SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the Transition Period from ____ to ____.
Commission File Number 0-7849
Delaware 22-1867895
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 Steamboat Road, Greenwich, Connecticut 06830
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(Address of principal executive offices) (Zip Code)
(203) 629-3000
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(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Number of shares of common stock, $.20 par value, outstanding as of August 1, 2003: 55,427,393
Part I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
W. R. Berkley Corporation and Subsidiaries Consolidated Balance Sheets
(dollars in thousands)
June 30, December 31,
2003 2002
------------ ------------
(Unaudited)
Assets
Investments:
Cash and cash equivalents $ 1,099,232 $ 594,183
Fixed maturity securities 3,721,275 3,511,522
Equity securities available for sale 305,874 205,372
Equity securities trading account 238,085 165,642
Other investments 89,377 45,187
------------ ------------
Total investments 5,453,843 4,521,906
------------ ------------
Premiums and fees receivable 987,712 822,060
Due from reinsurers 782,687 734,687
Accrued investment income 45,765 46,334
Prepaid reinsurance premiums 238,198 164,284
Deferred policy acquisition costs 370,653 308,200
Real estate, furniture & equipment at cost, less accumulated depreciation 140,027 135,488
Deferred federal and foreign income taxes 10,003 20,585
Goodwill 59,021 59,021
Trading account receivable from brokers and clearing organizations 153,413 177,309
Other assets 62,935 41,449
------------ ------------
Total assets $ 8,304,257 $ 7,031,323
============ ============
Liabilities and Stockholders' Equity
Liabilities:
Reserves for losses and loss expenses $ 3,633,849 $ 3,167,925
Unearned premiums 1,725,064 1,390,246
Due to reinsurers 190,046 184,912
Trading securities sold but not yet purchased 77,967 36,115
Policyholders' account balances 48,847 42,707
Due to brokers and clearing organizations 68,060 --
Other liabilities 320,995 294,334
Debt 499,377 362,985
Trust preferred securities 193,316 198,251
------------ ------------
Total liabilities 6,757,521 5,677,475
------------ ------------
Minority interest 21,490 18,649
Stockholders' equity:
Preferred stock, par value $.10 per share:
Authorized 5,000,000 shares; issued and outstanding - none -- --
Common stock, par value $.20 per share:
Authorized 150,000,000 shares, issued and outstanding,
net of treasury shares, 55,404,998 and 55,223,448 shares 13,934 13,934
Additional paid-in capital 824,222 823,190
Retained earnings 781,904 623,651
Accumulated other comprehensive income 131,725 104,603
Treasury stock, at cost, 14,264,552 and 14,446,102 shares (226,539) (230,179)
------------ ------------
Total stockholders' equity 1,525,246 1,335,199
------------ ------------
Total liabilities and stockholders' equity $ 8,304,257 $ 7,031,323
============ ============
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See accompanying notes to consolidated financial statements.
W. R. Berkley Corporation and Subsidiaries Consolidated Statements of Operations
(Unaudited)
(dollars in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues:
Net premiums written $ 875,457 $ 601,095 $ 1,767,516 $ 1,235,088
Change in unearned premiums, net (68,989) (88,407) (260,922) (243,934)
----------- ----------- ----------- -----------
Premiums earned 806,468 512,688 1,506,594 991,154
Net investment income 50,421 44,564 102,181 88,716
Service fees 25,910 20,924 51,379 41,117
Realized investment gains (losses) 43,673 (8,383) 58,277 (3,424)
Foreign currency gains (losses) 44 (66) (1,194) (62)
Other income 441 208 1,133 320
----------- ----------- ----------- -----------
Total revenues 926,957 569,935 1,718,370 1,117,821
----------- ----------- ----------- -----------
Expenses:
Losses and loss expenses 514,157 336,515 958,043 647,116
Other operating expenses 258,160 184,883 489,013 360,326
Interest expense 13,273 11,330 25,368 22,465
----------- ----------- ----------- -----------
Total expenses 785,590 532,728 1,472,424 1,029,907
----------- ----------- ----------- -----------
Income before income taxes and minority interest 141,367 37,207 245,946 87,914
Income tax expense (44,230) (15,563) (77,216) (31,785)
Minority interest (1,297) 5,730 (1,187) 5,641
----------- ----------- ----------- -----------
Net income $ 95,840 $ 27,374 $ 167,543 $ 61,770
=========== =========== =========== ===========
Net income per share:
Basic $ 1.73 $ 0.55 $ 3.03 $ 1.23
=========== =========== =========== ===========
Diluted $ 1.65 $ 0.52 $ 2.90 $ 1.18
=========== =========== =========== ===========
Average shares outstanding:
Basic $ 55,343 $ 50,125 $ 55,296 $ 50,020
=========== =========== =========== ===========
Diluted $ 58,035 $ 52,399 $ 57,774 $ 52,304
=========== =========== =========== ===========
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See accompanying notes to consolidated financial statements.
W. R. Berkley Corporation and Subsidiaries Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
Six Months ended Year Ended
June 30, 2003 December 31, 2002
---------------- -----------------
(Unaudited)
Common stock:
Beginning of period $ 13,934 $ 12,991
Issuance of common stock -- 943
--------- ---------
End of period $ 13,934 $ 13,934
========= =========
Additional paid in capital:
Beginning of period $ 823,190 $ 654,936
Issuance of common stock 393 168,254
Restricted stock units earned 639 --
--------- ---------
End of period $ 824,222 $ 823,190
========= =========
Retained earnings:
Beginning of period $ 623,651 $ 467,185
Net income 167,543 175,045
Elimination of international reporting lag (1,776) --
Dividends to stockholders' (7,514) (18,579)
--------- ---------
End of period $ 781,904 $ 623,651
========= =========
Accumulated other comprehensive income:
Unrealized investment gains:
Beginning of period $ 114,664 $ 41,731
Net change in period 33,876 72,933
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End of period 148,540 114,664
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Currency translation adjustments:
Beginning of period (10,061) (4,391)
Net change in period (6,754) (5,670)
--------- ---------
End of period (16,815) (10,061)
--------- ---------
Total accumulated other comprehensive income $ 131,725 $ 104,603
========= =========
Treasury stock:
Beginning of period $(230,179) $(240,857)
Issuance under stock option plan 3,640 10,749
Purchase of common stock -- (71)
--------- ---------
End of period $(226,539) $(230,179)
========= =========
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See accompanying notes to consolidated financial statements.
W. R. Berkley Corporation and Subsidiaries Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
For the Six Months
Ended June 30,
--------------------------
2003 2002
----------- -----------
Cash flows provided by operating activities:
Net income $ 167,543 $ 61,770
Adjustments to reconcile net income to cash
flows provided by operating activities:
Minority interest 1,187 (5,641)
Change in reserves for losses
and loss expenses, net 429,198 120,071
Depreciation and amortization 11,032 8,840
Change in unearned premiums and
prepaid reinsurance premiums 260,904 236,037
Change in premiums and fees receivable (165,652) (156,261)
Change in federal and foreign income taxes 11,096 28,336
Change in deferred policy acquisition cost (62,453) (33,158)
Realized investment and foreign currency (gains) losses (57,083) 3,486
Other, net 647 (24,026)
----------- -----------
Net cash flows provided by operating activities
before trading account 596,419 239,454
Change in trading account securities (6,695) 173,288
----------- -----------
Net cash flows provided by operating activities 589,724 412,742
----------- -----------
Cash flows used in investing activities:
Proceeds from sales, excluding trading account:
Fixed maturity securities 661,975 374,818
Equity securities 35,036 13,282
Maturities and prepayments of fixed maturity securities 284,163 119,401
Cost of purchases, excluding trading account:
Fixed maturity securities (1,059,270) (1,026,010)
Equity securities (120,210) (94,477)
Other invested securities (41,097) 46,386
Change in balances due to/from security brokers 51,315 (15,672)
Net additions to real estate, furniture and equipment (14,568) (2,066)
Other, net -- (6,604)
----------- -----------
Net cash flows used in investing activities (202,656) (590,942)
----------- -----------
Cash flows provided by financing activities:
Net proceeds from issuance of debt 196,840 --
Repayment and repurchase of debt and trust preferred securities (65,750) (8,000)
Cash dividends (10,472) (8,571)
Net proceeds from stock options exercised 4,672 6,534
Other, net (7,309) 21,161
----------- -----------
Net cash flows provided by financing activities 117,981 11,124
----------- -----------
Net increase (decrease) in cash and cash equivalents 505,049 (167,076)
Cash and cash equivalents at beginning of year 594,183 534,086
----------- -----------
Cash and cash equivalents at end of period $ 1,099,232 $ 367,010
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 21,132 $ 22,725
=========== ===========
Federal income taxes paid, net $ 65,909 $ 3,448
=========== ===========
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See accompanying notes to consolidated financial statements.
W. R. Berkley Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements June 30, 2003
1. GENERAL
The accompanying consolidated financial statements should be read in conjunction with the following notes and with the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Reclassifications have been made in the 2002 financial statements as originally reported to conform them to the presentation of the 2003 financial statements.
In the fourth quarter of 2002, the Company modified the presentation of reinsurance assumed from Lloyd's syndicates to reflect the Company's share of the reinsurance and brokerage costs paid by the syndicates. Previously, these amounts were netted against assumed premiums. Premiums and expenses for the first three quarters of 2002 were reclassified to conform with this presentation. There was no effect from this change on net income or net income per share.
The federal and foreign income tax provision has been computed based on the Company's estimated annual effective tax rate, which differs from the federal income tax rate of 35% principally because of tax-exempt investment income.
Basic earnings per share data is based upon the weighted average number of shares outstanding during the period. Diluted earnings per share data reflects the potential dilution that would occur if options granted under employee stock-based compensation plans were exercised and restricted stock units earned were delivered.
In the opinion of management, the financial information reflects all adjustments which are necessary for a fair presentation of financial position and results of operations for the interim periods. Seasonal weather variations affect the severity and frequency of losses sustained by the insurance and reinsurance subsidiaries. Although the effect on the Company's business of such natural catastrophes as tornadoes, hurricanes, hailstorms and earthquakes is mitigated by reinsurance, they nevertheless can have a significant impact on the results of any one or more reporting periods.
2. COMPREHENSIVE INCOME
The following is a reconciliation of comprehensive income (dollars in thousands):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net income $ 95,840 $ 27,374 $ 167,543 $ 61,770
Other comprehensive income:
Unrealized holding gains (losses) on investments, net of
taxes 10,755 38,038 (3,278) 17,277
Reclassification for realized gains included in net
income, net of taxes 28,287 (4,103) 37,154 (877)
--------- --------- --------- ---------
Unrealized investment gains, net of taxes 39,042 33,935 33,876 16,400
Currency translation adjustments, net of
taxes (4,656) 5,029 (6,754) 5,001
--------- --------- --------- ---------
Other comprehensive income 34,386 38,964 27,122 21,401
--------- --------- --------- ---------
Comprehensive income $ 130,226 $ 66,338 $ 194,665 $ 83,171
========= ========= ========= =========
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W. R. Berkley Corporation and Subsidiaries Notes to Unaudited Consolidated Financial Statements (Continued) June 30, 2003
3. STOCK-BASED COMPENSATION
During the first quarter of 2003, the Company adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, effective as of January 1, 2003. Under the prospective method of adoption selected by the Company, the fair value recognition provisions of FASB 123 are applied to all employee awards granted, modified or settled after January 1, 2003. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period (dollars in thousands, except per share data).
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net income, as reported $ 95,840 $ 27,374 $ 167,543 $ 61,770
Add: Stock-based compensation expense
included in reported net income, net of tax 10 -- 12 --
Deduct: Total stock-based employee
compensation expense under fair value based
method for all awards, net of tax
(1,196) (1,133) (2,390) (2,267)
----------- ----------- ----------- -----------
Pro forma net income $ 94,654 $ 26,241 $ 165,165 $ 59,503
=========== =========== =========== ===========
Earnings per share:
Basic - as reported $ 1.73 $ 0.55 $ 3.03 $ 1.23
Basic - pro forma $ 1.71 $ 0.52 $ 2.99 $ 1.19
Diluted - as reported $ 1.65 $ 0.52 $ 2.90 $ 1.18
Diluted - pro forma $ 1.63 $ 0.50 $ 2.86 $ 1.14
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On April 4, 2003, 300,000 Restricted Stock Units (RSU) were awarded to officers of the Company and its subsidiaries. Each RSU represents the right to receive one share of common stock, conditioned on the employee's satisfying certain requirements outlined in the award agreement. The RSU's vest after five years of continuous employment. The Company determines the cost of the RSU's awarded based on the market value of the stock at the time of the award. The cost is recognized as compensation expense as the units are earned over the vesting period. The Company recognized compensation expense related to RSU's of $639,000 in the second quarter of 2003. The remaining unearned compensation for outstanding RSU's was $12,141,000 as of June 30, 2003.
W. R. Berkley Corporation and Subsidiaries Notes to Unaudited Consolidated Financial Statements (Continued) June 30, 2003
4. INVESTMENTS
The cost, fair value and carrying value of fixed maturity securities and equity securities available for sale are as follows (dollars in thousands):
Gross Gross
Unrealized Unrealized Fair Carrying
Cost (a) Gain Loss Value Value
---------- ---------- ---------- ---------- ----------
June 30, 2003
Fixed maturity securities:
Held to maturity $ 190,133 $ 21,938 $ (83) $ 211,988 $ 190,133
Available for sale 3,320,183 215,139 (4,180) 3,531,142 3,531,142
---------- ---------- ---------- ---------- ----------
Total $3,510,316 $ 237,077 $ (4,263) $3,743,130 $3,721,275
========== ========== ========== ========== ==========
Equity securities available
for sale $ 287,778 $ 21,414 $ (3,318) $ 305,874 $ 305,874
December 31, 2002
Fixed maturity securities:
Held to maturity $ 205,856 $ 21,861 $ (107) $ 227,610 $ 205,856
Available for sale 3,129,993 184,751 (9,078) 3,305,666 3,305,666
---------- ---------- ---------- ---------- ----------
Total $3,335,849 $ 206,612 $ (9,185) $3,533,276 $3,511,522
========== ========== ========== ========== ==========
Equity securities available
for sale $ 203,388 $ 8,232 $ (6,248) $ 205,372 $ 205,372
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(a) Adjusted as necessary for amortization of premium or discount
5. REINSURANCE CEDED
The Company reinsures a portion of its exposures principally to reduce its net liability on individual risks and to protect against catastrophic losses. The following amounts arising under reinsurance ceded contracts have been deducted in arriving at the amounts reflected in the statement of operations (dollars in thousands):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
2003 2002 2003 2002
--------- -------- -------- --------
Ceded premiums earned:
Aggregate reinsurance agreement:
Individual losses $ 31,362 $ 23,496 $ 59,769 $ 39,172
Aggregate losses 5,000 6,250 10,000 12,500
--------- -------- -------- --------
Total 36,362 29,746 69,769 51,672
--------- -------- -------- --------
Other reinsurance contracts 84,119 76,344 181,760 149,977
--------- -------- -------- --------
Total $1120,481 $106,090 $251,529 $201,649
========= ======== ======== ========
Ceded losses incurred:
Aggregate reinsurance agreement:
Individual losses $ 26,528 $ 13,623 $ 46,929 $ 21,977
Aggregate losses 9,000 11,250 18,000 22,500
--------- -------- -------- --------
Total 35,528 24,873 64,929 44,477
--------- -------- -------- --------
Other reinsurance contracts 52,181 38,398 103,155 80,364
--------- -------- -------- --------
Total $ 87,709 $ 63,271 $168,084 $124,841
========= ======== ======== ========
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W. R. Berkley Corporation and Subsidiaries Notes to Unaudited Consolidated Financial Statements (Continued) June 30, 2003
5. REINSURANCE CEDED (continued)
Effective January 1, 2001, the Company entered into a multi-year aggregate reinsurance agreement that provides two types of reinsurance coverage. The first type of coverage provides protection for individual losses on an excess of loss or quota share basis, as specified for each class of business covered by the agreement. The second type of coverage provides aggregate accident year protection for the Company's reinsurance segment for loss and loss adjustment expenses incurred above a certain level. Loss recoveries are subject to annual limits and an aggregate limit over the contract period. The agreement contains a profit sharing provision under which the Company can recover a portion of premiums paid to the reinsurer if certain profit conditions are met. Based on its estimate of expected profits under the contract, the Company accrued return premiums of $18 million and $23 million for the second quarter and first six months of 2003, respectively.
