Exhibit 10.10

 

MARKEL CORPORATION

EMPLOYEE STOCK PURCHASE AND BONUS PLAN

 

This document provides information about a total of 100,000 shares of the Common
Stock, no par value (“Common Stock”), of Markel Corporation (the “Company”)
which may be acquired by employees and Directors of the Company and its
subsidiaries pursuant to the Company’s Employee Stock Purchase and Bonus Plan
(the “Plan”). This document also provides information about a Loan Program (the
“Loan Program”) to facilitate purchases of shares of the Company’s Common Stock
pursuant to the Plan. Under the Loan Program an eligible participant may borrow
an amount equal to the full purchase price of shares of Common Stock purchased
under the Plan (a “Loan”).

 

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS

COVERING SECURITIES THAT HAVE BEEN

REGISTERED UNDER THE SECURITIES

ACT OF 1933 (the “1933 Act”).

 

DATE: November, 2004

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INTRODUCTION TO THE PLAN

 

The Company has adopted the Markel Corporation Employee Stock Purchase and Bonus
Plan in a continuation of the Company’s efforts to encourage share ownership by
employees and Directors. The Plan provides an easy method for making purchases
of the Company’s Common Stock and also encourages share ownership by providing a
share bonus based on the net increase in the number of shares of Common Stock
purchased pursuant to the Plan by an employee or Director in a given year. A
description of the Loan Program feature of the Plan begins on page 6. The Plan
is not subject to the Employee Retirement Income Security Act of 1974 (“ERISA”)
and will be administered by the Company’s Human Resources Department in Glen
Allen, Virginia. You may obtain additional information about the Plan and its
administration by contacting Human Resources at (804) 747-0136.

 

PLAN ELIGIBILITY

 

All full-time and part-time employees of the Company or its designated
subsidiaries who have attained the age of 18 are eligible to elect to
participate in the Plan. Subject to certain conditions, non-employee Directors
of the Company are also eligible to participate. An eligible Participant may
elect to participate in the Plan by completing an enrollment form (available
from your Human Resources Department or on the Company Intranet) and an IRS W-9
or W-8 Form (also available from your Human Resources Department or on the
Company Intranet).

 

An eligible Participant may elect to participate at any time, may make changes
in the amount of deductions at any time and may also terminate participation at
any time by sending written instructions directly to the Human Resources
Department. Elections will become effective as soon as practicable following the
receipt of the election or change form by the Human Resources Department.

 

Participation in the Plan will automatically terminate in the payroll period
following the date an employee ceases to be a full-time or part-time employee or
for Directors, on the date a Director ceases to serve as a Director of the
Company.

 

NON-EMPLOYEE DIRECTOR PARTICIPANTS

 

Non-employee Directors of the Company may participate in the Plan subject to the
following conditions: (i) shares purchased under the Plan and Awards made under
the Plan must be held at least six months before they may be withdrawn from the
Plan or otherwise sold or disposed of by the Director (the Director’s election
to participate in the Plan authorizes the imposition of transfer restrictions as
necessary to implement this provision); (ii) stock purchases made by a Director
under the Plan may not exceed the amount of annual and meeting fees paid to

 

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the Director by the Company; and (iii) if a Director ceases participation in the
Plan, he or she may not participate again for at least six months. Effective
July 30, 2002, non-employee Directors may not receive new loans under the Loan
Program feature of the Plan.

 

All other applicable plan provisions apply to a non-employee Director’s
participation in the Plan.

 

METHOD FOR MAKING STOCK PURCHASES

 

At the time of enrollment an eligible Participant will specify the amounts to be
invested and the Company will regularly deduct the specified amount from the
Participant’s pay. The Participant may also elect to purchase shares other than
by payroll deduction provided such purchases are made in amounts aggregating
$500 or £300 or more. Deductions or contributions made in currencies other than
U.S. Dollars will be converted by the Company into U.S. Dollars at the then
existing exchange rate as reasonably determined by the Company. Amounts
contributed will be combined with all the money contributed by other
Participants and then sent to one or more brokers selected by the Company
(collectively the “Investing Broker”) to be used to purchase Common Stock at
market prices current at the time of purchase. Purchases may be made on the open
market or directly from the Company. Purchases will be made by the Investing
Broker no less frequently than once a payroll cycle for payroll deduction
purchases and as soon as practicable for lump sum and Loan Program purchases.
The amount of all Participants’ deductions or contributions will be forwarded by
the Company to the Investing Broker at least once a payroll cycle for payroll
deduction purchases and as soon as practicable for lump sum and Loan Program
purchases. The purchase price for a Participant’s stock will be determined by
the average of the market prices for the Common Stock purchased for all
Participants on a purchase date.

