DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
(RULE 14a-101)
PROXY STATEMENT PURSUANT TO
SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant x
Filed by a Party other than the
Registrant o
Check the appropriate
box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§240.14a-12
The Navigators Group,
Inc.
(Name of Registrant as Specified
In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check
the appropriate box):
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x
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No fee required.
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Fee computed on table below per
Exchange Act
Rules 14a-6(i)(4)
and
0-11.
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Title of each class of
securities to which transaction applies:
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Aggregate number of securities
to which transaction applies:
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Per unit price or other
underlying value of transaction computed pursuant to Exchange
Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate
value of transaction:
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Fee paid previously with
preliminary materials.
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Check box if any part of the
fee is offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously
Paid:
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Form, Schedule or Registration
Statement No.:
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THE
NAVIGATORS GROUP, INC.
One Penn Plaza
New York, New York
10119
ANNUAL MEETING
May 28, 2008
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of the Company to be held at 10:00 a.m. on
Wednesday, May 28, 2008 at the Companys office at
Reckson Executive Park, 6 International Drive, Rye Brook, New
York 10573.
A report of the Companys current affairs will be presented
at the Annual Meeting and Stockholders will have an opportunity
for questions and comments.
You are requested to sign, date and return your proxy card
whether or not you plan to attend the Annual Meeting.
We are grateful for your assistance and express our appreciation
in advance.
Sincerely yours,
Terence N. Deeks
Chairman
April 4, 2008
TABLE OF CONTENTS
THE
NAVIGATORS GROUP, INC.
One Penn Plaza
New York, New York 10119
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
May 28, 2008
To the Stockholders of
The Navigators Group, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders
of The Navigators Group, Inc. (the Company), a
Delaware corporation, will be held at the Companys office
at Reckson Executive Park, 6 International Drive, Rye
Brook, New York 10573 on Wednesday, May 28, 2008, at
10:00 a.m. At the meeting, stockholders will be asked
to:
(1) Elect nine (9) directors to serve until the 2009
Annual Meeting of Stockholders or until their respective
successors have been duly elected and qualified.
(2) Approve The Navigators Group, Inc. Employee Stock
Purchase Plan.
(3) Approve The Navigators Group, Inc. Executive
Performance Incentive Plan.
(4) Ratify the appointment by the Companys Board of
Directors of KPMG LLP as the independent auditors of the Company
to examine and report on the December 31, 2008 financial
statements.
(5) Transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
The close of business on April 1, 2008 has been fixed by
the Board of Directors as the date for the determination of
stockholders entitled to notice of and to vote at the Annual
Meeting, and only stockholders of record on such date will be
entitled to vote. A list of stockholders will be open to
examination by stockholders during ordinary business hours for a
period of ten (10) days prior to the Annual Meeting at the
office of the Company, Reckson Executive Park, 6 International
Drive, Rye Brook, New York 10573.
By Order of the Board of Directors
Elliot S. Orol
Senior Vice President, General Counsel
and Secretary
New York, New York
April 4, 2008
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING,
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN
THE ENCLOSED PREPAID ENVELOPE OR, IF YOU PREFER, SUBMIT YOUR
PROXY BY USING THE INTERNET AND FOLLOWING THE
INSTRUCTIONS ON THE PROXY CARD, TO ASSURE THAT YOUR SHARES
ARE REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU
MAY VOTE IN PERSON IF YOU WISH TO DO SO, EVEN IF YOU HAVE
PREVIOUSLY SUBMITTED YOUR PROXY.
THE
NAVIGATORS GROUP, INC.
One Penn Plaza
New York, New York 10119
ANNUAL
MEETING OF STOCKHOLDERS
PROXY
STATEMENT
General
Information
The accompanying form of proxy is solicited on behalf of the
Board of Directors (the Board) of The Navigators
Group, Inc. for use at the annual meeting (the Annual
Meeting) of the Companys stockholders or any
adjournment thereof. When we use the terms we,
us, our or the Company, we
are referring to The Navigators Group, Inc. and its
subsidiaries, unless the context otherwise requires. The persons
named on the proxy card have been designated as proxies by the
Companys Board of Directors. Such persons are officers of
the Company. Any stockholder desiring to appoint some other
person to represent him or her at the Annual Meeting may do so
by completing another form of proxy and delivering the completed
proxy to the Secretary of the Company at the address indicated
above, prior to the Annual Meeting. It is the responsibility of
the stockholder appointing some other person to represent him or
her to inform such person of the appointment. The Company has
first mailed or electronically delivered these proxy materials
to holders (Stockholders) of shares of the
Companys Common Stock, par value $.10 per share (the
Common Stock), on or about April 10, 2008. The
Companys executive office is located at One Penn Plaza,
New York, New York 10119. The Companys administrative
office is located at Reckson Executive Park, 6 International
Drive, Rye Brook, New York 10573.
The proxy materials are available over the Internet at the
web site address shown on your proxy
card. Internet voting is available 24 hours
a day. If you have access to the Internet, we encourage you to
vote this way. If you vote over the Internet, please do not
return your proxy card. Stockholders can elect to view future
proxy statements and annual reports over the Internet instead of
receiving paper copies in the mail. You can choose this option
and save the Company the cost of producing and mailing the
documents by following the instructions provided if you vote
over the Internet. Should you choose to view future proxy
statements and annual reports over the Internet, you will
receive an
e-mail next
year with voting instructions and the Internet address of those
materials.
The proxies that are properly executed and duly returned to
the Company and not revoked will be voted as specified and, if
no direction is made, will be voted for the election of each of
managements nine (9) nominees as directors and in
favor of Proposals 2, 3 and 4. Stockholders
may also be asked to consider and take action with respect to
such other matters as may properly come before the Annual
Meeting or any adjournment or adjournments thereof. Each proxy
granted is revocable and may be revoked at any time prior to its
exercise by giving notice of such revocation to the Secretary of
the Company at The Navigators Group, Inc., Reckson Executive
Park, 6 International Drive, Rye Brook, New York 10573. A
Stockholder who attends the Annual Meeting in person may, if he
or she wishes, vote by ballot at the Annual Meeting, thereby
canceling any proxy previously given. The outstanding voting
stock of the Company as of April 1, 2008, the record date,
consisted of 16,934,268 shares of Common Stock, with each
share of Common Stock entitled to one vote. Only Stockholders of
record at the close of business on April 1, 2008, are
entitled to vote at the Annual Meeting. The closing price of the
Common Stock on April 1, 2008 was $56.47. A copy of
the Companys Annual Report for the year ended
December 31, 2007 is being mailed simultaneously herewith
and is electronically available to Stockholders on the Internet
by logging on to www.proxyvote.com and following the
instructions provided.
PROPOSAL 1
ELECTION
OF DIRECTORS
The Board of Directors recommends that you vote FOR the
director nominees described below. Proxies will be so voted
unless Stockholders specify otherwise in their proxies.
The By-laws of the Company provide for the Company to have not
less than three nor more than twenty-one directors. The Board
proposes the election of the nine nominees named below to
constitute the entire Board of Directors of the Company until
the next Annual Meeting of Stockholders or until their
successors shall be duly elected and shall qualify. Each of the
nominees is currently a director of the Company and is standing
for re-election. Robert W. Eager, Jr., who has served as a
director of the Company since 2001, is retiring from the Board
effective with the 2008 Annual Meeting of Stockholders. Pursuant
to its authority under the By-laws of the Company, the Board has
reduced its size to nine (9) members effective as of the
Annual Meeting. In the event any nominee(s) named below is
unable or declines to serve, which the Board does not
anticipate, it is intended that the proxies will be voted for
the balance of those named and for any substitute nominee(s)
that the Board may designate.
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Position with the
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First Became
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Name
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Age
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Company
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a Director
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H. J. Mervyn Blakeney
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70
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Director
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2004
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Peter A. Cheney
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65
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Director
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2003
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Terence N. Deeks
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68
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Chairman
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1982
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W. Thomas Forrester
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59
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Director
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2006
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Stanley A. Galanski
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49
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Director, President & CEO
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2001
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Leandro S. Galban, Jr.
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73
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Director
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1983
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John F. Kirby
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61
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Director
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2004
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Marc M. Tract
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48
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Director
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1991
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Robert F. Wright
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82
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Director
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1993
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H. J. Mervyn Blakeney spent a
30-year
career with Cadbury Schweppes Plc, the final 10 years as
Managing Director of Schweppes International Ltd. and as a
director of its holding company. After retiring as an executive
in 1988, he has held non-executive directorships in various
industries, principally insurance, within the United Kingdom.
Mr. Blakeney is currently the non-executive Chairman of the
Board of Directors of Navigators Underwriting Agency Ltd., a
wholly-owned United Kingdom subsidiary of the Company.
Peter A. Cheney has been retired since 1996. Prior thereto,
Mr. Cheney held various positions at National Re
Corporation, including Executive Vice President, Chief Financial
Officer and Director from 1994 to 1996.
Terence N. Deeks is our founder. He has been our Chairman since
our formation in 1982, and was our President until May 2002 and
Chief Executive Officer until December 2002. Mr. Deeks is
chairman and a director of our wholly-owned insurance
subsidiaries including Navigators Insurance Company.
Mr. Deeks has been engaged in the property and casualty
insurance business since 1957.
W. Thomas Forrester retired in March 2007 from Progressive
Corporation, where he had been Chief Financial Officer since
1999. From 1984 to 1999, Mr. Forrester held a series of
increasingly senior financial and operating positions at
Progressive Corporation. Mr. Forrester began his career at
the public accounting firm of Price Waterhouse in 1976 and
worked in the audit and consulting areas.
Stanley A. Galanski has been our President since May 2002 and
our Chief Executive Officer since January 2003. Prior
thereto, he had been Executive Vice President and Chief
Operating Officer of the Company since March 2001.
Mr. Galanski was President of XL Insurance Company of New
York from 2000 to March 2001, President of XL Specialty
Insurance Company from 1997 to March 2001, and President of New
Hampshire Insurance Company from 1995 to 1997. From 1980 to
1995, Mr. Galanski held various underwriting and management
positions with the Chubb Group of Insurance Companies.
Mr. Galanski is a director of several of our wholly-owned
subsidiaries including Navigators Insurance Company.
2
Leandro S. Galban, Jr. has been, since 2006,
Chairman Financial Services of DLJ Merchant Banking
Partners, a private equity group that is part of Credit Suisse.
Prior thereto, from 2001 to 2005, he had been Vice Chairman
Investment Banking and a Managing Director of Credit
Suisse First Boston LLC. Prior thereto, from 1996 to 2000, he
had been a Managing Director and Co-Head of the Financial
Institutions Group of Donaldson, Lufkin & Jenrette, a
company acquired by Credit Suisse First Boston LLC.
John F. Kirby has been retired from Chubb & Son since
2003 and prior thereto, from 1998 to 2003, he was a Managing
Director with worldwide responsibility for ceded reinsurance.
From 1995 to 1998, he served as Senior Vice President and
Manager Global Marine & Aviation Practice
at Wilcox, Inc. Prior thereto, he held various senior positions
at The Continental Corporation from 1987 to 1995. He began his
career with the Chubb Group in 1964.
Marc M. Tract has been a partner of the law firm of Katten
Muchin Rosenman LLP and a predecessor firm since 1994, which
firms have been counsel to the Company for the same period.
Mr. Tract specializes in the areas of corporate and
regulatory matters for the insurance industry.
Robert F. Wright has been President and Chief Executive Officer
of Robert F. Wright Associates, Inc. since 1988. Mr. Wright
was a partner of the public accounting firm of Arthur
Andersen & Co. from 1960 to 1988. He is a director of
Delphi Financial Group, Inc. and Universal American Financial
Corporation.
Non-Director
Executive Officers
The current
non-director
executive officers of the Company are as follows:
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Name
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Age
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Position
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Paul J. Malvasio
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61
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Executive Vice President and Chief Financial Officer
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R. Scott Eisdorfer
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44
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Senior Vice President and Chief Information Officer
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Jane E. Keller
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55
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Senior Vice President and Chief Claims Officer
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Elliot S. Orol
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52
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Senior Vice President, General Counsel,
Chief Compliance Officer and Secretary
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Bradley D. Wiley
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54
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Senior Vice President, Financial Compliance Officer and Chief
Risk Officer
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Paul J. Malvasio has been employed by the Company since October
2003 and has been our Executive Vice President and Chief
Financial Officer since December 2003. Prior to joining the
Company, Mr. Malvasio served as President and Chief
Financial Officer of CORE Insurance Holdings, Inc. from 2001 to
2003 and as Executive Vice President and Chief Financial Officer
from 2000 to 2001. From 1995 to 2000 he served as Managing
Director and Chief Financial Officer of Risk Capital Re, Inc.
and from 1986 to 1995 as Chief Financial Officer of NAC Re, Inc.
Prior to entering the insurance industry, Mr. Malvasio was
an audit partner with Coopers & Lybrand.
Mr. Malvasio is a director of Navigators Insurance Company.
R. Scott Eisdorfer has been our Senior Vice President and
Chief Information Officer since 2001 and has held the same
titles with our insurance subsidiaries since 1999. From 1996 to
1999, Mr. Eisdorfer was a Vice President and Applications
Manager of General Reinsurance Corporation, and prior thereto
from 1985 held various information technology positions at
National Reinsurance Corporation. Mr. Eisdorfer is a
director of Navigators Insurance Company.
Jane E. Keller has been our Senior Vice President and Chief
Claims Officer since June 2004. Prior to joining the Company,
Ms. Keller served as the Senior Vice President and Chief
Claims Officer of Liberty International Underwriters from 2002
to 2004 and the Vice President of Claims from 2000 to 2002. From
1994 to 2000, she was the Senior Vice President of Claims at a
division of Great American Insurance Company. Prior thereto,
Ms. Keller was with the Home Insurance Company and in
private legal practice. Ms. Keller is a director of
Navigators Insurance Company.
Elliot S. Orol has been our Chief Compliance Officer since
November 2004, our Senior Vice President and General Counsel
since May 2005 and our Secretary since May 2006. Prior to
joining the Company, Mr. Orol was in private legal practice
and, from 2002 to 2003, served as Managing Director and General
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Counsel of Gerling Global Financial Products. From 1999 through
2001, he was a partner with the law firm of Cozen OConnor.
Prior thereto, he served from
1996-1999 as
Vice President, General Counsel and Secretary of the GRE
Insurance Group, and from
1987-1996 as
Vice President of The Continental Insurance Company.
Bradley D. Wiley has been our Senior Vice President and
Financial Compliance Officer since 2003 and Chief Risk Officer
since 2007. Mr. Wiley served as our Chief Financial Officer
from 1996 to 2003 and as Secretary from 1996 to 2006. From 1992
until 1996, Mr. Wiley was Senior Vice President and Chief
Financial Officer of Christiania Re Corp. and its wholly-owned
subsidiary, Christiania General Insurance Corp. Mr. Wiley
is a director of Navigators Insurance Company.
Ownership
of Voting Securities By Certain Beneficial Owners and
Management
The following table sets forth the beneficial ownership,
reported to the Company as of April 1, 2008, of shares of
Common Stock (i) by each person who holds of record or is
known by us to own beneficially more than 5% of the outstanding
Common Stock, (ii) by each of our current directors,
(iii) by each of the named executive officers in the
Summary Compensation Table under Compensation Discussion
and Analysis below, and (iv) by all current directors
and executive officers as a group. Except as otherwise
indicated, to our knowledge all shares are beneficially owned by
the persons named as owners.
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Amount and
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Nature of
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Percent of
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Name and Address of Beneficial Owner
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Beneficial Ownership
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Outstanding Shares
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Terence N. Deeks(1)
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2,245,704
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13.2
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One Penn Plaza
New York, NY 10119
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Dimensional Fund Advisors LP(2)
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1,405,347
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8.3
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1299 Ocean Avenue
Santa Monica, CA 90401
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Marc M. Tract(3)
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1,095,653
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6.5
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575 Madison Avenue
New York, NY 10022
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H. J. Mervyn Blakeney
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1,529
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*
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Peter A. Cheney
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4,916
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*
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Stephen R. Coward(4)
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3,459
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*
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Christopher C. Duca(5)
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28,952
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*
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Robert W. Eager, Jr.
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4,536
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*
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W. Thomas Forrester
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515
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*
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Stanley A. Galanski(6)
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110,530
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*
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Leandro S. Galban, Jr.(7)
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26,278
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*
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John F. Kirby
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2,672
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*
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Paul J. Malvasio(8)
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31,361
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*
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Robert F. Wright(9)
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14,738
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*
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All current directors and executive officers as a group
(17 persons)(1)(3)(4)(5)(6)(7)(8)(9)(10)(11)
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3,651,552
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21.6
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*
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Less than 1%.
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(1)
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Includes 370,776 shares,
852,471 shares and 840,835 shares which may be deemed
to be beneficially owned by Mr. Deeks as Settlor of the
Terence N. Deeks 2006 Qualified Three Year Annuity Trust, the
Terence N. Deeks 2007 Qualified Three Year Annuity Trust, and
the Terence N. Deeks 2008 Qualified Three Year Annuity Trust,
respectively, 75,842 shares owned jointly with his wife,
5,000 shares owned by the Deeks Family Foundation and
100,780 shares held directly. Excludes
1,087,015 shares which are held under certain instruments
of trust for the benefit of Mr. Deeks children and
grandchildren, of which Mr. Deeks disclaims beneficial
ownership.
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(2)
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Based on Form 13G filed with
the SEC on February 6, 2008 by Dimensional
Fund Advisors LP.
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(3)
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Includes 1,087,015 shares
held as trustee under certain instruments of trust for the
benefit of Mr. Deeks children and grandchildren, of
which Mr. Tract disclaims beneficial ownership, and
8,638 shares held directly.
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(4)
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Includes vested options to
purchase 500 shares at an exercise price of $29.11 per
share. Excludes 22,564 unvested shares from
Mr. Cowards stock grants.
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(5)
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Includes vested options to
purchase 22,500 shares at exercise prices ranging between
$19.10 and $33.19 per share. Excludes 20,666 unvested shares
from Mr. Ducas stock grants.