Certain of the Company's reinsurance agreements, including the aggregate reinsurance agreement, are structured on a funds held basis, whereby the Company retains some or all of the ceded premiums in a separate account that is used to fund ceded losses as they become due from the reinsurance company. Interest is credited to reinsurers for funds held on their behalf at rates ranging from 7.0% to 8.9% of the account balances, as defined under the agreements. Interest credited to reinsurers, which is reported as a reduction of net investment income, was $9 million and $16 million for the second quarter and first six months of 2003, respectively, and $5 million and $9 million for the corresponding 2002 periods. As of June 30, 2003 and December 31, 2002, funds held by the Company under the aggregate reinsurance agreement exceeded the amount recoverable from the reinsurer for losses and loss adjustment expenses.
6. INDUSTRY SEGMENTS
The Company's operations are presently conducted through five segments of the insurance business: specialty lines of insurance; alternative markets; reinsurance; regional property casualty insurance; and international. The specialty segment's business is principally within the excess and surplus lines, professional liability, commercial transportation and surety markets. The Company's alternative markets segment offers workers' compensation insurance on an excess and primary basis and provides fee-based services to help clients develop and administer self-insurance programs. The Company's reinsurance segment specializes in underwriting property casualty reinsurance on both a treaty and facultative basis. The regional property casualty insurance segment provides commercial property casualty insurance products. The international segment offers personal and commercial property casualty insurance in Argentina and savings and life products in the Philippines. During 2001, the Company discontinued its regional personal lines business and the alternative markets division of its reinsurance segment. These discontinued businesses are reported collectively as a separate business segment.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Realized investment and foreign currency gains and losses are not allocated to segments. Income tax expense and benefits are calculated based upon the Company's overall effective tax rate. Summary financial information about the Company's operating segments is presented in the following table. Income (loss) before income taxes by segment consists of revenues less expenses related to the respective segment's operations, including allocated investment income. Identifiable assets by segment are those assets used in or allocated to the operation of each segment.
W. R. Berkley Corporation and Subsidiaries Notes to Unaudited Consolidated Financial Statements (Continued) June 30, 2003
6. INDUSTRY SEGMENTS (continued)
Revenues
-----------------------------------------------
Earned Investment Pre-Tax Net
(dollars in thousands) Premiums Income Other Total Income Income
--------- ---------- --------- --------- --------- ---------
For the three months ended June 30, 2003:
Specialty $ 271,333 $ 15,935 $ -- $ 287,268 $ 54,756 $ 36,897
Alternative Markets 106,282 9,536 25,910 141,728 22,415 14,735
Reinsurance 196,632 12,744 -- 209,376 10,460 7,237
Regional 214,089 10,873 -- 224,962 34,071 22,380
International 18,132 1,662 -- 19,794 1,767 943
Discontinued Business -- -- -- -- -- --
Corporate and
eliminations -- (329) 441 112 (25,819) (14,639)
Realized gains -- -- 43,717 43,717 43,717 28,287
--------- ---------- --------- --------- --------- ---------
Consolidated $ 806,468 $ 50,421 $ 70,068 $ 926,957 $ 141,367 $ 95,840
========= ========== ========= ========= ========= =========
For the three months ended June 30, 2002:
Specialty (1) $ 174,053 $ 12,316 $ -- $ 186,369 $ 35,496 $ 22,532
Alternative Markets 51,487 9,207 20,816 81,510 13,749 9,380
Reinsurance (1) 82,259 10,502 (2) 92,759 2,635 4,115
Regional 172,062 11,186 -- 183,248 18,565 9,334
International 20,206 711 (4) 20,913 (800) (1,104)
Discontinued Business 12,621 1,147 -- 13,768 (4,600) (2,990)
Corporate and
eliminations -- (505) 322 (183) (19,389) (9,790)
Realized gains -- -- (8,449) (8,449) (8,449) (4,103)
--------- ---------- --------- --------- --------- ---------
Consolidated $ 512,688 $ 44,564 $ 12,683 $ 569,935 $ 37,207 $ 27,374
========= ========== ========= ========= ========= =========
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Revenues
-------------------------------------------------------
Earned Investment Pre-Tax Net
(dollars in thousands) Premiums Income Other Total Income Income
----------- ----------- ----------- ----------- ----------- -----------
For the six months ended June 30, 2003:
Specialty $ 512,960 $ 32,129 $ -- $ 545,089 $ 103,297 $ 68,352
Alternative Markets 189,256 19,063 51,379 259,698 44,364 29,480
Reinsurance 359,109 26,218 -- 385,327 20,129 13,961
Regional 412,294 22,152 -- 434,446 66,266 43,843
International 32,975 3,081 -- 36,056 3,002 1,570
Discontinued Business -- -- -- -- -- --
Corporate and
eliminations -- (462) 1,133 671 (48,195) (26,817)
Realized gains -- -- 57,083 57,083 57,083 37,154
----------- ----------- ----------- ----------- ----------- -----------
Consolidated $ 1,506,594 $ 102,181 $ 109,595 $ 1,718,370 $ 245,946 $ 167,543
=========== =========== =========== =========== =========== ===========
For the six months ended June 30, 2002:
Specialty (1) $ 324,475 $ 24,426 $ -- $ 348,901 $ 55,875 $ 36,245
Alternative Markets 96,824 17,961 40,842 155,627 27,981 18,865
Reinsurance (1) 146,838 20,684 (4) 167,518 10,826 10,357
Regional 328,643 21,207 -- 349,850 41,000 24,490
International 59,390 2,163 -- 61,553 (534) (1,340)
Discontinued Business 34,984 3,016 -- 38,000 (4,654) (3,025)
Corporate and
eliminations -- (741) 599 (142) (39,094) (22,945)
Realized gains -- -- (3,486) (3,486) (3,486) (877)
----------- ----------- ----------- ----------- ----------- -----------
Consolidated $ 991,154 $ 88,716 $ 37,951 $ 1,117,821 $ 87,914 $ 61,770
=========== =========== =========== =========== =========== ===========
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(1) During the first quarter of 2003, management responsibility and financial reporting for Vela Insurance Services, Inc., an excess and surplus lines underwriting manager, were transferred from the reinsurance segment to the specialty segment. Segment results for the prior period were restated to reflect this change.
W. R. Berkley Corporation and Subsidiaries Notes to Unaudited Consolidated Financial Statements (Continued) June 30, 2003
6. INDUSTRY SEGMENTS (continued)
Identifiable assets by segment are as follows (dollars in thousands):
June 30, December 31,
2003 2002
----------- ------------
Specialty $ 2,687,765 $ 2,271,105
Alternative Markets 1,335,346 1,197,977
Reinsurance 2,909,861 2,431,429
Regional 1,895,334 1,590,913
International 146,756 126,528
Discontinued Business 99,086 162,754
Corporate other and eliminations (769,891) (749,383)
----------- ------------
Consolidated $ 8,304,257 $ 7,031,323
=========== ============
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7. DEBT
In February 2003, the Company issued $200 million aggregate principal amount of 5.875% senior notes due February 2013. The notes were issued at 99.07% of their face value amount and the net proceeds after expenses were $196,840,000.
During, the first quarter of 2003, the Company repaid $35,793,000 of 6.5% senior subordinated notes and $25,000,000 of 6.71% senior notes upon their respective maturities.
8. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES
A subsidiary of the Company has a pending arbitration proceeding pertaining to the interpretation of the contract terms in two reinsurance agreements. The reinsurer's interpretation of the contract terms would reduce the amount recoverable from the reinsurer by approximately $49 million as of June 30, 2003. Although the ultimate outcome of this matter cannot be determined, management believes that the Company's interpretation of these agreements is correct and is vigorously pursuing this matter in arbitration.
There is a pending arbitration pertaining to reinsurance contract coverage issues where a subsidiary of the Company is the assuming reinsurer. Based on currently available information, the Company believes that the resolution of this pending arbitration will not have a material effect on its financial condition or results of operations. However, if this arbitration is decided adversely to the Company, the Company's potential exposure, in excess of the amount reserved, is up to $9 million, after tax.
The Company's subsidiaries are subject to other disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company's estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.
W. R. Berkley Corporation and Subsidiaries Notes to Unaudited Consolidated Financial Statements (Continued) June 30, 2003
9. ACCOUNTING CHANGES
The Company adopted Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, which clarifies controlling interest. The adoption of Interpretation 46 did not have any impact on the Company's results of operations or financial condition.
In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liability and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. One requirement under the Statement is that trust preferred securities to be presented as liabilities. The Company elected to adopt Statement 150 in the second quarter of 2003, and accordingly, trust preferred securities have been reclassified to liabilities in the accompanying consolidated balance sheet. There was no impact from the adoption of Statement 150 on the consolidated statement of operations.
10. SUBSEQUENT EVENT
In August 2003, the Company's board of directors approved a 3-for-2 common stock split to be paid in the form of a common stock dividend on August 27, 2003 to holders of record on August 18, 2003. The per share information in this 10-Q has not been adjusted to reflect this stock split.
During July 2003 the Company contributed approximately $107 million for an 80% interest in a newly formed U.K. insurance company, W. R. Berkley Insurance (Europe), Limited. The remaining 20% of W. R. Berkley Insurance (Europe), Limited is owned by Kiln plc.
11. SAFE HARBOR STATEMENT
This is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2003 and beyond, are based upon the Company's historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to, the cyclical nature of the property casualty industry, the long-tail and potentially volatile nature of the reinsurance business, product demand and pricing, claims development and the process of estimating reserves, the uncertain nature of damage theories and loss amounts, the ultimate results of the various pending legal and arbitration proceedings, the increased level of our retention, natural and man-made catastrophic losses, including as a result of terrorist activities, the impact of competition, the availability of reinsurance, the ability of our reinsurers to pay reinsurance recoverables owed to us, investment results and potential impairment of invested assets, exchange rate and political risks, legislative and regulatory developments, changes in the ratings assigned to us by ratings agencies, our exposure for terrorist acts, the availability of dividends from our insurance company subsidiaries, our successful integration of acquired companies or investment in new insurance ventures, our ability to attract and retain qualified employees, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These risks could cause actual results of the industry or our actual results for the year 2003 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Forward-looking statements speak only as of the date on which they are made.
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES
The notes to the Company's financial statements, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, discuss its significant accounting policies. Management considers certain of these policies to be critical to the portrayal of the Company's financial condition and results since they require management to establish estimates based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting measurements.
RESERVES FOR LOSSES AND LOSS EXPENSES The Company maintains reserves for losses and loss expenses to cover its estimated liability for unpaid claims, including legal and other fees, as well as a portion of its general expenses, for reported and unreported claims incurred as of the end of each accounting period. Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and administration of claims will cost. These estimates, which generally involve actuarial projections, are based on management's assessment of facts and circumstances then known, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties which are beyond the Company's control. The variables described above are affected by both internal and external events, such as changes in claims handling procedures, inflation, judicial and litigation trends and legislative changes. Additionally, there may be a significant delay between the occurrence of the insured event and the time it is reported to the Company.
The inherent uncertainties of estimating reserves are greater for certain types of liabilities, where the various considerations affecting these types of claims are subject to change and long periods of time may elapse before a definitive determination of liability is made. Reserve estimates are continually refined in an ongoing process as experience develops and further claims are reported and settled. Adjustments to reserves are reflected in the results of the periods in which such estimates are changed. Because setting reserves is inherently uncertain, the Company cannot assure that its current reserves will prove adequate in light of subsequent events. Should the Company need to increase its reserves, its net income for the period will decrease by a corresponding amount.
RESULTS OF OPERATIONS FOR THE FIRST SIX MONTHS OF 2003 COMPARED TO THE FIRST SIX MONTHS OF 2002
The Company reported net income of $168 million, or $2.90 per share, for the six months ended June 30, 2003 compared with $62 million, or $1.18 per share, for the corresponding 2002 period. Following are the components of net income for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002
--------- ---------
Underwriting income (1) $ 125,211 $ 36,072
Insurance services 10,651 6,984
Net investment income 102,181 88,716
Interest and other expenses (49,180) (40,372)
Realized investment and foreign currency gains (losses) 57,083 (3,486)
Income taxes and minority interest (78,403) (26,144)
--------- ---------
Net income $ 167,543 $ 61,770
========= =========
|
(1) Represents premiums earned less loss, loss expenses and underwriting expenses incurred.
UNDERWRITING Following is a summary of underwriting results for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---------- ------------- --------
Gross premiums written $2,073,968 $ 1,505,211 38%
Net premiums written 1,767,516 1,235,088 43%
Premiums earned 1,506,594 991,154 52%
Underwriting income 125,211 36,072
Loss ratio (1) 63.6% 65.3%
Expense ratio (2) 28.1% 31.1%
Combined ratio 91.7% 96.4%
|
(1) Represents losses and loss expenses incurred expressed as a percentage of premiums earned.
(2) Represents underwriting expenses expressed as a percentage of premiums earned.
The Company's operations are presently conducted through five segments:
specialty lines of insurance, alternative markets, reinsurance, regional
property casualty insurance, and international. In addition, the Company reports
the run-off of its discontinued personal lines and alternative markets
reinsurance business as a separate business segment.
During the first quarter of 2003, management responsibility and financial reporting for Vela Insurance Services, Inc., an excess and surplus lines underwriting manager, were transferred from the reinsurance segment to the specialty segment. Segment result for the prior period were restated to reflect this change. Additional information for the business segments follows.
SPECIALTY The specialty segment provides insurance products and services principally to the excess and surplus lines, professional liability, commercial transportation and surety markets. Following is a summary of underwriting results for the specialty segment for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
--------- ---------- --------
Gross premiums written $ 670,242 $ 470,931 42%
Net premiums written 607,784 412,193 47%
Premiums earned 512,960 324,475 58%
Underwriting income 71,168 31,449
Loss ratio 61.6% 62.3%
Expense ratio 24.5% 28.0%
Combined ratio 86.1% 90.3%
|
Net premiums written in 2003 increased by 47% compared with 2002 as a result of higher prices as well as new business. Net premiums written increased 45% for the Company's three excess and surplus lines companies, 52% for commercial transportation business and 39% for Monitor Liability Managers, Inc., which specializes in directors' and officers' and lawyers professional liability business. Net premiums written in 2003 also include $14 million from the Company's new underwriting unit, Berkley Medical Excess Underwriters, LLC.
The 2003 loss ratio decreased by 0.7 percentage points to 61.6%. The improvement was primarily a result of higher prices and more favorable terms and conditions for current business, partially offset by prior year reserve development. The 2003 expense ratio decreased by 3.5 percentage points to 24.5% as a result of a 58% increase in earned premiums with no significant increase in expenses other than commissions and premium taxes.
