banking, including
serving in various leadership roles at UBS, provides valuable
business experience and critical insights regarding investments,
finance and strategic transactions. Ms. Farrell brings
considerable financial expertise to the Board, providing an
understanding of financial statements, corporate finance,
executive compensation and capital markets.
(1)
Member of Nominating and Corporate Governance Committee
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 5, 2011.
Name
Age
Position
Eugene G. Ballard
58
Senior Vice President Chief Financial Officer
Ira S. Lederman
57
Senior Vice President General Counsel and Secretary
James G. Shiel
51
Senior Vice President Investments
Clement P. Patafio
46
Vice President Corporate Controller
Eugene G. Ballard has been Senior Vice President
Chief Financial Officer of the Company since June 1, 1999.
He was Treasurer of the Company from June 1999 to May 2009. He
has more than 20 years of experience in the insurance
industry.
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. He joined the
Company in 1983.
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.
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 nine 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) corporate governance 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.
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 (1) that
Mr. Nusbaum is a Senior Partner in the New York law firm of
Willkie Farr & Gallagher LLP (Willkie),
which serves as legal counsel to the Company, and
(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.
The Board 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) Mr. Nusbaums reputation and
professional background evidencing his independent nature, and
particularly Mr. Nusbaums history of acting
independently of Company management; and
(3) 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 rules.
The Board held six meetings during 2010 and acted by unanimous
written consent on one occasion. No director attended fewer than
75% of the total number of meetings of the Board and all
committees on which he or she served. Last year, five of the
directors attended the Companys 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 2010. 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 Audit 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
2010, the Audit Committee held nine meetings.
The Audit Committee has determined to engage KPMG LLP as the
Companys independent registered public accounting firm for
fiscal year 2011 and is recommending that our stockholders
ratify this appointment at our Annual Meeting. The report of our
Audit Committee is found on page 48 of this proxy statement.
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.
During 2010, the Compensation Committee was composed of
Ms. Farrell and Messrs. Brockbank, and Hawes, Jr.
Each member of the Compensation Committee is independent under
the rules of the NYSE. Mr. Hawes, Jr. is the current
Chair of the Committee. During 2010, the Compensation Committee
held seven meetings. The report of our Compensation Committee on
executive compensation is found on page 35 of this proxy
statement.
During 2010, the Compensation Committee retained the services of
an external compensation consultant. On February 1, 2010,
Hewitt Associates (the Compensation Committees prior
external consultant) spun off a portion of its executive
compensation practice into a separate independent entity called
Meridian Compensation Partners, LLC (Meridian). To
maintain consistent process and representation, the Compensation
Committee retained Meridian going forward as its independent
executive compensation consultant. The mandate of the external
compensation 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 the external compensation consultant on the
Compensation Committees behalf includes:
competitive market pay analyses, including proxy data studies,
Board of Director pay studies, and market trends;
ongoing support with regard to the latest relevant regulatory,
technical,
and/or
accounting considerations impacting compensation and benefit
programs;
assistance with the redesign of any compensation or benefit
programs, if desired/needed; and
preparation for and attendance at selected Compensation
Committee meetings.
The Compensation Committee did not direct the external
compensation consultant 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 external compensation consultant, and the
Compensation Committee evaluates the external compensation
consultant periodically. The Company does not engage Meridian
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 2012 Annual
Meeting below.
The Companys Corporate Governance Guidelines set forth
certain qualifications and specific qualities that 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: (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. 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 Committee does not have a formal policy with regard to the
consideration of diversity in identifying director nominees. In
accordance with the Guidelines, when considering the overall
composition of the Board, the Committee seeks a diverse and
appropriate balance of members who have the experiences,
qualifications, attributes and skills necessary to oversee a
publicly traded, financially complex, growth oriented,
international organization that operates in multiple regulatory
environments. The Committee seeks directors with experience in a
variety of professional disciplines and business ventures who
can provide diverse perspectives on the Companys
operations. The Committee evaluates the types of backgrounds
that are needed to strengthen and balance the Board based on the
foregoing factors and nominates candidates to fill vacancies
accordingly.
Since May 18, 2010, the Nominating and Corporate Governance
Committee has been composed of Messrs. Blaylock, Brockbank,
Daly, Hawes, Jr. 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 2010.
Other Committees. During 2010, the
Board had two other standing committees in addition to the
committees set forth above: the Executive Committee and the
Business Ethics Committee.
The Executive Committee is authorized to act on behalf of the
Board during periods between Board meetings. During 2010, the
Executive Committee was composed of Messrs. Berkley,
Berkley, Jr., Nusbaum and Shapiro. The Executive Committee
held one meeting in 2010.
The Business Ethics Committee, which during 2010 was composed of
Messrs. Blaylock, Nusbaum and Shapiro, administers the
Company-wide business ethics program. The Business
Ethics Committee reviews certain 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 2010, the
Business Ethics Committee held two meetings.
Additional
Information Regarding the Board
Board Leadership Structure. The Board
of Directors has not separated the positions of Chairman of the
Board and Chief Executive Officer of the Company, as reflected
in the Companys By-Laws. The Board does not believe that
the separation of the positions is necessary or desirable in the
Companys present circumstances. The Board believes that
current leadership of the Company has been effective in
overseeing stockholders long-term interests.
Mr. Berkley founded the Company in 1967 and has been its
Chairman of the Board and Chief Executive Officer since that
time, a period of over forty years. Under
Mr. Berkleys strategic leadership, the Company has
grown significantly, with Mr. Berkley being recognized for
his extensive experience in and leadership of the insurance and
reinsurance industries. Risk oversight is an especially complex
issue for property and casualty insurance companies, and the
Board believes that the Companys current leadership
structure has served this function well. Given
Mr. Berkleys extensive knowledge of the Company and
its operations, employees and culture, his significant ownership
stake and the strategic leadership that he brings to the Board,
as well as his active involvement in the Companys
day-to-day
business, the Board believes that it is appropriate that
Mr. Berkley serve as both Chairman of the Board and Chief
Executive Officer of the Company. The Board regularly reviews
and considers the Board leadership structure.
The Board does not have a lead director. The Board believes that
its current leadership structure has historically served the
Company well and continues to do so, by facilitating
communication between the Board and senior management of the
Company as well as Board oversight of the Companys
business and affairs. However, as described in
Communications with Non-Management Directors;
Executive Sessions below, the Boards independent
directors meet regularly in executive session, which serves to
promote open discussion among these directors. 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, a
process, the Board believes, that provides different directors
the opportunity to guide the Boards agenda and facilitates
collegiality among Board members.
Board Role in Risk Oversight. Managing
risk is a critical element of any property casualty insurance
business, such as the Company. The Board believes that risk
oversight is a responsibility of the entire Board, and it does
not look to any individual director or committee to lead it in
discharging this responsibility. Risk management is one of the
core responsibilities of the Chairman of the Board and Chief
Executive Officer and the President and Chief Operating Officer
and is a critical responsibility of every other senior officer
of the Company and its operating units.
The strategic management of risk in an insurance business is a
multi-level proposition. The Board has an active role, both as a
whole and also at the committee level, in risk oversight. The
Board and its committees receive periodic updates from members
of senior management on areas of
material risk to the Company, including operational, financial,
strategic, competitive, investment, reputational, legal and
regulatory risks. Among other things, the Board as a whole
oversees managements assessment of business risks relating
to the Companys insurance operations and investment
portfolio.
At the committee level, our Audit Committee regularly reviews
our financial statements, financial and other internal controls,
and remediation of material weaknesses and significant
deficiencies in internal controls, if any. Our Compensation
Committee regularly reviews our executive compensation policies
and practices and the risks associated with each. Our Nominating
and Corporate Governance Committee considers issues associated
with the independence of our Board, corporate governance and
potential conflicts of interest. While each committee is
responsible for evaluating certain risks and risk oversight, the
entire Board of Directors is regularly informed of risks
relevant to the Companys business, as described above.
Risk management is a core tenet of the Company, with the concept
of achieving appropriate risk-adjusted returns in our business a
driving principle since the Company was founded. As a key
element of their duties, our senior executives are responsible
for risks and potential risks as they arise from day to day in
their various operational areas. In recognition of the critical
nature of risk management, in 2009 the Company created a new
senior position, reporting directly to the Chairman and Chief
Executive Officer, which is responsible for enterprise risk
management. In addition, our internal audit function reports to
our Audit Committee on a quarterly basis, and more frequently to
the extent necessary.
Our independent outside auditors regularly identify and discuss
with our Audit Committee risks and related mitigation measures
that may arise during their regular reviews of the
Companys financial statements, audit work and executive
compensation policies and practices, as applicable.
Compensation
Committee Interlocks and Insider Participation
During fiscal year 2010, the Compensation Committee was composed
of Ms. Farrell and Messrs. Brockbank, and
Hawes, Jr. No member of the Compensation Committee was,
during fiscal year 2010, an officer or employee of the Company
or was formerly an officer of the Company, or had any
relationship requiring disclosure by the Company as a related
party transaction under Item 404 of
Regulation S-K.
No executive officer of the Company served on any board of
directors or compensation committee of any other company for
which any of the Companys directors served as an executive
officer at any time during fiscal year 2010.
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 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.