 

Each Participant must specify on the Enrollment Form the amount to be withheld
from his or her gross paycheck (multiples of
$/£5, minimum of $25/£15 per pay period), and such deductions will remain in
effect until the Participant files a new Enrollment Form or elects to terminate
deductions.

 

The current Investing Broker is Wachovia Employee Shareholder Services Group and
the current record keeper is Wachovia Bank, N.A. Wachovia Employee Shareholder
Services Group has agreed to process all purchases and sales of stock for the
Plan on a non-profit basis and will charge fees only to the extent necessary to
cover its costs in effecting the trade. In addition, no minimum fee will be
applied to any transaction.

 

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FEES AND EXPENSES

 

The Company will pay the Investing Broker’s fees for stock purchases made for
Participants. The Company will also pay for the cost of administering the stock
bonus feature of the Plan described below. The Investing Broker fees and other
charges in connection with sales, or in connection with purchases of Common
Stock or other securities not made pursuant to the Plan will be payable directly
by the Participant ordering such transactions.

 

PARTICIPANTS’ ACCOUNTS WITH THE INVESTING BROKER

 

The Investing Broker will open and maintain an individual account for each
Participant and will make purchases of Common Stock for the Participant’s
account using deductions and contributions made for the Participant.
Participants’ accounts will be credited with amounts that would represent
“fractional shares.” Under this feature, cash amounts which are not sufficient
to purchase whole shares will be credited to a Participant’s account as
fractional interests. Certificates for fractional shares will not, however, be
issued. Upon sale or distribution, a Participant will receive cash for such
fractional interest based on the then current market price of the Common Stock
as determined by the Investing Broker.

 

Each Participant will receive a statement each quarter as long as there is a
balance in his or her account and all notices of meetings, proxy statements and
any other material distributed by the Company for the benefit of its
stockholders. A Participant may call the Investing Broker from the U.S.
toll-free at 888-396-0853 or from the U.K. at (704) 427-5542 to obtain certain
account information and assistance A Participant may also access certain account
information online by visiting the Investing Broker’s internet site at
www.wachovia.com/corp_inst/essg/login. These procedures may be changed in the
future. The Company will not be responsible for keeping records with respect to
the Plan other than for payroll purposes and for purposes of determining the
Stock Bonus Awards described below. All other record keeping will be done by the
Investing Broker. The Company may receive information about a Participant’s
account, including purchases and sales, under the Plan.

 

STOCK BONUS AWARDS

 

Participants will receive a stock bonus of ten percent of the net increase in
shares of Common Stock purchased pursuant to the Plan during a given year (a
“Stock Bonus Award”). Stock Bonus Awards will be based on the net number of
shares of Common Stock purchased from January 1 through December 31 of a given
year and will be issued to or on behalf of a Participant not later than March 31
following the end of a given year. An employee will not receive a Stock Bonus
Award unless he or she is an eligible Participant not on probation on the date
the Stock Bonus Award is made.

 

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Unless other arrangements satisfactory to the Company in its sole discretion are
made, the net increase in the number of shares purchased pursuant to the Plan
will be based on statements provided by the Investing Broker and the Company
will be entitled to rely conclusively on such statements in determining Stock
Bonus Awards to be made under the Plan. Because Stock Bonus Awards will be
determined by reference to the statements of the Investing Broker, any requests
by a Participant for the issuance of shares in certificated form will cause
those shares not to be reflected on the statements and accordingly not to be
counted for purposes of determining the Stock Bonus Award.

 

No Stock Bonus Award will be made for an increase in the number of shares of
Common Stock held resulting solely from a subdivision or consolidation of
shares, the payment of a stock dividend, a stock split or other change in
capitalization. Stock Bonus Awards will be appropriately adjusted to reflect the
effects of such a change.