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(6)
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Includes vested options to
purchase 30,000 shares at an exercise price of $29.11.
Excludes 50,000 unvested shares from Mr. Galanskis
stock grants.
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(7)
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Includes 1,500 shares held by
family members of Mr. Galban.
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(8)
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Includes vested options to
purchase 20,000 shares at exercise prices ranging between
$29.11 and $33.19 per share. Excludes 17,015 unvested shares
from Mr. Malvasios stock grants.
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(9)
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Includes 4,000 shares owned
by Robert F. Wright Associates, Inc., which is wholly owned by
Mr. Wright.
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(10)
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Includes Mr. Eisdorfers
24,156 shares, which include vested options to purchase
15,000 shares at exercise prices ranging between $16.75 and
$29.11 per share and exclude 22,262 unvested stock grant shares;
includes Ms. Kellers 8,698 shares and excludes
15,604 unvested stock grant shares; includes
Mr. Orols 841 shares and excludes 7,881 unvested
stock grant shares; and includes Mr. Wileys
47,014 shares, which include vested options to purchase
32,500 shares at exercise prices ranging between $14.00 and
$29.11 per share and exclude 5,047 unvested stock grant shares.
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(11)
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No current directors or executive
officers have pledged shares of the Companys stock.
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Related
Party Transactions
Our Corporate Code of Ethics and Conduct applies to all of our
employees and directors and requires such individuals to discuss
any possible conflicts of interest with our Chief Compliance
Officer. Conflicts of interest are defined to include situations
where officers and directors or their family members have
interests in customers of or suppliers to the Company. In the
case of transactions involving directors or officers, the Chief
Compliance Officer reports the proposed transactions to the
non-interested members of the Board for approval. Approval is
based on whether the transaction is fair and equitable and on
terms no less favorable than the Company could obtain in
arms length transactions with unaffiliated third parties.
In our experience, this process has been adequate for the review
and approval of the few related party transactions that have
arisen from time to time.
In 2007, the Board of Directors adopted a policy requiring a
director to offer his or her resignation from the Board upon a
change in employment. The Board has discretion to determine,
based upon its evaluation of whether such change in employment
would create a possible conflict of interest or affect a
directors independence, as well as any other factors that
it may deem applicable, whether or not to accept such
resignation.
In addition, our Board of Directors annually reviews related
party transactions in connection with director independence.
During 2007, the following relationship with one of our
directors was reviewed and was found not to present a conflict
of interest or affect such directors independence:
Marc M. Tract is a partner of Katten Muchin Rosenman LLP, which
law firm serves as counsel to the Company and received fees of
approximately $240,000 in 2007. Mr. Tract, who does not
have any direct or indirect material interest in the legal fees
paid to Katten Muchin Rosenman LLP, is a member of the Executive
and Finance Committees of the Board.
On July 5, 2007, the Consulting Agreement, dated
July 5, 2006, pursuant to which John F. Kirby had provided
underwriting advisory and other consulting services to
Navigators Management Company, Inc., a wholly-owned subsidiary
of the Company, in consideration for the payment of $35,000 per
year, expired. Mr. Kirby was paid $11,667 under this
Consulting Agreement in 2007. This Consulting Agreement was not
5
renewed and is no longer in effect. Mr. Kirby is a member
of the Compensation and Underwriting Advisory Committees of the
Board.
On December 31, 2007, the Consultancy Agreement, dated
March 1, 1994, pursuant to which H.J. Mervyn Blakeney
provided consulting services to the Company and its wholly-owned
subsidiary, Navigators Underwriting Agency Ltd.
(NUAL), in consideration for the payment of
£30,000 per year, was terminated. Mr. Blakeney was
paid $59,400 in 2007 under this Consultancy Agreement, based on
the conversion rate, as of December 31, 2007, of
£1=$1.98. The Consultancy Agreement is no longer in effect.
Mr. Blakeney currently serves as a non-executive director
and chairman of the board of NUAL, and is paid £30,000 per
year for such NUAL board service. Mr. Blakeney is a member
of the Compensation and Finance Committees of the Board.
Board of
Directors and Committees
The Board of Directors of the Company held four meetings in 2007
and met in executive session without management present at each
of those meetings. During 2007 all incumbent directors attended
or participated in at least 75% of the meetings of the Board and
meetings of the committees of the Board of which the directors
are members. Directors are encouraged to attend the
Companys Annual Meeting. All of the directors serving on
the Board of Directors at the time of the 2007 Annual Meeting
attended that meeting. The Board has determined that all of the
directors of the Company who are listed in the table below,
other than Messrs. Deeks and Galanski, are
independent directors as such term is defined in
Rule 4200(a)(15) of the NASDAQ listing standards. The
members of the Audit Committee are also independent under the
applicable SEC standards. The independent members of the Board
of Directors meet at least two times per year in executive
session without management present.
The following table shows each of the six standing committees
established by the Board and the members and chairperson of each
Committee:
MEMBERSHIP
AND MEETINGS OF BOARD COMMITTEES
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Committee Name
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Corporate
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Governance
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Underwriting
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Director Name
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Audit
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Compensation
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and Nominating
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Executive
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Finance
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Advisory
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H.J. Mervyn Blakeney
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X
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X
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Peter A. Cheney
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Chair
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Terence N. Deeks
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Chair
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X
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Robert W. Eager, Jr.(1)
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X
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Chair
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W. Thomas Forrester
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X
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X
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Stanley A. Galanski
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X
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Leandro S. Galban, Jr.
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Chair
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X
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X
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X
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John F. Kirby
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X
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X
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Marc M. Tract
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X
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X
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Robert F. Wright
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Chair
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Chair
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X
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Total 2007 Meetings
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8
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4
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3
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2
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3
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4
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(1)
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Robert W. Eager, Jr. is retiring
from the Board effective with the 2008 Annual Meeting and will
not be standing for re-election in 2008.
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Below is a description of each committee of the Board of
Directors. Each of the committees has authority to engage legal
counsel or other experts or consultants as it deems appropriate
to carry out its responsibilities.
6
The Audit Committee is responsible for providing independent,
objective oversight of the quality and integrity of the
Companys financial reports and monitoring the reporting
process and internal controls of the Company. The Audit
Committees role includes discussing with management the
Companys processes for managing business and financial
risk and for compliance with significant applicable legal,
ethical and regulatory requirements. The Audit Committee is
responsible for the appointment, replacement, compensation and
oversight of the independent auditors engaged to prepare or
issue audit reports on the financial statements of the Company.
The Audit Committee relies on the expertise and knowledge of
management and the independent auditors in carrying out its
oversight responsibilities. The Board of Directors has
determined that each Audit Committee member has sufficient
knowledge in financial and auditing matters to serve on the
Audit Committee. Messrs. Forrester and Wright have been
designated as the financial experts serving on the Audit
Committee. Mr. Cheney also meets the financial expert
criteria as defined. The Audit Committee operates under a
charter which is reviewed annually and updated as necessary. The
charter is available on our website at www.navg.com under the
Corporate Governance link.
The Compensation Committee is responsible for: (i) setting
the compensation of the Chief Executive Officer and Chairman of
the Board, and reviewing and approving the compensation of other
executive officers of the Company; (ii) reviewing executive
bonus plan allocations; (iii) overseeing and advising the
Board on the adoption of policies that govern the Companys
compensation programs; (iv) overseeing the Companys
administration of its equity-based compensation and other
benefit plans; (v) approving grants of stock options and
stock awards to officers and employees of the Company under its
stock incentive plan; and (vi) periodic review and approval
of the compensation paid to non-employee directors for annual
retainers (including retainers paid to committee chairpersons)
and meeting fees, and making recommendations to the Board for
any adjustments. The Compensation Committee reviews and approves
corporate goals and objectives relevant to the President and
Chief Executive Officers compensation and the
recommendations of the President and Chief Executive Officer
with respect to the compensation of other senior executives.
When requested by the Committee, management advises the
Committee on the design and implementation of compensation plans
and programs. The Committee may engage compensation consultants
or other advisors at its discretion. The Committee may form, and
delegate to, subcommittees when appropriate. It did not do so in
2007. The Compensation Committee regularly reports and consults
with the independent members of the Board on executive
compensation matters. The Committees role includes
reviewing and approving the Compensation Discussion and Analysis
and producing the Compensation Committee Report required by SEC
rules and regulations. The specific responsibilities of the
Compensation Committee are set forth in the Compensation
Committee Charter which is available on our website at
www.navg.com under the Corporate Governance link. The
Compensation Committee Charter is reviewed annually and updated
as necessary.
The Corporate Governance and Nominating Committee is responsible
for overseeing the Board of Directors and its committees so that
all are appropriately constituted to meet their legal
obligations to our Stockholders and the Company. The specific
responsibilities and functions of the Corporate Governance and
Nominating Committee are set forth in the Corporate Governance
and Nominating Committee Charter which is available on our
website at www.navg.com under the Corporate Governance link. The
Corporate Governance and Nominating Committee Charter is
reviewed annually and updated as necessary.
In accordance with its charter, the Corporate Governance and
Nominating Committee shall, from time to time, establish
criteria or qualifications for Board membership based on the
nature, size and complexity of the Company and the stage of its
development. These criteria may include, among other things, an
individuals experience as a senior executive at a publicly
traded corporation, management consultant, investment banker,
partner at a law firm or registered public accounting firm,
professor at an accredited law or business school, experience in
the management or leadership of a substantial private business
enterprise, educational or not-for-profit organization, or such
other professional experience as the Committee shall determine.
The Corporate Governance and Nominating Committee has not
adopted specific minimum qualifications that nominees must meet
to be recommended by the Committee. The Corporate Governance and
Nominating Committee reviews its policy with respect to the
identification and evaluation of candidates for director from
time to time and may modify the policy in light of changes to
applicable legal or listing standards, as well as changes in the
Companys development and needs.
7
The Corporate Governance and Nominating Committees policy
is to consider recommendations for potential Board nominees
received from Stockholders and to evaluate such nominees in the
same manner that potential nominees recommended by Board
members, management or other parties are evaluated. The name of
any recommended candidate for director, together with a brief
biographical resume, a document indicating the candidates
willingness to serve, if elected, and evidence of the nominating
persons ownership of any of the Companys stock,
should be sent to the Secretary of the Company for referral to
the Chairman of the Corporate Governance and Nominating
Committee.
The Finance Committee monitors the performance of the
Companys investment portfolio and evaluates individual
investment portfolio managers on a regular basis. It is
responsible for the oversight of our investment strategy,
guidelines, transactions and performance and for assessing the
capital and financial resources of the Company. The specific
responsibilities and functions of the Finance Committee are set
forth in the Finance Committee Charter which is available on our
website at www.navg.com under the Corporate Governance link. The
Finance Committee Charter is reviewed annually and updated as
necessary.
The Underwriting Advisory Committee is responsible for the
oversight of our insurance underwriting strategy, guidelines and
practices. The specific responsibilities and functions of the
Underwriting Advisory Committee are set forth in the
Underwriting Advisory Committee Charter which is available on
our website at www.navg.com under the Corporate Governance link.
The Underwriting Advisory Committee Charter is reviewed annually
and updated as necessary.
The Executive Committee is available to handle matters between
scheduled Board meetings when it is impractical to call for a
special meeting of the entire Board. The specific
responsibilities and functions of the Executive Committee are
set forth in the Executive Committee Charter which is available
on our website at www.navg.com under the Corporate Governance
link. The Executive Committee Charter is reviewed annually and
updated as necessary.
Compensation
Discussion and Analysis
The objectives of the Companys compensation program are to
(1) provide fair, adequate and competitive compensation to
all employees, (2) attract qualified new individuals to
enter into employment with the Company, (3) facilitate the
retention of qualified employees and continuity of management,
and (4) provide incentives and rewards for such employees
to enhance the profitability and growth of the Company and align
the interests of employees and Stockholders. The Company uses
the various elements of its compensation program together to
achieve these objectives.
The Companys approach to employee compensation is grounded
in a pay-for-performance philosophy that seeks to emphasize
underwriting profitability over growth in premium revenues,
while maintaining conservative investment and accounting
practices. The Companys compensation program is designed
to reward employees based upon the annual performance of the
Company and their individual roles in achieving that level of
corporate performance. The Companys Board of Directors and
its senior management believe that compensation decisions for
each Named Executive Officer listed in the Summary Compensation
Table below should reflect the continued growth and financial
performance of the Company, the underwriting performance of the
business division, if any, for which such Named Executive
Officer has responsibility, and the individual contribution of
the Named Executive Officer to the overall financial success of
the Company.
The Company does not generally target any specific allocation
among the various elements of total compensation for Named
Executive Officers or other employees. Rather, compensation
decisions for Named Executive Officers other than the Chairman
and the President and Chief Executive Officer are based upon a
reasoned, subjective evaluation by the President and Chief
Executive Officer of the individual performance and future
potential of such Named Executive Officers, subject to the
review and approval of the Compensation Committee. Compensation
decisions for the Chairman and the President and Chief Executive
Officer are made by the Compensation Committee based upon the
factors described under Compensation Discussion and
Analysis Executive Performance Incentive
Plan below. Other than the President and Chief
Executive Officer, no Named Executive Officer or other officer
plays a role in determining compensation for the Named Executive
Officers.
8
Among the factors considered by the Company in determining
appropriate base salary, bonus and total compensation levels for
the Named Executive Officers for 2007 is compensation
information for corresponding executive officers in peer
companies. The companies selected by the Company and the
Compensation Committee as peer companies are considered
comparable to the Company either because of revenue size or
market capitalization, or because they are in lines of business
similar to the Companys lines of business, or because the
Company competes with them for talent or business. In the U.S.,
these peer companies include Argo Group International Holdings,
Ltd., W. R. Berkley Corp., Markel Corp., Philadelphia
Consolidated Holding Corp. and RLI Corp. In the U.K., the
Company reviewed summary compensation information based on
insurance industry compensation survey data from U.K. insurance
companies and Lloyds of London managing agents compiled by
Watson Wyatt Limited, a U.K. consulting firm, at the
Companys request. Watson Wyatt Limited played no role,
beyond compiling such information, in advising the Chief
Executive Officer or the Compensation Committee on compensation
decisions.
The Companys management compensation program currently
consists of the following elements: base salary; an executive
performance incentive plan (the Executive Performance
Incentive Plan or EPIP), which provides for an
annual cash bonus for designated individuals that is intended to
qualify for tax deductibility under section 162(m) of the
Internal Revenue Code of 1986, as amended (the
Code); an annual incentive compensation plan (the
Annual Incentive Program or AIP), which
provides for annual bonuses to all employees, other than
participants in the EPIP, consisting of cash and, for employees
at more senior levels, restricted common stock that vests in
equal annual installments over four years; the Admirals
Program (the Admirals Program), which provides
for restricted stock grants to certain key underwriters and
other employees that vest in three equal installments on the
third, fourth and fifth anniversaries of the grant date; and
retirement income plans including a money purchase plan (the
Money Purchase Plan or MPP), a 401(k)
plan with matching Company contribution (the 401(k)
Plan), and a U.K. pension scheme (the U.K.
Plan), which together provide for contributions by the
Company on behalf of each eligible employee based upon the
employees base salary and, with respect to the 401(k)
Plan, the employees own contribution to the 401(k) Plan.
Changes, if any, to base salary, and awards under the Executive
Performance Incentive Plan, the Annual Incentive Program and the
Admirals Program are made once each year, in late February
or early March. Set forth below is a description of these
various elements of the Companys compensation program for
the year ended December 31, 2007, why the Company pays each
element of compensation, how the Company arrived at the amount
of each element, and how each element fits into the
Companys overall compensation objectives.
Base Salaries. The Company pays base salaries
to each Named Executive Officer to compensate the officer for
his ongoing performance throughout the year, to promote
retention and in accordance with accepted industry market
practice. Base salaries are determined after evaluating a number
of factors, including local market conditions, individual job
performance, amounts paid to executives with comparable
experience at peer insurance companies, qualifications and
responsibilities of executives at other insurance companies and
underwriting management companies, and the overall financial
results of the Company. For Named Executive Officers, base
salary increases are not generally awarded annually, but are
awarded only when the Compensation Committee deems such
increases appropriate after evaluating the various factors
described above. In 2007, Mr. Galanskis base salary
was increased from $500,000 to $600,000, and
Mr. Malvasios base salary was increased from $310,000
to $335,000. Base salaries were not increased for any other
Named Executive Officers in 2007. The Company recognizes the
need to pay competitive base salaries to support its recruitment
and retention compensation objectives and its ability to provide
fair, adequate and competitive compensation to the Named
Executive Officers.
Executive Performance Incentive Plan. The
Companys Executive Performance Incentive Plan currently
provides for annual incentive payments to the Chairman and to
the President and Chief Executive Officer of the Company based
upon the Companys results as described below. It is
intended to promote the Companys pay-for-performance
compensation philosophy by providing a direct linkage between
Company performance and employee compensation. The EPIP is
administered by the Compensation Committee, which selects the
key executives of the Company who are eligible to receive cash
awards under this plan along with the target and maximum award
levels and the performance targets each year. For 2007, the EPIP
provided for bonus awards for Messrs. Deeks and Galanski of
up to 100% and 150%, respectively, of their base salaries.
9
The difference in the maximum percentage award payments for
which Messrs. Deeks and Galanski were eligible under the
EPIP for 2007 reflects their relative time commitments to the
management of the Company.
The Executive Performance Incentive Plan bonus award criteria
are based upon the degree to which the Company meets its budget
plan each year, with particular emphasis on achieving the
revenue, net income, earnings per share after taxes and return
on equity annual budget plan targets. The Compensation Committee
reviews these various bonus award criteria each year to
determine which criteria to use in setting the annual bonus
awards under the EPIP for such year. For 2007, the three
components of the EPIP bonus award payable to each participating
executive were as follows: (1) 80% of the award was
determined by the degree to which the Company achieved corporate
performance targets (the Basic Bonus Target) based
on its budget plan with respect to earnings per share after
taxes and return on equity; (2) 10% of the award was
determined by the Companys success in achieving a
reduction in its adjusted 2007 operating expense budget of up to
5% (the Expense Bonus Target); and (3) 10% of
the award was determined by the amount of the reduction in 2007
in the Companys reinsurance recoverables balance on paid
claims outstanding at the end of 2006 (the Recoverables
Bonus Target). For 2007, the Basic Bonus Target consisted
of earnings per share of $5.05 and a return on equity of 15.7%.