Copies 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 22, 2011 (except
as otherwise noted below) those persons known by the Company to
be the beneficial owners of more than 5% of the Companys
common stock:
Amount and Nature
of Beneficial
Percent
Name and Address of Beneficial Owner
Ownership
of Class
William R. Berkley
26,474,618
(1)
18.7
%
475 Steamboat Road
Greenwich, CT 06830
Eagle Capital Management, LLC
7,501,675
(2)
5.3
%
499 Park Avenue,
17th
Floor
New York, NY 10022
BlackRock, Inc.
7,461,336
(3)
5.3
%
40 East
52nd
Street
New York, NY 10022
(1)
Includes 3,636,861 shares of
common stock held by Mr. Berkley, 8,913,016 shares of
common stock and 8,724,542 shares of common stock held in
separate limited liability companies of which Mr. Berkley
is the
sole member, 3,186,833 shares
of common stock held by certain trusts of which Mr. Berkley
is the sole trustee, 379,688 shares of common stock which
are subject to currently exercisable stock options,
1,573,125 shares of common stock underlying restricted
stock units (973,125 of which have vested (the receipt of which
has been deferred), 300,000 of which vest on December 17,
2012 and 300,000 of which vest on March 2, 2015), and
60,553 shares held by Mr. Berkleys wife, as to
which shares he disclaims beneficial ownership.
(2)
Information as of December 31,
2010 based on a Schedule 13G, dated February 14, 2011,
filed with the Securities and Exchange Commission on behalf of
Eagle Capital Management, LLC. The Schedule 13G discloses
that Eagle Capital Management, LLC had sole voting power as to
6,434,483 shares and sole dispositive power as to all
7,501,675 shares.
(3)
Information as of December 31,
2010 based on a Schedule 13G, dated January 21, 2011,
filed with the Securities and Exchange Commission on behalf of
BlackRock, Inc. The Schedule 13G discloses that BlackRock,
Inc. had sole voting power and sole dispositive power as to all
7,461,336 shares.
The following table sets forth information as of March 22,
2011 regarding ownership by all directors and executive officers
of the Company, as a group, and each director and each executive
officer named in the Summary Compensation Table, individually,
of the Companys common stock. Except as described in the
footnotes below, all amounts reflected in the table represent
shares the beneficial owners of which have sole voting and
investment power.
Amount and Nature of
Percent
Name of Beneficial Owner
Beneficial Ownership
of Class
All directors and executive officers as a group (13 persons)
29,185,057
(1)(2)(3)
20.6
%
Eugene G. Ballard
274,486
(2)
*
William R. Berkley
26,474,618
(1)(2)
18.7
%
W. Robert Berkley, Jr.
939,889
(2)
*
Ronald E. Blaylock
13,785
(4)
*
Mark E. Brockbank
611,606
(5)
*
George G. Daly
23,825
*
Mary C. Farrell
12,000
*
Rodney A. Hawes, Jr.
17,500
*
Ira S. Lederman
333,299
(2)
*
Jack H. Nusbaum
71,827
*
Mark L. Shapiro
30,833
(6)
*
James G. Shiel
246,844
(2)
*
*
Less than 1%.
(1)
Includes 8,913,016 shares of
common stock and 8,724,542 shares of common stock held in
separate limited liability companies of which Mr. Berkley
is the sole member, 3,186,833 shares of common stock held
by certain trusts of which Mr. Berkley is the sole trustee
and 60,553 shares held by Mr. Berkleys wife, as
to which shares he disclaims beneficial ownership. Of the
26,474,618 shares, 18,357,337 shares are pledged as
security.
(2)
The amounts shown for
Messrs. Berkley, Berkley, Jr., Ballard, Lederman and Shiel
include shares of common stock which are subject to stock
options that are either currently exercisable or exercisable
within
sixty days of March 22, 2011
and shares of common stock underlying restricted stock units
(RSUs) in the following share amounts for each individual:
Vested RSUs
Name
Options
(Receipt Deferred)
Unvested RSUs
William R. Berkley
379,688
973,125
600,000
W. Robert Berkley, Jr.
202,502
146,250
300,000
Eugene G. Ballard
75,940
78,750
50,000
Ira S. Lederman
56,954
78,750
50,000
James G. Shiel
0
65,813
50,000
The unvested RSUs for the named individuals are scheduled to
vest as follows:
Vesting on
Vesting on
December 17,
March 2,
Name
2012
2015
William R. Berkley
300,000
300,000
W. Robert Berkley, Jr.
150,000
150,000
Eugene G. Ballard
25,000
25,000
Ira S. Lederman
25,000
25,000
James G. Shiel
25,000
25,000
(3)
The amounts shown for all directors
and executive officers as a group include an aggregate of
745,461 shares of common stock which are subject to stock
options that are either currently exercisable or are exercisable
within sixty days of March 22, 2011 and are held by
executive officers of the Company, and 1,074,000 shares of
common stock underlying RSUs, which are subject to forfeiture
until vested. Of the 29,191,159 shares,
18,364,127 shares are pledged as security.
(4)
Of the 13,785 shares,
6,790 shares are pledged as security.
(5)
Includes 603,106 shares held
in a corporation wholly owned by Mr. Brockbank.
(6)
Includes 22,333 shares held in
a trust.
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 Alabama)
without obtaining prior regulatory approval.
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 2010, the Company continued to engage 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., and
W. Robert Berkley, Jr., the Companys President and
Chief Operating Officer, is a minority stockholder and a
director of Associated Community Bancorp, Inc. During 2010,
Associated Community Brokers, Inc. received commissions (both
directly and indirectly) from the relevant insurance carriers in
the amount of $863,715 in connection with insurance brokerage
services provided to the Company and certain of its
subsidiaries. In addition, Associated Community Brokers, Inc.
may place business on behalf of unrelated third parties with
insurance company subsidiaries of the Company.
Also during 2010, certain of the Companys employees
performed services for Interlaken Capital, Inc., a company
substantially owned and controlled by William R. Berkley, the
Companys Chairman of the Board and Chief Executive
Officer. Interlaken separately compensates those Company
employees for such services.
The transactions requiring approval have been previously
approved in accordance with the procedures described above.
Jack H. Nusbaum, a director of the Company, is a Senior Partner
of Willkie Farr & Gallagher LLP, outside counsel to
the Company.
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
The purpose of this Compensation Discussion and Analysis
(CD&A) is to provide material information about
the Companys compensation policies, objectives and
decisions regarding the Companys Named Executive Officers
(or NEOs) and to put into perspective for investors
the numbers and narratives that follow. The following topics are
covered:
Executive summary;
Objectives of the executive compensation program;
Design of the executive compensation program, including the role
and rationale for each element;
Use of market and peer group data;
Executive compensation decisions during the last fiscal year;
Severance and
change-of-control
benefits; and
Discussion of risk in relation to executive compensation.
The CD&A and the tables that follow cover the compensation
paid to the following five NEOs:
The principal executive officer: William R. Berkley, Chairman of
the Board and Chief Executive Officer (or CEO);
The principal financial officer: Eugene G. Ballard, Senior Vice
President Chief Financial Officer; and
The three other highest-paid executive officers:
W. Robert Berkley, Jr., President and Chief Operating
Officer (or COO)
Ira S. Lederman, Senior Vice President General
Counsel and Secretary; and
James G. Shiel, Senior Vice President Investments.
Executive
Summary
Program Overview. The executive
compensation programs at the Company are unique. We believe that
the programs create a strong competitive advantage in the market
for retaining key talent. We also feel that the unique structure
aligns with long-term stockholder value creation better than
most traditional executive compensation programs. For example:
Our annual incentive program is non-formulaic. We feel that it
is critical to be able to respond to ever-changing market
conditions within our industry. A formula-based incentive could
drive counterproductive behaviors or result in executives making
the right decisions, only to see incentive payments reduced.
Nonetheless, our Compensation Committee holds the NEOs
accountable for the relative performance of the Company and
provides appropriate payments tied to that performance.
We do not provide automatic annual long-term incentive awards.
We provide periodic awards with a five-year performance or
vesting period. These performance and vesting periods are longer
than the three-year view of most traditional plans and allow our
executives to have a true long-term perspective of performance.
While our restricted stock unit awards do not have performance
criteria, none of the shares vest before the end of five years.
Even after this five year vesting period, the shares are
mandatorily deferred until the senior executive leaves the
Company. This long vesting period and subsequent deferral align
our senior executives with the success of the Company and its
stockholders better than most three-year performance-based
programs.
Although we do not have formal ownership requirements, through
the mandatory deferral, our NEOs have on average 14 times their
salary invested in Company stock. (This average excludes our
founder, Chairman and CEO, who owns approximately 19% of the
Companys stock.)
In keeping with good corporate governance practices, we do not
provide our NEOs with employment agreements and none of our NEOs
is entitled to any cash severance in the event of termination
from the Company, except pursuant to our executive compensation
plans as described below. We have also implemented a clawback
policy, and we prohibit hedging in Company stock.
2010 Financial Overview. This past
fiscal year remained challenging, and the insurance industry
continued to be very competitive. The Company performed
relatively well given the economic environment, and continued to
exceed the long-term performance of peer companies on many
fronts. Operationally, the Company continued to add business
units and finished the year with a strong balance sheet.