 

The Company may also make Loans to facilitate the purchase of the Company’s
Common Stock. Participants in the Loan Program will receive a stock bonus of
five percent of the number of shares of Common Stock purchased under the Loan
Program (a “Special Stock Bonus Award”). Special Stock Bonus Awards will not be
counted as an increase in the number of shares purchased by a Participant during
a calendar year. The timing of the issuance of a Special Stock Bonus Award to or
on behalf of a Participant shall be as determined by the Executive Officers. No
Special Stock Bonus Award will be made for an increase in the number of shares
of Common Stock held resulting solely from a subdivision or consolidation of
shares, the payment of a stock dividend, a stock split or other change in
capitalization. Special Stock Bonus Awards will be appropriately adjusted to
reflect the effects of such a change.

 

SALE OF SHARES

 

Each Participant may sell all or part of his or her stock by contacting the
Investing Broker directly. Sales will be processed as soon as practicable on a
daily basis. A Participant will be responsible for any sales or brokerage
commission incurred in connection with a sale of shares. The right to receive a
Stock Bonus Award may not be sold or transferred.

 

Persons who are “affiliates” of the Company within the meaning of applicable
federal securities laws and regulations (which, in general, means the executive
officers and directors of the Company) may not resell shares of Common Stock
acquired pursuant to the Plan in the absence of an effective registration
statement under the 1933 Act or the availability of an exemption from such
registration, such as the one afforded by Rule 144 of the 1933 Act. The
acquisition of shares of Common Stock by executive officers and non-employee
Directors (including the acquisition of shares by bonus awards) as well as any
subsequent resale of such shares may be subject to Section 16 of the Securities
Exchange Act of 1934 (the “1934 Act”) and the rules issued thereunder regarding
“short swing” trading.

 

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TAX CONSEQUENCES OF PLAN PARTICIPATION

 

Stock Bonus Awards and Special Stock Bonus Awards are subject to applicable
income withholding requirements and, unless the Company in its sole discretion
accepts another arrangement for the payment of such withholding, that
withholding will be deducted from the employee’s first paycheck following
receipt of an Award. Stock Bonus Awards received by non-employee Directors will
not be subject to withholding (unless a Director is subject to back-up
withholding) but may need to be considered by Directors when making estimated
tax payments.

 

Stock purchases made pursuant to the Loan Program will be made with after tax
dollars and will not have a tax impact on the employee or provide a tax
deduction for the Company.

 

LOAN PROGRAM

 

ELIGIBILITY

 

The Loan Program is available to all regular full-time and part-time employees
of the Company and its designated subsidiaries. New Loans under the Program are
not available to (x) Directors and Executive Officers, effective as of July 30,
2002, (y) employees who are on probation and (z) employees who are employed (i)
to perform a specific assignment, (ii) for a period of time of limited duration,
(iii) at a location, business unit or division that is being closed, or (iv) who
have failed, when required, to execute and deliver an Employee Secrecy and
Non-Piracy Agreement. New Loans under the Program are also not available to
employees who participated in a Loan Program and who have disposed of their
stock when such disposal was not previously approved by the Company’s Human
Resources Department. All requests by eligible employees to participate in the
Program are subject to approval, disapproval or reductions in loan amount by the
Executive Officers of the Company.

 

LEVELS OF PARTICIPATION

 

In order to participate in the Loan Program, a participant must agree to borrow
a minimum of $10,000/£6,000. If an employee’s base salary is less than
$50,000/£30,000, the maximum aggregate principal amount outstanding of all Loans
to the employee under the Loan Program generally will be limited to 50% of the
employee’s base salary. If an employee’s base salary is greater than or equal to
$50,000/£30,000, the maximum aggregate principal amount outstanding of all Loans
available to the employee under the Loan Program generally will be limited to
100% of base salary. In either case, the Executive Officers of the Company may,
in

 

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their sole discretion and if requested, approve a greater amount up to a maximum
of four times base salary or, under special circumstances, $1,000,000/ £600,000.
The aggregate principal amount outstanding of all Loans to an employee may not
exceed $1,000,000/£600,000 without the approval of the Company’s Board of
Directors or the Compensation Committee of the Board of Directors.

 

LOAN TERMS

 

Amount

 

The Loan to an employee will be in an original principal amount equal to
$10,000/ £6,000 and increments above that amount of $2,500/£1,500, as selected
by the employee. The Loan will be unsecured but will be full recourse to the
employee. This means the Loan will represent an unconditional promise to repay
the principal amount borrowed plus accrued interest irrespective of the value of
the shares of Common Stock purchased pursuant to the Plan. Any unpaid principal
and interest on the Loan will be due on April 1 of the tenth year from the year
the Loan is made. Loans may become due and payable at earlier times upon the
occurrence of certain events. See Other Terms below.