Achievement of 100% of the Basic Bonus Target would entitle each
executive participating in the EPIP to receive the full Basic
Bonus Target award of 100% of his base salary for this component
of his overall EPIP bonus award. Achievement of 80% of the Basic
Bonus Target (earnings per share of $4.04 and a return on equity
of 12.6%) would entitle each participating executive to receive
50% of his salary for this component of his overall EPIP bonus
award. Achievement of 115% or more of the Basic Bonus Target
(earnings per share of $5.81 and a return on equity of 18.1%)
would entitle each participating executive to receive the
maximum of 150% of his salary for this component of his EPIP
award. Achievement of between 80% and 115% of the Basic Bonus
Target would entitle each participating executive to receive a
corresponding Basic Bonus Target award of between 50% and 150%
of his base salary for this component of his overall EPIP bonus
award. For 2007, the two participating executives in the EPIP
achieved 139% of the Basic Bonus Target, 0% of the Expense Bonus
Target, and 82% of the Recoverables Bonus Target. This entitled
Messrs. Deeks and Galanski to an EPIP bonus payment of
119.5% of their respective base salaries, which was reduced to
100% with respect to Mr. Deeks to reflect his maximum
percentage award under the terms of the EPIP. Accordingly,
Messrs. Deeks and Galanski received cash bonus awards under
the EPIP in 2007 of $325,000 and $716,775, respectively.
The Compensation Committee believes that performance targets for
annual bonuses under the EPIP have been set at levels that can
be achieved only with significant effort on the part of
participants in the EPIP and that payment of the maximum award
amounts under the EPIP would reflect results substantially in
excess of expectations. The Compensation Committee has no
discretion under the EPIP to increase individual awards above
the amount determined by the applicable bonus award criteria.
The Compensation Committee selects the applicable bonus award
criteria, and the respective weights assigned to them, each
year. The Executive Performance Incentive Plan supports the
Companys retention compensation objectives by enabling the
Company to provide the Chairman and the President and Chief
Executive Officer with fair, adequate and competitive
compensation and appropriate incentives to enhance the
profitability and growth of the Company. Messrs. Deeks and
Galanski will again participate in the Executive Performance
Incentive Plan for 2008, subject to approval of the EPIP at the
2008 Annual Meeting of Stockholders.
In connection with the bonuses paid to Mr. Deeks and
Mr. Galanski for 2007 under the Executive Performance
Incentive Plan, the Compensation Committee reviewed their
overall 2007 compensation levels. The Committee considered
Mr. Deekss role as Chairman of the Board and founder
of the Company. The Committee also considered local market
conditions and job performance.
In setting Mr. Galanskis 2007 compensation package, a
number of factors were considered, including (i) the
business and leadership skills and experience of
Mr. Galanski and (ii) the importance of
Mr. Galanski to the continued growth, success, and future
of the Company, and the need to provide him with a significant
incentive as well as to motivate him and retain his services as
President and Chief Executive Officer. In addition to these
factors, Mr. Galanskis compensation package was
designed to be consistent with the objectives of the
Companys compensation program described above and its
pay-for-performance philosophy. Since Mr. Galanski joined
the Company in 2001, the Companys earnings per share have
increased from $.84
10
to $5.62, its book value per share has increased from $17.05 to
$39.24, and its share price has increased from $13.31 to $65.00.
(All figures are as of December 31, 2000 and
December 31, 2007, respectively.)
Under section 162(m) of the Code, annual compensation in
excess of $1.0 million paid to the chief executive officer
or any of the other three most highly compensated officers,
other than the chief financial officer, of any publicly held
corporation will not be deductible in certain circumstances.
Generally, performance-based compensation, as
defined in section 162(m), is not subject to the limitation
if certain requirements are satisfied. The Compensation
Committee has structured the Executive Performance Incentive
Plan so that such compensation is intended to qualify as
performance-based compensation under section 162(m).
However, the Compensation Committee may award compensation that
is not fully deductible if it determines that such an award is
consistent with the Companys compensation philosophy and
in the best interests of the Company and its Stockholders.
Annual Incentive Program. The Companys
Annual Incentive Program, in which all employees of the Company
other than the Chairman and the President and Chief Executive
Officer currently participate, provides for the payment of
annual bonuses consisting of cash and, for employees at
relatively senior levels, restricted common stock that vests in
equal installments over four years, with a greater proportion of
an employees AIP award generally being paid in stock at
the more senior levels.
The AIP divides employees into several groups, which are subject
to various performance indicators and objectives based upon
responsibilities, skills, experience and other relevant factors
appropriate for each group. The performance of each employee is
reviewed no less than once each year. Employees in each group
are eligible to earn an incentive compensation award based upon
a target percentage of their base salary, which ranges from 5%
to 85% among the different groups. Under the AIP, eligible
employees may receive an annual award of up to 150% of the
target percentage of their base salary. In 2007, the target
percentage for Messrs. Duca, Malvasio and Coward was 85% of
their respective base salaries.
Awards under the AIP are based on corporate performance,
divisional underwriting performance and individual performance
within the overall guidelines of the AIP. At more senior
employee levels, awards are weighted somewhat more heavily
toward corporate performance and, where applicable, divisional
underwriting performance, whereas at lower levels awards are
weighted somewhat more heavily toward individual performance For
Messrs. Duca and Coward, who have management responsibility
for business divisions within the Company, 25% of their overall
AIP bonus award is determined by the Companys corporate
performance, 50% by the underwriting performance of their
business divisions, and 25% by their individual performance. For
Mr. Malvasio, who does not have management responsibility
for a business division, 50% of his overall AIP bonus award is
determined by the Companys corporate performance and 50%
by his individual performance. The remaining Named Executive
Officers, Messrs. Deeks and Galanski, participate in the
Executive Performance Incentive Plan and so do not participate
in the Annual Incentive Program. The corporate performance
component of the AIP bonus award was based on the extent to
which the Company achieved its 2007 budget plan with respect to
gross written premium, combined ratio, and return on equity,
with these three elements being weighted at 15%, 50% and 35%,
respectively, of corporate performance. For 2007: (1) the
target for gross written premium was a 9.8% increase relative to
the Companys gross written premium for 2006; (2) the
target for the combined ratio was 88.6%; and (3) the target
for return on equity was 15.7%. The divisional performance
component of the AIP bonus award was based on the extent to
which the applicable business division achieved its 2007
divisional budget plan with respect to gross written premium and
combined ratio, with these two elements being weighted at 25%
and 75%, respectively, of divisional performance. For 2007:
(1) the target for gross written premium was a 3.3%
increase for the business division run by Mr. Duca relative
to that divisions gross written premium for 2006 and a
7.8% increase for the business division run by Mr. Coward
relative to that divisions gross written premium for 2006;
and (2) the target for the combined ratio was 91.2% for the
division run by Mr. Duca and 90.9% for the division run by
Mr. Coward. The individual performance component of the AIP
bonus awards for Messrs. Duca, Malvasio and Coward was
determined by Mr. Galanski, based upon his reasoned,
subjective evaluation of the individual performance of each such
Named Executive Officer. For achievement of 100% of the
corporate, individual and, where applicable, divisional
performance targets, AIP participants are entitled to receive
100% of their target percentages under the AIP. For achievement
of less than 100% of such corporate, individual and, where
11
applicable, divisional targets, AIP participants receive
correspondingly less than 100% of their target percentages. For
achievement of more than 100% of such corporate, individual and,
where applicable, divisional targets, AIP participants are
entitled to receive correspondingly more than 100% of their
target percentages under the AIP, up to a maximum of 150% of
their target percentages. The AIP bonus award for each
participating Named Executive Officer was reviewed and approved
by the Compensation Committee. The AIP bonus awards paid to
Messrs. Duca, Malvasio and Coward for 2007 were in the
amounts of $200,000, $375,000 and $304,500, respectively.
Pursuant to the terms of the AIP, these bonus awards were paid
60% in cash and 40% in restricted common stock of the Company
that vests in equal installments on the first, second, third and
fourth anniversaries of the date of the awards.
The Committee believes that performance targets for annual
bonuses under the AIP, as under the EPIP, have been set at
levels that can be achieved only with significant effort on the
part of the Named Executive Officers who participate in the AIP,
and that payment of the maximum award amounts under the AIP
would reflect results substantially in excess of expectations.
The Compensation Committee has discretion to amend individual
awards, subject to the maximum award amounts permitted under the
AIP, to assure that such awards reflect the contributions of
participating executives. It did not exercise such discretion
for the 2007 awards. The Compensation Committee determines the
relative weights of the corporate, divisional and individual
performance components of AIP bonus awards, as well as the
various elements of corporate performance and divisional
performance, each year. All common stock grants are made
pursuant to the Companys 2005 Stock Incentive Plan, and
reflect the evolution of the Compensation Committees
philosophy in favor of performance-based restricted stock grants
over stock options and SARs, which the Company believes to be in
the long-term interests of its Stockholders. The Company did not
issue any stock options or SARs in 2007, and has no current
plans to do so in 2008.
The Annual Incentive Program supports the Companys
recruitment objectives by enabling the Company to attract
qualified new employees. The AIP, like the Executive Performance
Incentive Plan, also supports the Companys retention
objectives, as well as its ability to provide participating
Named Executive Officers with competitive compensation and
appropriate incentives to enhance the profitability and growth
of the Company. For a Named Executive Officer who has
responsibility for one of the Companys various business
divisions, the divisional component of the AIP enables the
Company to directly tailor the amount of his incentive
compensation to the performance of his division. Finally, the
long term vesting of the restricted stock component of the AIP
award explicitly aligns the long term interests of the Named
Executive Officers with those of the Stockholders. The Company
generally encourages its employees to own its stock, and have
their equity at risk, to better align the long term interests of
its employees and Stockholders. As of December 31, 2007,
197 out of the Companys 401 employees directly own
stock that was either granted to them by the Company or was
purchased by them through the Companys Employee Stock
Purchase Plan described under Compensation Discussion and
Analysis Employee Stock Purchase Plan
below.
Admirals Program. In 2006, the
Compensation Committee, working with senior management of the
Company, established the Admirals Program, which provides
for restricted stock grants for certain key underwriters and
other employees of the Company that vest in equal installments
on the third, fourth and fifth anniversaries of the grant date.
These grants are generally made, subject to Compensation
Committee discretion, only to employees who are highly
significant contributors to the Company, have been employed by
the Company for at least three years and participate at
relatively high levels in the Annual Incentive Program or the
Executive Performance Incentive Plan. Typically, these grants
are not awarded to employees who received a grant under the
Admirals Program during the prior year. The number of
shares included in an employees initial Admirals
Program award is fixed at the time of grant. The number of
shares included in an employees Admirals Program
awards other than his or her initial award (Subsequent
Admirals Awards) varies with the Companys return on
equity over the three-year period immediately preceding the
vesting of each installment of each award. For achievement of
the 13% return on equity target for any three-year period,
recipients of Subsequent Admirals Awards are entitled to receive
the target amount of 100% of the applicable installment of an
award. For achievement of a 7% return on equity for any
three-year period, recipients of Subsequent Admirals Awards are
entitled to receive the threshold amount of 25% of the
applicable installment of an award. For achievement of a 15% or
higher return on equity for any three-year period, recipients of
12
Subsequent Admirals Awards are entitled to receive the maximum
amount of 150% of the applicable installment of an award.
Achievement of between a 7% and 15% return on equity for any
three-year period would entitle recipients of Subsequent
Admirals Awards to receive a corresponding percentage, ranging
from 25% to 150%, of the applicable installment of an award.
Achievement of less than a 7% return on equity for any
three-year period would not entitle recipients of Subsequent
Admirals Awards to receive any portion of the applicable
installment of an award. The Compensation Committee has
discretion to amend the terms and conditions of the
Admirals Program from time to time. Admirals Program
grants are generally awarded annually in late February or early
March of each year. In 2007, the Compensation Committee approved
a Subsequent Admirals Award to Mr. Galanski, which is in
the target amount of 25,000 shares and will vary with the
Companys return on equity as described above. The amount
of this grant and the decision to authorize an Admirals
Program award to Mr. Galanski in 2007 after he had received
an initial award in 2006 in the fixed amount of
25,000 shares reflect the Compensation Committees
consideration of the importance of Mr. Galanski to the
continued growth, success and future of the Company and the need
to provide him with a significant incentive as well as to
motivate him and retain his services as President and Chief
Executive Officer. No Admirals Program grants were made to
any other Named Executive Officers in 2007.
The Admirals Program is primarily designed to retain
qualified employees and facilitate continuity of management by
providing significant long term incentive stock awards to key
employees. It is a wealth-creation device for employees of
proven ability who are believed to have a long term commitment
to the success of the Company. The Admirals Program also
supports the Companys recruitment objectives by enabling
the Company to attract qualified new employees, and enhances the
Companys ability to provide Named Executive Officers and
others with adequate and competitive compensation and
appropriate incentives to enhance the profitability and growth
of the Company. The size of the individual stock awards is
determined by the Compensation Committee based upon the
recommendation of senior management, and reflects the position
of the award recipient within the organization, the importance
of the Named Executive Officer or other individual to the
continued growth and success of the Company, the need to retain
his or her services and related factors. Named Executive
Officers are not involved in the determination of the size of
their individual awards under the Admirals Program. The
Admirals Program fits into the Companys overall
compensation objectives by providing a unique long term
retention mechanism targeted toward a small number of highly
significant and valued contributors.
Retirement Income Plans. The Companys
retirement income plans include the Money Purchase Plan, the
401(k) Plan with matching Company contribution, and the U.K.
Plan. The Companys Money Purchase Plan is a defined
contribution plan that, in 2007, provided for a mandatory annual
contribution by the Company on behalf of each eligible employee
of 15% of such employees base salary, subject to certain
maximum contribution limits under applicable law. Beginning with
the 2008 plan year, the Company has reduced this mandatory
annual contribution percentage to 7.5%. All U.S. employees
currently become eligible to participate in the Money Purchase
Plan as of the January 1st immediately following their
date of hire. The Companys contributions to the MPP vest
in annual installments of 20% on each of the second, third,
fourth, fifth and sixth anniversaries of the date on which an
employee joined the Company, and become fully vested after the
employee has been employed by the Company for six years.
In addition to the Money Purchase Plan, all U.S. employees
are eligible to participate in the Companys 401(k) Plan.
In 2007, the 401(k) Plan did not provide for the Company to
match employee contributions to the Plan. Effective
January 1, 2008, the 401(k) Plan provides for the Company
to match each participating U.S. employees annual
contributions to the Plan up to 4% of such employees base
salary, subject to certain maximum contribution limits under
applicable law. In addition, at the discretion of the
Compensation Committee depending upon the yearly financial
performance of the Company, the Company may contribute up to an
additional 4% of each participating employees base salary
for such year. The Companys entire 401(k) Plan matching
contribution vests immediately.
The Companys U.K. employees participate in the U.K. Plan
rather than in the Money Purchase Plan and the 401(k) Plan. The
U.K. Plan, like the Money Purchase Plan, is a defined
contribution plan. The U.K. Plan provides for a mandatory
monthly contribution by the Company on behalf of each eligible
employee of 15% of such employees base salary, subject to
certain maximum contribution limits under applicable law, as
well as
13
for an additional 15% of such employees AIP award up to a
maximum annual additional contribution of $2,500. All Company
contributions to the U.K. Plan vest immediately. U.K. employees
are also entitled to make a voluntary annual contribution to the
U.K. Plan, which is deducted from their net base salary. All
U.K. employees become eligible to participate in the U.K. Plan
as of the date they become employees of the Company.
The Money Purchase Plan, the 401(k) Plan and the U.K. Plan are
together considered important long term retirement benefits that
support the Companys overall compensation objectives by
helping to provide fair, adequate and competitive compensation
to all employees, by helping to attract qualified new employees,
and by facilitating the long term retention of key existing
employees. The Money Purchase Plan and the U.K. Plan facilitate
recruiting and retention by distinguishing the Company from many
of its peer companies that do not provide this element of
compensation. The Money Purchase Plan, the 401(k) Plan and U.K.
Plan also facilitate retirement planning by Named Executive
Officers and other employees.
The Company does not offer a defined benefit pension plan or a
nonqualified deferred compensation plan.
Employee Stock Purchase Plan. The
Companys Employee Stock Purchase Plan provides employees
with the opportunity to acquire, subject to certain annual
limits, shares of Navigators common stock at a 10% discount from
the market price at the beginning or end of each six-month Plan
period. Employees purchase these shares through regular payroll
deductions. The Employee Stock Purchase Plan facilitates the
ownership of the Companys stock by its employees, which
helps to better align the long term interests of employees and
Stockholders. Through December 31, 2007, 144 employees
had purchased 61,040 shares of the Companys common
stock through the Employee Stock Purchase Plan.
Benefits. Executive officers also participate
in those benefit arrangements which are available to our
employees, including health and welfare benefit plans and, with
respect to U.S. employees including all Named Executive
Officers except Mr. Coward, the 401(k) Plan. For a
discussion of the Companys 401(k) Plan, please see
Compensation Discussion and Analysis
Retirement Income Plans above.
Mr. Galanski receives an annual car allowance from the
Company in the amount of $12,000 pursuant to the terms of his
employment agreement. In addition, the Company pays for the cost
of an annual physical examination for all executive officers and
members of the Board of Directors.
While the Company entered into employment agreements with
Messrs. Galanski and Coward in 2001 and 2002, respectively,
which agreements are still in effect, the other Named Executive
Officers do not have employment agreements with the Company. The
fact that the Company is no longer entering into employment
agreements reflects the philosophy of the Compensation Committee
that such agreements are not necessary to promote the objectives
of the Companys compensation program or in the long-term
interests of the Company. For a discussion of the employment
agreements with Messrs. Galanski and Coward, please see
Employment Agreements below.