Financially, 2010 operating earnings per share were flat over
2009, while net income per share increased 56% over 2009. The
Companys operating return on equity was down from last
year, our net income return on equity increased to 12.5%, our
combined ratio (reflecting our underwriting profitability)
continued to exceed industry norms and our book value per share
increased to $26.26 from $22.97. Annual cash incentive
compensation for 2010 for the NEOs was flat compared to the
prior year, reflecting these mixed results.
Our long-term growth in book value has remained strong given the
changing economic environment, averaging 15% over the last five
years. This strong performance resulted in a final payout from
our five-year long-term incentive plan (covering
2006-2010
performance) that was slightly below the maximum targeted level.
These performance results, a discussion of our compensation
structure and resulting compensation, and additional detail on
our programs and the actions taken in the last year are
described in greater detail in the remainder of this CD&A.
Objectives
of the Executive Compensation Program
Our executive compensation program is designed to:
Attract qualified executive talent;
Motivate executives to focus on and work toward corporate goals
and appropriately manage risk, thereby fostering enhanced
short-term and long-term financial performance and greater
stockholder value;
Provide an opportunity for executives to develop a significant
ownership stake in the Company and thus align their interests
with those of the Companys stockholders;
Encourage executive retention; and
Reward executives who contribute to the Companys
short-term and long-term success through demonstrated and
sustained performance.
The Companys executive compensation program for the NEOs
includes the following compensation elements.
Role of the Element and
Why W. R. Berkley Corporation
Pay Element
Uses the Element
Annual Cash Compensation
Required by market practice
Base Salary
Provides a fixed base level of
compensation for NEO services rendered during the year
Annual Incentive Bonus
Representative of market practice
Provides focus on annual and long-term
performance goals that are linked to Company success and
stockholder value
Motivates and rewards NEOs to achieve
return on capital objectives and individual objectives
Long-Term Incentive Compensation
Deferred Restricted Stock Units (RSUs)
Increases stock ownership among NEOs
since RSUs track the value of and pay out in shares of Company
stock
Aligns NEOs financial interests
with those of Company stockholders during the NEOs
employment since settlement of RSUs is deferred until separation
from service
Retains NEOs through use of overlapping
5-year vesting periods
Provides focus on stock price and
dividend yield
Long-Term Incentive Plan
Balances NEO external focus with
internal focus on growth in book value and return on equity
objectives necessary to achieve the growth in book value goals
Through a Company-wide goal, encourages
teamwork and decision-making to further the long-term best
interests of the Company
Encourages retention of NEOs through use
of overlapping 5-year performance periods
Allows NEOs to realize a portion of
long-term compensation at established intervals during
employment through potential Long-Term Incentive Plan
(LTIP) cash payments
Benefits and Perquisites
Benefit Replacement Plan
Makes up for Internal Revenue Code
(IRC) limits on Company contributions to the
qualified Profit Sharing Plan
Treats all employees equally
Provides a competitive compensation
element designed to attract and retain NEOs
Deferred Compensation
Allows NEOs to defer receipt of all or
part of their base salary and annual incentive bonus
Provides a strong retention feature
through above-market return potential
Provides additional cash flow to the
Company in a cost effective manner
Provides an attractive tax planning tool
designed to attract and retain NEOs
Additional Benefits
Provides supplemental coverage for
officers, including the NEOs, in the areas of life, travel
accident, and long-term disability insurance
Provides a competitive compensation
element designed to attract and retain NEOs
Personal Use of Company Aircraft (CEO
Enhances security and personal safety of
the CEO and COO
and COO only)
Enhances productivity of the CEO and COO
Supplemental Benefits Agreement (CEO only)
Rewards the founding CEO for long-term
service to the Company (37 years, at time of entering into
the agreement)
Provides competitive retirement income
relative to final average pay for the CEO
Provides continued health insurance
benefits and certain perquisites to the CEO after employment ends
Provides consideration in exchange for a
noncompete agreement with the CEO
Other
Director Fees (CEO & COO only)
Compensates NEOs who are also members of
the Board for responsibilities and duties that are separate and
distinct from their position as an officer
2007 Annual Incentive Compensation Plan. In 2006, the
Company adopted, and its stockholders approved, the 2007 Annual
Incentive Compensation Plan. The 2007 Annual Incentive
Compensation Plan is a cash-based annual bonus plan that does
not provide for the payment of equity compensation. During the
fiscal year ended December 31, 2010, the Compensation
Committee (the Committee) granted new awards under
this plan to the CEO and the COO. These awards were each subject
to a maximum bonus value and were designed to ensure that bonus
amounts are tax deductible under IRC Section 162(m). For
2010, the CEO was eligible for a maximum bonus equal to 3.75% of
the Companys pre-tax net income. The COO was eligible for
a maximum bonus equal to 1.25% of the Companys pre-tax net
income.
Subject to the maximum bonus value, actual bonus amounts were
determined by the Committee, using negative discretion, after
evaluating certain Company results. Return on equity was the
primary factor evaluated for 2010. The Committee also considered
earnings per share, combined ratio (combined ratio is a measure
of overall underwriting profitability where a combined ratio of
less than 100 indicates an underwriting profit), investment
income and consistency of the management team in determining the
annual bonus amounts. In addition, for the COO, the Committee
took into account an initial recommendation from the CEO.
Annual Bonus Program. The annual incentive bonus for each
NEO other than the CEO and the COO is a discretionary bonus
determined by the CEO based primarily on the Companys
financial results, with an emphasis on return on equity. The CEO
also evaluates each such NEOs individual accomplishments
and contributions to the Companys results as he does for
the Companys other senior officers. However, this
additional subjective evaluation is not based on any specific
criteria and generally will not impact the bonus levels, either
positively or negatively, except in cases of extraordinary
performance. These bonus amounts are then reviewed and confirmed
by the Committee.
The annual incentive bonus is designed to support the
Companys objectives by providing a financially attractive
compensation program designed to attract and retain executive
talent, while focusing NEOs on short-term Company goals designed
to contribute to overall Company success and add to shareholder
value.
Long-Term Incentives. The
Companys long-term incentive program consists of a
combination of equity compensation through awards of RSUs
pursuant to the Companys 2003 Stock Incentive Plan and
cash compensation through awards of performance units under the
LTIP.
LTIP Awards. In 2009, the Company adopted, and its
stockholders reapproved, the LTIP. The LTIP is a cash-based plan
that does not provide for the payment of equity compensation.
LTIP awards are denominated in performance units that grow in
value based on one or more performance measures selected by the
Committee and are payable, to the extent earned, in cash. The
performance measure for current LTIP awards is the sum of the
year-to-year
increase in book value of Company stock during a five-year
performance period. In order to fully earn the maximum value of
the LTIP award, the Companys return on equity objectives
need to be met. The performance units pay out in cash at the end
of the performance period. New LTIP units are granted
periodically, generally twice
within a five-year period. Awards under the LTIP are designed to
meet the requirements for performance-based compensation under
Section 162(m) of the IRC.
Restricted Stock Units. RSUs awarded to the NEOs
generally have a five-year vesting period, during which they are
subject to a substantial risk of forfeiture should the executive
leave before the end of the five-year period. After vesting,
payment of the RSUs is deferred (on a mandatory basis) until
90 days following the NEOs separation from service
with the Company (subject to a six-month delay to comply with
Section 409A of the IRC). Grants of RSUs are made
periodically, generally twice within a five-year period.
The long-term incentive program supports the Companys
objectives by encouraging the NEOs to continue their employment
with us through multiple overlapping
5-year
vesting cycles for RSUs and LTIP awards. The LTIP and RSU awards
encourage the NEOs to achieve and sustain longer-term Company
performance goals. The RSUs also align the NEOs financial
interests with those of the Companys stockholders and
reward the NEOs in line with stockholders as the value of the
Companys stock increases.
Deferred Compensation. The Company
maintains the Deferred Compensation Plan for Officers, in which
NEOs are eligible to participate on a voluntary basis. Under the
plan, participants 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 determined annually by the
Committee. At the time of the deferral election, amounts may be
deferred until any date on or before the officers
separation from service. At the officers election made at
the time of deferral, the Company will pay the deferred amounts
either in a lump sum or in no more than five annual installments
beginning generally within 60 days of a date which is prior
to or on the date of the officers separation from service
(subject to a six-month delay to comply with Section 409A
of the IRC). The amounts deferred are not secured or funded by
the Company in any manner. For 2010, the Committee agreed to
accrue interest on the deferred amounts at the prime rate of
interest reported by JPMorgan Chase. The Non-Qualified Deferred
Compensation table for 2010 and the associated narrative and
footnotes provide information on the amounts deferred by the
NEOs under the Plan in 2010, interest earned on deferred amounts
in 2010, and the year-end balances.
The Deferred Compensation Plan for Officers provides a valuable
tax planning mechanism to the NEOs and thereby supports the
Companys objectives by providing a compensation program
designed to attract talented executives and retain our current
NEOs. In addition, deferrals under the plan allow for delayed
compensation payments and thereby increased cash flow for the
Company.