 

Interest

 

The Loan will accrue interest from the date on which shares are purchased
(“Closing”) until paid in full at a rate of 3% per year. The interest rate may
increase in the event any of the shares (including Special Stock Bonus Awards)
acquired under the Loan Program or previous loan programs are sold, pledged or
otherwise transferred except as permitted by the Plan. See Other Terms below.

 

Payments

 

If the original principal amount of the Loan is less than $25,000/£15,000,
payment must be made by bi-weekly or monthly payroll deductions, as applicable,
which will begin with the first full payroll period after Closing. If the Loan
amount is greater than or equal to $25,000/£15,000, an employee may elect to
make annual payments on March 31 of each year. For annual payment loans made
during the first calendar quarter of the year the full annual payment will be
due on the following March 31; for annual payment loans made in the second
calendar quarter the first payment due will be 75% of the annual amount; for
annual payment loans made in the third calendar quarter the first payment due
will be 50% of the annual amount and for loans made in the fourth quarter the
first payment due will be 25% of the annual amount.

 

Payment amounts, whether bi-weekly, monthly or annual, will be based on a 3%
interest rate per annum and assuming full amortization of the Loan over a
15-year term. The Loan will, however, be due and payable in full on April 1 of
the tenth year from the year the loan is made; for example a loan made in August
2000 will be due and payable on April 1, 2010. There will be a balloon payment
of remaining principal and accrued interest due at maturity.

 

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The following table gives the payment amounts (both recurring and balloon) per
$/£1,000 borrowed for biweekly (North American operations), monthly
(International operations) and annual payments (all operations). For purposes of
calculating the balloon payment the loan is assumed to begin on August 1 of a
given year.

 

    Recurring amount

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  Balloon amount

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Bi-weekly

  3.17   410.30

Monthly

  6.90   408.58

Annual

  83.78   424.95

 

Other Terms

 

All Loans under the Loan Program may be prepaid at any time. Prepayments will be
applied first to accrued but unpaid interest and then to principal. Unless a
prepayment is equal to or greater than 10% of the then outstanding Loan balance,
prepayments will not change the amount of required payments; they will instead
reduce the balance of the Loan resulting in a smaller balloon payment or full
repayment before the normal maturity date. If a prepayment is equal to or
greater than 10% of the then outstanding Loan balance the Company will, at a
Participant’s request, prepare a new payment schedule which will provide for the
repayment of the remaining Loan balance at the original maturity date in
substantially equal installments (either by-weekly or annual, as applicable) on
the terms described above.

 

A Loan will become due and payable at the option of the Company in the event of
(i) the failure by an employee to make any payment when due; (ii) an employee’s
insolvency, application for appointment of receiver, filing of a petition under
any bankruptcy law or the making of an assignment for the benefit of creditors;
(iii) an employee’s death or long-term disability or (iv) 90 days after
termination of employment with the Company or its subsidiaries, whether
voluntary or involuntary, by reason of retirement or otherwise; 6 months in the
event of termination due to downsizing or reduction in force.

 

Because the Loan Program is designed to encourage long-term employee ownership
of Common Stock, if any shares of Common Stock acquired by a Participant under
the Loan Program or previous loan programs (including the Special Stock Bonus
Award) are sold, pledged or otherwise transferred, the interest rate on the Loan
will be immediately adjusted to a market rate which the Company has determined
to be the Prime Rate plus 7%, and payments will also commence immediately at the
higher rate. For those making payments by bi-weekly or monthly payroll deduction
the payment amount will immediately increase. For those making annual payments,
the next payment which would otherwise be due will be immediately due and
payable

 

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and the remaining annual payment amounts will be increased to reflect the higher
rate on the Loan. If a Participant withdraws any such shares from his or her
account with the Investing Broker, the Participant must make arrangements
satisfactory to the Company regarding the registration and/or custody of the
share certificates so that the Company can determine the interest rate and
payment terms applicable to the Participant’s Loan; a failure to make such
arrangements will result in the interest rate and payment terms being adjusted
as described above.