There are currently no stock ownership requirements for Named
Executive Officers with respect to the common stock of the
Company. For a description of the current ownership of common
stock of the Company by the Named Executive Officers, please see
Ownership of Voting Securities By Certain Beneficial
Owners and Management above.
Each element of the Companys compensation program
complements the other elements in that all elements together are
designed to support the Companys pay-for-performance
philosophy. The various elements of each Named Executive
Officers compensation package are designed collectively to
assure that the package provides for fair and competitive
compensation, facilitates the retention of the Named Executive
Officer and therefore the continuity of the Companys
management, and provides incentives and rewards for the Named
Executive Officer to enhance the profitability and growth of the
Company. However, the amount of any individual element of a
Named Executive Officers compensation does not generally
affect the amount of the other elements of his compensation.
While the MPP contribution is, and the AIP award is expected to
be, made annually and the U.K. Plan contribution is made
monthly, an increase in base salary and an Admirals
Program restricted stock grant are not generally given to a
Named Executive Officer each year.
14
The Compensation Committee evaluates the Companys
management compensation program on an ongoing basis to assure
that it is consistent with the objectives of the program and
with the Companys pay-for-performance compensation
philosophy.
Summary
Compensation Table
The following table sets forth a summary of the compensation
paid by the Company to the Chief Executive Officer, Principal
Financial Officer and each of the three other most highly paid
executive officers of the Company or its subsidiaries (the
Named Executive Officers).
SUMMARY
COMPENSATION TABLE
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Change
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in
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Pension
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Value
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and
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Non-
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Non-
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Equity
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Qualified
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Incentive
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Deferred
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Name
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Plan
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Compen-
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All Other
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and
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Stock
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Option
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Compen-
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sation
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Compen-
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Principal
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Salary
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Bonus(1)
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Awards(2)
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Awards(2)
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sation
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Earnings
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sation(3)
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Total
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Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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(i)
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(j)
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Terence N. Deeks
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2007
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325,000
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325,000
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148,300
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69,420
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867,720
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Chairman
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2006
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325,000
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403,000
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45,700
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68,670
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842,370
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Stanley A. Galanski
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2007
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575,000
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716,775
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450,883
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84,000
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47,725
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1,874,383
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President &
Chief Executive Officer
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2006
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483,333
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599,333
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77,844
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84,000
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46,975
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1,291,485
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Christopher C. Duca(4)
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2007
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285,000
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1,184,000
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160,884
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194,125
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35,725
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1,859,734
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SVP of Navigators Management Co., Inc. and President of the
Navigators Pro Division
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2006
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282,500
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490,000
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108,592
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91,525
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34,975
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1,007,592
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Paul J. Malvasio(5)
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2007
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330,833
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225,000
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327,702
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77,650
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36,125
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997,310
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EVP & Chief Financial Officer
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2006
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310,000
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221,340
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311,062
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77,650
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35,375
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955,427
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Stephen R. Coward(6)
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2007
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331,650
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182,700
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178,800
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225,284
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51,923
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970,357
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Managing Director Navigators Underwriting Agency Ltd.
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2006
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294,000
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134,946
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135,351
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6,122
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46,275
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616,694
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(1)
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The Bonus amounts reflect the cash
bonus paid for 2007 to each Named Executive Officer. For
Messrs. Deeks and Galanski, the Bonus amounts reflect the
cash bonus paid pursuant to the Executive Performance Incentive
Plan for 2007. For Messrs. Duca, Malvasio and Coward, the
Bonus amounts include the cash component, but not the restricted
stock award component, of the Annual Incentive Program awards
for 2007. Such restricted stock awards are based on the closing
stock price of $55.83 on the grant date of February 11,
2008 and vest 25% each year on the first, second, third and
fourth anniversaries of such date. Such restricted stock awards
are granted pursuant to the Companys 2005 Stock Incentive
Plan. Mr. Duca received $80,000 in restricted stock.
Mr. Malvasio received $150,000 in restricted stock.
Mr. Coward received $121,800 in restricted stock. The cash
bonus paid for 2007 to Mr. Duca included $120,000 pursuant
to Mr. Ducas 2007 Annual Incentive Program award and
$1,064,000 paid pursuant to a Navigators Pro division bonus plan
that covered the 2005 and prior underwriting years (the
NavPro Plan) in which Mr. Duca had participated
prior to its termination on December 31, 2005 in lieu of
participating in the Companys Annual Incentive Program.
The final distribution of underwriting profits for the years
covered by the NavPro Plan will be made in 2010. The NavPro Plan
bonus for Mr. Duca does not include any portion of the
$1,213,577 accrued by the Company but not yet payable to the
various NavPro Plan participants, including Mr. Duca, under
the terminated NavPro Plan, which amount may increase or
decrease depending upon the development of the underwriting
results for the years covered by the NavPro Plan. Information on
the 2006 Bonus amounts paid to the Named Executive Officers can
be found in the Companys 2007 Proxy Statement.
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15
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(2)
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The Stock Awards and Option Awards
vest in four equal installments on the first, second, third and
fourth anniversaries of their respective grant dates, other than
Admirals Program stock grants made during 2007 to
Mr. Galanski and during 2006 to Messrs. Galanski,
Duca, Malvasio and Coward that vest in three equal installments
on the third, fourth and fifth anniversaries of their respective
grant dates. The Stock Award and Option Award amounts represent
the dollar amount of stock, option and SARs compensation expense
recognized for financial statement purposes in 2007 and 2006
under FAS 123R (excluding any forfeiture assumptions) and
include compensation costs associated with stock, option and
SARs awards granted in previous years as well as any stock
awards granted in 2007. No option or SARs awards were granted in
2007 or 2006. For a discussion of valuation assumptions for 2007
and 2006, see Note 14 to our Consolidated Financial
Statements included in our Annual Report on
Form 10-K
for the years ended December 31, 2007 and December 31,
2006, respectively.
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(3)
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All Other Compensation includes:
cash contributions made by the Company pursuant to the terms of
the Companys Money Purchase Plan in 2007 and 2006 for each
Named Executive Officer other than Mr. Coward in the
amounts of $33,750 and $33,000, respectively, which do not
become fully vested until the employee has been employed by the
Company for six years; payment by the Company of the cost of an
annual physical examination for each Named Executive Officer in
an amount ranging from $1,975 to $2,375; and an annual
automobile allowance for Mr. Galanski in the amount of
$12,000. For Mr. Deeks, All Other Compensation also
includes imputed interest income for 2007 and 2006 in the amount
of $33,295 per year related to split dollar life insurance
policy premiums that were advanced by the Company for the years
1992-2002
and that are repayable upon the earlier of the termination of
such policy or the payment of benefits thereunder. For
Mr. Coward, All Other Compensation also includes cash
contributions made by the Company to its U.K. Pension Scheme in
2007 and 2006 on his behalf in the amounts of $49,748 (based on
the conversion rate on December 31, 2007 of £1=$1.98)
and $44,100 (based on the conversion rate on December 31,
2006 of £1=$1.96), respectively, which contributions are
fully vested.
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(4)
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Effective March 1, 2008,
Mr. Ducas base salary was increased to $310,000.
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(5)
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Effective March 1, 2008,
Mr. Malvasios base salary was increased to $375,000.
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(6)
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Effective March 1, 2008,
Mr. Cowards base salary was increased to $378,100,
based on the conversion rate on February 29, 2008 of
£1=$1.99. Mr. Cowards base salary and the cash
component of his Annual Incentive Program bonus award included
in columns (c) and (d) above, respectively, are paid
to him in British pounds, and the dollar value of these amounts
paid to him in 2007 is calculated based on the conversion rate
as of December 31, 2007 of £1=$1.98.
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Grants of
Plan-Based Awards
The following table contains information concerning the grants
of plan-based awards made to each of the Named Executive
Officers in the year ended December 31, 2007. There were no
options or SARs granted in 2007.
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GRANTS OF PLAN-BASED AWARDS
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Estimated Future
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Estimated Future
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All Other
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All Other
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Grant
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Payouts Under
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Payouts Under
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Stock Awards:
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Awards:
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Exercise
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Date Fair
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Non-Equity Incentive
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Equity Incentive Plan
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Number
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Number of
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or Base
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Value of
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|
Plan Awards
|
|
|
Awards(1)
|
|
|
of Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
|
|
|
|
|
|
|
|
|
Maxi-
|
|
|
|
|
|
|
|
|
Maxi-
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Options
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
mum
|
|
|
Threshold
|
|
|
Target
|
|
|
mum
|
|
|
Units(2)
|
|
|
Options
|
|
|
Awards
|
|
|
Awards(3)
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
$/Share
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
(k)
|
|
|
(l)
|
|
|
Terence N. Deeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley A. Galanski
|
|
|
8/10/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
25,000
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,300,000
|
|
Christopher C. Duca
|
|
|
3/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,643
|
|
|
|
|
|
|
|
|
|
|
|
80,031
|
|
Paul J. Malvasio
|
|
|
3/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,030
|
|
|
|
|
|
|
|
|
|
|
|
147,591
|
|
Stephen R. Coward
|
|
|
3/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,847
|
|
|
|
|
|
|
|
|
|
|
|
89,967
|
|
|
|
|
(1)
|
|
These restricted shares are issued
under the Companys 2005 Stock Incentive Plan in accordance
with the terms of Admirals Program stock grants and vest
in three equal installments on the third, fourth and fifth
anniversaries of the grant date. A return on equity of 7% for
the three-year period immediately preceding the vesting of any
such installment would result in a threshold plan award of 25%
of the target for such installment. A return on equity of 13%
for such three-year period would result in a plan award of 100%
of the target for such installment. A return on equity of 15% or
more for such three-year period would result in a maximum plan
award of 150% of the target for such installment. A return on
equity of less than 7% for such three-year period would result
in no plan award for such installment. For further discussion of
the Admirals Program, please see Compensation
Discussion and Analysis Admirals
Program above.
|
16
|
|
|
(2)
|
|
These restricted shares are issued
under the Companys 2005 Stock Incentive Plan in accordance
with the terms of the Annual Incentive Program and vest in equal
installments on the first, second, third and fourth
anniversaries of the grant date. For further discussion of the
Annual Incentive Program, please see Compensation
Discussion and Analysis Annual Incentive
Program above.
|
|
(3)
|
|
Calculated in accordance with
FAS 123R. For a discussion of valuation assumptions, see
Note 14 to our Consolidated Financial Statements included
in our Annual Report on
Form 10-K
for the year ended December 31, 2007.
|
Employment
Agreements
On March 26, 2001, the Company entered into an employment
agreement with Mr. Galanski providing for an initial
three-year term of employment that continues for successive
one-year periods unless either party elects to terminate the
agreement upon 120 days notice to the other party
prior to the expiration of the then-current one-year period. The
agreement provided for the issuance to Mr. Galanski as of
the date of the agreement of a stock grant of
100,000 shares of Common Stock subject to vesting
provisions of 25% per year. All of such shares are now fully
vested. In the event that a change of control of the Company had
occurred during the initial three-year term resulting in the
termination of Mr. Galanskis employment or the
resignation of Mr. Galanski following a material reduction
in his responsibilities or a demotion from his current position,
Mr. Galanski would have been entitled to receive his base
salary for the remaining term of his employment agreement and
all outstanding unvested stock grants made to Mr. Galanski
during the initial term would have immediately vested. The
agreement provides for a $12,000 annual car allowance for
Mr. Galanski. Upon the termination of
Mr. Galanskis employment agreement, the Company may
elect to enforce against Mr. Galanski one-year restrictive
covenants with respect to nonsolicitation of the Companys
employees and noncompetition with the Companys business,
provided that the Company continues to pay to Mr. Galanski
his then-current base salary during such one-year period. In
accordance with its terms, Mr. Galanskis employment
agreement was automatically renewed in December 2007 for a
one-year period through March 2009.
Effective January 2, 2002, Navigators Underwriting Agency
Ltd. (NUAL), a wholly-owned subsidiary of the
Company and the managing agency of the Companys
Lloyds of London Syndicate 1221, entered into an
employment agreement with Mr. Coward, which continues in
effect until either party provides three months advance
notice of termination to the other party or until the last day
of the month in which Mr. Coward reaches the age of 60. The
agreement provides that Mr. Coward may not compete with
NUAL or solicit any employee of NUAL during the six-month period
following termination. The agreement does not include provisions
regarding change of control or acceleration of outstanding stock
grants.
None of the other Named Executive Officers is currently a party
to an employment agreement with the Company or any of its
subsidiaries.
2005
Stock Incentive Plan
The 2005 Stock Incentive Plan authorizes the issuance in the
aggregate of 1,000,000 incentive stock options, non-incentive
stock options, restricted shares and stock appreciation rights
for the Companys Common Stock (collectively, the
Awards). The 2005 Stock Incentive Plan was approved
by Stockholders at the May 20, 2005 Annual Meeting of
Stockholders. The Company filed a Registration Statement
relating to the 2005 Stock Incentive Plan. The 2005 Stock
Incentive Plan provides for discretionary grants of Awards to
all employees, non-employee directors and consultants to the
Company or any of its subsidiaries, or any corporation acquired
by the Company or any of its subsidiaries. The 2005 Stock
Incentive Plan is the only plan under which the Compensation
Committee currently makes equity awards. For a discussion of the
equity awards made to employees under the 2005 Stock Incentive
Plan in connection with the Companys Annual Incentive
Program and Admirals Program, please see
Compensation Discussion and Analysis Annual
Incentive Program and Compensation Discussion
and Analysis Admirals Program,
respectively. In 2007, no Awards were made to any Named
Executive Officers under the 2005 Stock Incentive Plan other
than pursuant to the Annual Incentive Program and the
Admirals Program.
The purposes of the 2005 Stock Incentive Plan are to facilitate
fair, adequate and competitive compensation and to induce
certain individuals to remain in the employ of, or to continue
to serve as directors of or as independent consultants to the
Company and its present and future subsidiaries, to attract new
individuals to
17
enter into such employment and service and to encourage such
individuals to secure or increase on reasonable terms their
stock ownership in the Company. The Board believes that the
granting of Awards under the 2005 Stock Incentive Plan will
promote continuity of management, increased incentive and
personal interest in the welfare of the Company and aid in
securing its continued growth and financial success.
The 2005 Stock Incentive Plan will terminate ten years from its
adoption. The Board of Directors may at any time terminate the
2005 Stock Incentive Plan or make such modifications to the 2005
Stock Incentive Plan as it may deem advisable. The Board,
however, may not, without approval by the Stockholders of the
Company, increase the number of shares of Common Stock as to
which Awards may be granted under the 2005 Stock Incentive Plan,
change the manner of determining stock option or SAR prices or
change the class of persons eligible to participate in the 2005
Stock Incentive Plan.
The 2005 Stock Incentive Plan is administered by our
Compensation Committee. The Compensation Committee has
discretion to determine the participants under the 2005 Stock
Incentive Plan, the types, terms and conditions of the Awards,
including performance and other earnout
and/or
vesting contingencies, permit transferability of Awards to an
immediate family member of a participant or a trust established
on behalf of such immediate family member, interpret the 2005
Stock Incentive Plans provisions and administer the 2005
Stock Incentive Plan in a manner that is consistent with its
purpose.
Under the 2005 Stock Incentive Plan, the Compensation Committee
may grant Awards in the form of options to purchase shares of
Common Stock. All stock options issued under the 2005 Stock
Incentive Plan are exercisable upon vesting for one share of the
Companys Common Stock. The initial per share exercise
price for an incentive stock option may not be less than 100% of
the fair market value of a share of Common Stock on the date of
grant, or 110% of such fair market value with respect to a
participant who, at such time, owns stock representing more than
10% of the total combined voting power of the Common Stock. The
initial per share exercise price for a non-incentive stock
option may not be less than 100% of the fair market value of a
share of Common Stock on the date of grant.
No option granted pursuant to the 2005 Stock Incentive Plan may
be exercised more than 10 years after the date of grant,
except that incentive stock options granted to participants who
own more than 10% of the total combined voting power of the
Common Stock at the time the incentive stock option is granted
may not be exercised more than five years after the date of
grant. Any option granted to a non-employee director of the
Company or any of its subsidiaries shall be 10 years in
duration.
The 2005 Stock Incentive Plan also permits the grant of
restricted shares of Common Stock, herein referred to as
Stock Awards. A Stock Award is a grant of shares or
of a right to receive shares of Common Stock (or their cash
equivalent or a combination of both) in the future. Each Stock
Award will be subject to conditions, restrictions and
contingencies established by the Compensation Committee. In
making a determination regarding the allocation of such shares,
the Compensation Committee may take into account the nature of
the services rendered by the respective individuals, their
present and potential contributions to the success of the
Company and its subsidiaries and such other factors as the
Compensation Committee in its discretion shall deem relevant.
The 2005 Stock Incentive Plan also permits the grant of stock
appreciation rights (SARs), which is a grant of the
right to receive cash equal to the value of the SAR. The value
of a SAR with respect to one share of Common Stock on any date
is the excess of the fair market value of a share on such date
over the base value of such SAR. The base value of any SAR with
respect to one share of Common Stock shall equal the fair market
value of a share of Common Stock as of the date the SAR is
granted.
Participants shall not have any interest or voting rights in
shares covered by their Awards until the Awards shall have been
exercised in the case of options and SARs and the shares shall
have vested in the case of Stock Awards. The 2005 Stock
Incentive Plan also has provisions related to both the payment
by the Company of a stock dividend and the occurrence of a
change of control.
18
2002
Stock Incentive Plan
At the May 30, 2002 Annual Meeting, the Stockholders
approved the 2002 Stock Incentive Plan (the 2002 Stock
Plan). The Company filed a Registration Statement relating
to the 2002 Stock Plan.
Pursuant to the 2002 Stock Plan, the Company may grant to
eligible persons awards including, but not limited to, incentive
stock options, non-incentive stock options and restricted shares
of Common Stock. The 2002 Stock Plan authorized awards relating
to an aggregate of up to 1,000,000 shares of Common Stock,
of which no more than 100,000 awards may be in the form of
restricted stock grants.