ALTERNATIVE MARKETS The alternative markets segment offers workers' compensation insurance on an excess and primary basis and provides fee-based services to help clients develop and administer self-insurance programs. Following is a summary of underwriting results for the alternative markets segment for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---- ---- --------
Gross premiums written $ 271,677 $ 146,040 86%
Net premiums written 227,905 126,637 80%
Premiums earned 189,256 96,824 95%
Underwriting income 14,650 3,040
Loss ratio 67.7% 67.5%
Expense ratio 24.5% 29.4%
Combined ratio 92.2% 96.9%
|
Net premiums written in 2003 increased by 80% compared with 2002. The increase reflects higher prices as well as an increase in policies-in-force for both primary and excess workers' compensation business. The expense ratio decreased by 4.9 percentage points to 24.5% due to a 95% increase in premiums earned with no significant increase in expenses other than commissions and premium taxes.
Following is a summary of insurance services results for the alternative markets segment for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---- ---- --------
Service revenues $ 51,379 $ 40,842 26%
Service expenses (40,728) (33,858) 20%
-------- --------
Service income before taxes $ 10,651 $ 6,984 53%
======== ========
|
Service revenues in 2003 increased 26% compared with 2002 primarily as a result of an increase in service fees for managing assigned risk plans in ten states. Service income before taxes increased 53% compared with 2002 due to revenues increasing at a greater rate than expenses.
REINSURANCE The Company's reinsurance segment specializes in underwriting property, casualty and surety reinsurance on both a treaty and facultative basis. Following is a summary of underwriting results for the reinsurance segment for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---- ---- --------
Gross premiums written $ 505,754 $ 342,732 48%
Net premiums written 421,876 264,699 59%
Premiums earned 359,109 146,838 145%
Underwriting loss (6,044) (8,691)
Loss ratio 71.6% 72.5%
Expense ratio 30.1% 33.4%
Combined ratio 101.7% 105.9%
|
Net premiums written in 2003 increased by 59% compared with 2002 as a result of higher prices and new business. Net premiums written increased 102% to $117 million for facultative reinsurance, 32% to $114 million for Lloyd's reinsurance, 49% to $135 million for standard treaty business and 91% to $56 million for the other reinsurance units, Berkley Capital Underwriters, LLC and Berkley Underwriting Partners, LLC. Net premiums written in 2003 also include $21 million from the Company's new direct facultative underwriting unit, B F Re Underwriters, LLC. Premiums earned in 2003 increased 145% compared with 2002, primarily as a result of substantial growth in net written premiums during 2002.
The 2003 loss ratio decreased 0.9 percentage points to 71.6%. The decrease reflects the improved results for the current accident year as a result of higher prices for both treaty and facultative risks which was offset by the impact of reserve development on prior years. The 2003 and 2002 underwriting results also reflect loss recoveries under the Company's aggregate reinsurance agreement. (See Note 7 of "Notes to Consolidated Financial Statements".) The 2003
expense ratio decreased 3.3 percentage points to 30.1% primarily as a result of a shift in the mix of business and increased volume.
REGIONAL The regional property casualty insurance segment principally provides commercial property casualty insurance products. Following is a summary of underwriting results for the regional segment for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---- ---- --------
Gross premiums written $589,829 $ 475,005 24%
Net premiums written 475,979 376,358 26%
Premiums earned 412,294 328,643 25%
Underwriting income 44,114 19,793
Loss ratio 58.1% 62.5%
Expense ratio 31.2% 31.5%
Combined ratio 89.3% 94.0%
|
Net premiums written in 2003 increased by 26.0% compared with 2002. The increase reflects higher prices across all four regional units. The 2003 loss ratio decreased by 4.4 percentage points to 58.1% primarily as a result of higher prices in 2002 and 2003. Weather-related losses for the regional segment were $21 million in 2003 compared with $22 million in 2002.
INTERNATIONAL The international segment offers personal and commercial property casualty insurance in Argentina and savings and life products in the Philippines. Following is a summary of underwriting results for the international segment for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---- ---- --------
Gross premiums written $ 36,466 $ 60,191 -39%
Net premiums written 33,972 52,256 -35%
Premiums earned 32,975 59,390 -44%
Underwriting income (loss) 1,323 (1,849)
Loss ratio 52.4% 58.7%
Expense ratio 43.6% 44.4%
Combined ratio 96.0% 103.1%
|
Net premiums written in 2003 decreased by 35% compared with 2002. The decrease was the result of the withdrawal from life insurance business in Argentina and of lower exchange rates for the Argentine peso in 2003. The combined ratio decreased 7.1 percentage points to 96.0% as a result of a reduction in costs relating to the withdrawal from life insurance business in Argentina and of improvement in underwriting results for the Argentine property casualty business.
DISCONTINUED The discontinued segment consists of regional personal lines and the alternative markets reinsurance, which were discontinued in 2001. Following is a summary of underwriting results for the discontinued segment for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002
---- ----
Gross premiums written $ -- $ 10,312
Net premiums written -- 2,945
Premiums earned -- 34,984
Underwriting loss -- (7,670)
|
The personal lines and alternative markets reinsurance business were discontinued in 2001 and there was no activity in the first six months of 2003.
NET INVESTMENT INCOME Following is a summary of investment activity for the six months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---- ---- --------
Net investment income $ 102,181 $ 88,716 15%
Average invested assets 4,867,379 3,664,756 33%
Annualized effective yield (1) 4.9% 5.4%
Realized investment and foreign
Currency gains (losses) 57,083 (3,486)
Change in unrealized gains 51,499 15,008
|
(1) Represents net investment income (before interest in funds held) expressed as a percentage of average invested assets.
Net investment income in 2003 increased 15% compared with 2002. Average invested assets increased 33% compared with 2002 as a result of cash flow from operations and of the proceeds from a secondary stock offering in 2002 and a debt offering in 2003. The average yield on investments was 4.9% in 2003 compared with 5.4% in 2002. The lower yield in 2003 reflects the decrease in general interest rate levels as well as an increase in the portion of the portfolio invested in cash and cash equivalents and municipal securities.
The carrying value of the Company's investment portfolio as of June 30, 2003 and June 30, 2002 is as follows (dollars in thousands):
June 30, December 31,
2003 2002
----------- -----------
Cash and cash equivalents $ 1,099,232 $ 594,183
Fixed maturities 3,721,275 3,511,522
Equity securities available for sale 305,874 205,372
Trading account(1) 313,531 306,836
Other investments 89,377 45,187
Due to brokers and clearing
organizations (59,678) --
----------- -----------
Total $ 5,469,611 $ 4,663,100
=========== ===========
|
(1) Represents trading account equity securities plus trading account receivables from brokers and clearing organizations less trading account equity securities sold but not yet purchased.
At June 30, 2003, as compared with December 31, 2002, the fixed maturity portfolio mix was as follows: U.S. Government securities were 15% (20% in 2002); state and municipal securities were 43% (29% in 2002); corporate securities were 11% (19% in 2002); mortgage-backed securities were 26% (27% in 2002); foreign bonds were 5% in 2003 and 2002.
INTEREST AND OTHER EXPENSES Interest and other expenses represents interest expense, corporate expenses and other miscellaneous income and expenses. Interest and other expenses were $49 million in 2003 compared with $40 million in 2002. The increase reflects higher general and administrative expenses and an increase in interest expense of $3 million as a result of a $200 million debt offering in February 2003.
REALIZED GAINS Realized investment and foreign currency gains of $57.1 million resulted primarily from the sale of fixed income securities in order to decrease the duration of the portfolio and to increase the portion of the portfolio invested in municipal securities.
INCOME TAXES AND MINORITY INTEREST The effective income tax rate was 31% in 2003 and 36% in 2002. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income. Minority interest represents the portion of the Company's international operations held by outside investors.
OPERATING RESULTS FOR THE SECOND QUARTER OF 2003 COMPARED TO THE SECOND QUARTER OF 2002
The Company reported net income of $96 million, or $1.65 per share, for the three months ended June 30, 2003 compared with $27 million, or $.52 per share, for the corresponding 2002 period. Following are the components of net income for the three months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002
---- ----
Underwriting income $ 68,133 $ 17,431
Insurance services 4,999 3,534
Net investment income 50,421 44,564
Interest and other expenses (25,903) (19,873)
Realized investment and foreign currency gains (losses) 43,717 (8,449)
Income taxes and minority interest (45,527) (9,833)
-------- --------
Net income $ 95,840 $ 27,374
======== ========
|
UNDERWRITING Following is a summary of underwriting results for the three months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
---- ---- --------
SPECIALTY
Gross premiums written $ 348,936 $ 252,995 38%
Net premiums written 321,083 219,764 46%
Premiums earned 271,333 174,053 56%
Underwriting income 38,821 23,182
Loss ratio 61.5% 58.9%
Expense ratio 24.1% 27.8%
Combined ratio 85.6% 86.7%
ALTERNATIVE MARKETS
Gross premiums written $ 101,496 $ 47,867 112%
Net premiums written 90,723 42,057 116%
Premiums earned 106,282 51,487 106%
Underwriting income 7,880 1,008
Loss ratio 68.1% 68.1%
Expense ratio 24.5% 30.0%
Combined ratio 92.6% 98.1%
REINSURANCE
Gross premiums written $ 243,362 $ 175,789 38%
Net premiums written 207,077 135,410 53%
Premiums earned 196,632 82,259 139%
Underwriting loss (2,284) (7,284)
Loss ratio 71.3% 74.9%
Expense ratio 29.8% 34.0%
Combined ratio 101.1% 108.9%
REGIONAL
Gross premiums written $ 293,971 $ 236,686 24%
Net premiums written 238,225 192,655 24%
Premiums earned 214,089 172,062 24%
Underwriting income 23,198 7,377
Loss ratio 58.2% 64.3%
Expense ratio 31.0% 31.4%
Combined ratio 89.2% 95.7%
|
2003 2002 % Change
---------- ------------ --------
INTERNATIONAL
Gross premiums written $ 19,730 $ 13,973 41%
Net premiums written 18,349 11,706 57%
Premiums earned 18,132 20,206 -10%
Underwriting income (loss) 518 (1,105)
Loss ratio 55.1% 56.0%
Expense ratio 42.1% 49.5%
Combined ratio 97.2% 105.5%
DISCONTINUED
Gross premiums written $ -- $ 1,693
Net premiums written -- (497)
Premiums earned -- 12,621
Underwriting loss -- (5,747)
TOTAL
Gross premiums written $1,007,495 $ 729,003 38%
Net premiums written 875,457 601,095 46%
Premiums earned 806,468 512,688 57%
Underwriting income 68,133 17,431
Loss ratio 63.8% 65.6%
Expense ratio 27.8% 31.0%
Combined ratio 91.6% 96.6%
|
Net premiums written in 2003 increased 46% as a result of price increases and new business as discussed above. The 2003 loss ratio decreased by 1.8 percentage points to 63.8% as a result of higher prices and more favorable terms and conditions for current business as discussed above. The 2003 expense ratio decreased 3.2 percentage points to 27.8% as a result of a 57% increase in earned premiums compared with a 41% increase in underwriting expenses.
NET INVESTMENT INCOME Following is a summary of investment activity for the three months ended June 30, 2003 and 2002 (dollars in thousands):
2003 2002 % Change
----------- ----------- ---------
Net investment income $ 50,421 $ 44,564 13%
Average invested assets 5,055,899 3,736,254 35%
Annualized effective yield 4.7% 5.4%
Realized investment and foreign
Currency gains (losses) 43,717 (8,449)
|
Net investment income in 2003 increased 13% compared with 2002. Average invested assets increased 35% compared with 2002 as a result of cash flow from operations and of the proceeds from a secondary stock offering in 2002 and a debt offering in 2003. The average yield on investments was 4.7% in 2003 compared with 5.4% in 2002. The lower yield in 2003 reflects the decrease in general interest rate levels as well as an increase in the portion of the portfolio invested in cash and cash equivalents and municipal securities.
INTEREST AND OTHER EXPENSES Interest and other expenses represents interest expense, corporate expenses and other miscellaneous income and expenses. Interest and other expenses were $26 million in 2003 compared with $20 million in 2002. The increase reflects higher general and administrative expenses and an increase in interest expense as a result of a $200 million debt offering in February 2003.
REALIZED GAINS Realized investment and foreign currency gains of $43.7 million resulted primarily from the sale of fixed income securities in order to decrease the duration of the portfolio and to increase the portion of the portfolio invested in municipal securities.
INCOME TAXES AND MINORITY INTEREST The effective income tax rate was 31% in 2003 and 42% in 2002. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income. Minority interest represents the portion of the Company's international operations held by outside investors.
FINANCING ACTIVITY
In February 2003, the Company issued $200 million aggregate principal amount of 5.875% senior notes due February 2013. The notes were issued at 99.07% of their face value amount and the net proceeds after expenses were $196,840,000.
During the first quarter of 2003, the Company repaid $35,793,000 of 6.5% senior subordinated notes and $25,000,000 of 6.71% senior notes upon their respective maturities. During the second quarter of 2003, the company purchased $4,957,000 (carrying value) of its trust preferred securities.
At June 30, 2003, the Company's outstanding debt was $505 million (face amount). The maturities of the debt are $40 million in 2005, $100 million in 2006, $89 million in 2008, $200 million in 2013 and $76 million in 2022. The Company also has $195 million (face amount) of trust preferred securities that mature in 2045.
At June 30, 2003, stockholders' equity was $1,525 million and total capitalization (stockholders' equity, debt and trust preferred securities) was $2,218 million. The percentage of the Company's capital attributable to debt and trust preferred securities was 31% at June 30, 2003 compared with 30% at December 31, 2002.
For background information concerning the Company's Liquidity and Capital Resources, see the Company's Annual Report on Form 10-K for the year ended December 31, 2002.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company's market risk generally represents the risk of gain or loss that may result from the potential change in the fair value of the Company's investment portfolio as a result of fluctuations in prices, interest rates and currency exchange rates. The Company attempts to manage its interest rate risk by maintaining an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities, i.e., policy claims and debt obligations.
The duration of the investment portfolio declined from approximately 4.8 years at December 31, 2002 to 4.5 years at June 30, 2003. The overall market risk relating to the Company's portfolio has remained similar to the risk at December 31, 2002.
Item 4. Controls and Procedures
The Company's management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14 as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company has in place appropriate controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act and the rules thereunder, is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
A subsidiary of the Company has a pending arbitration proceeding pertaining to the interpretation of the contract terms in two reinsurance agreements. The reinsurer's interpretation of the contract terms would reduce the amount recoverable from the reinsurer by approximately $49 million as of June 30, 2003. Although the ultimate outcome of this matter cannot be determined, management believes that the Company's interpretation of these agreements is correct and is vigorously pursuing this matter in arbitration.
There is a pending arbitration pertaining to reinsurance contract coverage issues where a subsidiary of the Company is the assuming reinsurer. Based on currently available information, the Company believes that the resolution of this pending arbitration will not have a material effect on its financial condition or results of operations. However, if this arbitration is decided adversely to the Company, the Company's potential exposure, in excess of the amount reserved, is up to $9 million, after tax.
The Company's subsidiaries are subject to other disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company's estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.
Item 2. Changes in Securities and Use of Proceeds
On April 4, 2003, 300,000 Restricted Stock Units (RSU) were awarded to officers of the Company and its subsidiaries. Each RSU represents the right to receive one share of common stock, conditioned on the employee's satisfying certain requirements outlined in the award agreement. The RSU's vest after five years of continuous employment. The shares were not registered under the Securities Act of 1933 in reliance on the exemption provided in Section 4(2) thereof for transactions not involving a public offering.