 

The Company will consider waiving the foregoing interest rate and payment
adjustments if the purpose of the sale is (x) to fund a medical emergency or
other financial hardship, (y) to fund an educational need or (z) to pay the
exercise price of Company stock options. Any such waiver must be approved by the
Company’s Human Resource Department in advance. If shares acquired under the
Loan Program are used to pay the exercise price of Company stock options and if
a Participant deposits into his or her account with the Investing Broker a
number of shares obtained upon exercise of an option equal to the number of
shares used to pay the exercise price of an option, no increase in interest rate
or payment adjustment will result from such transfer.

 

In addition, the interest rate and payment adjustments will not apply if after
giving effect to the sale the then current market value of the shares held in a
Participant’s account with the Investing Broker equals or exceeds two times the
then existing Loan balance.

 

Neither a Loan nor any rights or obligations thereunder will be transferable by
the Participant except by will or the laws of descent and distribution. The
promissory note evidencing the Loan may be sold or transferred by the Company.

 

SPECIAL STOCK BONUS AWARD

 

Participants in the Loan Program will receive a stock bonus of five percent of
the number of shares of Common Stock purchased under the Loan Program (a Special
Stock Bonus Award). Neither shares purchased under the Loan Program nor Special
Stock Bonus Awards will be counted as an increase in the number of shares
purchased by a Participant during a calendar year under the Plan for purposes of
determining regular Bonus Awards. The timing of the delivery of a Special Stock
Bonus Award to or on behalf of a Participant shall be as determined by the
Executive Officers of the Company. No Special Stock Bonus Award will be made for
an increase or decrease in a number of shares of Common Stock held resulting
solely from a subdivision or consolidation of shares, the payment of a stock
dividend, a stock split or other change in capitalization. Special Stock Bonus
Awards will be appropriately adjusted to reflect the effects of such a change.

 

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COMPANY INCENTIVE PAYMENTS

 

In connection with the Loan Program the Company will provide an incentive
payment based on a five-year compound annual growth in book value (“Company
Incentive Payment”) as follows:

 

Directors and Executive Officers

 

For Directors and Executive Officers with Loans in effect on July 30, 2002
(“Grandfathered Loans”), the scale used to determine the Company Incentive
Payment and the method used to calculate the five-year compound annual growth in
book value (“CAGBV”) will remain identical to that in effect on July 30, 2002.

 

All Other Participants

 

For all other Participants, effective with the Company Incentive Payment due in
March, 2003, the Board of Directors has adjusted the scale used to determine the
Company Incentive Payment and the method used to calculate the CAGBV, in light
of the prevailing interest rate environment during the past few years. The Board
of Directors may amend the scale as well as the method used to calculate CAGBV
at any time or from time to time in such respects as it shall deem advisable in
order to respond to changes in the interest rate environment or other factors
affecting the CAGBV, and all such modifications shall apply to all Loans (other
than Grandfathered Loans) then outstanding under the Loan Program.

 

5 year Compound Annual
Growth in Book Value

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   Company Incentive Payment
as% of Original Loan Balance

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Under 11%         0% 11%    1.25% 12%    1.50% 13%    2.00% 14%    2.50% 15%   
3.00% 16%    3.75% 17%    4.50% 18%    5.00% 19%    5.50% 20%    6.25% 21%   
7.25% 22%    8.50% 23%    10.00% 24%    12.50% Over 24%    Discretionary

 

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For purposes of calculating the CAGBV, (i) book value will not be adjusted to
exclude the benefit of issuing equity securities before January 1, 2003 at
prices above the preceding year-end book value or to exclude goodwill
amortization costs resulting from transactions in which equity securities were
issued, and (ii) book value will be adjusted to exclude the benefit of issuing
equity securities after January 1, 2003, at prices above the preceding year-end
book value.

 

Payment of Company Incentive Payment

 

One-half of the calculated annual incentive payment will be applied to a
Participant’s outstanding indebtedness to reduce the amount of the required
balloon payment or the Loan balance and one-half of the calculated annual
incentive payment, net of taxes required to be withheld on the entire Company
Incentive Payment, will be paid directly to the associate by March 31 of a given
year. If a Loan commitment is received on or before July 1 of a year, a
Participant will be eligible for one-half of the applicable incentive payment,
if any, for the year in which the loan is made.