Benefit Replacement. The Company
maintains a Benefit Replacement Plan to make up for IRC pay
limits under the Companys Profit Sharing Plan. Under the
Benefit Replacement Plan, participants receive a potential
annual payment of the amount they would have otherwise received
absent the limitations imposed by the IRC on the Profit Sharing
Plan. This amount is paid in an annual lump sum unless deferred
by the employee under the Deferred Compensation Plan for
Officers. Additional information on the amounts paid under this
plan can be found in the Summary Compensation Table
All Other Compensation and the associated footnotes.
The Benefit Replacement Plan ensures that the full value of the
intended benefits under the Companys Profit Sharing Plan
is provided to the NEOs and as such supports the Companys
objectives by providing a compensation program designed to
attract talented executives and retain current NEOs.
Supplemental Benefits Agreement with the
CEO. On August 19, 2004, the Company
entered into a Supplemental Benefits Agreement with
Mr. William Berkley. The agreement was put into place to
recognize the significant contribution that the CEO has made to
the Companys past and ongoing success. The agreement was
amended in December 2007 to comply with the requirements of
Section 409A of the IRC and further amended in December
2008. The agreement provides the CEO, or spouse, as described
below, with the following benefits:
An annual retirement benefit equal to the greater of $1,000,000
or 50% of Mr. William Berkleys highest average
three-year compensation over the prior ten fiscal years, but not
exceeding 150% of his average five-year compensation over the
prior five fiscal years;
Continued health insurance coverage (including coverage for his
spouse) for the remainder of his or her life, as applicable;
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 latest to occur of two years following such
termination, the date he ceases to be Chairman of the Board, or
the date he ceases to provide consulting services to the Company;
Office accommodations and secretarial support; and
Payment of any excise taxes imposed on the CEO under
Section 4999 of the IRC (plus payment of additional taxes
incurred as a result of the Companys payment of excise
taxes) should any of these benefits trigger such excise taxes.
Mr. William Berkley is entitled to the commencement of
retirement benefits on the earliest to occur of January 2,
2014, his death, and a change of control of the Company. If
Mr. Berkleys employment terminates prior to the
benefit commencement date, a
make-up
account will be credited monthly with an amount equal to one
twelfth of the annual retirement benefit plus interest. This
make-up
account was added to ensure Mr. Berkleys benefit is
kept whole for changes required under Section 409A of the
IRC. The balance in the
make-up
account, if any, will be paid and the commencement of regular
payments of the annual retirement benefit will begin on the
benefit commencement date. Mr. Berkley is entitled to the
other benefits as triggered or when he voluntarily leaves the
Company.
In exchange for the benefits outlined above, 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. The decision to provide these benefits was made without
regard to other compensation elements. Likewise, providing these
benefits did not influence compensation levels in other areas.
The Supplemental Benefits Agreement supports the Companys
objectives by rewarding the CEO for his long service and prior
contributions to the Companys long-term success and
stockholder value. The agreement also protects the Company from
potential competitive activities following the CEOs
retirement. 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.
The Committee reviews and analyzes market data on total direct
executive compensation annually. Total direct compensation
(defined as salary, annual bonus, and long-term incentive
awards) for the NEOs is compared to that paid to individuals
holding comparable positions at peer companies.
In 2010, the Committee reviewed data from the same group of peer
companies as was used in 2009. These companies, shown below,
represent direct competitors for both business and executive
talent and are believed to provide a reasonable assessment of
industry market pay levels.
Ace Limited
Alleghany Corporation
American Financial Group
Arch Capital Group Ltd.
Axis Capital Holdings Limited
The Chubb Corporation
CNA Financial Corporation
Everest Re Group Ltd.
HCC Insurance Holdings, Inc.
Markel Corporation
Old Republic International Corporation
PartnerRe Ltd.
The Progressive Corporation
RenaissanceRe Holdings Ltd.
Transatlantic Holdings Inc.
The Travelers Companies, Inc.
White Mountains Insurance Group Ltd.
XL Capital Ltd.
Market data is reviewed together with performance data for the
peer companies to review alignment of total direct compensation
paid and relative performance of the peer companies. However,
market data is only one of many factors considered in setting
future compensation awards as discussed further below.
Executive
Compensation Decisions During the Last Fiscal Year
General Approach. The Company does not
target any particular allocation for base salary, annual
incentive bonus, or long-term incentive compensation as a
percentage of total compensation.
Rather, pay decisions for NEOs are based on a subjective
assessment of Company performance and are designed to ensure
that compensation is appropriate based on relative company
performance.
The CEO may make an initial recommendation to the Committee
concerning the COOs compensation. Other than the CEO and
COO, no executive officer plays a role in determining
compensation for the other NEOs. Neither the CEO nor the COO
makes the final determination concerning their respective
compensation.
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. Effective January 1, 2010,
Mr. Berkley, Jr.s salary was increased to
$850,000 reflecting his promotion to COO of the Company.
Salary actions taken for other NEOs were based on the CEOs
subjective assessment as outlined below, the NEOs
contribution to the Company, and retention needs:
Salary Increase
Rationale
Mr. Ballard
3.06%
To maintain competitive positioning
Mr. Lederman
3.06%
To maintain competitive positioning
Mr. Shiel
3.06%
To maintain competitive positioning
All base salary changes were effective January 1, 2010. In
2010, the Committee also determined that there would be no
increase in base salary for 2011 for any of the NEOs.
Annual Incentive Bonus. For
Messrs. Ballard, Lederman, and Shiel, the CEO determined,
and reviewed with the Committee, the 2010 bonus amounts as shown
in the Summary Compensation Table. These amounts were based on a
subjective assessment of overall Company performance (primarily
return on equity, or ROE). See the discussion on CEO bonus for a
more detailed analysis of Company performance. The CEO may also
make adjustments to the individual bonus amounts based on
extraordinary individual performance (either positive or
negative). Based on the CEOs assessment, in 2010 there was
no extraordinary individual performance that warranted any
adjustment to the bonus amounts determined based on Company
performance. The 2010 bonus award for each of these NEOs was
$325,000, the same as in the prior year.
Annual Incentive Bonus Under the
Plan. For 2010, the CEO and COO were
the only participants in the 2007 Annual Incentive Compensation
Plan. For the COO, the CEO made an initial recommendation for a
bonus of $1,100,000, the same as the prior years bonus
amount, and the Committee approved this amount. The bonus amount
was based on a subjective assessment by the CEO and the
Committee of Company performance, primarily ROE, as well as
earnings per share, combined ratio and investment income. An
analysis of the Companys performance is outlined below.
This bonus amount was less than the maximum (1.25% of pre-tax
net income, or $7,500,000) described earlier.
For the CEO, Company performance was a critical factor in
determining the final bonus amount. Using a subjective
assessment of various measures (as further discussed below), the
Committee awarded the CEO a bonus of $6,200,000, the same as the
prior years bonus. The primary measure
considered was ROE. The Committee also considered the
Companys earnings per share, combined ratio (relative to
the industry) and investment income. The following outlines the
Committees analysis for the CEOs bonus determination:
Return on stockholders equity was 12.5% based on net
income (up from the prior years 10.2%) and 11.6% based on
operating income, which is down from the prior years 14.7%
(operating income is a non-GAAP financial measure defined by the
Company as net income excluding income or losses from investment
funds and net investment gains and losses). The Companys
ROE performance over the past five years was at the 67th
percentile relative to peers, based on data through the third
quarter (the most recent reported data available at the time of
the determination);
Combined ratio of 94.5% was 7.5 points better than the
industrys estimated overall combined ratio;
Net income was $2.90 per share, 56% higher than the previous
year; however, operating income was $2.69 per share, the same as
the previous year; and
Net investment income, including income (loss) from investment
funds, was $553 million, down 2.5% from the prior year.
While the measures are listed in order of importance, no
particular allocation was applied to the measures. The Committee
also considered:
Amounts paid in prior years and Company performance in 2010
relative to those prior years; and
Company performance relative to industry peers.
The CEOs bonus is the same as the previous years,
consistent with that of the other executive officers of the
Company. The bonus for the CEO reflects the Committees
satisfaction with the efforts of the CEO and actions taken to
ensure the Companys success in future years. The amount
paid was less than the maximum bonus amount (3.75% of pre-tax
net income, or $22,600,000) described earlier.
Long-Term Incentives. NEOs received new
RSU awards in 2010. RSU awards are generally made at least twice
over a five-year period and generally vest over a five-year
period as well. The table below identifies the number of units
awarded to each NEO in 2010. In determining the number of RSUs
awarded, the Committee considered the NEOs length of
service, position with the Company, individual contribution to
the overall performance of the Company and recommendations of
the CEO. Additional information regarding these awards can be
found in the 2010 Grants of Plan Based Awards table below.
NEOs did not receive new LTIP awards in 2010. LTIP awards, like
RSU grants, are generally made at least twice over a five-year
period and have a five-year performance term. During 2010,
however, there were two relevant ongoing LTIP award cycles:
2006 LTIP Award: This award is earned over the five-year period
of 2006 through 2010. Final payments were made under this award
in early 2011. Under SEC disclosure rules, these full payments
are not reflected in the Summary Compensation Table. Rather, a
portion of the amount has been shown in the each of the five
years based on the amount contingently earned during that year.
The full amounts received by the NEOs in early 2011 for the 2006
award were as follows:
Amount Previously
Paid due to 409A
Amendments (see
Final Payment made
NEO
Full Award Earned
prior years proxy)
in Early 2011
Mr. Berkley
$
9,816,994
$
4,919,812
$
4,897,182
Mr. Berkley, Jr.