On May 20, 2003, the Company issued 158 shares of its Common Stock to each of its nine directors (1,422 shares in the aggregate). The shares were issued as a portion of annual director's fees pursuant to the Company's 1997 Director Stock Plan. The shares were not registered under the Securities Act of 1933 in reliance on the exemption provided in Section 4(2) thereof for transactions not involving a public offering.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 20, 2003. The meeting involved the election of directors for a term to expire at the Annual Meeting of Stockholders to be held in the year 2006, the approval of an amendment and restatement of the W. R. Berkley Corporation 1992 Stock Option Plan in the form of the W. R. Berkley Corporation 2003 Stock Incentive Plan, the approval of an amendment to the Company's Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 80,000,000 to 150,000,000, and the ratification of the appointment of independent auditors for the year 2003. The directors elected and the results of the voting are as follows:
(i) Election of Directors:
Nominee Votes For Votes Withheld
------------------ ---------- --------------
William R. Berkley 40,687,706 10,773,284
George G. Daly 50,618,870 842,120
Philip J. Ablove 39,734,322 11,726,668
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(ii) Approval of the amendment and restatement of the W. R. Berkley Corporation 1992 Stock Option Plan in the form of the W. R. Berkley Corporation 2003 Stock Incentive Plan:
Votes For Votes Against Votes Abstained ---------- ------------- --------------- 44,374,797 7,025,148 61,045 |
(iii) Approval of the amendment to the Company's Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 80,000,000 to 150,000,000:
Votes For Votes Against Votes Abstained ---------- ------------- --------------- 49,833,479 1,567,056 60,455 |
(iv) Ratification of Auditors:
Votes For Votes Against Votes Abstained ---------- ------------- --------------- 50,953,779 471,123 36,088 |
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number
(3.1) The Company's Restated Certificate of Incorporation, as
amended through May 19, 2003.
(3.2) Amendment, dated May 20, 2003, to the Company's Restated
Certificate of Incorporation, as amended.
(10.1) W. R. Berkley 2003 Stock Incentive Plan (incorporated by
reference to Annex A from the Company's Proxy Statement for
the Annual Meeting of Stockholders held on May 20, 2003).
(10.2) Form of Restricted Stock Unit Agreement.
(31.1) Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2) Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1) Certification of the Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
|
During the quarter ended June 30, 2003, the Company filed the following Report on Form 8-K:
Report dated April 25, 2003 with respect to the press release relating to the announcement of the Company's results of operations for the first quarter of 2003 (under item 9, for information required by item 12, of Form 8-K).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
W. R. BERKLEY CORPORATION
Date: August 6, 2003 /s/ WILLIAM R. BERKLEY
------------------------------
William R. Berkley
Chairman of the Board and
Chief Executive Officer
Date: August 6, 2003 /s/ EUGENE G. BALLARD
------------------------------
Eugene G. Ballard
Senior Vice President,
Chief Financial Officer
and Treasurer
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EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
FINEVEST SERVICES, INC.
FINEVEST SERVICES, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Finevest Services, Inc. and the name under which the corporation was originally incorporated is Automated Financial Management, Inc. The date of filing its original Certificate of Incorporation with the Secretary of State was January 20, 1970.
2. This Restated Certificate of Incorporation restates and integrates and further amends the Certificate of Incorporation of this corporation by changing the name of the corporation to "W. R. Berkley Corporation," by deleting certain clauses of Article Third relating to purposes and objects of the corporation, by decreasing the number of shares which the corporation is authorized to issue and increasing the par value per share, by adding a proviso to Article SEVENTH (1) and Article SEVENTH (2)(a), by changing the requirements for removal of directors, by adding a new Article with respect to shareholder voting rights and by changing certain requirements with respect to amendments.
3. The text of the Certificate of Incorporation as amended or supplemented heretofore is further amended hereby to read as herein set forth in full.
"FIRST: The name of the corporation (hereinafter called the "Corporation") is W. R. BERKLEY CORPORATION.
SECOND: The respective names of the County and of the City within the County in which the registered office of the Corporation is to be located in the State of Delaware are the County of New Castle and the City of Wilmington. The name of the registered agent of the Corporation is The Corporation Trust Company. The street and number of said registered office and the address by street and number of said registered agent is 100 West Tenth Street, Wilmington, Delaware.
THIRD: The nature of the business of the Corporation and the objects or purposes to be transacted, promoted or carried on by it are as follows:
To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is FIVE MILLION (5,000,000) and the par value of each such share is Twenty Cents ($.20) amounting in the aggregate to ONE MILLION DOLLARS ($1,000,000).
The designation and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof are as follows:
(a) The stock of the Corporation shall be of one class and shall be denominated "Common Stock".
(b) Each share of Common Stock shall be entitled to one vote.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatever.
SEVENTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders, it is further provided:
1. The number of directors of the Corporation shall be as specified in the By-Laws of the Corporation but such number may from time to time be increased or decreased in such manner as may be prescribed by the By-Laws, subject to the requirements of Article TENTH of this Certificate of Incorporation. The election of directors need not be by ballot.
2. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered:
(a) To make, alter, amend and repeal By-Laws, subject to the power of the stockholders to alter or repeal the By-Laws made by the Board of Directors and subject to the requirements of Article TENTH of this Certificate of Incorporation.
(b) Subject to the applicable provisions of the By-Laws then in effect, to determine, from time to time, whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation.
(c) Without the assent or vote of the stockholders, to authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as the Board of Directors, in its sole discretion, may determine, and to authorize the mortgaging or pledging, as security therefor, of any property of the Corporation, real or personal, including after-acquired property.
(d) To determine whether any, and, if any, what part, of the net profits of the Corporation or of its net assets in excess of its capital shall be declared in dividends and paid to the stockholders, and to direct and determine the use and disposition of any such net profits or such net assets in excess of capital.
(e) To fix from time to time the amount of profits of the Corporation to be reserved as working capital or for any other lawful purpose.
(f) To establish bonus, profit-sharing or other types of incentive or compensation plans for the employees (including officers and directors) of the Corporation and to fix the amount of profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts of their respective participations.
(g) By resolution passed by a majority of the whole Board to designate one or more committees to consist of two or more directors of the Corporation which, to the extent provided in the resolution or in the By-Laws of the Corporation shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it, such committee or committees to have such name or names as may be stated in the By-Laws of the Corporation or as determined from time to time by resolution adopted by the Board of Directors. In addition to the powers and authorities hereinbefore or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such other acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, of the Certificate of Incorporation and of the By-Laws of the Corporation.
3. Any director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time for cause by the majority vote of the members of the Board then in office, or, with or without cause, by the vote or consent of the holders of at least four-fifths (80%) of the outstanding stock of the Corporation entitled to vote for the election of directors.
4. No contract or other transaction between the Corporation and any other corporation and no other act of the Corporation shall, in the absence of fraud, in any way be affected or invalidated by the fact that any of the directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officers of, such other corporation. Any director of the Corporation individually or any firm or association of which any director may be a member, may be a party to, or may be pecuniarily or otherwise interested in any contract or transaction of the Corporation, provided that the fact that be individually or such firm or association is so interested shall be disclosed or
shall have been known to the Board of Directors or a majority of such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction shall be taken. Any director of the Corporation who is also a director or officer of such other corporation or who is so interested may be counted in determining the existence of a quorum at any meeting of the Board of Directors which shall authorize any such contract or transaction, with like force and effect as if he were not such director or officer of such other corporation or not so interested. Any director of the Corporation may vote upon any contract or other transaction between the Corporation and any subsidiary or affiliated corporation without regard to the fact that he is also a director of such subsidiary or affiliated corporation.
Any contract, transaction or act of the Corporation or of the directors, which shall be ratified by a majority of a quorum of the stockholders of the Corporation at any annual meeting, or at any special meeting called for such purpose, shall, insofar as permitted by law or by the Certificate of Incorporation of the Corporation, be as valid and as binding as though ratified by every stockholder of the Corporation; provided, however, that any failure of the stockholders to approve or ratify any such contract, transaction or act, when and if submitted, shall not be deemed in any way to invalidate the same or deprive the Corporation, its directors, officers or employees, of its or their right to proceed with such contract, transaction or act.
5. Subject to any limitation in the By-Laws, the members of the Board of Directors shall be entitled to reasonable fees, salaries or other compensation for their services and to reimbursement for their expenses as such members. Nothing contained herein shall preclude any director from serving the Corporation, or any subsidiary or affiliated corporation, in any other capacity and receiving proper compensation therefor.
6. If the By-Laws so provide, the stockholders and Board of Directors of the Corporation shall have power to hold their meetings, to have an office or offices and to keep the books of the Corporation, subject to the provisions of the laws of Delaware, outside of said State at such place or places as may from time to time be designated by them.
EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code, or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation.
NINTH: No dividend shall be declared or paid which shall impair the capital of the Corporation nor shall any distribution of assets be made to any holder of the Corporation's
capital stock unless the value of the assets of the Corporation remaining after such payment or distribution is at least equal to the aggregate of its debts and liabilities, including capital. A director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officials as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid.
TENTH: 1. Except as set forth in Paragraph 4 of this Article TENTH, the affirmative vote or consent of the holders of four-fifths (80%) of the stock of the Corporation entitled to vote in elections of directors shall be required to authorize any of the following transactions:
(a) merger or consolidation of the Corporation into any other corporation; or
(b) sale, lease, exchange, mortgage or other disposition of all or any substantial part of the assets of the Corporation to any other corporation, person or other entity; or
(c) sale or lease by any other corporation, person or entity to the Corporation or any subsidiary thereof of any securities or assets (except assets having any aggregate fair market value of less than $4,000,000) in exchange for voting securities (or securities convertible into voting securities, or options, warrants, or rights to purchase voting securities) of the Corporation or any subsidiary thereof
if, as of the record date for the determination of stockholders entitled to notice thereof and to vote thereon or consent thereto, such other corporation, person or entity is, or has been at any time within the preceding two years, the beneficial owner directly
or indirectly of 5% or more of the outstanding shares of stock of the Corporation entitled to vote in elections of directors. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the stock of the Corporation otherwise required by law or any agreement between the Corporation and any national securities exchange.
2. For purposes of this Article TENTH any corporation, person or other entity shall be deemed to be the beneficial owner of any shares of stock of the Corporation,
(a) which it owns directly, whether or not of record; or
(b) which it has the right to acquire pursuant to any agreement or understanding or upon exercise of conversion rights, warrants or options or otherwise; or
(c) which are beneficially owned, directly or indirectly
(including shares deemed to be owned through application of clause (b)
above) by any "affiliate" or "associate" as those terms are defined in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect on April 1, 1973; or
(d) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (b) above)
by any other corporation, person or entity with which it or its
"affiliate" or "associate" has any agreement or arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing stock of the Corporation.
For the purposes of this Article TENTH, the outstanding shares of any class of stock of the Corporation shall include shares deemed owned through the application of clauses 2 (b) (c) and (d) above, but shall not include any other shares which may be issuable pursuant to any agreement or upon exercise of conversion rights, warrants, options or otherwise.
3. The Board of Directors shall have the power and duty to determine for the purposes of this Article TENTH on the basis of information known to the Corporation, whether:
(a) such other corporation, person or other entity beneficially owns more than 5% of the outstanding shares of stock of the Corporation entitled to vote in elections of directors,
(b) a corporation, person, or entity is an "affiliate" or "associate" of another,
(c) the assets being acquired by the Corporation, or any subsidiary thereof, have an aggregate fair market value of less than $4,000,000, and
(d) the memorandum of understanding referred to in Paragraph 4 below is substantially consistent with the transaction covered thereby.
Any such determination shall be conclusive and binding for all purposes of this Article TENTH.
4. The provisions of this Article TENTH shall not apply to,
(a) any merger or similar transaction with any corporation if the Board of Directors of the Corporation has approved a memorandum of understanding with such other corporation with respect to such transaction prior to the time that such other corporation shall have become a beneficial owner of more than 5% of the outstanding shares of stock of the Corporation entitled to vote in elections of directors; or
(b) any merger or consolidation of the Corporation with, or any sale or lease to the Corporation or any subsidiary thereof of any of the assets of, any corporation of which a majority of the outstanding shares of all classes of stock entitled to vote in elections of directors is owned of record or beneficially by the Corporation and its subsidiaries.
ELEVENTH: 1. From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article ELEVENTH.
2. Notwithstanding the foregoing Paragraph 1 or any other provision of this Certificate of Incorporation or of the By-Laws of the Corporation (and in addition to any other vote that may be required by statute) the vote of the holders of four-fifths (80%) of all holders of the stock of the Corporation entitled to vote for the election of directors shall be required to amend, alter, change or repeal Articles SEVENTH, TENTH or ELEVENTH of this Certificate of Incorporation or Article III, Sections 1 or 2 of the By-laws of this Corporation."
4. This Restated Certificate of Incorporation was duly adopted by written consent of the stockholders in accordance with the applicable provisions of Sections 228, 242 and 245, of the General Corporation Law of the State of Delaware and written notice of the adoption of this Restated Certificate of Incorporation has been given as provided by Section 228 of the General Corporation Law of the State of Delaware to every stockholder entitled to such notice.
5. That the capital of said corporation will not be reduced under or by reason of any amendment in this Restated Certificate of Incorporation.
IN WITNESS WHEREOF, said Finevest Services, Inc. has caused this certificate to be signed by William R. Berkley its President, and attested by David C. Campbell, its Secretary, this 4th day of May, 1973.
FINEVEST SERVICES, INC.
By /s/ William R. Berkley
-----------------------
President
ATTEST:
By /s/ David C. Campbell
----------------------
Secretary
|
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
WILLIAM R. BERKLEY, being duly sworn, deposes and says that he is the person who signed the foregoing Restated Certificate of Incorporation; that he signed said Certificate in the capacity set beneath his signature thereon; that he has read the foregoing Restated Certificate of Incorporation and knows the contents thereof; and that the statements contained therein are true.
/s/ William R. Berkley ----------------------- William R. Berkley |
Subscribed and sworn to
before me on May 4th, 1973.
/s/ Richard Katz ----------------- Notary Public |
RICHARD KATZ
NOTARY PUBLIC, STATE OF NEW YORK
NO. 31-7176990
QUALIFIED IN NEW YORK COUNTY
COMMISSION EXPIRES MARCH 30, 1974
(Seal)
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
W. R. BERKLEY CORPORATION
The undersigned, being the Chairman of W. R. BERKLEY CORPORATION, a corporation existing under the laws of the State of Delaware, does hereby certify:
FIRST: That Article FOURTH of the Restated Certificate of Incorporation of said corporation be and it hereby is amended to read as follows:
FOURTH: The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is ten million (10,000,000) shares, of which nine million (9,000,000) shares are to be Common Stock of the par value of twenty cents ($.20) each, and one million (1,000,000) shares are to be Preferred Stock of the par value of ten cents ($.10) each.
The classes of Preferred Stock and Common Stock shall have the following respective terms:
PREFERRED STOCK
1. The Preferred Stock may be issued from time to time in one or more series, each such series to have such
distinctive designation or title as may be fixed by the Board of Directors prior to the issuance of any shares thereof. Each such series may differ from every other series already outstanding in such respects as may be determined from time to time by the Board of Directors prior to the issuance of any shares thereof, including but not limited to the following:
(a) The rate of dividend, if any, which the Preferred Stock of any such series shall be entitled to receive, whether the dividends of such series shall be cumulative or non--cumulative and, if such dividends shall be cumulative, the date from which they shall be cumulative.
(b) The right or obligation, if any, of the Corporation to redeem shares of Preferred Stock of any series and the amount per share which the Preferred Stock of any such series shall be entitled to receive in case of the redemption thereof, and the right of the Corporation, if any, to reissue any such shares after the same shall have been redeemed.
(c) The amount per share which the Preferred Stock of any such series shall be entitled to receive in case of the voluntary liquidation, dissolution or winding up of the Corporation, or in case of the involuntary liquidation, dissolution or winding up of the Corporation.