 

METHOD OF PURCHASES

 

In order to participate in the Loan Program, each eligible Participant must
complete and return a Loan Program Enrollment Agreement to Human Resources. The
Enrollment Agreement is available from your Human Resources Department and the
Markel Corporation and Markel International intranet websites. Upon execution of
the Enrollment Agreement, the Participant irrevocably agrees, subject to any
applicable disclosure requirements, to borrow the amount indicated in the
Enrollment Agreement and agrees to execute and deliver promissory notes and
other agreements that the Company deems necessary or appropriate to implement
the Loan Program. Each Enrollment Agreement is subject to acceptance or
rejection by the Company, in whole or in part. The Investing Broker will make
purchases as soon as practicable under the Loan Program. The purchase price for
a Participant’s stock will be determined by the average price paid for all of
the Common Stock purchased for all Participants on a purchase date. Shares
acquired under this Loan Program may be purchased by the Investing Broker in the
open market, from officers or other affiliates of the Company or from the
Company.

 

A Participant will have full shareholder rights with respect to shares of Common
Stock acquired pursuant to the Loan Program including the right to vote the
shares. A Participant has the right to sell, pledge or otherwise dispose of such
shares; however such actions may result in a higher interest rate and adjusted
payment terms.

 

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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

 

The following is a summary of the U.S. Federal income tax consequences to the
Company and participants under the Plan. It is general and does not purport to
be complete. There may also be applicable state and local taxes. In addition, in
some cases it may be important to consider the effect, if any, of gift, estate
and inheritance taxes.

 

NO REPRESENTATION RESPECTING THE TAX TREATMENT OF ANY LOAN HAS BEEN MADE TO A
PLAN PARTICIPANT. PLAN PARTICIPANTS ARE URGED TO CONSULT THEIR COUNSEL,
ACCOUNTANTS, OR OTHER TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF LOANS
GRANTED TO THEM IN RELATION TO THEIR OWN PARTICULAR TAX SITUATION.

 

Stock purchases made with employee or Director deductions will be made with
after-tax dollars and will not have a tax impact on the Participant or provide a
tax deduction for the Company. Stock Bonus Awards and Special Stock Bonus Awards
will generally be deemed compensation income to a Participant in an amount equal
to the fair market value of the shares on the date the shares are credited to
the Participant’s account. The Company will also receive an income tax deduction
in an amount equal to the amount of compensation recognized by the Participant.

 

For Participants

 

The following is general information about tax consequences of the features of
the Plan described below under present Federal income tax law and existing,
temporary and proposed regulations, which are subject to change at any time.

 

Special Stock Awards

 

A participant will receive a stock bonus of five percent of the number of shares
of Common Stock purchased under the loan program (see “Special Stock Bonus
Award” above) for which no consideration will be paid. The Special Stock Bonus
Award will be taxable compensation to the extent of the fair market value on the
date of receipt of the number of shares of Common Stock that constitute the
Special Stock Bonus Award. The award will be subject to federal and state income
tax withholding.

 

Company Incentive Payment

 

A participant may receive an incentive payment based on the Company’s compound
average growth in book value (see “Company Incentive Payment” above). One-half
of this payment will be made in cash and one-half will be applied to reduce the
balance of a Participant’s loan. The full amount of the incentive payment will
be taxable compensation and will be subject to federal and state tax
withholding.

 

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Loans

 

The Internal Revenue Code provides that where the interest rate payable on a
loan is less than the applicable federal rate (the “AFR”), the loan is a “below
market loan” and in such case an amount known as “foregone interest” is treated
as transferred from the lender to the borrower, and retransferred by the
borrower to the lender as interest. The Company has determined that the initial
loans under the Plan are compensation-related “below market loans” to which the
AFR rules apply. Accordingly, in any calendar year in which the aggregate loans
outstanding between the Company and a Participant exceed $10,000, the amount of
“foregone interest” must be determined. If the loan remains outstanding for an
entire calendar year, the amount of the “foregone interest” is the excess of (a)
the result produced when the appropriate AFR is multiplied by the principal
amount of the loan, over (b) the sum of all amounts payable as interest on the
loan allocable to the calendar year. The AFR is published by the Internal
Revenue Service periodically and is determined when the loan is made. If the
loan is outstanding for part of a calendar year, the AFR regulations specify the
methodology for determining foregone interest for the part of the calendar year
the loan was deemed outstanding. The participant will have imputed taxable
income and imputed interest expense equal to the foregone interest each year the
loan is outstanding.

 

If the Common Stock purchased with a loan under the Plan is sold, pledged or
withdrawn (see “Other Terms” above) or for any other reason the terms of the
loan are adjusted and as a result the interest rate on the participant’s loan is
increased so that the rate equals or exceeds the AFR (as described above), the
amount of foregone interest and imputed income for that year may be reduced or
eliminated with respect to the period following the interest rate adjustment.