$
2,454,248
$
1,229,953
$
1,224,295
Mr. Ballard
$
989,718
$
500,000
$
489,718
Mr. Lederman
$
981,699
$
491,981
$
489,718
Mr. Shiel
$
858,987
$
430,484
$
428,503
2008 LTIP Award: This award is earned over the five-year period
of 2008 through 2012. While no payments have been made under
this plan, a portion of the amount earned under this award
during 2010 is shown in the Summary Compensation Table under
Non-Equity Incentive Plan Compensation, as required by SEC rules.
While no new LTIP awards were made in 2010, a new award was
approved at the December 2010 Committee meeting, effective
January 1, 2011. The structure of the 2011 award is similar
to prior grants with the value of units being based on growth in
book value per share. The following units were awarded and will
be disclosed in the Grants of Plan Based Awards Table in our
proxy statement next year.
Maximum Award Value:
(Any Value Earned will be Paid
Units Awarded
in Early 2016)
Mr. Berkley
40,000
$
10,000,000
Mr. Berkley, Jr.
20,000
5,000,000
Mr. Ballard
5,000
1,250,000
Mr. Lederman
5,000
1,250,000
Mr. Shiel
5,000
1,250,000
LTIPs have no value on the date of grant, but are expected to
grow in value based on the growth in book value over the
five-year period.
Severance
and
Change-of-Control
Benefits
The Company generally does not have any contracts, agreements,
plans or arrangements that provide for severance payments to the
NEOs at, following, or in connection with any termination of
employment. However, the following agreements provide for
certain benefits upon specific termination events:
The Supplemental Benefits Agreement, which is described in
greater detail above, provides the CEO with certain benefits
upon death or termination of employment to recognize his
significant contributions to the Companys success from the
time he founded the Company.
RSUs held by the NEOs are subject to accelerated ratable vesting
upon death or disability. Ratable vesting of the RSUs is
intended to fairly compensate the NEOs for service to the
Company through the date of their death or disability.
In the event of the termination of an NEOs employment on
account of his death, disability, qualified retirement, or his
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 will be determined and fixed as of
the end of the fiscal year immediately prior to the fiscal year
in which the termination occurred and paid 90 days
following such termination. This accelerated payment fairly
compensates the NEOs for service to the Company through the
fiscal year just prior to their termination.
Upon a Change of Control as described in the various plan
documents:
Benefits under the Supplemental Benefits Agreement become
payable.
RSUs will become fully vested and settled in full.
The value of all LTIP awards will be determined and fixed as of
the end of the fiscal year prior to the Change of Control and
paid to the participant within 90 days following the last
day of the performance period.
These provisions support the Companys compensation
objectives by keeping executives focused on delivering strong
results and evaluating potential change of control events from a
neutral perspective. The provisions remove concerns over the
possible personal impact of such events. For additional detail,
see Executive Compensation Potential Payments
Upon Termination or Change of Control below.
Discussion
of Risk and Compensation Plans
The Company has a variety of practices, policies, and incentive
design features that are intended to ensure that employees are
not encouraged to take unnecessary or excessive risks, based on
which the Committee believes that risks arising from the
Companys compensation policies and practices for its
employees are not reasonably likely to have a material adverse
effect on the Company. These practices, policies and incentive
design features include:
Multi-year equity vesting and multi-year performance periods.
The LTIP has a
5-year
performance period and the RSUs have a
5-year
vesting requirement. These extended time periods reflect the
longer-term nature of business decisions and align employees
with the longer-term performance of the Company.
Clawback Policy. The Compensation Committee has approved
recapture provisions for certain misconduct by grantees of RSUs
and LTIPs.
Stock Ownership. While the Company does not have formal stock
ownership guidelines, stock ownership is generally strongly
encouraged and mandated under the RSU deferral program. The CEO
currently beneficially owns approximately 19% of the
Companys outstanding common stock. Other NEOs also have
significant beneficial ownership positions (averaging in excess
of 14 times base salary) through outright common stock ownership
and deferred RSU awards.
Prohibition on Hedging. The Companys senior officers as
well as the presidents and chief financial officers of the
Companys subsidiaries are prohibited from hedging and
other derivative transactions with respect to the Companys
common stock.
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis shown above.
Based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that this Compensation
Discussion and Analysis be included in this Proxy Statement and
the Annual Report on
Form 10-K
for the year ended December 31, 2010.
Compensation Committee
Rodney A. Hawes, Jr., Chairman
Mark E. Brockbank
Mary C. Farrell
March 31, 2011
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.
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 total compensation
exceeded $100,000 for the last fiscal year.
Summary
Compensation Table
Change in
Pension Value
and
Nonqualified
Non-Equity
Deferred
Stock
Incentive Plan
Compensation
All Other
Name and
Salary
Bonus
Awards
Compensation
Earnings
Compensation
Total
Principal Position
Year
($)(1)
($)
($)(2)
($)(3)
($)
($)
($)
William R. Berkley
2010
1,000,000
(4)
7,797,000
9,276,506
5,906,790
(5)
653,345
(6)(7)
24,633,641
Chairman of the Board
2009
1,000,000
8,317,950
8,002,244
489,885
17,810,079
and Chief Executive Officer
2008
1,000,000
7,737,000
8,880,600
668,172
390,937
18,676,710
W. Robert Berkley, Jr.
2010
850,000
(4)
3,898,500
2,033,990
337,076
(6)(7)
7,119,566
President and Chief
2009
700,000
1,746,031
251,007
2,697,038
Operating Officer
2008
700,000
3,868,500
1,832,025
228,579
6,629,104
Eugene G. Ballard
2010
572,000
325,000
649,750
340,623
74,125
(7)
1,961,498
Senior Vice President
2009
555,000
325,000
235,104
62,490
1,177,594
Chief Financial Officer
2008
545,000
340,000
644,750
230,435
54,907
1,815,092
Ira S. Lederman
2010
572,000
325,000
649,750
340,623
72,818
(7)
1,960,191
Senior Vice President
2009
555,000
325,000
235,104
62,490
1,177,594
General Counsel and Secretary
2008
545,000
340,000
644,750
230,435
54,907
1,815,092
James G. Shiel
2010
572,000
325,000
649,750
318,653
68,548
(7)
1,933,952
Senior Vice President
2009
555,000
325,000
220,284
59,925
1,160,209
Investments
2008
545,000
200,000
644,750
215,615
53,878
1,659,243
(1)
Any amounts deferred, whether
pursuant to a plan established under section 401(k) of the
Internal Revenue Code, or otherwise, are included for the fiscal
year in which earned.
(2)
This column represents the
aggregate grant date fair value of awards computed in accordance
with FASB ASC Topic 718, Compensation Stock
Compensation (ASC 718). 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 ($25.99 on
March 2, 2010). The RSUs vest in one installment, generally
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 has a
separation from service prior to such vesting date on account of
death, disability or as determined by the Compensation
Committee, a pro rata share of the number of RSUs granted to the
recipient shall vest and be distributed to the recipient
90 days (or, in some cases, 6 months) following such
event. Upon a separation from service for any other reason prior
to vesting, all unvested RSUs held by the recipient will expire
and be forfeited. For additional information relating to the
valuation assumptions with respect to the prior year grants,
refer to note 22 of the Companys financial statements
in the
Form 10-K
for the year ended December 31, 2010, 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 NEOs.
(3)
This column includes the dollar
amount of bonus awards earned by Messrs. Berkley and
Berkley, Jr., for performance during 2010 under the 2007 Annual
Incentive Compensation Plan of $6,200,000 and $1,100,000,
respectively. These awards were paid in February 2011. This
column also includes the dollar amounts contingently earned
during the 2010 fiscal year with respect to awards granted to
each of the named executives in fiscal years prior to 2011
pursuant to the LTIP, subject to the terms and conditions of the
LTIP agreements. See the 2010 Grants of Plan-Based Awards table
on page 37 for additional information relating to the 2007
Annual Incentive Compensation Plan. For additional information
on the LTIP, refer to note 23 of the Companys
financial statements in the
Form 10-K
for the year ended December 31, 2010, as filed with the SEC.
(4)
The bonus awards earned by
Messrs. Berkley and Berkley, Jr., for performance during
2010 and paid in February 2011 under the 2007 Annual Incentive
Compensation Plan are reported in the Non-Equity Incentive Plan
Compensation column of this Summary Compensation Table.
This amount represents the change
in pension value under the Supplemental Benefits Agreement. See
page 28 for additional information about the Supplemental
Benefits Agreement, amended as of December 12, 2008.
(6)
This amount includes
(i) Company director fees of $81,000 and 3,000 shares
of the Companys common stock awarded to directors on
May 18, 2010, having a value of $81,570, payable to each of
Messrs. Berkley and Berkley, Jr.; (ii) the incremental
cost to the Company related to personal use of Company-owned
aircraft by Mr. Berkley ($96,696) and Mr. Berkley, Jr.
($71,944); and (iii) for Mr. Berkley only, secretarial
and administrative assistant expenses of $63,648. To increase
productivity and for reasons of security and personal safety,
the Board has required Messrs. Berkley and Berkley, Jr., to
use Company-owned 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.