The 2002 Stock Plan is administered by the Compensation
Committee consisting of two or more members of the Board. The
members of the Compensation Committee are appointed annually by,
and serve at the pleasure of, the Board. In the event that no
Compensation Committee is appointed, the 2002 Stock Plan shall
be administered by the Board of Directors.
No option granted pursuant to the 2002 Stock Plan may be
exercised more than 10 years after the date of grant,
except that incentive stock options granted to participants who
own more than 10% of the total combined voting power of the
Common Stock at the time the incentive stock option is granted
may not be exercised more than five years after the date of
grant.
As a result of the approval of the 2005 Stock Plan at the
May 20, 2005 Annual Meeting of Stockholders, no further
stock or option awards have been or will be granted under the
2002 Stock Plan.
Stock
Option Plans and Stock Appreciation Rights Plan
In 1986 and 1987, the Company adopted two stock option plans
which allowed for the grant to key employees of the Company, its
subsidiaries and affiliates, of options to purchase an aggregate
of 900,000 shares of Common Stock. The Company filed a
Registration Statement relating to the aggregate of the
900,000 shares of Common Stock which may be issued upon the
exercise of options granted or that may be granted under these
two plans, an incentive stock option plan and a non-qualified
stock option plan (together, the Stock Option
Plans). The stock options vest at a rate of 25% per year.
The Stock Option Plans are administered by the Compensation
Committee of the Board. As a result of the approval of the 2002
Stock Plan at the May 30, 2002 Annual Meeting of
Stockholders, no further options have been or will be issued
under the Stock Option Plans.
In 1996, the Company adopted a phantom stock appreciation rights
plan (the SARs Plan) which allows for the grant to
key employees of the Company and its affiliates of up to 300,000
SARs. The Compensation Committee administers the SARs Plan and
approves the employees who will receive grants of the rights.
The SARs vest at a rate of 25% per year. Upon exercise of a
stock appreciation right, the key employee is entitled to
receive cash in an amount equal to the difference between the
fair market value of the Common Stock at the exercise date and
the exercise price (which shall not be less than 90% of the fair
market value of the Common Stock at the date of grant). As a
result of the approval of the 2005 Stock Plan at the
May 20, 2005 Annual Meeting of Stockholders, no further
SARs have been or will be issued under the SARs Plan.
19
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth information for each of the Named
Executive Officers with respect to his outstanding equity awards
as of December 31, 2007.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Market or
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Payout
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Value of
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
Market
|
|
Number of
|
|
Unearned
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Unearned
|
|
Shares,
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Shares,
|
|
Units or
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Units or
|
|
Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
Other Rights
|
|
Rights That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
That Have
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested (1)
|
|
Not Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Terence N. Deeks
|
|
|
10,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
10.50
|
|
|
|
9/29/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley A. Galanski
|
|
|
22,500
|
|
|
|
7,500
|
(3)
|
|
|
|
|
|
|
29.11
|
|
|
|
2/28/14
|
|
|
|
25,000
|
(8)
|
|
|
1,625,000
|
|
|
|
25,000
|
(9)
|
|
|
1,625,000
|
|
Christopher C. Duca
|
|
|
10,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
19.10
|
|
|
|
9/1/11
|
|
|
|
10,000
|
(10)
|
|
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
19.10
|
|
|
|
9/1/11
|
|
|
|
1,643
|
(10)
|
|
|
106,795
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
1,250
|
(4)
|
|
|
|
|
|
|
29.11
|
|
|
|
2/28/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
5,000
|
(5)
|
|
|
|
|
|
|
33.19
|
|
|
|
3/8/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Malvasio
|
|
|
3,750
|
|
|
|
1,250
|
(4)
|
|
|
|
|
|
|
29.11
|
|
|
|
2/28/14
|
|
|
|
1,657
|
(11)
|
|
|
107,705
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
(6)
|
|
|
|
|
|
|
33.19
|
|
|
|
3/8/15
|
|
|
|
1,839
|
(11)
|
|
|
119,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(11)
|
|
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,030
|
(11)
|
|
|
196,950
|
|
|
|
|
|
|
|
|
|
Stephen R. Coward
|
|
|
|
|
|
|
500
|
(7)
|
|
|
|
|
|
|
29.11
|
|
|
|
2/26/14
|
|
|
|
913
|
(12)
|
|
|
59,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
808
|
(12)
|
|
|
52,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(12)
|
|
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,847
|
(12)
|
|
|
120,055
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Market Value based on
December 31, 2007 closing price of the Companys
common stock of $65.00.
|
|
(2)
|
|
Stock Appreciation Rights (SARs)
issued to Mr. Deeks on 9/29/00 and to Mr. Duca on
9/1/01.
|
|
(3)
|
|
Options to purchase these
7,500 shares became exercisable on 2/29/08.
|
|
(4)
|
|
Options to purchase these
1,250 shares became exercisable on 2/29/08.
|
|
(5)
|
|
Options to purchase 2,500 of these
shares became exercisable on 3/8/08. Options to purchase the
remaining 2,500 shares become exercisable on 3/8/09.
|
|
(6)
|
|
Options to purchase 5,000 of these
shares became exercisable on 3/8/08. Options to purchase the
remaining 5,000 shares become exercisable on 3/8/09.
|
|
(7)
|
|
Options to purchase these
500 shares became exercisable on 2/26/08.
|
|
(8)
|
|
Shares of stock vest in three equal
installments on 9/12/09, 9/12/10 and 9/12/11 in accordance with
the terms of the Admirals Program. For further discussion
of the Admirals Program, please see Compensation
Discussion and Analysis Admirals
Program above.
|
|
(9)
|
|
Shares of stock vest in three equal
installments on 8/10/10, 8/10/11 and 8/10/12 in accordance with
the terms of variable grant awards under the Admirals
Program. For further discussion of the Admirals Program,
please see Compensation Discussion and
Analysis Admirals Program above.
|
|
(10)
|
|
Includes 410 shares that
vested on 3/2/08 and a balance of 1,233 shares that will
vest in three equal installments on 3/2/09, 3/2/10 and 3/2/11
from an initial grant of 1,643 shares dated 3/2/07; and
10,000 shares granted on 3/22/06 that will vest in three
equal installments on 3/22/09, 3/22/10 and 3/22/11.
|
|
(11)
|
|
Includes 828 shares that
vested on 3/8/08 and a balance of 829 shares that will vest
on 3/8/09 from an initial grant of 3,314 shares dated
3/8/05; 613 shares that vested on 2/29/08 and a
balance of 1,226 shares that will vest in two equal
installments on 2/28/09 and 2/28/10 from an initial grant of
2,452 shares dated 2/28/06; 10,000 shares granted on
3/22/06 that will vest in three equal installments on 3/22/09,
3/22/10 and 3/22/11; and 757 shares that vested on 3/2/08
and a balance of 2,273 shares that will vest in three equal
installments on 3/2/09, 3/2/10 and 3/2/11 from an initial grant
of 3,030 shares dated 3/2/07.
|
20
|
|
|
(12)
|
|
Includes 456 shares that
vested on 3/8/08 and a balance of 457 shares that will vest
on 3/8/09 from an initial grant of 1,826 shares dated
3/8/05; 269 shares that vested on 2/29/08 and a balance of
539 shares that will vest in two equal installments on
2/28/09 and 2/28/10 from an initial grant of 1,077 shares
dated 2/28/06; 10,000 shares granted on 3/22/06 that will
vest in three equal installments on 3/22/09, 3/22/10 and
3/22/11; and 461 shares that vested on 3/2/08 and a balance
of 1,386 shares that will vest in three equal installments
on 3/2/09, 3/2/10 and 3/2/11 from an initial grant of
1,847 shares dated 3/2/07.
|
Options
Exercised and Stock Vested
The following table sets forth information for each of the Named
Executive Officers with respect to options exercised and stock
grants vested, and the value realized on such exercise or
vesting, during the year ended December 31, 2007.
OPTIONS
EXERCISED AND STOCK VESTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
|
Acquired on Exercise
|
|
|
Exercise (1)
|
|
|
Acquired on Vesting
|
|
|
Vesting (2)
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
Terence N. Deeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley A. Galanski
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher C. Duca
|
|
|
|
|
|
|
|
|
|
|
642
|
|
|
|
30,552
|
|
Paul J. Malvasio
|
|
|
|
|
|
|
|
|
|
|
5,817
|
|
|
|
320,761
|
|
Stephen R. Coward
|
|
|
7,500
|
|
|
|
231,883
|
|
|
|
854
|
|
|
|
42,794
|
|
|
|
|
(1)
|
|
Calculated based on the product of
the number of shares acquired on exercise of the option award
multiplied by the difference between the Companys stock
price on the NASDAQ National Market at the time of such exercise
and the strike price of the option award.
|
|
(2)
|
|
Calculated based on the product of
the number of shares acquired on vesting of the stock award
multiplied by the closing stock price on the NASDAQ National
Market on the vesting date.
|
21
The following table sets forth the payments that would be
received by each Named Executive Officer if his employment with
the Company were terminated as of December 31, 2007.
POTENTIAL
PAYMENTS UPON TERMINATION OF EMPLOYMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical/
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Welfare
|
|
|
Acceleration and
|
|
|
Total
|
|
|
|
Severance
|
|
|
Benefit
|
|
|
Continuation of
|
|
|
Termination
|
|
|
|
Payment
|
|
|
(present value)
|
|
|
Equity Awards
|
|
|
Benefits
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Terence N. Deeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
545,000
|
(2)
|
|
|
545,000
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
545,000
|
(2)
|
|
|
545,000
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
545,000
|
(2)
|
|
|
545,000
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
|
|
|
|
|
|
|
|
545,000
|
(2)
|
|
|
545,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley A. Galanski
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
600,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
600,000
|
|
Voluntary Termination
|
|
|
600,000
|
(1)
|
|
|
|
|
|
|
807,525
|
(3)
|
|
|
1,407,525
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
600,000
|
(1)
|
|
|
|
|
|
|
807,525
|
(3)
|
|
|
1,407,525
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
600,000
|
(1)
|
|
|
|
|
|
|
4,057,525
|
(4)
|
|
|
4,657,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher C. Duca
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
459,000
|
(2)
|
|
|
459,000
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
1,211,638
|
(2)(3)
|
|
|
1,211,638
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
1,211,638
|
(2)(3)
|
|
|
1,211,638
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
|
|
|
|
|
|
|
|
1,968,433
|
(2)(4)
|
|
|
1,968,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Malvasio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
452,688
|
(3)
|
|
|
452,688
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
452,688
|
(3)
|
|
|
452,688
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
|
|
|
|
|
|
|
|
1,526,878
|
(4)
|
|
|
1,526,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen R. Coward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
|
|
|
|
|
|
|
|
881,920
|
(4)
|
|
|
881,920
|
|
|
|
|
(1)
|
|
This cash severance payment, as
provided in Mr. Galanskis employment agreement with
the Company and based upon Mr. Galanskis annual base
salary of $600,000 as of 12/31/07, assumes that notice of
termination of employment is given as of such date and that the
Company elects to enforce the restrictive covenants included in
such employment agreement with respect to noncompetition and
nonsolicitation of employees. This cash severance payment would
be paid to Mr. Galanski in accordance with the
Companys regular payroll schedule during the one-year
period beginning as of such termination date. For a discussion
of the terms of Mr. Galanskis employment agreement,
please see Employment Agreements above.
|
22
|
|
|
(2)
|
|
Assumes the exercise as of
12/31/07 of all SARs held by Mr. Deeks and Mr. Duca,
respectively, upon retirement or termination of employment,
based on the December 31, 2007 closing price of the
Companys common stock of $65.00.
|
|
(3)
|
|
Assumes the exercise of all
outstanding vested options within 90 days of the date of
termination pursuant to the Companys 2005 Stock Incentive
Plan and 2002 Stock Incentive Plan, based on the
December 31, 2007 closing price of the Companys
common stock of $65.00.
|
|
(4)
|
|
Assumes both a change of control
as of 12/31/07 and termination of employment with the Company
within one year thereafter. Under these assumptions, the
Companys 2005 Stock Incentive Plan provides for immediate
vesting of all outstanding stock and option awards. Also assumes
the exercise of all outstanding vested options within
90 days of the date of termination pursuant to the
Companys 2002 Stock Incentive Plan, based on the
December 31, 2007 closing price of the Companys
common stock of $65.00.
|
Compensation
of Directors
Each director who is not an officer or employee of the Company
receives an annual payment consisting of $25,000 in restricted
shares of the Companys Common Stock, payable in the first
quarter of each year for service during the preceding year
(based on the closing price of the Companys Common Stock
on the last business day of such preceding year), and $20,000 in
cash, payable in quarterly installments, as well as a fee of
$2,000 for each Board meeting attended and $1,000 for each
telephonic Board meeting attended. In addition, members of the
Audit Committee of the Board are paid $2,000 for each Audit
Committee meeting attended in person and $1,000 for each Audit
Committee meeting attended by telephone, and members of all
other Board committees are paid $1,000 for each committee
meeting attended in person and $500 for each committee meeting
attended by telephone. The chairmen of the Audit Committee and
the Compensation Committee are paid annual retainers of $20,000
and $10,000, respectively. Chairmen of other Board committees do
not currently receive annual retainers for their services as
chairmen.
The Compensation Committee of the Board recognizes the
importance of ownership of the Common Stock of the Company by
its independent directors in aligning the interests of the Board
with those of our Stockholders. Accordingly, as described above,
each director receives payment of $25,000 in restricted shares
of the Companys Common Stock as part of his annual
compensation for Board service, and is required to hold such
shares for a minimum of one year. Our directors have generally
retained ownership of their Common Stock after such restrictions
have lapsed.
23
Shown below is a table that sets forth the total compensation
paid to each independent Board member in 2007.
DIRECTOR
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
H. J. Mervyn Blakeney
|
|
|
34,500
|
|
|
|
25,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,400
|
(3)
|
|
|
118,926
|
|
Peter A. Cheney
|
|
|
47,000
|
|
|
|
25,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,026
|
|
Robert W. Eager, Jr.
|
|
|
44,000
|
|
|
|
25,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,026
|
|
W. Thomas Forrester
|
|
|
34,000
|
|
|
|
6,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,269
|
|
Leandro S. Galban, Jr.
|
|
|
49,000
|
|
|
|
25,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,026
|
|
John F. Kirby
|
|
|
36,000
|
|
|
|
25,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,667
|
(3)
|
|
|
72,693
|
|
Marc M. Tract
|
|
|
32,000
|
|
|
|
25,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,026
|
|
Robert F. Wright
|
|
|
70,000
|
|
|
|
25,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,026
|
|
|
|
|
(1)
|
|
Includes, in addition to all Board
and committee meeting fees and Audit and Compensation Committee
chairmens annual retainer fees, an annual cash retainer of
$20,000 paid quarterly to each director for his 2007 Board
service.
|
|
(2)
|
|
The amounts shown represent the
dollar amount of stock compensation expense recognized for
financial statement purposes in 2007 under FAS 123R
(excluding any forfeiture assumptions) and include compensation
costs associated with any stock awards granted in 2007. Stock
awards issued in 2007 are for 2006 Board service. Each director
who is not an officer or employee of the Company receives an
annual award of $25,000 in restricted shares of Common Stock.
Mr. Forrester received a pro-rated stock award of $6,260 in
restricted shares of Common Stock, reflecting his election to
the Board in September 2006. For a discussion of valuation
assumptions, see Note 14 to our Consolidated Financial
Statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2007.
|
|
(3)
|
|
Includes fees received for
consulting services to the Company and/or its subsidiaries. The
respective consulting agreements between the Company and
Messrs. Blakeney and Kirby were terminated in 2007. For a
discussion of these consulting agreements, please see
Related Party Transactions above. For
Mr. Blakeney, the amount under All Other Compensation was
paid to him in British pounds, and the dollar value of such
amount is calculated based on the conversion rate on
December 31, 2007 of £1= $1.98.
|
24
Equity
Compensation Plan Information
The following chart includes information as of December 31,
2007 with respect to equity compensation plans where equity
securities of the Company may be issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
|
B
|
|
|
C
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
securities to be
|
|
|
|
|
|
Number of securities
|
|
|
|
issued upon
|
|
|
|
|
|
remaining available
|
|
|
|
exercise of
|
|
|
Weighted-
|
|
|
for future issuance
|
|
|
|
outstanding
|
|
|
average exercise
|
|
|
under equity
|
|
|
|
stock options and
|
|
|
price of
|
|
|
compensation plans
|
|
|
|
vesting of unvested
|
|
|
outstanding
|
|
|
(excluding securities
|
|
Plan Category
|
|
stock grants(2)
|
|
|
stock options
|
|
|
reflected in column A)
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
776,216
|
|
|
$
|
23.34
|
|
|
|
572,191
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
776,216
|
|
|
|
|
|
|
|
572,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Consists of the 2005 Stock
Incentive Plan, the 2002 Stock Incentive Plan and the Stock
Option Plans.
|
|
(2)
|
|
Column A includes 391,866 unvested
stock grants.
|
Compensation
Committee Interlocks and Insider Participation
No member of the Compensation Committee has ever been an officer
or employee of the Company or of any of its subsidiaries or
affiliates. None of our executive officers has served on the
board of directors or on the compensation committee of any other
entity where any officer of such entity served either on the
Companys Board or on its Compensation Committee.
Compensation
Committee Report
The Boards Compensation Committee is charged, among other
things, to make periodic reviews of the Companys
compensation arrangements with executive officers and to make
recommendations to the Board of Directors with respect to such
arrangements. The Compensation Committees function is more
fully described in its charter, which the Board has adopted and
is available on our website at www.navg.com under the Corporate
Governance link.
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis section of
the Companys 2008 Proxy Statement, and believes that the
Compensation Discussion and Analysis fairly represents the
compensation philosophy of the Company. Based on such review and
discussion, the Committee has recommended to the Board of
Directors that the Compensation Discussion and Analysis be
included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2007 and in the
Companys 2008 Proxy Statement.