 

Imputed interest (as described above) is treated as the payment of investment
interest by the participant. Individual taxpayers may deduct investment interest
only to the extent of their net investment income for the year. Net investment
income is the excess of investment income over investment expenses for the year.
Investment income consists of (1) gross income from property held for
investment, such as interest and dividends, (2) any net gain from disposition of
investment property other than net capital gain (net long-term capital gain in
excess of net short-term capital loss), and (3) any net capital gain which a
participant elects to include in investment income thereby foregoing the
beneficial capital gain tax rate. Investment income does not include imputed
income resulting from the application of the AFR rules. Investment expenses are
deductible expenses other than interest which are directly related to the
production of investment income (after applying the 2% of adjusted gross income
floor). Investment interest that is not deductible in a year may be carried over
and deducted in future years, subject to the applicable limitations.

 

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Income imputed to a participant under the AFR rules is not subject to income tax
withholding, but is subject to tax and withholding under the Federal Insurance
Contributions Act (Social Security). Such withholding will be made periodically
from a Participant’s paycheck. The Company is required to report the amount of
the imputed income on the participant’s W-2 each year. In addition, the Company
will timely furnish each participant with the information pertaining to the
amount and computation of foregone interest.

 

The principal amount of a loan to acquire Common Stock will be the participant’s
tax basis for the purpose of determining gain or loss on the subsequent sale or
exchange of the Common Stock.

 

For the Company

 

The Company usually will be entitled to a business expense deduction at the time
and in the amount that the participant recognizes ordinary income in connection
with a loan or upon the receipt of a Special Stock Bonus Award or Company
incentive Payment. In addition, any payments of loan interest by the participant
to the Company would be taxable income to the Company. Generally, the Company is
not taxed on a participant’s repayment of principal of a loan.

 

In addition, Section 162(m) of the Tax Code generally imposes a $1,000,000
limitation on the annual compensation deduction allowable to a publicly held
corporation in respect of its chief executive officer and its other four most
highly paid officers. This section may limit the Company’s deductions for
payments under the Plan.

 

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UNITED KINGDOM TAX CONSEQUENCES

 

The following is a summary of the UK income tax and National Insurance
Contributions (“NIC”) consequences to the participants under the Plan. It is
general and does not purport to be complete.

 

NO REPRESENTATION RESPECTING THE TAX TREATMENT OF ANY LOAN HAS BEEN MADE TO A
PLAN PARTICIPANT. PLAN PARTICIPANTS ARE URGED TO CONSULT THEIR ACCOUNTANT OR
OTHER TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF LOANS GRANTED TO THEM IN
RELATION TO THEIR OWN PARTICULAR TAX SITUATION.

 

Stock Purchases

 

Stock purchases made with employee or Director deductions will be made out of
salary net of tax and employee’s NIC (“net salary”). Stock Bonus Awards and
Special Stock Bonus Awards will be treated as a Participant’s taxable income
equal in amount to the open market value of the stock on the date the shares are
credited to the Participant’s account. For this purpose the open market value of
the stock will be converted into sterling using the then existing exchange rate
as reasonably determined by the Company.

 

Bonus Awards

 

Stock Bonus Awards and Special Stock Bonus Awards are subject to deduction of
tax at source under the PAYE system and are subject to NIC. Unless the Company
in its sole discretion accepts another arrangement for the payment of such tax
and NIC, the tax and NIC will be deducted from the employee’s or Director’s
monthly net paycheck due within 30 days following the award. In the event that
payroll deduction is insufficient to finance the payment of tax and NIC, the
Company reserves the right to instruct the Investing Broker to sell sufficient
shares of the stock credited to the Participant’s account to fund the payment of
the tax and NIC.

 

Loans

 

UK tax law provides that where the interest rate payable by an employee or
Director on a loan from his or her employer or an associated company is less
than the “Official Rate”, the loan is a “beneficial loan” and in such a case the
employee or Director is taxable on the difference between the interest at the
Official Rate and the actual rate of interest.

 

The amount subject to tax is called the cash equivalent of the benefit of the
loan. Official Rates are prescribed by the Treasury from time to time.