(d) The right, if any, of the holders of Preferred Stock of any such series to convert the same into other classes of stock, and the terms and conditions of such conversion.
(e) The voting power, if any, of the holders of Preferred Stock of any series, and the terms and conditions under which they may exercise such voting power.
(f) The terms of the sinking fund or fund of a similar nature, if any, to be provided for the Preferred Stock of any such series.
(g) Such other preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, which are fixed by resolution or resolutions of the Board of Directors (the "Authorization Resolutions") providing for the issuance of the Preferred Stock of any such series.
The description and terms of the Preferred Stock of each series in respect of the foregoing particulars shall be fixed and determined by the Board of Directors by appropriate resolution or resolutions at or prior to the time of the authorization of the issue of the original shares of each such series.
2. In case the stated dividends (to the extent then payable) and the amounts payable on liquidation, dissolution or winding up of the Corporation are not paid in full, the shareholders of all series of the Preferred Stock shall share in the payment of dividends, including accumulations, if any, and in any distribution of assets other than by way of dividends, in accordance with and to the extent permitted by the preferences fixed by the Authorization Resolutions of all series of Preferred Stock then outstanding.
3. The holders of the Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available therefor, preferential dividends in cash at the annual rate fixed for each particular series. The holders of the Preferred Stock of each series shall be entitled to receive any additional dividends thereon as may be specified in the Authorization Resolutions of such series.
4. So long as any of the Preferred Stock remains outstanding, in no event shall any dividend whatever, whether in cash or other property (other than in shares of Common Stock), be paid or declared on the Common Stock by the Corporation unless (a) the full dividends of the Preferred Stock for all past dividend periods from the respective date or dates on which they become cumulative shall have been paid and the full dividend thereon for the then current dividend period shall have been paid or declared and a sum set apart sufficient
for the payment thereof, and (b) if at any time the Corporation is obligated to retire or redeem shares of any series of the Preferred Stock pursuant to a sinking fund or a fund of a similar nature or otherwise, all arrears, if any, in respect of the retirement or redemption of the Preferred Stock of all such series shall have been made good. Subject to the foregoing provisions, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock in accordance with paragraph 7 of this Article FOURTH from time to time out of the remaining funds of the Corporation legally available therefor, and the Preferred Stock shall not, unless otherwise permitted by the Authorization Resolutions of such series, be entitled to participate in any such dividend, whether payable in cash, stock or otherwise. No limitations, conditions or restrictions whatever are imposed by the provisions of this paragraph 4 upon the purchase or redemption or other acquisitions by the Corporation of any class or classes of any capital stock or other securities of the Corporation.
5. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of the Common Stock, the holders of the Preferred Stock of each series shall be entitled to be paid in cash the applicable liquidation price per share determined the manner, or in the amount, fixed at the time of the original
authorization of issuance of shares of such respective series, together with a sum, in the case of each share of the Preferred Stock, computed at the annual dividend rate for the series of which the particular share is a part from the date on which dividends on such share became cumulative to the date fixed for such distribution or payment less the aggregate amount of all dividends theretofore and on such distribution or payment date paid thereon. If such payment shall have been made in full to the holders of the Preferred Stock, the remaining assets and funds of the Corporation shall be distributed among the holders of the Common Stock and the holders of the Preferred Stock of each series, if any, entitled to participate in the remaining assets and funds of the Corporation in accordance with the terms fixed in the Authorization Resolutions of such series.
6. Notice of every redemption of Preferred Stock at the option of the Board of Directors shall be mailed at least 30 days in advance of the date determined by the Board of Directors for such redemption (herein called the "redemption date") to each holder of shares so to be redeemed at his address as the same shall appear on the books of the Corporation as of the date of mailing such notice. Such notice shall state the redemption date and the number of shares to be redeemed. The holder or holders of the shares of such stock to be redeemed shall deliver the certificate or certificates representing such shares, properly endorsed for transfer, to
the Corporation at its principal place of business on the redemption date, against payment therefor. Any Federal or State documentary stamp tax payable on the transfer to the Corporation of the shares to be redeemed shall be paid by the Corporation. The shares of such stock to be redeemed shall be selected in such manner as the Board of Directors may determine, it being expressly understood that any such redemption need not be ratable among the holders of any class or classes of the Corporation's capital stock and may be limited to all or part of the shares of one or more classes of the stock held by one or more holders of stock. The Board of Directors shall have full power and authority, subject to the limitations and provisions herein contained, to prescribe the terms and conditions upon which such stock shall be redeemed from time to time. If any notice of redemption shall have been given as aforesaid, and if on or before the redemption date the funds necessary for such redemption shall have been set aside by the Corporation, separate and part from its other funds, in trust for the pro rata benefit of the holder or holders of the shares so called for redemption, then, from and after the redemption date, notwithstanding that any certificates for shares of stock so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall not be deemed outstanding, the right to receive any dividends thereon shall cease to accrue from and after the redemption date and all rights of the holder or holders of the shares so called for redemption shall forthwith, after the
redemption date, cease and terminate, excepting only the right to receive the amount payable in respect of such redemption but without interest. Any moneys so set aside by the Corporation and unclaimed at the end of six years from the redemption date shall, to the extent permitted by applicable law, revert to the general funds of the Corporation after which reversion such funds shall become contributions to the capital of the Corporation and the holder or holders of such shares shall have no further claim or right to such funds.
COMMON STOCK
7. Except as otherwise required by law and except as expressly provided in this Certificate of Incorporation or in any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the foregoing provisions of this Article FOURTH with respect to the Preferred Stock, the holders of the Common Stock (i) shall have the exclusive voting rights for the election of directors and for all other purposes, each holder of Common Stock being entitled to one vote for each share thereof held by such holder except as otherwise required by law, and (ii) shall be entitled to receive dividends declared payable in such property or shares of the capital stock of the Corporation when and as declared by the Board of Directors.
SECOND: That the amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this certificate this 14th day of August, 1984.
/s/ William R. Berkley
----------------------------
William R. Berkley, Chairman
Attest:
/s/ Robert V. Mendelsohn
-------------------------------
Robert V. Mendelsohn, Secretary
|
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
W. R. BERKLEY CORPORATION
The undersigned, being the Chairman of W. R. BERKLEY CORPORATION, a corporation existing under the laws of the State of Delaware, hereby certifies that:
1. The first paragraph of Article FOURTH of the Restated Certificate of Incorporation of said corporation be and it hereby is amended to read as follows:
FOURTH: The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is forty-five million (45,000,000) shares, of which forty million (40,000,000) shares are to be Common Stock of the par value of twenty cents ($.20) each, and five million (5,000,000) shares are to be Preferred Stock of the par value of ten cents ($.l0) each.
2. The amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this certificate this 16th day of May, 1986.
/s/ William R. Berkley
-------------------------------
William R. Berkley, Chairman
Attest:
/s/ Brian C. Kelly
-------------------------
Brian C. Kelly, Secretary
|
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
W. R. BERKLEY CORPORATION
The undersigned, being the Chairman of W. R. BERKLEY CORPORATION, a corporation existing under the laws of the State of Delaware, hereby certifies that:
1. A new Article TWELFTH be and it hereby is added to the Restated Certificate of Incorporation of said corporation, to read as follows:
TWELFTH: 1. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this Article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
2. Right to Indemnification. Each person who is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he is or was serving as a director, officer or employee of the Corporation (or is or was serving at the request of the Corporation in a similar capacity with another entity, including employee benefit plans) (hereinafter an "indemnitee"), shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as in effect. This indemnification will cover all expense, liability and loss (including attorneys' fees, judgements, fines, ERISA excise taxes or penalties and settlement amounts) reasonably incurred by the indemnitee in connection with a proceeding. Such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall continue to the benefit of the indemnitee's heirs, executors and administrators. Except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee only if such proceeding was authorized by the Board of Directors of the Corporation. The right to indemnification conferred by this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"). If the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his capacity as a director or officer shall be made only upon delivery to the Corporation of an undertaking by such indemnitee to repay all amounts so advanced if it is ultimately determined by final judicial decision that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise (hereinafter an "undertaking").
(b) Right of Indemnitee to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within ninety days after receipt of a written claim, the indemnitee may bring suit against the Corporation to recover the unpaid amount. (In the case of a claim for advancement of expenses, the applicable period will be twenty days.) If successful in any such suit, the indemnitee will also be entitled to be paid the expense of prosecuting such suit. In any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met the applicable standard of conduct under the Delaware General Corporation Law. In any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, it shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the
applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Board of Directors of the Corporation to determine prior to the commencement of such suit that the indemnitee has met the applicable standard of conduct for indemnification set forth in the Delaware General Corporation Law, nor an actual determination by the Board of Directors of the Corporation that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this Section or otherwise shall be on the Corporation.
(c) Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section will not be exclusive of any other right which any person may have or hereafter acquire under any statute, this Restated Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or other entity against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person under the Delaware General Corporation Law.
(e) Indemnification of Agents of the Corporation. The Corporation may, if authorized by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any agent of the Corporation to the same extent as for directors, officers and employees of the Corporation.
2. The amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this certificate this 15th day of May, 1987.
/s/ William R. Berkley
------------------------------
William R. Berkley, Chairman
Attest:
/s/ Brian C. Kelly
-------------------------
Brian C. Kelly, Secretary
|
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
7 3/8% SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK
OF
W. R. BERKLEY CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State Of Delaware
W. R. Berkley Corporation, a Delaware corporation (the "Company"), certifies that pursuant to the authority contained in Article IV of its Restated Certificate of Incorporation (the "Certificate of Incorporation") and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Company by unanimous written consents dated July 7, 1993 and January 14, 1994, adopted the following resolution which resolution remains in full force and effect on the date hereof:
RESOLVED, that there is hereby established the following series of authorized preferred stock having a par value of $.10 per share, which shall be designated as "7 3/8% Series A Cumulative Redeemable Preferred Stock" (the "Series A Preferred Stock") and which shall consist of 1,150,000 shares having the following voting powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this paragraph 1 shall have, for all purposes of this resolution, the meanings herein specified (with terms defined in the singular having comparable meanings when used in the plural).
Business Day. The term "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.
Common Stock. The term "Common Stock" shall mean the common stock, par value $.20 per share, of the Company.
Dividend Payment Date. The term "Dividend Payment Date" shall have the meaning set forth in subparagraph (b) of paragraph 2 below.
Dividend Period. The term "Dividend Period" shall mean the period from, and including, the Initial Issue Date to, but not including, the first Dividend Payment Date and thereafter, each quarterly period from, and including, the Dividend Payment Date to, but not including, the next Dividend Payment Date.
Initial Issue Date. The term "Initial Issue Date" shall mean the date that shares of Series A Preferred Stock are first issued by the Company.
Liquidation Preference. The term "Liquidation Preference" shall mean $150 per share.
Record Date. The term "Record Date" shall mean the date designated by the Board of Directors of the Company at the time a dividend is declared; provided, however, that such Record Date shall be the first day of the calendar month in which the applicable Dividend Payment Date falls or such other date designated by the Board of Directors for the payment of dividends that is not more than thirty (30) days nor less than ten (10) days prior to such Dividend Payment Date.
Redemption Date. The term "Redemption Date" shall have the meaning set forth in subparagraph (b) of paragraph 4 below.
Redemption Price. The term "Redemption Price" shall mean a price per share equal to $150 together with accrued and unpaid dividends, if any, thereon to the Redemption Date.
2. Dividends.
(a) The record holders of Series A Preferred Stock shall be entitled to receive dividends, when and as declared by the Board of Directors of the Company, out of funds legally available for payment of dividends. Such dividends shall be payable by the Company in cash at the rate of 7 3/8% percent per annum of the Liquidation Preference (equivalent to $11.0625 per share of Series A Preferred Stock).
(b) Dividends on shares of Series A Preferred Stock shall accrue and be cumulative from the Initial Issue Date. Dividends shall be payable quarterly in arrears when and as declared by the Board of Directors of the Company on January 15, April 15, July 15 and October 15 of each year (each, a "Dividend
Payment Date"), commencing on April 15, 1994. If any Dividend Payment Date occurs on a day that is not a Business Day, any accrued dividends otherwise payable on such Dividend Payment Date shall be paid on the next succeeding Business Day. The amount of dividends payable on Series A Preferred Stock for each full Dividend Period shall be computed by dividing by four (4) the annual dividend rate set forth in subparagraph 2(a) above. Dividends payable in respect of any Dividend Period which is less than a full Dividend Period in length will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends shall be paid to the holders of record of the Series A Preferred Stock as their names shall appear on the stock transfer records of the Company at the close of business on the Record Date for such dividend. Dividends in respect of any past Dividend Periods that are in arrears may be declared and paid at any time to holders of record on the Record Date therefor. Any dividend payment made on shares of Series A Preferred Stock shall be first credited against the earliest accrued but unpaid dividend due which remains payable.
(c) If any shares of Series A Preferred Stock are outstanding, no full dividends shall be declared or paid or set apart for payment on any series of preferred stock ranking junior to or on a parity with the Series A Preferred Stock as to dividends for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Stock for all past Dividend Periods and the then current Dividend Period. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the shares of the Series A Preferred Stock and the shares of any series of preferred stock ranking on a parity as to dividends with the Series A Preferred Stock, all dividends declared upon the shares of the Series A Preferred Stock and any other such series of preferred stock shall be declared pro rata so that the amount of dividends declared per share on the Series A Preferred Stock and such other series of preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series A Preferred Stock and such other series of preferred stock bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Stock which may be in arrears.
(d) Except as provided in subparagraph 2(c), unless full cumulative dividends on the Series A Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no dividends (other than in Common Stock or other capital stock of the Company ranking junior to the Series A Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) shall be declared or paid or set aside for payment or other distribution shall be declared or made upon the Common Stock or the capital stock of the Company ranking junior to or on a parity with the Series A Preferred Stock as to dividends or upon liquidation, dissolution or winding up, nor shall the Common Stock or other capital stock of the Company ranking junior to or on a parity with the Series A Preferred Stock as to dividends or upon liquidation, dissolution or winding up be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company or any subsidiary of the Company (except by conversion into or exchange for other capital stock of the Company ranking junior to the Series A Preferred Stock as to dividends and upon liquidation, dissolution or winding up).
(e) Notwithstanding anything contained herein to the contrary, no dividends on shares of Series A Preferred Stock shall be declared by the Board of Directors of the Company or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.
(f) Notwithstanding anything contained herein to the contrary, dividends on the Series A Preferred Stock, if not paid on the applicable Dividend Payment Date, will accrue whether or not dividends are declared for such Dividend Payment Date, whether or not the Company has earnings and whether or not there are funds legally available for the payment of such dividends.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, subject to the prior preferences and other rights of any capital stock of the Company ranking prior to the Series A Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up which shall have been issued in accordance with the provisions of subparagraph 5(a), but before any distribution or payment shall be made to the holders of capital stock ranking junior to the Series A Preferred Stock in the distribution of assets upon any liquidation, dissolution or winding up of the Company, the holders of Series A Preferred Stock shall be entitled to receive out of the assets of the Company legally available for distribution to its stockholders
liquidating distributions in cash or property at its fair market value as determined by the Board of Directors of the Company in the amount of the Liquidation Preference per share plus an amount equal to all dividends accrued and unpaid thereon to the date of such liquidation, dissolution or winding up. After payment of the full amount of liquidating distributions to which they are entitled, the holders of Series A Preferred Stock will have no right or claim to any of the remaining assets of the Company and shall not be entitled to any other distribution in the event of liquidation, dissolution or winding up of the affairs of the Company.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up the legally available assets of the Company are insufficient to pay the amount of the Liquidation Preference per share plus an amount equal to all dividends accrued and unpaid on the Series A Preferred Stock and the corresponding amounts payable on all shares of capital stock ranking on a parity with the Series A Preferred Stock in the distribution of assets upon liquidation, dissolution or winding up, then the holders of the Series A Preferred Stock and all other such capital stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Neither the consolidation or merger of the Company into or with another corporation or corporations nor the sale, lease, transfer or conveyance of all or substantially all of the assets of the Company to another corporation or any other entity shall be deemed a liquidation, dissolution or winding up of the affairs of the Company within the meaning of this paragraph 3.