The Compensation Committee:
H. J. Mervyn Blakeney
Leandro S. Galban, Jr. (Chairman)
John F. Kirby
25
Audit
Committee Report
The Audit Committee of the Board is responsible for providing
independent, objective oversight of the Companys
accounting functions, internal controls and financial reporting
process. The Audit Committee is currently composed of four
directors, each of whom meets the independence requirements of
the NASDAQ stock market and the SEC. The Audit Committee
operates under a written charter approved by the Board, which
was reviewed in 2007 and is available on our website at
www.navg.com under the Corporate Governance link.
The Companys management is responsible for the
Companys internal controls and financial reporting
process. The independent registered public accounting firm KPMG
LLP is responsible for performing an independent audit of the
Companys consolidated financial statements in accordance
with generally accepted accounting principles and to issue a
report thereon. The Audit Committees responsibility is to
monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee
met with management and the independent auditors to discuss the
audited December 31, 2007 financial statements. The Audit
Committee also discussed with the independent auditors the
matters required by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in
effect. The Audit Committee also received written disclosures
from the independent auditors required by Independence Standards
Board Standard No. 1, Independence Discussions with
Audit Committees, as currently in effect, and the Audit
Committee discussed with the independent auditors that
firms independence.
The Audit Committee also reviewed, and discussed with management
and KPMG LLP, managements report and KPMG LLPs
report and attestation on internal control over financial
reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002. Management is responsible for those
activities required to ensure compliance with this legislation.
Based upon the Audit Committees discussions with
management and the independent auditors, and the Audit
Committees review of the representations of management,
the Audit Committee recommended that the Board of Directors
include the audited consolidated financial statements in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2007, to be filed with the
SEC.
The Audit Committee:
Peter A. Cheney
Robert W. Eager, Jr.
W. Thomas Forrester
Robert F. Wright (Chairman)
26
PROPOSAL 2
APPROVAL OF THE NAVIGATORS GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
Effective as of March 20, 2008, the Board of Directors
adopted, subject to stockholder approval, The Navigators Group,
Inc. Employee Stock Purchase Plan (the Plan). This
Employee Stock Purchase Plan is substantially identical to the
one that was in effect for 2007, and the Company seeks
stockholder approval at the 2008 Annual Meeting of Stockholders
for its continuation.
The following summary of certain features of the Plan is
qualified in its entirety by reference to the full text of the
Plan, which is included in this Proxy Statement as
Appendix A. All capitalized terms used but not defined
herein have the respective meanings ascribed to them in the Plan.
Nature
and Purpose of the Plan
The purpose of the Plan is to provide employees of the Company
and its subsidiaries with an opportunity to purchase shares of
the Companys Common Stock through payroll deductions. The
Company intends that the Plan qualify as an employee stock
purchase plan under Section 423 of the Internal
Revenue Code of 1986, as amended (the Code).
Accordingly, the provisions of the Plan are to be construed so
as to extend and limit participation in a manner consistent with
the requirements of Code Section 423.
Duration
and Modification
The Plan will be effective July 1, 2008 and will continue
in effect for five years, unless sooner terminated by the Board
which may at any time and for any reason terminate or amend the
Plan as it may deem advisable. However, the Company shall obtain
stockholder approval of any amendment to the Plan to the extent
that such approval shall be necessary to comply with Code
Section 423.
Administration
of the Plan
The Plan is administered by the Board or a committee appointed
by the Board.
Offering
Periods
In general, participants under the Plan purchase shares of
Common Stock (Common Shares) in consecutive
six-month offering periods, with a new offering period
commencing on each January 1 and July 1, unless otherwise
determined by the Plan Administrator.
Securities
Subject to the Plan; Market Price
The number of Common Shares reserved for sale under the Plan is
200,000, of which 69,518 Common Shares have already been issued.
If the total number of shares which would otherwise be subject
to purchase under the Plan exceeds the number of shares then
available under the Plan, the Plan Administrator is required to
make a pro rata allocation of the shares available for grant in
as uniform and equitable a manner as is practicable. In such
event, the Plan Administrator is required to give written notice
of such reduction in the number of shares subject to issuance to
each participant affected thereby.
Eligibility
Each employee of the Company and its eligible subsidiaries who
is customarily employed for at least 20 hours per week is
eligible to participate under the Plan, subject to certain
additional limitations imposed by Code Section 423(b).
Participation
An employee may become a participant in the Plan by completing a
subscription agreement authorizing payroll deductions on the
form provided by the Plan Administrator at least 15 days
prior to the first day of the
27
offering period with respect to which it is to be effective.
Payroll deductions will be equal to the whole percentage of
compensation (at least 1%, but not to exceed 10%) specified by
the participant. As of December 31, 2007,
401 employees were eligible to participate in the Plan, and
the closing price of the Companys Common Stock was $65.00.
Purchase
Price
The purchase price per share at which Common Shares are to be
sold under the Plan is the lesser of (i) 90% of the fair
market value of a Common Share at the offering date (the first
business day of the offering period) and (ii) 90% of the
fair market value of a Common Share on the last business day of
the offering period. The fair market value of a Common Share on
any offering date shall mean the closing price of a Common Share
on the NASDAQ National Market on the last business day
immediately preceding such date or (ii) if there is no sale
of a Common Share on such business day, the average of the bid
and asked prices at the close of the market on that day.
Purchase
of Shares
The maximum number of Common Shares a participant may purchase
during each calendar year shall not exceed 1,000 shares or
an aggregate fair market value of $25,000, subject to certain
limitations set forth in the Code and availability of shares
under the Plan.
Unless a participant withdraws from the offering period (as
described below), his or her direction to purchase shares will
be exercised automatically at each exercise date (the last
business day of the offering period), and the maximum number of
full shares will be purchased at the applicable price with the
payroll deductions credited to his or her account. The shares
purchased shall be issued to the participant as promptly as
practicable after the exercise date. A participants
direction to purchase shares under the Plan may be exercised
only by the participant.
Voting
Rights
Participants shall not have any interest or voting rights in
shares until the shares shall have been issued.
Adjustments
The number of Common Shares available for grant or granted under
the Plan may be adjusted, as determined by the Plan
Administrator, in the event of a stock dividend, reorganization,
recapitalization, stock
split-up,
combination of shares, sale of assets, merger or consolidation
in which the Company is the surviving corporation or, as may be
determined by the Plan Administrator, in the event of any other
change affecting the number or kind of outstanding Common
Shares. In the event of the dissolution or liquidation of the
Company, the Board may, in its discretion, accelerate the
exercise of all participant subscription agreements
and/or
terminate the same within a reasonable time thereafter.
Withdrawal;
Termination of Employment
A participant may withdraw all, but not less than all, the
payroll deductions credited to his or her account under the Plan
at any time prior to an exercise date by giving written notice
to the Plan Administrator on a form provided for such purpose.
If the participant withdraws from the offering period, all of
the participants payroll deductions credited to his or her
account will be paid to the participant (without interest) as
soon as practicable after receipt of the notice of withdrawal
and his or her direction for the current offering period will be
automatically canceled, and no further payroll deductions for
the purchase of shares will be made during such offering period.
Participation may be resumed for subsequent offering periods
pursuant to a new subscription agreement filed in accordance
with the Plan.
Upon termination of the participants continuous status as
an employee prior to an exercise date of an offering period for
any reason, including retirement or death, he or she will be
deemed to have elected to withdraw from the Plan, the payroll
deductions credited to his or her account will be returned to
him or her as
28
soon as practicable after such termination or, in the case of
death, to the person or persons entitled thereto under the Plan,
and the participants subscription agreement will be
automatically canceled.
A participants withdrawal from an offering period will not
have any effect upon his or her eligibility to participate in a
succeeding offering period or in any similar plan that may
hereafter be adopted by the Company.
Participant accounts under the Plan are unfunded and maintained
solely for recordkeeping purposes. All payroll deductions
credited to participant accounts under the Plan may be used by
the Company for any corporate purpose, and neither the Company
nor the Plan Administrator shall be obligated to segregate such
payroll deductions.
Federal
Income Tax Consequences
The following is a brief and general summary of the material
United States federal income tax consequences applicable to the
Plan. The summary does not address any provisions of the income
tax laws of any state, local or foreign taxing jurisdiction.
The summary is based on interpretations of the Code, regulations
issued thereunder, and rulings and decisions currently in
effect, all of which are subject to change. Any such change may
be applied retroactively and may adversely affect the federal
income tax consequences described herein.
The Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Code
Sections 421 and 423. Under these provisions, a participant
recognizes no income or loss upon the purchase of Common Shares
under the Plan (Plan Shares). If a participant sells
Plan Shares after the date that is the later of (a) two
years from the beginning of the offering period during which the
Plan Shares were purchased and (b) one year from the date
the Plan Shares were purchased (the Plan Holding
Period), then any recognized gain is treated as ordinary
income in an amount equal to the lesser of (a) the excess
of the fair market value of the Plan Shares at the time of such
disposition over the purchase price and (b) 10% of the fair
market value of the Plan Shares on the first day of the offering
period, and any remaining gain will be taxed as long-term
capital gain. If a participant recognizes a loss on a sale of
Plan Shares after the Plan Holding Period, then the loss is
treated as a long-term capital loss. If a participant sells or
otherwise disposes of Plan Shares before the end of the Plan
Holding Period, the excess of the fair market value of the Plan
Shares on the exercise date over the purchase price will be
treated as ordinary income. Any additional gain or loss
recognized on the disposition of the stock will be short- or
long-term capital gain or loss, depending on the length of time
the employee held the stock after exercise of the purchase right.
The Company is not entitled to a deduction with respect to the
purchase or disposition of Plan Shares, except to the extent
that a participant recognizes ordinary income upon the
disposition of Plan Shares prior to the Plan Holding Period. The
Company does not have an obligation to withhold on any income
resulting from the disposition of Plan Shares.
Each participant should consult his or her tax advisor as to the
federal, state, local and other tax consequences of the
purchase, ownership and disposition of Plan Shares as well as
any tax consequences arising under the laws of any other taxing
jurisdiction to which he or she may be subject.
The Board recommends a vote FOR Proposal 2.
Proxies will be so voted unless Stockholders specify otherwise
in their proxies.
29
PROPOSAL 3
APPROVAL OF THE NAVIGATORS GROUP, INC.
EXECUTIVE PERFORMANCE INCENTIVE PLAN
Effective as of March 20, 2008, the Board of Directors
adopted, subject to stockholder approval, The Navigators Group,
Inc. Executive Performance Incentive Plan (the Executive
Performance Incentive Plan). This Executive Performance
Incentive Plan is substantially identical to the one that was in
effect for 2007, and the Company seeks Stockholder approval at
the 2008 Annual Meeting of Stockholders for its continuation.
Please see Compensation Discussion and
Analysis Executive Performance Incentive
Plan for a discussion of the awards paid to the
Chairman and the President and Chief Executive Officer of the
Company under the Executive Performance Incentive Plan for 2007.
A copy of the Executive Performance Incentive Plan is included
in this Proxy Statement as Appendix B and the following
description is qualified in its entirety by reference to the
Executive Performance Incentive Plan.
Nature
and Purpose of the Plan
The Executive Performance Incentive Plan provides for annual
incentive payments to certain key executives of the Company
based upon Company performance. As discussed in the Compensation
Discussion and Analysis section of the Companys 2008 Proxy
Statement, the Companys compensation programs are based on
a philosophy of enhancing stockholder value. A central element
of this philosophy has been to link a significant portion of
annual cash compensation to the attainment of the Companys
annual financial objectives. The Executive Performance Incentive
Plan is intended to continue this direct linkage between Company
performance and compensation. The Board recommends that the
Executive Performance Incentive Plan be approved by the
Stockholders.
Under Section 162(m) of the Internal Revenue Code (the
Code), the Company cannot deduct compensation (other
than certain qualified performance-based
compensation) in excess of $1 million in any taxable
year paid to the chief executive officer or any of the other
three most highly compensated executive officers, other than the
chief financial officer, of any publicly held corporation
(collectively, the Executive Participants). The
Company intends to structure awards under the Executive
Performance Incentive Plan so that compensation resulting
therefrom would be qualified performance-based
compensation eligible for deductibility. To allow the
Company to so qualify for such deduction, the Company is seeking
approval of the Executive Performance Incentive Plan.
The Executive Performance Incentive Plan allows for aggregate
payments which may not exceed 5% of the pre-tax earnings of the
Company for the fiscal year relating to the award. If there are
no such earnings, no payments can be made under the Executive
Performance Incentive Plan. No individual may receive as a
maximum amount an annual payment under the Executive Performance
Incentive Plan which exceeds 150% of his or her base
compensation for the fiscal year relating to the awards. In no
event may any Executive Participant receive an annual payment
under the Executive Performance Incentive Plan which exceeds
$3,000,000. Payments under the Executive Performance Incentive
Plan shall be made in cash. Mr. Deeks received payments
under the Executive Performance Incentive Plan of $325,000 in
2007 and $403,000 in 2006. Mr. Galanski received payments
under the Executive Performance Incentive Plan of $716,775 in
2007 and $599,333 in 2006.
Administration
The Executive Performance Incentive Plan will be administered by
the Compensation Committee. The Committee shall select the key
executives of the Company who shall receive awards under the
Executive Performance Incentive Plan, the target and maximum
pay-out levels, and the performance targets. The Committee will
certify the level of attainment of performance targets.
30
Performance
Criteria
Code Section 162(m) requires that performance awards be
based upon objective performance measures. Under the Executive
Performance Incentive Plan, the Compensation Committee is
authorized to award performance incentive awards to the
Executive Participants based upon some or all of the following
performance criteria: (a) earnings; (b) revenue;
(c) underwriting profitability; (d) expansion and
growth; (e) financial return ratios; (f) loss,
expense,
and/or
combined ratios; (g) return on equity; and (h) product
development and distribution. For any participant who is not an
Executive Participant, other performance measures or objectives,
whether quantitative or qualitative, may be established.
Performance criteria may relate to the total Company or any
business unit. Performance targets may be set at a specific
level or may be expressed as relative to the comparable measures
at comparison companies or a defined index. The Committee shall
establish one or more objectively determinable performance
measures based on the above criteria no later than 90 days
after the beginning of the fiscal year and at a time when the
achievement of such measure(s) is substantially uncertain. The
Committees discretion may not be exercised to increase the
award payable to any of the Executive Participants above the
maximum amount determined by the applicable performance measure.
Term and
Amendment of the Plan
The Executive Performance Incentive Plan, if reapproved by
stockholders, will continue to be effective for all fiscal years
beginning with the fiscal year ending December 31, 2008.
The Executive Performance Incentive Plan may be amended or
discontinued by the Board at any time. However, no amendment may
increase the total payments which may be made under the
Executive Performance Incentive Plan in any fiscal year or the
maximum payment which may be made to any individual in any
fiscal year above the award limits outlined above and specified
in the Executive Performance Incentive Plan. The Committee may
exercise its discretion to make no award payments to
Participants subject to Code Section 162(m) in respect of
the fiscal year ending December 31, 2013 or any subsequent
fiscal year if the Plan has not been reapproved by the
Companys stockholders at the first meeting of stockholders
during calendar year 2013, if such reapproval is necessary for
compliance with Code Section 162(m).
Future
Plan Awards
Since future awards under the proposed Executive Performance
Incentive Plan will be based upon the future performance of the
Company, actual payments cannot be determined at this time. Set
forth in the table below are the cash awards paid to
Messrs. Deeks and Galanski under the Executive Performance
Incentive Plan for 2007. No other Named Executive Officers
participated in the Executive Performance Incentive Plan in 2007.
Executive
Performance Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Number
|
|
Name and Position
|
|
Value ($)
|
|
|
of Units
|
|
|
Terence N. Deeks, Chairman
|
|
|
325,000
|
|
|
|
|
|
Stanley A. Galanski, President and Chief Executive Officer
|
|
|
716,775
|
|
|
|
|
|
Christopher C. Duca, SVP of Navigators Management Co., Inc.
and President of Navigators Pro Division
|
|
|
|
|
|
|
|
|
Paul J. Malvasio, EVP and Chief Financial Officer
|
|
|
|
|
|
|
|
|
Stephen R. Coward, Managing Director, Navigators Underwriting
Agency Ltd.
|
|
|
|
|
|
|
|
|
Executive Group
|
|
|
1,041,775
|
|
|
|
|
|
Non-Executive Director Group
|
|
|
|
|
|
|
|
|
Non-Executive Officer Employee Group
|
|
|
|
|
|
|
|
|
The Board recommends a vote FOR Proposal 3.
Proxies will be so voted unless Stockholders specify otherwise
in their proxies.
31
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Independent
Registered Public Accounting Firm
KPMG LLP, Certified Public Accountants, has been appointed by
the Board, upon the recommendation of the Audit Committee after
evaluating the performance and independence of KPMG LLP, as
independent auditors for the Company to examine and report on
its December 31, 2008 financial statements, which
appointment will be submitted to the Stockholders for
ratification at the Annual Meeting. Submission of the
appointment of the auditors to the Stockholders for ratification
will not limit the authority of the Board or its Audit Committee
to appoint another accounting firm to serve as independent
auditors if the present auditors resign or their engagement is
otherwise terminated.
The Board recommends a vote FOR Proposal 4.
Proxies will be so voted unless Stockholders specify otherwise
in their proxies.
Representatives of KPMG LLP are expected to be present at the
Annual Meeting, with the opportunity to make a statement if they
desire to do so, and to be available to respond to appropriate
questions. The following table presents fees for professional
audit services rendered by KPMG LLP for the audit of the
Companys annual financial statements for 2007 and 2006,
and fees billed for other services rendered by KPMG LLP related
to those periods.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit Fees(1)
|
|
$
|
1,907,560
|
|
|
$
|
1,828,803
|
|
Audit Related Fees(2)
|
|
|
22,200
|
|
|
|
213,613
|
|
Tax Fees(3)
|
|
|
129,640
|
|
|
|
150,322
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,059,400
|
|
|
$
|
2,192,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Audit fees consisted primarily of
fees for the annual audit of the Companys financial
statements and internal control over financial reporting
including the requirements of Section 404 of the
Sarbanes-Oxley Act, as well as quarterly reviews and statutory
audits.
|
|
(2)
|
|
Audit related fees consisted
primarily, for 2007, of fees for services in connection with the
Securities and Exchange Commissions review of the
Companys 2006
Form 10-K
and, for 2006, of fees for services in connection with a
registration statement and the issuance of related consents and
comfort letters.
|
|
(3)
|
|
Tax fees consisted primarily of
fees for tax compliance and advisory services.
|
The Audit Committee approves each engagement of the independent
auditors in advance. The Audit Committees chairman has
been authorized to approve such services subject to ratification
at the next Audit Committee meeting.