 

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No tax is due if the total on all beneficial loans from the employer or an
associated company does not exceed £5,000 at any time during the tax year. For
this purpose advances of salary for season ticket purchase or gym membership
must be taken into account. Thus if an employee or Director has a season ticket
loan whose maximum in the tax year is £2,500 and takes out in the same year a
loan to purchase stock whose sterling value is £3,000, tax will be due on the
cash equivalent of both loans. There is no exemption for the first £5,000 of the
loans outstanding in the tax year.

 

If the Common Stock purchased with a loan under the Plan is sold, pledged or
withdrawn (see “Other terms” above) or for any other reason the terms of a loan
are adjusted and as a result the interest rate on the participant’s loan is
increased, so that the rate equals or exceeds the Official Rate, the loan will
cease to be a beneficial loan and no further taxable income will arise in
respect of that loan.

 

There are two alternative ways of calculating the taxable benefit from one or
more beneficial loans. One is known as the “normal averaging method” and applies
automatically unless

 

•   The Director or employee elects for the other (known as the “alternative
precise method”) or

 

•   The Inland Revenue gives notice that it intends to use the “alternative
precise method”

 

The choice of method is available for each loan separately.

 

The normal averaging method of calculation is based on:

 

•   the average amount of the loan calculated by reference to the maximum
opening and closing balances at the beginning and end of the tax year. If the
loan was not in existence throughout the whole year, the average is based on the
maximum balances on the dates the loan was made or discharged; and

 

•   The average appropriate “Official Rate” of interest for the tax year – or
for such shorter period as the loan was in existence.

 

The alternative method of calculation involves

 

•   Dividing the appropriate “Official Rate” by 365 and

 

•   Applying that to the total of the maximum amounts of the loan outstanding on
each day of the tax year.

 

In effect the total amounts of the maximum balances on the loan for each day are
converted into the equivalent balance for one day to which one day’s interest
charge is applied at the appropriate Official Rate. Any interest paid on the
loan for the tax year is then deducted to arrive at the chargeable benefit for
that year.

 

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In calculating the chargeable benefit from a beneficial loan, interest paid is
deductible only if it has actually been paid and if it has been paid for the
relevant tax year. It does not have to be paid in the tax year to qualify.

 

At the end of each tax year the employer is required to give particulars of the
benefits provided for each Director or employee on form P11D. This includes
beneficial loans. The employee is required to include any benefits provided for
him or her in the annual Tax Return.

 

No employees’ NIC is due on the provision of a beneficial loan.

 

MISCELLANEOUS

 

The Board of Directors may terminate or amend the Plan at any time or from time
to time in such respects as it shall deem advisable.

 

INFORMATION ABOUT THE COMPANY

 

The Company has filed with the Securities and Exchange Commission (the
“Commission”) a registration statement under the 1933 Act with respect to the
securities described in this document.

 

The Company files reports, proxy statements and other information with the
Commission. You may read and copy any reports, statements and other information
filed by the Company at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. The Commission’s website
is http://www.sec.gov.

 

The documents listed below have been filed with the Commission and are
incorporated by reference into this document.

 

  (a) The Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2003.

 

  (b) The Company’s Quarterly Report on Form 10-Q for the quarters ended March
31, 2004, June 30, 2004, and September 30, 2004.

 

  (c) Reports on Form 8-K filed on August 11, 2004 and August 25, 2004.

 

  (d)

The description of the Common Stock contained in the Company’s Registration

 

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Statement on Form 8-A filed on April 17, 2000 under Section 12(b) of the
Securities Exchange Act of 1934, including any amendments to such Registration
Statement hereafter filed.

 

All documents subsequently filed by the Company pursuant to Sections 13, 14 and
15 (d) of the 1934 Act, prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which deregisters
all such securities then remaining unsold, shall be deemed to be incorporated by
reference into this document and to be a part hereof from the date of filing of
such documents.

 

The Company will provide, without charge, to each person to whom this document
is delivered, upon oral or written request of such person, a copy of any and all
information that has been incorporated by reference in this document and, unless
it has previously been furnished, a copy of the most recent annual report to
shareholders. Such requests should be directed to Pam Perrott, Senior Vice
President of Human Resources, Markel Corporation, 4521 Highwoods Parkway, Glen
Allen, Virginia 23060 (telephone: (804) 965-1730).

 

The Plan described in this document shall be administered and interpreted by the
Company’s Human Resources Department whose decisions shall be final and binding.

 

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