4. Redemption by the Company.
(a) The Series A Preferred Stock may be redeemed, in whole or from time to time in part, at any time after January 24, 1999 at the option of the Company at the Redemption Price.
(b) Each date fixed for redemption pursuant to subparagraph 4(a) above is called a "Redemption Date". If the Redemption Date is after a Record Date and before the related Dividend Payment Date, the dividend payable on such Dividend Payment Date shall be paid to the holder in whose name the Series A Preferred Stock to be redeemed is registered at the close of business on such Record Date notwithstanding the redemption thereof between such Record Date and the related Dividend Payment Date or the Company's default in the payment of the dividend due.
(c) In case of redemption of less than all shares of Series A Preferred Stock at the time outstanding, the shares to be redeemed shall be selected pro rata from the holders of record
of such shares in proportion to the number of shares held by such holders (with adjustments to avoid redemption of fractional shares) or by lot in a manner determined by the Company.
(d) Notice of any redemption will be given by publication in a
newspaper of general circulation in the City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days prior to the Redemption Date. A similar notice will be mailed by
the Company, postage prepaid, not less than 30 nor more than 60 days prior to
the Redemption Date, addressed to the respective holders of record of the Series
A Preferred Stock to be redeemed at their respective addresses as they appear on
the stock transfer records of the Company. No failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any shares of Series A Preferred Stock except
as to the holder or holders to whom the Company has failed to give notice or to
whom notice was defective. In addition to any information required by law or by
the applicable rules of any exchange upon which Series A Preferred Stock (or any
interests therein) may be listed, admitted to trading or included for quotation,
such notice shall state: (i) the Redemption Date; (ii) the Redemption Price;
(iii) the number of shares of Series A Preferred Stock to be redeemed and, if
less than all shares held by such holder are to be redeemed, the number of such
shares to be redeemed; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the Redemption Price; and (v) that
dividends on the shares to be redeemed will cease to accrue on the Redemption
Date.
(e) If notice has been mailed in accordance with subparagraph 4(d) above and provided that on or before the Redemption Date specified in such notice all funds necessary for such redemption shall have been set aside by the Company in accordance with the provisions of subparagraph (f) below, separate and apart from its other funds in trust for the pro rata benefit of the holders of the shares so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Redemption Date, dividends on the shares of the Series A Preferred Stock so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding and shall not have the status of shares of Series A Preferred Stock, and all rights of the holders thereof as shareholders of the Company (except the right to receive from the Company the Redemption Price) shall cease. Upon surrender, in accordance with said notice, of the certificates for any shares so redeemed (properly endorsed or signed for transfer, if the Company shall so require and the notice shall so state), such shares shall be redeemed by the Company at the Redemption Price. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares without cost to the holder thereof.
(f) Any funds deposited with a bank or trust company for the purpose of redeeming Series A Preferred Stock shall be irrevocable except that:
(i) the Company shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Company and unclaimed by the holders of the Series A Preferred Stock entitled thereto at the expiration of two (2) years from the applicable Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the Company, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Company shall look only to the Company for payment of the Redemption Price without interest or other earnings.
(g) No Series A Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Price.
(h) Unless full cumulative dividends on all shares of Series A Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no shares of any Series A Preferred Stock shall be redeemed unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of Series A Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred Stock, and, unless full cumulative dividends on all outstanding shares of Series A Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, the Company shall not purchase or otherwise acquire directly or indirectly any shares of Series A Preferred Stock (except by conversion into or exchange for capital stock of the Company ranking junior to the Series A Preferred Stock as to dividends and upon liquidation, dissolution or winding up).
(i) All shares of Series A Preferred Stock redeemed pursuant to this paragraph 4 shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock, without designation as to series and may thereafter be reissued as shares of any series of preferred stock.
5. Voting Rights.
(a) The holders of record of shares of Series A Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in this paragraph 5 or as otherwise provided by law. The Company shall not, without the affirmative vote or consent of the holders of at least two-thirds of the shares of the Series A Preferred Stock outstanding at the time, given in person or by proxy, at a meeting (such Series A Preferred Stock voting separately as a class), (i) authorize, create or issue, or increase the authorized or issued amount of, any class or series of capital stock ranking prior to the Series A Preferred Stock with respect to the payment of dividends or distribution of assets upon liquidation, dissolution or winding up, or reclassify any authorized capital stock into shares of such prior-ranking stock, or authorize, create or issue any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such prior-ranking stock; or (ii) amend, alter or repeal the provisions of the Certificate of Incorporation or this Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof for the Series A Preferred Stock ("Certificate of Designations"), whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Stock or the holders thereof; provided, however, that any increase in the amount of the authorized preferred stock or any outstanding series of preferred stock or any other capital stock of the Company, or the creation and issuance of any other series of preferred stock or of any other capital stock of the Company, in each case ranking on a parity with or junior to the Series A Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(b) If and whenever dividends payable on Series A Preferred
Stock shall be in arrears for six (6) or more consecutive Dividend Periods, then
the holders of Series A Preferred Stock, voting separately as a class (with such
other series as provided in subparagraph 5(f) below), shall be entitled at the
next annual meeting of the stockholders or at any special meeting to elect two
(2) additional directors. Upon election,
such directors shall become additional directors of the Company and the authorized number of directors of the Company shall thereupon be automatically increased by such number of directors.
(c) Whenever the voting right referred to in subparagraph 5(b) shall have vested, such right may be exercised initially either at a special meeting of the holders of Series A Preferred Stock, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at such annual meetings of the holders of Series A Preferred Stock. Such right of the holders of Series A Preferred Stock to elect directors may be exercised until all dividends to which the holders of Series A Preferred Stock shall have been entitled for all previous Dividend Periods and the current Dividend Period shall have been paid in full or declared and a sum of money sufficient for the payment thereof set aside for payment, at which time the right of the holders of Series A Preferred Stock to elect such number of directors shall cease, the term of such directors previously elected shall, upon the resignation thereof, thereupon terminate, and the authorized number of directors of the Company shall thereupon return to the number of authorized directors otherwise in effect, but subject always to the same provisions for the renewal and divestment of such special voting rights in the case of any such future dividend default or defaults.
(d) At any time when such voting right shall have vested in the holders of Series A Preferred Stock and if such right shall not already have been initially exercised, a proper officer of the Company shall, upon the written request of any holder of record of Series A Preferred Stock then outstanding, addressed to the Secretary of the Company, call a special meeting of holders of Series A Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company or, if none, at a place designated by the Secretary of the Company. If such meeting shall not be called by the proper officers of the Company within thirty (30) days after the personal service of such written request upon the Secretary of the Company, or within thirty (30) days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Company at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of ten percent (10%) of the shares of Series A Preferred Stock then outstanding may designate in writing a holder of Series A Preferred Stock to call such meeting at the expense of the Company, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the place for holding annual meetings of the Company or, if none, at a place designated by
such holder. Any holder of Series A Preferred Stock that would be entitled to vote at such meeting shall have access to the stock books of the Company for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this paragraph. Notwithstanding the provisions of this paragraph, however, no such special meeting shall be called if any such request is received less than 90 days before the date fixed for the next ensuing annual or special meeting of stockholders.
(e) If the directors so elected by the holders of Series A Preferred Stock shall cease to serve as a director before his term shall expire, the holders of Series A Preferred Stock then outstanding may, at a special meeting of the holders called as provided above, elect a successor to hold office for the unexpired term of the director whose place shall be vacant.
(f) If at any time when the holders of Series A Preferred Stock are entitled to elect directors pursuant to the foregoing provisions of this paragraph 5 the holders of any one or more additional series of preferred stock are entitled to elect directors by reason of any default or event specified in the Certificate of Incorporation, as in effect at the time, or in the Certificate of Designations for such series, and if the terms for such other additional series so permit, then the voting rights of the two or more series then entitled to vote shall be combined (with each series having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Series A Preferred Stock and of all such other series then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other series have elected such directors prior to the happening of the default or event permitting the holders of Series A Preferred Stock to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Company as elsewhere required in subparagraph 5(d) above, then a new election shall be held with all such other series of preferred stock and the Series A Preferred Stock voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors. If the holders of any such other series are entitled to elect in excess of two directors, the Series A Preferred Stock shall not participate in the election of more than two such directors, and those directors whose terms first expire shall be deemed to be the directors elected by the holders of Series A Preferred Stock; provided that if at the expiration of such terms the holders of Series A Preferred Stock are entitled to vote in the election of directors pursuant to the provisions of this paragraph 5, then the Secretary of the Company shall call a meeting (which meeting may be the annual meeting or special meeting of stockholders referred to in subparagraph 5(c) above) of holders of Series A Preferred
Stock for the purpose of electing replacement directors (in accordance with the provisions of this paragraph 5) to be held at or prior to the time of expiration of the expiring terms referred to above.
(g) In any matter in which the Series A Preferred Stock may vote (as expressly provided herein or as may be required by law), each share of Series A Preferred stock shall be entitled to one (1) vote, any portion of which may be directed separately by the holder thereof (or by any proxy or proxies of such holder). With respect to each share of Series A Preferred Stock, the holder thereof may designate up to six (6) proxies, with each such proxy having the right to vote one-sixth of a share of Series A Preferred Stock).
6. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Series A Preferred Stock shall not have any voting powers, preferences and relative, participating, optional or other special rights, other than those specifically set forth in this Certificate of Designations (as such Certificate of Designations may be amended from time to time) and in the Certificate of Incorporation. The shares of Series A Preferred Stock shall have no preemptive or subscription rights.
7. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.
8. Severability of Provisions.
If any voting powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as such Certificate of Designations may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional and other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or
other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences and relative, participating, optional or other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly executed by its Senior Vice President, General Counsel and Secretary and attested by its Assistant Secretary, this 21st day of January, l994.
W. R. BERKLEY CORPORATION
By: /s/ Robert S. Gorin
-------------------------
Robert S. Gorin
Senior Vice President,
General Counsel and
Secretary
ATTEST:
By: /s/ Ira S. Lederman
--------------------
Ira S. Lederman
Assistant Secretary
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CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES B CUMULATIVE REDEEMABLE PREFERRED STOCK
OF
W. R. BERKLEY CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
W. R. Berkley Corporation, a Delaware corporation (the "Company"), certifies that pursuant to the authority contained in Article IV of its Restated Certificate of Incorporation (the "Certificate of Incorporation") and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Company at a meeting held on July 14, 1995, adopted the following resolution which resolution remains in full force and effect on the date hereof:
RESOLVED, that there is hereby established the following series of authorized preferred stock having a par value of $.10 per share, which shall be designated as "Series B Cumulative Redeemable Preferred Stock" (the "Series B Preferred Stock") and which shall consist of 458,667 shares having the following voting powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this paragraph 1 shall have, for all purposes of this resolution, the meanings herein specified (with terms defined in the singular having comparable meanings when used in the plural).
Affiliate. The term "Affiliate" shall have the meaning specified in Rule 12b-2 under the Securities Exchange Act of 1934.
Business Day. The term "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.
Common Stock. The term "Common Stock" shall mean the common stock, par value $.20 per share, of the Company.
Dividend Payment Date. The term "Dividend Payment Date" shall have the meaning set forth in subparagraph (b) of paragraph 2 below.
Dividend Period. The term "Dividend Period" shall mean the period from, and including, the Initial Issue Date to, but not including, the first Dividend Payment Date and thereafter, each quarterly period from, and including, the Dividend Payment Date to, but not including, the next Dividend Payment Date.
Initial Issue Date. The term "Initial Issue Date" shall mean the date that shares of Series B Preferred Stock are first issued by the Company.
Investment Banking Firm. The term "Investment Banking Firm" shall mean a nationally recognized investment banking firm selected by the Company.
Liquidation Preference. The term "Liquidation Preference" shall mean $150 per share.
Market Rate. The term "Market Rate" shall mean a percentage rate per annum of the Liquidation Preference selected by the Investment Banking Firm pursuant to subsection (a) of paragraph 2 below.
Record Date. The term "Record Date" shall mean the date designated by the Board of Directors of the Company at the time a dividend is declared; provided, however, that such Record Date shall be the first day of the calendar month in which the applicable Dividend Payment Date falls or such other date designated by the Board of Directors for the payment of dividends that is not more than thirty (30) days nor less than ten (10) days prior to such Dividend Payment Date.
Redemption Date. The term "Redemption Date" shall have the meaning set forth in subparagraph (b) of paragraph 4 below.
Redemption Price. The term "Redemption Price" shall mean a price per share equal to $150 together with accrued and unpaid dividends, if any, thereon to the Redemption Date.
Registration Rights Agreement. The term "Registration Rights Agreement" shall mean the Registration Rights Agreement, dated as of December 28, 1995, between the Company and General Re Corporation, as the same may be amended from time to time.
2. Dividends.
(a) The record holders of Series B Preferred Stock shall be entitled to receive dividends, when and as declared by the Board of Directors of the Company, out of funds legally available for payment of dividends. Such dividends shall be payable by the Company in cash at the following percent per annum of the Liquidation Preference for the Dividend Periods indicated:
Percent Dividend Period
------------ ----------------------------------------------------
0% From Initial Issue Date to first Dividend
Payment Date
2% From first Dividend Payment Date to second
Dividend Payment Date
4% From second Dividend Payment Date to third
Dividend Payment Date
6% From third Dividend Payment Date to establishment of
the Market Rate as specified in this Section 2(a)
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If Series B Preferred Stock is proposed to be included in a registration statement to be filed by the Company pursuant to the Registration Rights Agreement by a notice delivered to the Company in accordance with the terms thereof, then the dividend rate for the Series B Preferred Stock (to be effective for Dividend Periods or portions thereof terminating immediately subsequent to any sale of Series B Preferred Stock pursuant any such registration statement) shall be the rate (the "Market Rate") determined by the Investment Banking Firm which shall cause the Series B Preferred Stock to trade at a price equal to 100% of the Liquidation Preference on the effective date of any such registration statement. In the event that no shares of Series B Preferred Stock are sold pursuant to any such registration statement by the 180th day after the date of receipt by the Company of the notice hereinbefore referred to, the dividend rate for the Series B Preferred Stock shall be the rate as determined by the Investment Banking Firm that would cause the Series B Preferred Stock trading at its Liquidation Preference to yield an amount equal to the yield on the Company's 7 3/8% Series A Cumulative Redeemable Preferred Stock trading at its liquidation preference on such 180th day.
(b) Dividends on shares of Series B Preferred Stock shall accrue and be cumulative from the Initial Issue Date. Dividends shall be payable quarterly in arrears when and as declared by the Board of Directors of the Company on January 15, April 15, July 15, and October 15, of each year (each, a "Dividend Payment Date"), commencing on January 15, 1996. If any
Dividend Payment Date occurs on a day that is not a Business Day, any accrued dividends otherwise payable on such Dividend Payment Date shall be paid on the next succeeding Business Day. Dividends payable in respect of any Dividend Period which is less than a full Dividend Period in length will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends shall be paid to the holders of record of the Series B Preferred Stock as their names shall appear on the stock transfer records of the Company at the close of business on the Record Date for such dividend. Dividends in respect of any past Dividend Periods that are in arrears may be declared and paid at any time to holders of record on the Record Date therefor. Any dividend payment made on shares of Series B Preferred Stock shall be first credited against the earliest accrued but unpaid dividend due which remains payable.