32
ALL OTHER
MATTERS WHICH MAY PROPERLY
COME BEFORE THE ANNUAL MEETING
Management does not know of any other matters to be brought
before the Annual Meeting except those set forth in the notice
thereof. If other business is properly presented for
consideration at the Annual Meeting, it is intended that the
proxies will be voted by the persons named therein in accordance
with their judgment on such matters.
Stockholder
Approval
The presence of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting,
whether in person or represented by proxy, is necessary to
constitute a quorum. Abstentions are counted as present and
entitled to vote for purposes of determining a quorum. With
respect to Proposal 1, directors are elected by the
affirmative vote of a plurality of the votes cast by the shares
entitled to vote. Votes may be cast in favor or withheld; votes
that are withheld will have no effect on the results. Approval
of Proposals 2, 3 and 4 requires the affirmative vote of
the holders of a majority of the total number of shares of
Common Stock represented at the Annual Meeting. Abstentions are
not counted as votes for or against
these proposals and therefore will have the effect of a vote
against Proposals 2, 3 and 4 but will have no effect on
Proposal 1. Shares held by brokers as nominees or in
street name for which the broker does not have
discretionary authority to vote and has not received specific
instructions on how to vote from the customer are not voted and
are referred to as broker non-votes. Shares that are
the subject of broker non-votes will be counted as shares not
entitled to vote and therefore will have no effect on the
outcome of any of the proposals. Stockholders are entitled to
one vote per share on all matters submitted for consideration at
the Annual Meeting.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers, and persons who
own more than 10% of our Common Stock, to file certain reports
regarding the ownership of the Common Stock with the SEC. These
insiders are required by the SECs regulations to furnish
the Company with copies of all Section 16(a) forms they
file. To our knowledge, based solely on review of the copies of
such reports furnished to us and written representations that no
reports were required, all of our directors, executive officers
and 10% Stockholders made all required filings on time.
We have adopted a code of business conduct and ethics, referred
to as our Corporate Code of Ethics and Conduct, that applies to
all employees, officers and directors and meets the requirements
of the rules of the SEC and of the NASDAQ. In addition, we have
adopted a Code of Ethics that applies to our Chief Executive
Officer and our senior financial officers which meets the SEC
requirements. Both the Corporate Code of Ethics and Conduct and
the Code of Ethics are available on our website at www.navg.com
under the Corporate Governance link. Any amendments to or waiver
of the Corporate Code of Ethics and Conduct or the Code of
Ethics will be disclosed on our website under the same link
promptly following the date of such amendment or waiver. In
addition, in accordance with NASDAQ listing requirements, the
Company also intends to disclose on a
Form 8-K
any waivers from the Corporate Code of Ethics and Conduct that
are granted to directors and executive officers.
Absence
of Dissenters or Appraisal Rights
Under Section 262 of the Delaware General Corporation Law,
Stockholders have the right to dissent from certain corporate
actions. In such cases, dissenting Stockholders are entitled to
have their shares appraised and be paid the fair value of their
shares provided that certain procedures perfecting their rights
are followed. The proposals described in this Proxy Statement do
not entitle a Stockholder to exercise any such dissenters
or appraisal rights.
33
Stockholders
Proposals and Communications
Any proposal by a Stockholder of the Company intended to be
presented at the 2009 Annual Meeting of Stockholders must be
received by the Company at its principal administrative office
no later than December 19, 2008 for inclusion in the
Companys proxy statement and form of proxy relating to
that meeting. Any such proposal must also comply with the other
requirements of the proxy solicitation rules of the SEC.
The Board of Directors believes that it is important for
Stockholders to have a process to send communications to the
Board. Accordingly, Stockholders desiring to send a
communication to the Board, or to a specific director, may do so
by delivering a letter to the Secretary of the Company at The
Navigators Group, Inc., Reckson Executive Park, 6 International
Drive, Rye Brook, New York 10573. The mailing envelope must
contain a clear notation indicating that the enclosed letter is
a Stockholder-Board Communication or
Stockholder-Director
Communication-name of specific director or directors. All
such letters must identify the author as a Stockholder and
clearly state whether the intended recipients of the letter are
all members of the Board or certain specified individual
directors. The Secretary of the Company will open such
communications and make copies, and then circulate them to the
appropriate director or directors.
Form 10-K
Annual Report
UPON WRITTEN REQUEST BY A STOCKHOLDER, WE WILL FURNISH THAT
PERSON, WITHOUT CHARGE, A COPY OF THE ANNUAL REPORT ON
FORM 10-K
FOR 2007 WHICH IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES
THERETO. The
Form 10-K
Annual Report for 2007 provided to Stockholders will not include
the documents listed in the exhibit index of the
Form 10-K.
Upon written request, we will furnish to the Stockholder copies
of any exhibits for a nominal charge. Requests should be
addressed to The Navigators Group, Inc., Attn: Gail Kalter,
Investor Relations Department, Reckson Executive Park, 6
International Drive, Rye Brook, New York 10573. In addition, we
make available through our website at www.navg.com under the SEC
Filings link, free of charge, our Annual Report on
Form 10-K
including exhibits, quarterly reports on
Form 10-Q
including exhibits, current reports on
Form 8-K
including exhibits, and all amendments to those reports as soon
as reasonably practicable after such material is electronically
filed with or furnished to the SEC.
Solicitation
and Expenses of Solicitation
Our officers and employees may solicit proxies. Proxies may be
solicited by personal interview, mail and telephone. Brokerage
houses and other institutions, nominees and fiduciaries will be
requested to forward solicitation material to the beneficial
owners of Common Stock, and will be reimbursed for their
reasonable out-of-pocket expenses in forwarding such
solicitation material. The costs of preparing this Proxy
Statement and all other costs in connection with the
solicitation of proxies for the Annual Meeting of Stockholders
are being borne by the Company. It is estimated that the costs
will be nominal.
Your cooperation in giving this matter your immediate attention
and in returning your proxy promptly will be appreciated.
By Order of the Board of Directors
Elliot S. Orol
Senior Vice President,
General Counsel and Secretary
New York, New York
April 4, 2008
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APPENDIX A
THE
NAVIGATORS GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1
Purpose
The purpose of The Navigators Group, Inc. Employee Stock
Purchase Plan (the Plan) is to provide the employees
of The Navigators Group, Inc. (the Company) and its
Subsidiaries with an opportunity to purchase shares of Stock
through payroll deductions. The Plan is intended to qualify as
an employee stock purchase plan under
Section 423 of the Internal Revenue Code of 1986, as
amended (the Code) The provisions of the Plan shall
be construed so as to extend and limit participation consistent
with the applicable requirements of the Code.
Section 2
Definitions
The following words have the following meanings unless a
different meaning is plainly required by the context.
2.1 Board means the Board of Directors
of The Navigators Group, Inc.
2.2 Compensation means an
Employees gross compensation from the Company and all
Subsidiaries, including, without limitation, gross base
compensation, commissions, overtime, shift premiums, incentive
compensation and bonuses.
2.3 Continuous Status as an Employee
means the absence of any interruption or termination of
service as an Employee. Continuous Status as an Employee shall
not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company or a Subsidiary, provided
that such leave is for a period of not more than 90 days or
re-employment upon the expiration of such leave is guaranteed by
contract or statute.
2.4 Contributions means all amounts
credited to the account of a Participant pursuant to the Plan.
2.5 Employee means any person, including
an officer, who is an employee of the Company or a Subsidiary
and whose customary employment is at least twenty
(20) hours per week.
2.6 Exercise Date means the last
business day of each Offering Period of the Plan.
2.7 Fair Market Value means, as of any
date, (i) the closing sale price of the Stock on the NASDAQ
National Market on such date or (ii) if there is no sale of
the Stock on the NASDAQ National Market on such date, the
average of the bid and asked prices at the close of the market
on such date.
2.8 Offering Date means the first
business day of each Offering Period of the Plan.
2.9 Offering Period means a period of
six (6) months commencing on the January 1 or July 1 of
each year, except as otherwise set forth in the Plan or
determined by the Plan Administrator.
2.10 Participant means an Employee who
has elected to participate in the Plan for an Offering Period by
completing a subscription agreement in accordance with
Section 5.1.
2.11 Plan Administrator means the Board
or the Committee appointed by the Board to administer the Plan,
as described in Section 12.
2.12 Stock means the Common Stock, par
value $0.10, of the Company.
2.13 Subsidiary means a corporation,
domestic or foreign, of which not less than 50% of the voting
shares are held by the Company or a Subsidiary, whether or not
such corporation now exists or is hereafter organized or
acquired by the Company or a Subsidiary.
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Section 3
Eligibility
3.1 General Rule. Any person who is an
Employee on the Offering Date of a given Offering Period shall
be eligible to participate in such Offering Period under the
Plan, subject to the requirements of paragraph 5.1 and the
limitations imposed by Section 423(b) of the Code;
provided, however, that an Employee working in a country whose
laws make participation in the Plan impractical
and/or
illegal (as determined by the Plan Administrator, in its sole
discretion), shall not be eligible to participate in the Plan.
3.2 Exceptions. Any provisions of the
Plan to the contrary notwithstanding, no Employee shall be
granted an option under the Plan if (i) immediately after
the grant, such Employee (or any other person whose stock
ownership shall be attributed to such Employee pursuant to
Section 424(d) of the Code) would own shares
and/or hold
outstanding options to purchase shares possessing five percent
(5%) or more of the total combined voting power or value of all
classes of shares of the Company or of any Subsidiary of the
Company, or (ii) the rate of withholding under such option
would permit the employees rights to purchase shares under
all employee stock purchase plans (described in Section 423
of the Code) of the Company and its Subsidiaries to accrue
(i.e., become exercisable) at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such shares
(determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.
Section 4
Offering
Period
4.1 The Plan shall generally be administered with respect
to consecutive Offering Periods with a new Offering Period
commencing on or about each January 1 and July 1, or at
such other time or times as may be determined by the Board. The
first Offering Period shall be a six (6) month period
commencing on July 1, 2008.
The Board shall have the power to change the duration
and/or
frequency of an Offering Period with respect to future offerings
without shareholder approval, if such change is announced at
least fifteen (15) days prior to the scheduled beginning of
the first Offering Period to be affected.
Section 5
Participation
5.1 An Employee shall become a Participant in the Plan for
an Offering Period by completing a subscription agreement
provided by the Plan Administrator, which authorizes payroll
deductions of an amount equal to a whole percentage, between one
percent (1%) and ten percent (10%), as elected by such Employee,
of such Employees Compensation; provided, however, that in
the case of any Employee of a Subsidiary in the United Kingdom,
payroll deductions with respect to any Offering Period shall not
exceed the lesser of (i) 10% of such Employees salary
during such Offering Period, or (ii) £125, multiplied by
the number of months in such Offering Period. Such amount shall
be withheld as a payroll deduction and paid as such
Employees Contribution to the Plan. The subscription
agreement must be submitted to the payroll office at least
15 days prior to the applicable Offering Date.
5.2 Payroll deductions begin on the first payroll date
following the applicable Offering Date and end on the last
payroll paid prior to the Exercise Date of the Offering Period
to which the subscription agreement is applicable, unless sooner
terminated by the Participant as provided in Section 10.
Section 6
Method of
Payment of Contributions
6.1 Payroll deductions shall be made on each payday during
the Offering Period in an amount between one percent (1%) and
ten percent (10%) (in whole number increments), as elected by
the Participant, of his or
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her Compensation otherwise payable on each such payday. All
payroll deductions made by a Participant shall be credited as
Contributions to his or her account under the Plan. Each
Participants account under the Plan is unfunded and is
maintained solely for recordkeeping purposes. A Participant may
not make any payments into the account other than Contributions
made through payroll deductions.
6.2 A Participant may discontinue his or her participation
in the Plan as provided in Section 10, or may change the
rate of his or her payroll deduction with respect to an Offering
Period prior to or during such Offering Period by completing and
filing with the Plan Administrator a new authorization for
payroll deduction, provided that the Board may, in its sole
discretion, impose reasonable and uniform restrictions on the
ability of Participants to change the rate of payroll
deductions. The change in rate shall be effective no later than
fifteen (15) days following the Plan Administrators
receipt of the new authorization.
6.3 Notwithstanding the foregoing, to the extent necessary
to comply with Section 3.2 of the Plan,
Section 423(b)(8) of the Code or other applicable law, a
Participants payroll deductions may be automatically
decreased to zero percent (0%) at any time during the Offering
Period.
6.4 No interest shall accrue on the Contributions of a
Participant in the Plan.
6.5 All Contributions received or held by the Plan
Administrator under the Plan may be used by the Company for any
corporate purpose, and neither the Plan Administrator nor the
Company shall be obligated to segregate such Contributions.
Section 7
Grant of
Option
7.1 Each Participant in the Plan in an Offering Period
shall be granted, on the Offering Date during such Offering
Period, an option to purchase shares of Stock on the Exercise
Date during such Offering Period with the Contributions
accumulated prior to such Exercise Date.
7.2 The number of full shares of Stock that may be
purchased on an Exercise Date shall be determined by dividing
such Participants total Contributions accumulated prior to
such Exercise Date and credited to the Participants
account as of the Exercise Date by the Purchase Price (as
defined in Section 7.3 below). Notwithstanding the
foregoing, the maximum number of shares of Stock a Participant
may purchase in any calendar year may not exceed 1,000, except
as otherwise adjusted under Section 15; provided, further,
that such purchase shall be subject to the limitations set forth
in Sections 3.2 and 11 hereof.
7.3 The Purchase Price for each share of Stock purchased
under the Plan shall be the lesser of (i) ninety percent
(90%) of the Fair Market Value of a share of Stock at the
Offering Date and (ii) ninety percent (90%) of the Fair
Market Value of a share of Stock at the Exercise Date.
Section 8
Exercise
of Option
8.1 Unless the Participant withdraws from the Plan as
provided in Section 10, the Participants option for
the purchase of Stock shall be exercised automatically on the
Exercise Date of the Offering Period at the Purchase Price with
the accumulated Contributions credited to his or her account.
8.2 The Shares purchased upon exercise of an option
hereunder shall be deemed to be transferred to the Participant
on the Exercise Date.
8.3 The maximum number of shares of Stock shall be
determined based on the Purchase Price and the accumulated
Contributions credited to the Participants account in
accordance with Section 7. No fractional shares are permitted to
be purchased under the Plan. Any Contributions for an Offering
Period credited to a Participants account which are not
sufficient to purchase a full share of Stock on the Exercise
Date of such Offering Period shall be retained in the
Participants account and applied to the purchase of shares
of Stock in the next Offering Period.
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8.4 The shares purchased shall be issued to the Participant
as promptly as practicable after the Exercise Date of the
Offering Period during which such shares were purchased.
8.5 During a Participants lifetime, the option to
purchase shares of Stock hereunder shall be exercisable only by
the Participant.
Section 9
Delivery
9.1 As promptly as practicable after the Exercise Date of
an Offering Period, the Plan Administrator shall arrange
delivery to each Participant, as appropriate, of a certificate
representing the shares of Stock, if any, purchased upon
exercise of his or her option for such Offering Period.
Section 10
Voluntary
Withdrawal; Termination of Employment
10.1 A Participant may withdraw all, but not less than all,
of the Contributions credited to his or her account and not yet
used to exercise his or her option under the Plan at any time
prior to an Exercise Date by giving written notice to the Plan
Administrator of withdrawal from the Offering Period on a form
provided for such purpose. If the Participant withdraws from an
Offering Period, all of the Participants Contributions
credited to his or her account shall be paid to the Participant
as promptly as practicable after receipt of the notice of
withdrawal, and his or her option for such Offering Period shall
be automatically canceled and no further payroll deductions for
the purchase of Stock shall be made for such Participant during
such Offering Period.
10.2 Upon termination of the Participants Continuous
Status as an Employee prior to an Exercise Date of an Offering
Period for any reason, including, without limitation, retirement
or death, all Contributions credited to his or her account shall
be returned to him or her, in cash, as promptly as practicable
after such termination or, in the case of death, to the person
or persons entitled thereto under Section 13, and the
Participants option to purchase Stock shall be
automatically canceled.
10.3 In the event an Employee fails to remain in Continuous
Status as an Employee during an Offering Period in which the
Employee is a Participant, he or she shall be deemed to have
elected to withdraw from the Plan, and all Contributions
credited to his or her account for such Offering Period shall be
returned to the Participant in cash, and the Participants
option to purchase Stock with respect to such Offering Period
shall be automatically canceled.
10.4 A Participants withdrawal from an Offering
Period shall not have any effect upon his or her eligibility to
participate in a succeeding Offering Period or in any similar
plan that may hereafter be adopted by the Company, in accordance
with the applicable terms and conditions of such plan.
Section 11
Stock
11.1 The total number of shares of Stock made available for
sale under the Plan is 200,000 and is subject to adjustment, at
the sole discretion of the Plan Administrator, in the event of
changes in the capitalization of the Company.
11.2 If the total number of shares subject to options
granted pursuant to Section 7 exceeds the number of shares
available under the Plan, the Plan Administrator shall make a
pro rata allocation of the shares remaining available for option
grant in a practical and equitable manner. In such event, the
Plan Administrator shall give written notice to each affected
Participant stating the reduction of the number of shares due to
the adjustment and shall return to each affected Participant any
excess Contributions credited to such Participants account
as soon as practicable after the affected Exercise Date of such
Offering Period.
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11.3 A Participant shall have no interest or voting rights
in shares covered by his or her option until such option has
been exercised.