(7)
For Messrs. Berkley, Berkley,
Jr., Ballard, Lederman and Shiel, these amounts include Company
contributions to the Profit Sharing Plan of $22,050 each;
attributed premiums for term life insurance of $1,200 each;
Benefit Replacement Plan contributions of $67,950, $54,450,
$30,737, $29,430 and $29,430, respectively; and dividend
equivalents on vested RSUs of $239,231, $24,863, $20,138,
$20,138 and $15,868, respectively.
Plan-Based
Awards
The following table shows information regarding awards granted
to the NEOs in 2010 (portions of which are reflected to the
extent required in the Summary Compensation Table):
2010
GRANTS OF PLAN-BASED AWARDS
Estimated
Possible
and
Future
Payouts
Under
Non-Equity
Incentive
Plan
Awards
Name
Plan Name
Maximum($)(1)
William R. Berkley
2007 Annual Incentive Compensation Plan
22,623,938
W. Robert Berkley, Jr.
2007 Annual Incentive Compensation Plan
7,541,313
(1)
These amounts represented the
potential maximum value of the annual bonus awards for 2010
under the 2007 Annual Incentive Compensation Plan, which was,
for the CEO, 3.75% of the Companys pre-tax net income and,
for the COO, 1.25% of the Companys pre-tax net income. The
actual amount of bonus awards paid to Messrs. Berkley and
Berkley, Jr. for performance during 2010 under the 2007 Annual
Incentive Compensation Plan of $6,200,000 and $1,100,000,
respectively, are reported in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table. Because
of the nature of these bonus awards, there is no target or
minimum threshold performance level for an award. As such, the
Threshold and Target columns have been
omitted from this table.
Outstanding
Equity Awards
The following table provides information on the holdings of
stock options and stock awards by the NEOs as of
December 31, 2010. This table includes unexercised option
awards (no NEO has any unvested option awards) and unvested
RSUs. Each equity grant is shown separately for each NEO.
The market value of the stock awards is based on the closing
market price of the Companys stock as of December 31,
2010, which was $27.38.
OUTSTANDING
EQUITY AWARDS AT FISCAL 2010 YEAR-END
OPTION AWARDS
STOCK AWARDS
Number of
Number of
Market Value
Securities
Shares or
of Shares
Underlying
Units of
or Units
Unexercised
Stock
Stock That
of Stock
Option
Options (#)
Option
Option
Award
Have Not
That Have
Grant
Exercisable
Exercise
Expiration
Grant
Vested
Not Vested
Name
Date
(1)(2)
Price ($)(1)
Date
Date
(#)(1)(3)
($)
William R. Berkley
03/13/2001
1,025,000
9.34
03/13/2011
04/03/2002
379,688
11.39
04/03/2012
06/17/2008
300,000
8,214,000
03/02/2010
300,000
8,214,000
W. Robert Berkley, Jr.
03/13/2001
256,252
9.34
03/13/2011
04/03/2002
202,502
11.39
04/03/2012
06/17/2008
150,000
4,107,000
03/02/2010
150,000
4,107,000
Eugene G. Ballard
04/03/2002
75,940
11.39
04/03/2012
06/17/2008
25,000
684,500
03/02/2010
25,000
684,500
Ira S. Lederman
04/03/2002
56,954
11.39
04/03/2012
06/17/2008
25,000
684,500
03/02/2010
25,000
684,500
James G. Shiel
06/17/2008
25,000
684,500
03/02/2010
25,000
684,500
(1)
These amounts have been adjusted to
reflect all subsequent common stock splits through
December 31, 2010.
(2)
All outstanding options 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 the Company 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 vested according to a graded schedule
of 25% of the award on each of the third, fourth, fifth, and
sixth anniversaries of the 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 generally on the fifth anniversary of their
respective grant dates, provided the NEO remains employed by the
Company on the vesting date. If an NEO separates from service
prior to the vesting date on account of death, disability or as
determined by the Compensation Committee, a pro rata share of
the number of RSUs granted to him shall vest and be distributed
to him generally 90 days following such termination date.
Upon a separation from service for any other reason prior to
vesting, all unvested RSUs will expire and be forfeited. In
addition, vested RSUs may be subject to recapture by the Company
in certain circumstances. 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. Subject generally to a minimum three-year vesting
requirement on all equity awards, the Compensation Committee may
generally accelerate the vesting of any or all RSUs at any time.
The following table shows for the fiscal year ended
December 31, 2010 information concerning the exercise of
stock options by the NEOs and the pre-tax value realized upon
such exercises.
OPTION
EXERCISES AND STOCK VESTED IN 2010
OPTION AWARDS
STOCK (RSU) AWARDS
Number of Shares
Number of Shares
Pre-Tax Value
(RSUs) Acquired on
Pre-Tax Value
Acquired on Exercise
Realized on Exercise
Vesting
Realized on Vesting
Name
(#)
($)(1)
(#)(2)
($)(3)
William R. Berkley
1,000,000
18,070,000
315,000
W. Robert Berkley, Jr.
250,000
4,517,500
90,000
Eugene G. Ballard
18,985
437,414
22,500
Ira S. Lederman
15,822
362,798
22,500
James G. Shiel
63,282
1,034,997
22,500
(1)
This column reflects the difference between the market value of
the shares on the date of exercise and the exercise price of the
stock options.
(2)
Represents RSUs granted on December 5, 2005 that vested on
December 5, 2010.
(3)
The receipt of the RSUs has been deferred until the earlier of
the NEOs separation of service or a change in control,
thus no value was realized on vesting in 2010.
Pension
Benefits
The following table shows for the fiscal year ended
December 31, 2010 information relating to the pension
benefits provided to Mr. Berkley under the Supplemental
Benefits Agreement:
PENSION
BENEFITS
Number of
Present
Payments
Years
Value of
During
Credited
Accumulated
Last Fiscal
Service
Benefit
Year
Name
Plan Name
(#)
($)(1)
($)
William R. Berkley
Supplemental Benefits Agreement(1)
51,599,087
(1)
For additional information on the key actuarial assumptions used
to derive the projected benefit obligation and related
retirement expenses with respect to the Supplemental Benefits
Agreement (as described above on page 28), refer to
note 24 of the Companys financial statements in the
Form 10-K
for the year ended December 31, 2010, as filed with the SEC.
Mr. Berkley is entitled to the commencement of retirement
benefits on the earliest to occur of January 2, 2014, his
death, and a change of control of the Company. In the event
retirement benefits are triggered by a change in control of the
Company, Mr. Berkley will receive, in lieu of the yearly
retirement benefits described above on page 28, a lump sum
amount equal to the actuarial present value set forth in the
Pension Benefits table. If Mr. Berkley predeceases his
spouse, fifty percent
(50%) of such benefit will be paid annually to his spouse for
the remainder of her life. Mr. Berkley may elect, within
ten days of the date the annual retirement benefit begins, to
receive an annual lifetime annuity benefit under a joint-and
survivor annuity based on the lives of Mr. Berkley and his
spouse that is the actuarial equivalent to the payments that
would otherwise have been made had no such election occurred.
Non-Qualified
Deferred Compensation
The table below provides information on the year-end balances of
amounts deferred in prior years by the NEOs under the Deferred
Compensation Plan for Officers.
NON-QUALIFIED
DEFERRED COMPENSATION FOR 2010
Aggregate
Earnings in
Aggregate
Last FY
Balance at
Name
($)(1)
Last FYE ($)(1)(2)
William R. Berkley
63,804
1,996,528
W. Robert Berkley, Jr.
Eugene G. Ballard
49,960
1,560,093
Ira S. Lederman
68,970
2,158,188
James G. Shiel
36,620
1,145,915
(1)
Such amounts are accrued, and are not secured or funded by the
Company.
(2)
Does not include vested RSUs (the receipt of which has been
deferred until the earlier of the NEOs separation of
service or a change in control) as follows:
Mr. Berkley 973,125; Mr. Berkley,
Jr. 146,250; Mr. Ballard 78,750;
Mr. Lederman 78,750; and
Mr. Shiel 65,813. These RSUs are fully vested,
but have been mandatorily deferred to align the NEOs
financial interests with those of the Companys
stockholders during the NEOs employment since settlement
of the RSUs is deferred until the NEOs separation of
service from the Company.
The amounts set forth in the table above were deferred pursuant
to the Companys Deferred Compensation Plan for Officers in
which NEOs are eligible to participate on a voluntary basis.
Under the plan, participants 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 determined annually by the
Compensation Committee. At the time of the deferral election,
amounts may be deferred until any date on or before the
officers separation from service. At the officers
election made at the time of deferral, the Company will pay the
deferred amounts either in a lump sum or in no more than five
annual installments beginning generally within 60 days of a
date which is prior to or on the date of the officers
separation from service (subject to a six-month delay to comply
with Section 409A of the IRC). For 2010, the Compensation
Committee agreed to accrue interest on the deferred amounts at
the prime rate of interest reported by JPMorgan Chase.
Potential
Payments Upon Termination or Change of Control
Except as provided for in the CEOs Supplemental Benefits
Agreement, RSUs that ratably vest upon death or disability, and
LTIP awards that become payable upon certain terminations, the
Company does not have any contracts, agreements, plans or
arrangements that provide for severance payments to the NEOs at,
following, or in connection with any termination of employment.