(c) If any shares of Series B Preferred Stock are outstanding, no full dividends shall be declared or paid or set apart for payment on any series of preferred stock ranking junior to or on a parity with the Series B Preferred Stock as to dividends for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series B Preferred Stock for all past Dividend Periods and the then current Dividend Period. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the shares of the Series B Preferred Stock and the shares of any series of preferred stock ranking on a parity as to dividends with the Series B Preferred Stock, all dividends declared upon the shares of the Series B Preferred Stock and any other such series of preferred stock shall be declared pro rata so that the amount of dividends declared per share on the Series B Preferred Stock and such other series of preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series B Preferred Stock and such other series of preferred stock bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series B Preferred Stock which may be in arrears.
(d) Except as provided in subparagraph 2(c), unless full cumulative dividends on the Series B Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no dividends (other than in Common Stock or other capital stock of the Company ranking junior to the Series B Preferred Stock as to dividends and upon liquidation, dissolution or winding up) shall be declared or paid or set aside for payment or no other distribution shall be declared or made upon the Common Stock or the capital stock of the Company ranking junior to or on a parity with the Series B Preferred Stock as to dividends or upon liquidation, dissolution or winding up, nor shall the Common Stock or other capital stock of the Company ranking junior to or
on a parity with the Series B Preferred Stock as to dividends or upon liquidation, dissolution or winding up be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company or any subsidiary of the Company (except by conversion into or exchange for other capital stock of the Company ranking junior to the Series B Preferred Stock as to dividends and upon liquidation, dissolution or winding up).
(e) Notwithstanding anything contained herein to the contrary, no dividends on shares of Series B Preferred Stock shall be declared by the Board of Directors of the Company or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.
(f) Notwithstanding anything contained herein to the contrary, dividends on the Series B Preferred Stock, if not paid on the applicable Dividend Payment Date, will accrue whether or not dividends are declared for such Dividend Payment Date, whether or not the Company has earnings and whether or not there are funds legally available for the payment of such dividends.
(g) The Series B Preferred Stock shall rank on a parity as to dividends or upon liquidation, dissolution or winding up with the Company's 7-3/8% Series A Cumulative Redeemable Preferred Stock.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, subject to the prior preferences and other rights of any capital stock of the Company ranking prior to the Series B Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up which shall have been issued in accordance with the provisions of subparagraph 5(a), but before any distribution or payment shall be made to the holders of capital stock ranking junior to the Series B Preferred Stock in the distribution of assets upon any liquidation, dissolution or winding up of the Company, the holders of Series B Preferred Stock shall be entitled to receive out of the assets of the Company legally available for distribution to its stockholders liquidating distributions in cash or property at its fair market value as determined by the Board of Directors of the Company in the amount of the Liquidation Preference per share plus an amount equal to all dividends accrued and unpaid thereon to the date of such liquidation, dissolution or winding up. After payment of
the full amount of liquidating distributions to which they are entitled, the holders of Series B Preferred Stock will have no right or claim to any of the remaining assets of the Company and shall not be entitled to any other distribution in the event of liquidation, dissolution or winding up of the affairs of the Company.
(b) In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the legally available assets of the Company are insufficient to pay the amount of the Liquidation Preference per share plus an amount equal to all dividends accrued and unpaid on the Series B Preferred Stock and the corresponding amounts payable on all shares of capital stock ranking on a parity with the Series B Preferred Stock in the distribution of assets upon liquidation, dissolution or winding up, then the holders of the Series B Preferred Stock and all other such capital stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Neither the consolidation or merger of the Company into or with another corporation or corporations nor the sale, lease, transfer or conveyance of all or substantially all of the assets of the Company to another corporation or any other entity shall be deemed a liquidation, dissolution or winding up of the affairs of the Company within the meaning of this paragraph 3.
4. Redemption by the Company.
(a) The Series B Preferred Stock may be redeemed, in whole or from time to time in part, at the option of the Company at the Redemption Price on any Dividend Payment Date; provided, however, that subsequent to any sale of Preferred Stock pursuant to a Registration Statement filed by the Company pursuant to the Registration Rights Agreement, the Series B Preferred Stock may be redeemed, in whole or from time to time in part, at any time subsequent to the fifth anniversary of any such sale, at the option of the Company at the Redemption Price on any Dividend Payment Date.
(b) Each date fixed for redemption pursuant to subparagraph 4(a) above is called a "Redemption Date".
(c) In case of redemption of less than all shares of Series B Preferred Stock at the time outstanding, the shares to be redeemed shall be selected pro rata from the holders of record of such shares in proportion to the number of shares held by such holders (with adjustments to avoid redemption of fractional shares) or by lot in a manner determined by the Company.
(d) Notice of any redemption will be mailed by the Company, postage prepaid, not less than 30 nor more than 60 days prior to the Redemption Date, addressed to the respective holders of record of the Series B Preferred Stock to be redeemed at their
respective addresses as they appear on the stock transfer records of the
Company. No failure to give such notice or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the redemption of any
shares of Series B Preferred Stock except as to the holder or holders to whom
the Company has failed to give notice or to whom notice was defective. In
addition to any information required by law or by the applicable rules of any
exchange upon which Series B Preferred Stock (or any interests therein) may be
listed, admitted to trading or included for quotation, such notice shall state:
(i) the Redemption Date; (ii) the Redemption Price; (iii) the number of shares
of Series B Preferred Stock to be redeemed and, if less than all shares held by
such holder are to be redeemed, the number of such shares to be redeemed; (iv)
the place or places where certificates for such shares are to be surrendered for
payment of the Redemption Price; and (v) that dividends on the shares to be
redeemed will cease to accrue on the Redemption Date.
(e) If notice has been mailed in accordance with subparagraph 4(d) above and provided that on or before the Redemption Date specified in such notice all funds necessary for such redemption shall have been set aside by the Company in accordance with the provisions of subparagraph (f) below, separate and apart from its other funds in trust for the pro rata benefit of the holders of the shares so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Redemption Date, dividends on the shares of the Series B Preferred Stock so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding and shall not have the status of shares of Series B Preferred Stock, and all rights of the holders thereof as shareholders of the Company (except the right to receive from the Company the Redemption Price) shall cease. Upon surrender, in accordance with said notice, of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and the notice shall so state), such shares shall be redeemed by the Company at the Redemption Price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares without cost to the holder thereof.
(f) Any funds deposited with a bank or trust company for the purpose of redeeming Series B Preferred Stock shall be irrevocable except that:
(i) the Company shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Company and unclaimed by the holders of the Series B Preferred Stock entitled thereto at the expiration of two (2) years from the applicable Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the Company, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Company shall look only to the Company for payment of the Redemption Price without interest or other earnings.
(g) No Series B Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Price.
(h) Unless full cumulative dividends on all shares of Series B Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no shares of any Series B Preferred Stock shall be redeemed unless all outstanding shares of Series B Preferred Stock are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of Series B Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series B Preferred Stock, and, unless full cumulative dividends on all outstanding shares of Series B Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, the Company shall not purchase or otherwise acquire directly or indirectly any shares of Series B Preferred Stock (except by conversion into or exchange for capital stock of the Company ranking junior to the Series B Preferred Stock as to dividends and upon liquidation, dissolution or winding up).
(i) All shares of Series B Preferred Stock redeemed pursuant to this paragraph 4 shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock, without designation as to series and may thereafter be reissued as shares of any series of preferred stock other than Series B Preferred Stock.
5. Voting Rights.
(a) The holders of record of shares of Series B Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in this paragraph 5 or as otherwise provided by law. The Company shall not, without the affirmative vote or consent of the holders of at least two-thirds of the shares of the Series B Preferred Stock outstanding at the time, given in person or by proxy, at a meeting (such Series B Preferred Stock voting separately as a class), (i) increase the
authorized or issued amount of Series B Preferred Stock; (ii) authorize, create or issue, or increase the authorized or issued amount of, any class or series of capital stock ranking prior to the Series B Preferred Stock with respect to the payment of dividends or distribution of assets upon liquidation, dissolution or winding up, or reclassify any authorized capital stock into shares of such prior-ranking stock, or authorize, create or issue any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such prior-ranking stock; or (iii) amend, alter or repeal the provisions of the Certificate of Incorporation or this Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof for the Series B Preferred Stock ("Certificate of Designations"), whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series B Preferred Stock or the holders thereof; provided, however, that any increase in the amount of the authorized preferred stock (other than the Series B Preferred Stock) or any outstanding series of preferred stock or any other capital stock of the Company, or the creation and issuance of any other series of preferred stock or of any other capital stock of the Company, in each case ranking on a parity with or junior to the Series B Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(b) If and whenever dividends payable on Series B Preferred
Stock shall be in arrears for six (6) or more consecutive Dividend Periods, then
the holders of Series B Preferred Stock, voting separately as a class (with such
other series as provided in subparagraph 5 (f) below), shall be entitled at the
next annual meeting of the stockholders or at any special meeting to elect two
(2) additional directors. Upon election, such directors shall become additional
directors of the Company and the authorized number of directors of the Company
shall thereupon be automatically increased by such number of directors.
(c) Whenever the voting right referred to in subparagraph 5(b) shall have vested, such right may be exercised initially either at a special meeting of the holders of Series B Preferred Stock, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at such annual meetings of the holders of Series B Preferred Stock. Such right of the holders of Series B Preferred Stock to elect directors may be exercised until all dividends to which the holders of Series B Preferred Stock shall have been entitled for all previous Dividend Periods and the current Dividend Period shall have been paid in full or declared and a sum of money sufficient for the payment thereof set aside for payment, at which time the right of the holders of Series B Preferred Stock to elect such number of directors shall cease,
the term of such directors previously elected shall, upon the resignation thereof, thereupon terminate, and the authorized number of directors of the Company shall thereupon return to the number of authorized directors otherwise in effect, but subject always to the same provisions for the renewal and divestment of such special voting rights in the case of any such future dividend default or defaults.
(d) At any time when such voting right shall have vested in the holders of Series B Preferred Stock and if such right shall not already have been initially exercised, a proper officer of the Company shall, upon the written request of any holder of record of Series B Preferred Stock then outstanding, addressed to the Secretary of the Company, call a special meeting of holders of Series B Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company or, if none, at a place designated by the Secretary of the Company. If such meeting shall not be called by the proper officers of the Company within thirty (30) days after the personal service of such written request upon the Secretary of the Company, or within thirty (30) days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Company at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of ten percent (10%) of the shares of Series B Preferred Stock then outstanding may designate in writing a holder of Series B Preferred Stock to call such meeting at the expense of the Company, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the place for holding annual meetings of the Company or, if none, at a place designated by such holder. Any holder of Series B Preferred Stock that would be entitled to vote at such meeting shall have access to the stock books of the Company for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this paragraph. Notwithstanding the provisions of this paragraph, however, no such special meeting shall be called if any such request is received less than 90 days before the date fixed for the next ensuing annual or special meeting of stockholders.
(e) If a director so elected by the holders of Series B Preferred Stock shall cease to serve as a director before his term shall expire, the holders of Series B Preferred Stock then outstanding may, at a special meeting of the holders called as provided above, elect a successor to hold office for the unexpired term of the director whose place shall be vacant.
(f) If at any time when the holders of Series B Preferred Stock are entitled to elect directors pursuant to the foregoing provisions of this paragraph 5 the holders of any one or more additional series of preferred stock are entitled to elect directors by reason of any default or event specified in
the Certificate of Incorporation, as in effect at the time, or in the Certificate of Designations for such series, and if the terms for such other additional series so permit, then the voting rights of the two or more series then entitled to vote shall be combined (with each series having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Series B Preferred Stock and of all such other series then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other series have elected such directors prior to the happening of the default or event permitting the holders of Series B Preferred Stock to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Company as elsewhere required in subparagraph 5(d) above, then a new election shall be held with all such other series of preferred stock and the Series B Preferred Stock voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors. If the holders of any such other series are entitled to elect in excess of two directors, the Series B Preferred Stock shall not participate in the election of more than two such directors, and those directors whose terms first expire shall be deemed to be the directors elected by the holders of Series B Preferred Stock; provided that if at the expiration of such terms the holders of Series B Preferred Stock are entitled to vote in the election of directors pursuant to the provisions of this paragraph 5, then the Secretary of the Company shall call a meeting (which meeting may be the annual meeting or special meeting of stockholders referred to in subparagraph 5(c) above) of holders of Series B Preferred Stock for the purpose of electing replacement directors (in accordance with the provisions of this paragraph 5) to be held at or prior to the time of expiration of the expiring terms referred to above.
(g) In any matter in which the Series B Preferred Stock may vote (as expressly provided herein or as may be required by law), each share of Series B Preferred Stock shall be entitled to one (1) vote, any portion of which may be directed separately by the holder thereof (or by any proxy or proxies of such holder).
6. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Series B Preferred Stock shall not have any voting powers, preferences and relative, participating, optional or other special rights, other than those specifically set forth in this Certificate of Designations (as such Certificate of Designations may be amended from time to time) and in the Certificate of Incorporation. The shares of Series B Preferred Stock shall have no preemptive or subscription rights.
7. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.
8. Severability of Provisions.
If any voting powers, preferences and relative, participating, optional and other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as such Certificate of Designations may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional and other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences and relative, participating, optional or other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein.
9. Restrictions on Transfer. Until such time as shares of Series B Preferred Stock are sold pursuant to a registration statement filed by the Company pursuant to the Registration Rights Agreement, shares of Series B Preferred Stock may only be transferred to an Affiliate of General Re Corporation. Any transfer in violation of this Section 9 shall be null and void.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly executed by its Chairman of the Board, Chief Executive Officer and President and attested by its Secretary, this 21st day of December, 1995.
W. R. BERKLEY CORPORATION
By: /s/ William R. Berkley
----------------------------
William R. Berkley
Chairman of the Board,
Chief Executive Officer and
President
ATTEST:
By: /s/ Robert S. Gorin
---------------------
Robert S. Gorin
Secretary
|
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
W. R. BERKLEY CORPORATION
The undersigned, being the Chairman of W. R. BERKLEY CORPORATION, a corporation existing under the laws of the State of Delaware, hereby certifies that:
1. The first paragraph of Article FOURTH of the Restated Certificate of Incorporation of said corporation be and it hereby is amended to read as follows:
FOURTH: The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is eighty-five million (85,000,000) shares, of which eighty million (80,000,000) shares are to be Common Stock of the par value of twenty cents ($.20) each, and five million (5,000,000) shares are to be Preferred Stock of the par value of ten cents ($.l0) each.
2. The amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this certificate this 12th day of May, 1998.
/s/ William R. Berkley
----------------------------
William R. Berkley, Chairman
Attest:
/s/ Ira S. Lederman
------------------------------------
Ira S. Lederman, Assistant Secretary
|
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
W. R. BERKLEY CORPORATION
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
We, William R. Berkley, Chairman of the Board, and Cornelius T. Finnegan III, Secretary, of W. R. Berkley Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the Restated Certificate of Incorporation, as amended, of the said Corporation, the said Board of Directors on May 11, 1999, adopted the following resolution creating a series of 40,000 shares of Preferred Stock designated as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Restated Certificate of Incorporation, as amended, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" and the number of shares constituting such series shall be 40,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A
Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1000 times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $.20 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after May 11, 1999 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided, however, that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than thirty (30) days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii) of this
Section 3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the right
of the holders of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the holders
of Common Stock shall not affect the exercise by the holders of Preferred Stock
of such voting right. At any meeting at which the holders of Preferred Stock
shall exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C) (iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than twenty (20) days and not later than sixty (60) days after such order or request or in default of the calling of such meeting within sixty (60) days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C) (ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of paragraph (C)
(ii) of this Section 3 (such number being subject, however, to change thereafter
in any manner provided by law or in the certificate of incorporation or
by-laws). Any vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled by a majority of the
remaining Directors.