11.4 Shares to be delivered to a Participant under the Plan
shall be registered in the name of the Participant.
11.5 Shares of Stock purchased under the Plan may, at the
sole discretion of the Plan Administrator, be subject to
restrictions on subsequent resale.
Section 12
Administration
12.1 The Plan shall be administered by the Board or a
committee appointed by the Board (the Plan
Administrator).
12.2 The Plan Administrator shall have full power to adopt,
amend and rescind any rules as deemed appropriate and consistent
for the administration of the Plan. The Plan Administrator shall
construe and interpret the Plan in its sole and absolute
discretion, and make all other determinations necessary or
advisable for the administration of the Plan.
12.3 The administration, interpretation or application of
the Plan by the Plan Administrator and all determinations by the
Plan Administrator with respect to the Plan shall be final,
conclusive and binding upon all Employees and Participants and
all other persons interested or claiming an interest under the
Plan.
Section 13
Designation
of Beneficiary
13.1 A Participant may file a written designation of a
beneficiary who is to receive Stock
and/or cash,
if any, from the Participants account under the Plan in
the event of such Participants death at a time when cash
or Stock are held for his or her account. Any such designation
shall not be effective until filed with the Plan Administrator.
Any such designation of a beneficiary may be changed by the
Participant at any time by written notice filed with the Plan
Administrator.
13.2 In the event of the death of a Participant and in the
absence of a valid designation of a beneficiary who is living at
the time of such Participants death, the Plan
Administrator shall deliver such Stock
and/or cash
to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been
appointed (to the knowledge of the Plan Administrator), the Plan
Administrator, in its sole discretion, may deliver such Stock
and/or cash
to the spouse or to any one or more dependents or relatives of
the Participant. If no spouse, dependent or relative is known to
the Plan Administrator, the Plan Administrator, in its sole
discretion, may deliver such cash
and/or Stock
to such other person as the Plan Administrator may reasonably
designate.
Section 14
Transferability
14.1 Neither Contributions credited to a Participants
account nor any rights with regard to an option to purchase
shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than as provided in
Section 13) by the Participant.
14.2 Any such attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Plan
Administrator may treat such act as an election to withdraw in
accordance with Section 10.
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Section 15
Adjustments
Upon Changes in Capitalization; Corporate Transactions
15.1 In the event that a dividend shall be declared upon
the Stock payable in shares of Stock, the number of shares of
Stock then subject to any option and the number of shares of
Stock which may be purchased upon the exercise of options
granted under the Plan but not yet covered by an option may be
adjusted, at the sole discretion of the Plan Administrator, by
adding to each share the number of shares which would be
distributed thereon if such shares had been outstanding on the
date fixed for determining the stockholders entitled to receive
such Stock dividend. In the event that the outstanding shares of
Stock shall be changed into or exchanged for a different number
or kind of share of stock or other securities of the Company or
of another corporation, whether through reorganization,
recapitalization, stock
split-up,
combination of shares, sale of assets, merger or consolidation
in which the Company is the surviving corporation, then, there
shall be substituted for each share of Stock then subject to any
option and for each share of Stock which may be purchased upon
the exercise of options granted under the Plan but not yet
covered by an option, the number and kind of shares of stock or
other securities into which each outstanding share of Stock
shall be so changed or for which each such share shall be
exchanged, as determined by the Plan Administrator, in its sole
discretion.
15.2 In the event that there shall be any change, other
than as specified in the first paragraph of Section 15.1
hereof, in the number or kind of outstanding shares of Stock, or
of any stock or other securities into which the Common Stock
shall have been changed, or for which it shall have been
exchanged, then, if the Board shall, in its sole discretion,
determine that such change equitably requires an adjustment in
the number or kind of shares then subject to any option and the
number or kind of shares available for issuance in accordance
with the provisions of the Plan but not yet covered by an
option, such adjustment shall be made by the Board and shall be
effective and binding for all purposes of the Plan and of each
option.
15.3 In the case of any substitution or adjustment in
accordance with the provisions of this Section 15, the
option price in each option for all Stock covered thereby prior
to such substitution or adjustment shall be the option price for
all shares of stock or other securities which shall have been
substituted for such Stock or to which such Stock shall have
been adjusted in accordance with the provisions of this
Section 15.
15.4 No adjustment or substitution provided for in this
Section 15 shall require the Company to issue a fractional share
under any option.
15.5 In the event of dissolution or liquidation of the
Company, or a merger, reorganization or consolidation in which
the Company is not the surviving corporation, the Board, in its
sole discretion, may accelerate the exercise of each option
and/or
terminate the same.
Section 16
Amendment
or Termination
16.1 The Board may at any time and for any reason terminate
or amend the Plan in whole or in part. Except as provided in
Section 15, no such termination may affect options to
purchase shares previously granted. Except as provided in
Section 15, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any
Participant. In addition, to the extent necessary, but only to
such extent, to comply with Section 423 of the Code (or any
successor rule or provision or any other applicable law or
regulation), the Company shall obtain shareholder approval of an
amendment in such a manner and to such a degree as so required.
Section 17
Notices
17.1 All notices or other communications by a Participant
to the Plan Administrator under or in connection with the Plan
shall be deemed to have been duly given when received in the
form specified by the
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Plan Administrator at the location, or by the person, designated
by the Plan Administrator for the receipt thereof.
Section 18
Conditions
Upon Issuance of Shares
18.1 Shares of Stock shall not be issued with respect to an
option to purchase, unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may
then be listed.
18.2 As a condition to the exercise of an option, the Plan
Administrator may require the Participant exercising such option
to represent and warrant at the time of such exercise that the
shares of Stock are being purchased only for investment and
without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned
applicable provisions of law.
18.3 Each Participant agrees, by entering the Plan, to
promptly give the Plan Administrator notice of any disposition
of shares of Stock purchased under the Plan where such
disposition occurs within two (2) years after the date of
grant of the option pursuant to which such shares were purchased.
Section 19
EFFECTIVE
DATE; TERM OF PLAN
19.1 The Plan shall become effective on July 1, 2008,
subject to approval by the shareholders of the Company within
twelve (12) months, before or after, of the date the Plan
is adopted.
19.2 The Plan shall continue in effect for a term of five
(5) years unless sooner terminated under Section 16.
IN WITNESS WHEREOF, The Navigators Group, Inc. has hereby
adopted this Plan on
this
day
of ,
2008.
THE NAVIGATORS GROUP, INC.
By:
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Attest:
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Name:
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Title:
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APPENDIX B
THE
NAVIGATORS GROUP, INC.
EXECUTIVE PERFORMANCE INCENTIVE PLAN
The purpose of the Executive Performance Incentive Plan (the
Plan) is to promote the interests of The Navigators
Group, Inc. (the Company) and its stockholders by
providing additional compensation as an incentive to certain key
executives of the Company and its Subsidiaries who contribute
materially to the success of the Company and such Subsidiaries.
The following terms when used in the Plan shall, for the
purposes of the Plan, have the following meanings:
(a) Code shall mean the Internal Revenue
Code of 1986, as amended.
(b) Company shall mean The Navigators
Group, Inc., and its subsidiaries.
(c) Exchange Act shall mean the
Securities Exchange Act of 1934, as amended.
(d) Subsidiary shall mean any
corporation which at the time qualifies as a subsidiary of the
Company under the definition of subsidiary
corporation in Section 424 of the Code.
The Plan shall be administered under the supervision of the
Board of Directors of the Company (the Board) which
shall exercise its powers, to the extent herein provided,
through the agency of the Compensation Committee (the
Committee) which shall be appointed by the Board.
The Committee shall consist of not less than two
(2) members of the Board who meet the definition of
outside director under the provisions of
Section 162(m) of the Code and the definition of
non-employee director under the provisions of the
Exchange Act or the regulations or rules promulgated thereunder.
The Committee, from time to time, may adopt rules and
regulations (Regulations) for carrying out the
provisions and purposes of the Plan and make such
determinations, not inconsistent with the terms of the Plan, as
the Committee shall deem appropriate. The Committee may alter,
amend or revoke any Regulation adopted. The interpretation and
construction of any provision of the Plan by the Committee
shall, unless otherwise determined by the Board, be final and
conclusive.
Participants in the Plan shall be such key
executives of the Company as may be designated by the Committee
to participate in the Plan with respect to each fiscal year.
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5.
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Performance
Incentive Awards:
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For each fiscal year of the Company, the Committee shall
determine the following:
(i) The Company, and its Subsidiaries to participate in the
Plan for such fiscal year.
(ii) The executives who will participate in the Plan for
such fiscal year.
(iii) The basis(es) for determining the maximum amount of
the Awards to such Participants will be dependent upon the
attainment by the Company or any Subsidiary or subdivision
thereof of any specified performance goal or objective.
Performance measures established by the Committee may relate to
the total Company or a business unit. Performance measures may
be set at a specific level or may be expressed as relative to
the comparable measures at comparison companies or a defined
index.
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Performance criteria for Awards under the Plan may include one
or more of the following operating performance measures:
(a) earnings; (b) revenue; (c) underwriting
profitability; (d) expansion and growth; (e) financial
return ratios; (f) loss, expense,
and/or
combined ratios; (g) return on equity; and (h) product
development and distribution.
(iv) For Participants subject to Section 162(m) of the
Code, the Committee shall establish one or more objectively
determinable performance measures based on the criteria
described above no later than 90 days after the beginning
of the fiscal year and at a time when the achievement of such
measure (or measures) is substantially uncertain. No award shall
be paid to a Participant unless the Committee determines that
the performance measures applicable to that Participant have
been achieved.
(v) For any Participant not subject to Section 162(m)
of the Code, other performance measures or objectives, whether
quantitative or qualitative, may be established. The Committee
shall establish the specific targets for the selected measures.
These targets may be set at a specific level or may be expressed
as relative to the comparable measure at comparison companies or
a defined index.
(vi) The Committees discretion may not be exercised
to increase the award payable to any Participant subject to
Section 162(m) of the Code above the amount determined by
the applicable performance measure.
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6.
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Payment
of Current Portion of Performance Incentive Awards:
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(a) Subject to conditions as are provided in the Plan, the
Awards made to Participants shall be paid to them in cash in
accordance with subsection (b) below.
(b) As soon as practicable after the end of the fiscal
year, the Committee shall determine the extent to which Awards
have been earned on the basis of the actual performance in
relation to the established performance objectives as
established for that fiscal year. Such Awards are only payable
to the extent that the Participants have performed their duties
to the satisfaction of the Committee. There shall be deducted
from all payments of Awards any taxes required to be withheld by
any government entity and paid over to any such government in
respect of any such payment. Unless otherwise elected by the
Participant, such deductions shall be at the established
Withholding Tax Rate. Participants may elect to have the
deduction of taxes cover the amount of any Applicable Tax (the
amount of Withholding Tax plus the incremental amount determined
on the basis of the highest marginal tax rate applicable to such
Participant).
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7.
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Maximum
Payments Under the Plan:
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Payments under the Plan shall be subject to the following
maximum levels.
(a) Total Payments. The total amount of
Awards paid under the Plan relating to any fiscal year may not
exceed 5% of pretax earnings in that fiscal year, provided,
however, that if there are no pretax earnings, then no Awards
may be paid under the Plan.
(b) Maximum Individual Award. The maximum
amount which any individual Participant may receive relating to
any fiscal year may not exceed 150 percent of their base
compensation in that fiscal year, provided that in no event
shall the amount which any one individual Participant may
receive relating to any fiscal year exceed $3,000,000.
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8.
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Conditions
Imposed on Payment of Awards:
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Payment of each Award to a Participant shall be subject to the
following provisions and conditions:
(a) Rights to Awards. No Participant
shall have any right or interest, whether vested or otherwise,
in the Plan or in any Award thereunder, contingent or otherwise,
unless and until all of the terms, conditions and provisions of
the Plan and the Regulations that affect such Participant shall
have been complied with. Nothing contained in the Plan or in the
Regulations shall require the Company to segregate or earmark
any cash. Neither the adoption of the Plan nor its operation
shall in any way affect
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the rights and power of the Company or of any Subsidiary to
dismiss
and/or
discharge any employee at any time.
(b) Rights to Payments. No absolute right
to any Award shall be considered as having accrued to any
Participant prior to the close of the fiscal year with respect
to which an Award is made. No Participant shall have any
enforceable right to receive any Award made with respect to a
fiscal year or to retain any payment made with respect thereto
if for any reason (death included) the Participant, during such
entire fiscal year, has not performed his or her duties to the
satisfaction of the Company.
(a) By accepting any benefits under the Plan, each
Participant shall be conclusively deemed to have indicated
acceptance and ratification of, and consent to, any action taken
or made to be taken or made under the Plan by the Company, the
Board, or the Committee.
(b) Any action taken or decision made by the Company, the
Board, or the Committee, arising out of or in connection with
the construction, administration, interpretation or effect of
the Plan or of the Regulations shall lie within its absolute
discretion, as the case may be, and shall be conclusive and
binding upon all Participants.
(c) No member of the Board, or the Committee, shall be
liable for any act or failure to act of any other member, or of
any officer, agent or employee of such Board or Committee, as
the case may be, or for any act or failure to act, except on
account of their own acts done in bad faith.
(d) The Board,
and/or the
Committee, may rely upon any information supplied to them by any
officer of the Company or any Subsidiary and may rely upon the
advice of counsel in connection with the administration of the
Plan and shall be fully protected in relying upon such
information or advice.
(e) Notwithstanding anything to the contrary in the Plan,
neither the Board nor the Committee shall have any authority to
take any action under the Plan where such action would affect
the Companys ability to account for any business
combination as a pooling of interests.
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10.
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Amendment
or Discontinuance:
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The Board may alter, amend, suspend or discontinue the Plan, but
may not, without approval of the holders of a majority of the
Companys Common Stock ($0.10 par value) make any
alteration or amendment thereof which would permit the total
payments under the Plan for any year to exceed the limitations
provided in Paragraph 7 hereof.
The Plan has been effective for all prior fiscal years beginning
with 2003 by action of the Board of Directors and shareholder
approval and will continue to be effective for all fiscal years
beginning with 2008 conditioned on and subject to reapproval of
the Plan, by a vote of the holders of a majority of the shares
of Common Stock of the Company present in person or by proxy at
the first duly held stockholders meeting during 2008 at which a
quorum representing a majority of all outstanding voting stock
is present. The Committee may exercise its discretion to make no
award payments to Participants subject to Section 162(m) of
the Code in respect of the 2013 fiscal year or any later fiscal
year if the Plan has not been reapproved by the Companys
stockholders at the first meeting of stockholders during 2013,
if necessary for compliance with Section 162(m) of the Code.
B-3
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THE NAVIGATORS GROUP, INC.
6 INTERNATIONAL DRIVE
ATTN: CORPORATE SECRETARY
RYE BROOK, NY 10573
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VOTE BY MAIL
Mark, sign and date your proxy card and return it
in the postage-paid envelope we have provided or return it to The Navigators Group, Inc.,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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VOTE BY INTERNET - www.proxyvote.com |
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Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
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ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS |
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If you would like to reduce the costs
incurred by The Navigators Group, Inc. in mailing proxy materials, you can consent to receiving
all future proxy statements, proxy cards and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please follow the instructions above to vote using
the Internet and, when prompted, indicate that you agree to receive or access stockholder
communications electronically in future years. |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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NAVGT1
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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THE NAVIGATORS GROUP, INC. |
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1. |
Election of Directors:
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Nominees |
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For |
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Withhold |
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For All |
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To withhold authority to vote for any individual nominee(s), mark
For All Except and write the number(s) of the nominee(s) on the line below. |
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(1) |
H.J. Mervyn Blakeney |
(6) |
Leandro S. Galban, Jr. |
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For All |
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Except |
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(2) |
Peter A. Cheney |
(7) |
John F. Kirby |
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(3) |
Terence N. Deeks |
(8) |
Marc M. Tract |
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(4) |
W. Thomas Forrester |
(9) |
Robert F. Wright |
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(5) |
Stanley A. Galanski |
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The Board of Directors Recommends a Vote FOR PROPOSAL 1. |
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Abstain |
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2.
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Approve The Navigators Group, Inc. Employee Stock Purchase Plan. |
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The Board of Directors Recommends a Vote FOR PROPOSAL 2. |
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3.
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Approve The Navigators Group, Inc. Executive Performance Incentive Plan. |
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The Board of Directors Recommends a Vote FOR PROPOSAL 3. |
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4.
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Ratification of the appointment of KPMG LLP as the Companys
independent registered public accounting firm for 2008. |
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The Board of Directors Recommends a Vote FOR PROPOSAL 4. |
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Please sign this Proxy Form, which is solicited on
behalf of the Board of Directors, and return it promptly in the enclosed postage prepaid envelope.
Please sign exactly as name appears hereon. |
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MATERIALS ELECTION
As of July 1, 2007, SEC rules permit companies to send you a notice that proxy information is
available on the Internet, instead of mailing you a complete set of materials. Check the box to
the right if you want to receive a complete set of future proxy materials by mail, at no cost to
you. If you do not take action you may receive only a Notice.
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Signature [PLEASE SIGN WITHIN
BOX] |
Date |
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Signature (Joint Owners) |
Date |
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Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
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THE NAVIGATORS GROUP, INC.
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One Penn Plaza
New York, New York 10119
PROXY FOR THE MAY 28, 2008 ANNUAL MEETING OF STOCKHOLDERS
Elliot S. Orol and Bradley D. Wiley, or any one of them, with power of substitution, are hereby authorized as proxies to represent and to vote the shares of the undersigned at the Annual Meeting of Stockholders of The Navigators Group, Inc. to be held at 10:00 a.m., Wednesday, May 28, 2008, at the office of the Company at Reckson Executive Park, 6 International Drive, Rye Brook, New York 10573, and at any adjournment thereof. The proxies are to vote the shares of the undersigned as instructed on the reverse
side and in accordance with their judgment on all other matters which may properly come before the Annual Meeting.
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTOR NOMINEES AND FOR PROPOSALS 2, 3 AND 4.
(Continued and to be signed on the reverse side.)