None of
the NEOs other than the CEO has employment or change of control
agreements with the Company. The information below describes and
quantifies certain compensation that would become payable under
existing plans and arrangements if a change of control had
occurred or if an NEOs employment had terminated on
December 31, 2010. 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,
2010, which benefits are described above and quantified in the
Pension Benefits table on page 39. In addition to the cash
retirement benefit described above on page 28, 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 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. The Company estimates the cost
associated with the benefits that are to be provided during the
two-year period set forth above to be $800,000 per annum, and
that the cost associated with the benefits to be provided upon
request would be $200,000 per annum. After his termination,
Mr. Berkley and his spouse are also entitled to receive
lifetime health insurance coverage for which the Company
estimates the present value of the cost to be $230,000. The
estimated benefit to Mr. Berkley under the Supplemental
Benefits Agreement described above, had he become entitled to
receive such benefits upon a change in control occurring on
December 31, 2010, does not include any
gross-up as
provided under the agreement because Mr. Berkley would not
have been subject to the excise tax under Section 4999 of
the Internal Revenue Code.
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.
As described in the Compensation Discussion and Analysis above,
with respect to all the NEOs, and in the Pension Benefits table,
with respect to Mr. Berkley, upon a Change of Control as
described in the various plan documents:
1. Mr. Berkley will be entitled to a lump sum payment
of the present value of the retirement benefit under the
Supplemental Benefits Agreement, as disclosed in the Pension
Benefits table above.
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 Compensation Committee, but
no later than the date of the Change of Control.
3. The value of all LTIP awards will be determined and
fixed as of the end of the fiscal year immediately prior to the
fiscal year in which the Change of Control occurred. 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,
his RSUs would vest pro-rata. With respect to LTIP awards, if
one of the NEOs, prior to the last day of the performance period
of the
award, were to terminate employment due to death, disability,
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 for that NEO
would be determined and fixed as of the end of the fiscal year
immediately prior to 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) of 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, 2010.
POTENTIAL
TERMINATION OR CHANGE OF CONTROL PAYMENTS
UNDER RSUS AND THE LTIP
RSUs
LTIP
Total
Name
($)
($)(1)(2)
($)
William R. Berkley
Change of Control
16,428,000
4,966,950
21,394,950
Death or Disability
6,004,097
4,966,950
10,971,047
W. Robert Berkley, Jr.
Change of Control
8,214,000
1,470,156
9,684,156
Death or Disability
3,002,048
1,470,156
4,472,204
Eugene G. Ballard
Change of Control
1,369,000
542,379
1,911,379
Death or Disability
500,342
542,379
1,042,721
Ira S. Lederman
Change of Control
1,369,000
542,379
1,911,379
Death or Disability
500,342
542,379
1,042,721
James G. Shiel
Change of Control
1,369,000
503,134
1,872,134
Death or Disability
500,342
503,134
1,003,476
(1)
Had termination or change of control occurred on or after
January 1, 2011, the LTIP value including the amount earned
during 2010 would have been as follows for the identified
individuals: Berkley - $8,043,456; Berkley, Jr.
$2,404,146; Ballard $883,002; Lederman - $883,002;
and Shiel $821,787. In February 2011, amounts paid
to the identified individuals with respect to their 2006 LTIP
awards were as follows: Berkley $4,987,182; Berkley,
Jr. $1,224,295; Ballard - $489,718;
Lederman $489,718; and Shiel $428,503.
(2)
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 the Deferred Compensation
Plan for Officers that permits the deferral of their base
salary, bonus compensation, and excess profit sharing
contribution for any year. The last column of the Non-Qualified
Deferred Compensation table for 2010 on page 40 reports
each NEOs aggregate balance at December 31, 2010. The
NEOs are entitled to receive the amount in their deferred
compensation account in the event of a separation from service.
The account balances
continue to accrue interest income between the separation from
service event and the date distributions are made, and therefore
amounts payable to the NEOs, assuming a separation from service
on December 31, 2010, would differ from those shown in the
Non-Qualified Deferred Compensation table for 2010 to some small
degree to account for such interest.
Director
Compensation
For 2010, each director received a quarterly stipend of $18,000
and a fee of $1,500 for each Board meeting attended. In
addition, on May 18, 2010, pursuant to the Companys
2009 Directors Stock Plan, each continuing director
received a grant of 3,000 shares of the Companys
common stock. Members of the Audit Committee and the
Compensation Committee, which both consist 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 such
committee receiving an additional annual stipend of $30,000.
Members of the Audit Committee and the Compensation Committee
each also receive $1,000 for each substantive meeting attended.
In accordance with the Companys guidelines, each director,
within 12 months of becoming a director, is required to own
an amount of common stock of the Company equal to three times
the annual stipend paid to the director. The Company also
maintains a Deferred Compensation Plan for Directors pursuant to
which directors may elect to defer all or a portion of their
retainer
and/or
meeting fees for any year. Amounts deferred may, at the election
of the director, (1) be deemed invested in the
Companys common stock or (2) accrue a reasonable rate
of interest, determined annually by the Compensation Committee.
At the time of the deferral election, amounts may be deferred
until any date on or before the directors separation from
service with the Board. The Company will pay the deferred
amounts, at the election of the director made at the time of
deferral, either in a lump sum or in no more than five annual
installments beginning on a date which is prior to or on the
date of the directors separation from service with the
Board. Upon the death of a director, the directors
deferred account balance will be distributed within sixty days
following death. For 2010, the Compensation Committee determined
that interest on the deferred amounts would accrue at the prime
rate of interest reported by JPMorgan Chase.
The following table shows for the fiscal year ended
December 31, 2010, information concerning the compensation
of directors who are not named in the Summary Compensation Table:
2010
DIRECTOR COMPENSATION
Stock
Fees Earned or
Awards
Name
Paid in Cash ($)
($)(1)
Total ($)
Ronald E. Blaylock
92,500
81,570
174,070
Mark E. Brockbank
93,000
81,570
174,570
George G. Daly
94,000
81,570
175,570
Mary C. Farrell
93,000
81,570
174,570
Rodney A. Hawes, Jr.
123,000
81,570
204,570
Jack H. Nusbaum
81,000
81,570
162,570
Mark L. Shapiro
124,000
81,570
205,570
(1)
Represents the fair value of 3,000 shares of the
Companys common stock on May 18, 2010, the date of
grant ($27.19 per share).
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, 2010, including the W. R.
Berkley Corporation 2003 Stock Incentive Plan. The table also
includes information regarding 1,012,500 RSUs awarded to
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
10,036,702
$
27.50
1,785,875
Equity compensation plans not approved by stockholders
978,760
$
12.62
Total
11,015,462
$
26.18
1,785,875
(1)
Represents RSUs, each of which represents the right to receive
one share of common stock 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 vested in full in one installment on
April 4, 2008. In the event of a change of control of the
Company (as defined in the RSU agreements) the shares of common
stock underlying each RSU will be delivered to the RSU
recipients. 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 (as adjusted for subsequent stock splits): William R.
Berkley 455,625; W. Robert Berkley, Jr.
33,750; Eugene G. Ballard 33,750; Ira S.
Lederman 33,750; Clement P. Patafio
8,438; and James G. Shiel 25,313; and an aggregate
of 396,563 RSUs were granted to 27 other officers of the Company
and its subsidiaries.
ADVISORY
VOTE ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, we are
submitting to our stockholders this advisory vote on the
compensation of our named executive officers, which gives
stockholders another mechanism to convey their views about our
compensation programs and policies. Although your vote on
executive compensation is not binding on the Board or the
Company, the Board values the views of our stockholders. The
Board and Compensation Committee will review the results of the
non-binding vote and consider them in addressing future
compensation policies and decisions.
As described in detail under the heading Compensation
Discussion and Analysis, we believe that our executive
compensation programs are unique and are designed to create a
strong
competitive advantage in the market both for retaining talent
and for creating long-term stockholder value. Specifically, we
incentivize our executives with a non-formulaic annual bonus
program, which provides the Compensation Committee with
flexibility to respond to market conditions on a real-time basis
and avoids creating counterproductive incentives for our
executives. Additionally, RSU awards for our NEOs contain a
mandatory deferral feature that delays settlement and delivery
of shares until the executives separation from service
with the Company, which promotes a long-term perspective on
performance. While no new LTIP awards were made in 2010, a new
award was approved at the December 2010 Committee meeting,
effective January 1, 2011. This program promotes our
long-term approach to compensation incentives, as well as our
emphasis on pay for performance, because LTIP awards remain
outstanding over a five-year period and have value only to the
extent that the Company experiences growth in book value.
Consistent with good corporate governance practices, we do not
provide our NEOs with employment agreements or cash severance in
the event of a termination of employment.
This past fiscal year remained challenging, and the insurance
industry continued to be very competitive. The Company performed
relatively well given the economic environment, and continued to
exceed the long-term performance of peer companies on many
fronts. Operationally, the Company continued to add business
units and finished the year with a strong balance sheet.