(D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized
but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $10 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of 1000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation, as amended, of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 11th day of May, 1999.
/s/ William R. Berkley ---------------------- William R. Berkley Chairman of the Board /s/ Cornelius T. Finnegan III ----------------------------- Secretary |
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
W. R. BERKLEY CORPORATION
The undersigned, being the Chairman of the Board and Chief Executive Officer of W. R. BERKLEY CORPORATION, a corporation existing under the laws of the State of Delaware, hereby certifies that:
1. The first paragraph of Article Fourth of the Restated Certificate of Incorporation of said corporation be and it hereby is amended to read as follows:
FOURTH: The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is one hundred fifty-five million (155,000,000) shares, of which one hundred fifty million (150,000,000) shares are to be Common Stock of the par value of twenty cents ($.20) each, and five million (5,000,000) shares are to be Preferred Stock of the par value of ten cents ($.10) each.
2. The amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this certificate this 20th day of May, 2003.
/s/ William R. Berkley
------------------------
William R. Berkley
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ Ira S. Lederman
--------------------------
Ira S. Lederman, Secretary
|
EXHIBIT 10.2
RESTRICTED STOCK UNIT
AGREEMENT
THIS AGREEMENT, dated as of April 4, 2003, by and between W. R. BERKLEY CORPORATION, a Delaware corporation (the "Company"), and _____________________________ (the "Grantee").
W I T N E S S E T H:
WHEREAS, the Grantee is an employee of the Company or subsidiary thereof (an "Employee"), and the Company wishes to grant the Grantee a notional interest in shares of the Company's common stock, par value $0.20 per share (the "Stock"), subject to certain restrictions (the "Restricted Stock Units"), on the terms and conditions set forth herein; and
WHEREAS, through the grant of these Restricted Stock Units, the Company hopes to incentivise and retain the services of Grantee and encourage stock ownership by Grantee in order to give Grantee a proprietary interest in the Company's success and align Grantee's interest with those of the stockholders of the Company.
NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows:
SECTION 1. GRANT OF RESTRICTED STOCK UNITS. As of the date hereof, the Company hereby grants to the Grantee ________ Restricted Stock Units. Each Restricted Stock Unit shall represent the right to receive one share of Stock subject to the terms and conditions set forth herein.
SECTION 2. NON-TRANSFERABILITY. Except as specifically consented to by the Compensation and Stock Option Committee (the "Committee") of the Board of Directors of the Company (the "Board"), the Grantee may not sell, transfer, pledge, or otherwise encumber or dispose of the Restricted Stock Units other than by will or the laws of descent and distribution.
SECTION 3. VESTING; FORFEITURE.
(a) The Restricted Stock Units granted hereunder shall vest (subject to forfeiture, as set forth in Section 3(d) below) on the fifth anniversary of the date hereof, provided the Grantee has remained an Employee from the date hereof through such fifth anniversary. In the event that Grantee's employment with the Company is terminated on account of death, Disability or Retirement (each, as defined below), a pro-rata portion of the Restricted Stock Units shall vest (subject to forfeiture, as set forth in Section 3(d) below) immediately upon such termination. The number of Restricted Stock Units that will vest upon termination on account of death, Disability or Retirement shall be the total number of Restricted Stock Units granted hereunder multiplied by a fraction, the numerator of which is the number of days the Grantee served as an Employee from the date of this Agreement to the date of such termination and the denominator of which is one thousand eight hundred twenty five (1,825). Notwithstanding the vesting schedule set forth above, the Committee shall have absolute discretion to accelerate the vesting (subject to forfeiture, as set forth in Section 3(d) below) of the Restricted Stock Units at any time and for any reason.
(b) In the event that Grantee's employment with the
Company is terminated for any reason, all unvested Restricted Stock Units
(except for those that vest immediately upon death, Disability or Retirement)
shall be forfeited, and the Grantee shall have no further rights with respect to
such Restricted Stock Units.
(c) For purposes of this Agreement, the Grantee's employment will be deemed to have terminated on account of a Disability if such employment has terminated on account of the total and permanent disability of the Grantee, as determined by the Committee in its sole discretion. For purposes of this Agreement, the Grantee's employment will be deemed to have terminated on account of Grantee's Retirement if such employment is terminated and thereafter Grantee either retires from gainful employment or becomes employed outside of the property/casualty insurance or reinsurance industry.
(d) The Grantee agrees not to engage in a Competitive Action (as defined below) from the date hereof through the first anniversary of the date of Grantee's termination of employment with the Company. If on or prior to the Settlement Date (as defined below), the Grantee engages in a Competitive Action or enters into, or has entered into, an agreement (written, oral or otherwise) to engage in Competitive Action, all of the Restricted Stock Units shall be immediately forfeited, and the Grantee shall have no further rights with respect to such Restricted Stock Units. In the event that the Grantee engages in a Competitive Action or enters into, or has entered into, an agreement (written, oral or otherwise) to engage in Competitive Action after the Settlement Date but on or prior to the first anniversary of the Grantee's termination of employment with the Company, the Grantee shall pay to the Company, upon demand by the Company, an amount equal to (i) the value, as of the Settlement Date, of the number of shares of Stock delivered to the Grantee in respect of Restricted Stock Units, (ii) the amount paid to the Grantee on the Settlement Date in respect of Dividend Equivalents (as defined below) and interest thereon and (iii) the value of all dividends paid to the Grantee in respect of the shares of Stock delivered to the Grantee on the Settlement Date. The Grantee may satisfy the payment obligation to the Company under (i) above by returning the shares delivered to the Grantee on the Settlement Date.
(e) For purposes of this Agreement, the Grantee will be deemed to engage in a "Competitive Action" if, either directly or indirectly, and whether as an employee, consultant, independent contractor, partner, joint venturer or otherwise, the Grantee (i) in any geographical area where the Company is engaged in business, engages in any business activities which are competitive, to any material extent, with any type or kind of business activities conducted by the Company in such area, (ii) on behalf of any person or entity engaged in business activities competitive with the business activities of the Company, solicits or induces, or in any manner attempts to solicit or induce, any person employed by, or as an agent of, the Company to terminate such person's employment or agency relationship, as the case may be, with the Company, (iii) diverts, or attempts to divert, any person, concern or entity from doing business with the Company or attempts to induce any such person, concern or entity to cease being a customer of the Company or (iv) makes use of, or attempts to make use of, the Company's property or proprietary information, other than in the course of the performance of services to the Company or at the direction of the Company. The determination as to whether the Grantee has engaged in a Competitive Action (as defined herein) shall be made by the Committee in its sole and absolute discretion. The Committee's exercise or nonexercise of such discretion with respect to any particular event or occurrence by or with respect to the Grantee or any other recipient of restricted stock units shall not in any way reduce or eliminate the authority of the Committee to (i) determine that any event or occurrence by or with respect to the Grantee constitutes engaging in a Competitive Action or (ii) determine the related Competitive Action date.
SECTION 4. DELIVERY AND POSSESSION OF SHARE CERTIFICATES. Ninety (90) days following the Grantee's termination of employment for any reason, or such earlier date as determined by the Committee in its sole discretion (the "Settlement Date"), provided the Grantee has not engaged in, or entered into an agreement (written, oral or otherwise) to engage in, Competitive Action, the Company shall deliver to the Grantee (or the Grantee's estate in the event of death) a certificate or certificates representing the number of shares of Stock equal to the number of vested Restricted
Stock Units (if any) as of the date of such termination and Grantee shall take possession thereof. Settlement of the Restricted Stock Units shall be made exclusively from treasury shares held by the Company. Notwithstanding anything herein to the contrary, in the event of a Change of Control (as defined below), the Restricted Stock Units shall immediately become fully vested and no longer subject to forfeiture and the Company shall immediately deliver to the Grantee (or the Grantee's estate in the event of death) a certificate or certificates representing the number of shares of Stock equal to the number of vested Restricted Stock Units.
SECTION 5. DIVIDENDS AND DIVIDEND EQUIVALENTS. No dividends or dividend equivalents shall accrue or be paid with respect to any outstanding unvested Restricted Stock Units. With respect to each vested Restricted Stock Unit, an amount equal to any cash dividends paid by the Company in respect of a share of Stock shall be accrued for the account of the Grantee at the time any such dividends are paid to stockholders (the "Dividend Equivalents"). The Dividend Equivalents shall be subject to forfeiture to the same extent that the corresponding Restricted Stock Units are subject to forfeiture. On the Settlement Date, an amount equal to the Dividend Equivalents accrued for the account of the Grantee (plus any interest accrued with respect to such Dividend Equivalents) shall be paid to the Grantee in cash. Accrued Dividend Equivalents shall be credited with interest, compounded quarterly. The interest rate will be the prime rate in effect from time to time as reported in the Wall Street Journal or as established by the Committee prior to the beginning of each year.
SECTION 6. COMPANY; GRANTEE.
(a) The term "Company" as used in Section 3 or otherwise in this Agreement with reference to the Grantee's employment shall include the Company and its subsidiaries. The term "subsidiary" as used in this Agreement shall mean any subsidiary of the Company as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended.
(b) Whenever the word "Grantee" is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Restricted Stock Units may be transferred by will or by the laws of descent and distribution, the word "Grantee" shall be deemed to include such person or persons.
SECTION 7. COMPLIANCE WITH LAW. The securities granted hereunder have not been registered under the Securities Act of 1933 (as now in effect or as hereafter amended) (the "Securities Act"). The Grantee hereby confirms that the Grantee has been informed that any shares of Stock acquired hereunder are restricted securities under the Securities Act and may not be resold or transferred unless the Stock is first registered under the Federal securities laws or unless an exemption from registration is available. The Company shall in no event be obliged to register any securities pursuant to the Securities Act or to take any other affirmative action in order to cause the issuance or transfer of shares acquired pursuant to this Agreement to comply with any law or regulation of any governmental authority.
SECTION 8. NOTICE. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by the Grantee to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices or communications by the Company to the Grantee may be given to the Grantee personally or may be mailed to Grantee at the Grantee's last known address, as reflected in the Company's records.
SECTION 9. CHANGES IN CAPITAL STRUCTURE.
(a) The aggregate number of Restricted Stock Units granted hereunder shall be automatically appropriately adjusted for any increase or decrease in the number of outstanding shares of stock resulting from a stock split or other subdivision or consolidation of shares of Stock or for other capital adjustments or payments of stock dividends or stock distributions or other increases or decreases in the outstanding shares of Stock without receipt of consideration by the Company. Any such adjustment shall be conclusively determined by the Board.
(b) In the event of any change in the outstanding shares of Stock by reason of any recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other corporate change, or any distributions to common stockholders other than cash dividends, the Board shall make such substitution or adjustment, if any, as it deems to be equitable, as to the number or kind of shares of Stock or other securities issued pursuant to this Agreement.
(c) The existence of this Agreement will not affect in any way the right or power of the Company or its stockholders to make or authorize any of the following:
(i) any adjustments, recapitalization, reorganizations or other changes in the Company's capital structure or its business;
(ii) any merger or consolidation of the Company;
(iii) any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred to prior preference stocks ahead of or affecting the Stock or the rights thereof or convertible into or exchangeable for Stock;
(iv) the dissolution or liquidation of the Company;
(v) any sale or transfer of all or any part of its assets or business; or
(vi) any other corporate act or proceeding.
SECTION 10. CHANGE OF CONTROL. For purposes of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of Stock (the
"Outstanding Company Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company,
(iv) any acquisition by William R. Berkley or any entity directly or indirectly
controlled by William R. Berkley, (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii), and (iii) of
subsection (c) of this Section 10 or (vi) any acquisition that is approved in
advance by the Board at a time when the Incumbent Board (as hereinafter defined)
constitutes at least a majority of the Board (an "Approved Acquisition"); or
(b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation of the sale or reorganization of the Company or the consolidation or merger of the Company with another corporation, or the sale or exchange of all or substantially all of the assets of the Company (a "Corporate Event"), unless following such Corporate Event, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Stock and Outstanding Company Voting Securities immediately prior to such Corporate Event beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Event (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Event, of the Outstanding Company Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person other than (1) William R. Berkley or any entity directly or indirectly controlled by William R. Berkley, (2) any corporation resulting from such Corporate Event, or (3) any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Event, beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Event or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Event, or was acquired pursuant to an Approved Acquisition and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Event were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Event; or
(d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
SECTION 11. WITHHOLDING. At the time of vesting and/or settlement of the Restricted Stock Units, as appropriate, the Committee shall require the Grantee to pay to the Company an amount sufficient to pay all federal, state and local withholding taxes applicable, in the Committee's judgment, to the settlement of the Restricted Stock Units, and the Grantee's right to vesting and/or settlement, as appropriate, shall be contingent upon such payment. Such payment to the Company may be effected through (a) payment by the recipient to the Company of the aggregate withholding taxes in cash or cash equivalents; (b) at the discretion of the Committee, the Company's withholding from the number of shares of Stock that would otherwise be delivered to the Grantee upon settlement of the Restricted Stock Units, a number of shares of Stock with an aggregate fair market value on the date of settlement (as determined by the Committee) equal to the aggregate amount of withholding taxes; or (c) at the discretion of the Committee, any combination of these two methods.
SECTION 12. AGREEMENT TO ARBITRATE. Any controversy or claims between the parties arising out of or related to this Agreement shall be submitted to binding arbitration before the American Arbitration Association in the greater New York metropolitan area and judgment upon the award rendered as a result of such arbitration shall be final and binding and may be entered in any court having competent jurisdiction. Any such arbitration shall be conducted by a panel of three arbitrators under the "baseball arbitration" methodology. As such, each party shall submit to the arbitrator and exchange with each other in advance of the arbitration hearing their last best offers for settlement of the controversy or claim under the Agreement. The arbitrators shall be limited to ruling in favor of one or the other parties.
SECTION 13. NO RIGHT TO CONTINUED SERVICE. This Agreement does not confer upon the Grantee any right to continue as an Employee of the Company, nor shall it interfere in any way with the right of the Company to terminate Grantee's employment at any time for any reason.
SECTION 14. BINDING EFFECT. This Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.
SECTION 15. GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof.
SECTION 16. SIGNATURE IN COUNTERPARTS. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
* * *
THIS AGREEMENT CONTAINS AN ARBITRATION CLAUSE IN SECTION 12.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
W. R. BERKLEY CORPORATION
By: ___________________________
Name:
Title:
EXHIBIT 31.1
CERTIFICATIONS
I, William R. Berkley, Chairman of the Board and Chief Executive Officer of W. R. Berkley Corporation (the "registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2003
/s/ WILLIAM R. BERKLEY
--------------------------
William R. Berkley
Chairman of the Board and
Chief Executive Officer
|
EXHIBIT 31.2
CERTIFICATIONS
I, Eugene G. Ballard, Senior Vice President, Chief Financial Officer and Treasurer of W. R. Berkley Corporation (the "registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2003
/s/ EUGENE G. BALLARD
-----------------------------
Senior Vice President,
Chief Financial Officer and
Treasurer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of W. R. Berkley Corporation (the "Company") on Form 10-Q for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, William R. Berkley, Chairman of the Board and Chief Executive Officer of the Company, and Eugene G. Ballard, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ WILLIAM R. BERKLEY ------------------------------ William R. Berkley Chairman of the Board and Chief Executive Officer /s/ EUGENE G. BALLARD ----------------------------- Eugene G. Ballard Senior Vice President - Chief Financial Officer and Treasurer August 6, 2003 |
A signed original of this written statement required by Section 906 has been provided to W. R. Berkley Corporation (the "Company") and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.