Operating earnings per share were flat over 2009, while net
income per share increased 56%. The Companys operating
return on equity was down from last year, our net income return
on equity increased to 12.5%, our combined ratio (reflecting our
underwriting profitability) continued to exceed industry norms,
and our book value per share increased to $26.26 from $22.97. In
light of these mixed results, annual cash incentive compensation
for our NEOs was flat compared to 2009. Additionally, we did not
increase base salaries for our NEOs in 2011 over 2010 levels. We
believe that these decisions support our goal of compensating
our executives in a manner that is commensurate with the
performance of the Company.
The vote on this resolution is not intended to address any
specific element of compensation; rather, the vote is intended
to provide our stockholders with the opportunity to approve, on
an aggregate basis and in light of our corporate performance,
the compensation program for our NEOs as described above. The
following resolution will be submitted for a stockholder vote at
our 2011 Annual Meeting:
RESOLVED, that the stockholders of the Company approve, on
a non-binding advisory basis, the compensation of the
Companys named executive officers listed in the 2010
Summary Compensation Table included in the proxy statement for
the 2011 Annual Meeting, as such compensation is disclosed
pursuant to the compensation disclosure rules of the Securities
and Exchange Commission, including the section titled
Compensation Discussion and Analysis, as well as the
compensation tables and other narrative executive compensation
disclosures thereafter.
The Board of Directors unanimously recommends a vote
FOR the adoption of the resolution above
approving the compensation of the Companys named executive
officers.
ADVISORY
VOTE ON FREQUENCY OF
SAY-ON-PAY
VOTE
Stockholders are being asked to vote on whether the stockholder
vote on the compensation of our named executive officers, as set
forth in the proposal above, should occur every one, two, or
three
years. We are providing our stockholders with an advisory vote
on the frequency of the stockholder vote on the compensation of
our named executive officers as required pursuant to
Section 14A of the Securities Exchange Act of 1934. This
advisory vote is another mechanism for stockholders to provide
input on our compensation programs. Although your vote on
whether the stockholder vote on the compensation of our named
executive officers, as set forth in the proposal above, should
occur every one, two, or three years is not binding on the Board
or the Company, the Board values the views of our stockholders.
The Board and Compensation Committee will review the results of
the vote and take them into consideration in determining how
often to conduct the stockholder vote on the compensation of our
named executive officers.
We believe that stockholders should have the opportunity to vote
on the compensation of our named executive officers every three
years, consistent with our Compensation Committees focus
on multi-year performance-based compensation, such as the LTIP,
and its value to the Companys stockholders, particularly
in light of the long-term nature of the Companys insurance
business. We believe that a vote every three years will provide
stockholders the ability to evaluate our compensation program
over a time period similar to the periods associated with our
compensation awards, allowing them to compare the Companys
compensation programs to the Companys long-term
performance. Additionally, our compensation programs do not
change much from year to year, such that we would consider it
superfluous to provide a
say-on-pay
vote more frequently than once every three years. The
Compensation Committee would similarly benefit from this longer
time period between advisory votes. Three years will give the
Compensation Committee sufficient time to fully analyze the
results of a
say-on-pay
vote, consider appropriate changes to the Companys
compensation programs as necessary and assess how these changes
have affected performance, while avoiding over-emphasis on
short-term variations in compensation and business results.
The following resolutions will be submitted for a stockholder
vote at our 2011 Annual Meeting:
RESOLVED, that the stockholders of the Company approve, on
a non-binding advisory basis, that the stockholder vote on the
compensation of the Companys named executive officers
listed in the annual proxy statement should occur EVERY
YEAR.
or
RESOLVED, that the stockholders of the Company approve, on
a non-binding advisory basis, that the stockholder vote on the
compensation of the Companys named executive officers
listed in the annual proxy statement should occur EVERY TWO
YEARS.
or
RESOLVED, that the stockholders of the Company approve, on
a non-binding advisory basis, that the stockholder vote on the
compensation of the Companys named executive officers
listed in the annual proxy statement should occur EVERY THREE
YEARS.
The Board of Directors unanimously recommends a vote
FOR the adoption, on an advisory basis, of
the resolution that the stockholder vote on the compensation of
the Companys named executive officers occur EVERY
THREE YEARS.
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, 2011. 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 appoint
auditors for the 2011 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 LLP for its professional services provided in 2010 and
2009 were as follows:
Type of Fees
2010
2009
Audit fees(1)
$
6,938,000
$
6,860,200
Audit-related fees(2)
295,000
448,200
Tax fees(3)
111,000
147,900
All other fees(4)
48,000
37,600
Total fees
$
7,392,000
$
7,493,900
(1)
Audit fees consist of fees the Company paid to KPMG LLP 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.
(4)
All other fees consist of fees for actuarial 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 2010 were approved by the Audit Committee in
accordance with this policy.
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, the
Companys independent registered public accounting firm for
2010, 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 the effectiveness of the Companys internal
control over financial reporting.
In this context, the Audit Committee has reviewed and discussed
with management and KPMG LLP the audited financial statements
for the year ended December 31, 2010 and KPMG LLPs
evaluation of the Companys internal control over financial
reporting. The Audit Committee has discussed with KPMG LLP the
matters that are required to be discussed by Statement on
Auditing Standards No. 61, as currently in effect
(Communication With Audit Committees). KPMG LLP has provided to
the Audit Committee the written disclosures and the letter
required by the applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountants communications with the audit committee
concerning independence and the Audit Committee has discussed
with KPMG LLP that firms independence. The Audit Committee
has concluded that KPMG LLPs provision of audit and
non-audit services to the Company and its affiliates are
compatible with KPMG LLPs 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, 2010 be included in our Annual Report on
Form 10-K
for 2010. 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, 2011.
Audit Committee
Mark L. Shapiro, Chairman
Ronald E. Blaylock
George G. Daly
April 4, 2011
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.
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 properly submitted
in time for voting, the shares represented thereby will be voted
as indicated therein and in this proxy statement.
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, 2010.
STOCKHOLDER
NOMINATIONS FOR BOARD MEMBERSHIP
AND OTHER PROPOSALS FOR 2012 ANNUAL MEETING
It is anticipated that the next Annual Meeting of Stockholders
after the one scheduled for May 17, 2011 will be held on or
about May 15, 2012. 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 2012 no earlier
than February 17, 2012 and no later than March 19,
2012. 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 2011 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 2012, such proposal must be received by the
Secretary of the Company by December 7, 2011 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.
The Companys (i) Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010;
(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 are available on our website at
www.wrberkley.comand are 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
VOTE BY INTERNET www.proxyvote.com Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 P.M. Eastern Time on May 16, 2011. Have your
proxy card in hand when you access the web site and follow the instructions to obtain your records
and to create an electronic voting instruction form. W. R. BERKLEY CORPORATION ELECTRONIC DELIVERY
OF FUTURE PROXY MATERIALS ATTN: IRA S. LEDERMAN If you would like to reduce the costs incurred by
our company in mailing proxy GENERAL COUNSEL AND SECRETARY 475 STEAMBOAT ROAD materials, you can
consent to receiving all future proxy statements, proxy cards GREENWICH,CT 06830 and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate that you agree to
receive or access proxy materials electronically in future years. VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
on May 16, 2011. Have your proxy card in hand when you call and then follow the instructions. VOTE
BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH
AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For
All To withhold authority to vote for any All All Except individual nominee(s), mark For All The
Board of Directors recommends you vote Except and write the number(s) of the nominee(s) on the
line below. FOR the following: 0 0 0 1. Election of Directors Nominees 01 Rodney A. Hawes, Jr. 02
Jack H. Nusbaum 03 Mark L. Shapiro The Board of Directors recommends you vote FOR the following
proposal: For Against Abstain 2 To consider and cast a non-binding advisory vote on a resolution
approving the compensation of the Companys executive 0 0 0 officers pursuant to the compensation
disclosure rules of the Securities and Exchange Commission, or say-on-pay vote. The Board of
Directors recommends you vote 3 YEARS on the following proposal: 3 years 2 years 1 year Abstain 3
To consider and cast a non-binding advisory vote on the frequency with which say-on-pay votes
should be held in the 0 0 0 0 future. The Board of Directors recommends you vote FOR the following
proposal: For Against Abstain 4 To ratify the appointment of KPMG LLP as the independent registered
public accounting firm for the Company for the fiscal 0 0 0 year ending December 31, 2011. NOTE: In
their discretion, the proxies are authorized to vote upon such other matters as may properly come
before the meeting. For address change/comments, mark here. 0 R1.0.0.11699 (see reverse for
instructions) 1 Please sign exactly as your name(s) appear(s) hereon. When signing as 0000098113
attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners
should each sign personally. All holders must sign. If a corporation or partnership, please sign in
full corporate or partnership name, by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date
Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual
Report, Notice and Proxy Statement is/ are available at www.proxyvote.com . W. R. BERKLEY
CORPORATION Annual Meeting of Stockholders May 17, 2011 1:00 PM This proxy is solicited by the
Board of Directors 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 17, 2011
at 1:00 p.m., and at any adjournment of such meeting. This proxy, when properly executed, will be
voted in the manner directed herein. If no such direction is made, this proxy will be voted in
accordance with the Board of Directors recommendations. R1.0.0.11699 Address change/comments: 2
0000098113 (If you noted any Address Changes and/or Comments above, please mark corresponding box
on the reverse side.) Continued and to be signed on reverse side