def14a
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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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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applies:
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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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o
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Fee paid previously with preliminary materials.
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o
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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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Form, Schedule or Registration Statement No.:
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THE
NAVIGATORS GROUP, INC.
6 International Drive
Rye Brook, New York 10573
ANNUAL MEETING
May 26, 2011
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
Thursday, May 26, 2011 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 13, 2011
TABLE OF CONTENTS
THE
NAVIGATORS GROUP, INC.
6 International Drive
Rye Brook, New York 10573
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 26, 2011
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 Thursday, May 26, 2011, at
10:00 a.m. At the meeting, stockholders will be asked
to:
(1) Elect ten (10) directors to serve until the 2012
Annual Meeting of Stockholders or until their respective
successors have been duly elected and qualified;
(2) Pass an advisory resolution on executive compensation;
(3) Hold an advisory vote to recommend the frequency of
future advisory votes on executive compensation;
(4) Ratify the appointment of KPMG LLP as the independent
auditors of the Company to examine and report on the
December 31, 2011 financial statements; and
(5) Transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
The close of business on April 1, 2011 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
Bruce J. Byrnes
Secretary
Rye Brook, New York
April 13, 2011
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, TO
ASSURE THAT YOUR SHARES ARE REPRESENTED 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 FOLLOWING THE INSTRUCTIONS ON THE
PROXY CARD. 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.
6 International Drive
Rye Brook, New York 10573
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 13, 2011. The
Companys executive and 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
our ten (10) nominees as directors (Proposal 1), for
the approval of the compensation of our named executive officers
(Proposal 2), for the approval of an annual advisory vote
on executive compensation (Proposal 3) and in favor of
the appointment of KPMG LLP as the independent auditors of the
Company for fiscal year 2011 (Proposal 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, 2011, the record
date, consisted of 17,305,759 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,
2011 are entitled to vote at the Annual Meeting. The closing
price of the Common Stock on April 1, 2011 was $51.74. A
copy of the Companys Annual Report for the year ended
December 31, 2010 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 of
Directors proposes the election of the ten 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 other than Mr. Johnson is currently a director of
the Company. All directors other than Mr. Mendelsohn and
Ms. Tomlinson are standing for re-election. The Board of
Directors appointed Mr. Mendelsohn as a director on
August 11, 2010 and Ms. Tomlinson as a director on
February 17, 2011. Mr. Peter A. Cheney, who has served
on the Board of Directors since 2003, is retiring from the Board
effective upon the conclusion of the Annual Meeting and will not
stand for re-election. In the event any nominee named below is
unable or declines to serve, which the Board of Directors does
not anticipate, it is intended that the proxies will be voted
for the balance of those named and for any substitute nominee
that the Board of Directors 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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73
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Director
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2004
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Terence N. Deeks
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71
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Chairman
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1982
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W. Thomas Forrester
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62
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Director
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2006
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Stanley A. Galanski
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52
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Director, President & CEO
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2001
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Geoffrey E. Johnson
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63
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Director
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John F. Kirby
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64
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Director
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2004
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Robert V. Mendelsohn
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64
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Director
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2010
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Marjorie D. Raines
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64
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Director
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2010
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Janice C. Tomlinson
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60
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Director
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2011
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Marc M. Tract
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51
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Director
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1991
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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 was a non-executive director of Navigators
Underwriting Agency Ltd., a wholly-owned United Kingdom
subsidiary of the Company, until December 2010 and until
February 2010 was the non-executive Chairman of that board.
Peter A. Cheney, 68, has been retired since 1996. Prior thereto,
Mr. Cheney held various positions at National Re
Corporation, including as Executive Vice President, Chief
Financial Officer and Director from 1994 to 1996.
Mr. Cheney, who has served on the Board of Directors since
2003, is retiring from the Board effective upon the conclusion
of the Annual Meeting and will not stand for re-election.
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 has
been engaged in the property and casualty insurance business
since 1957. Mr. Deeks served as an Executive Chairman of
the Board from his retirement as Chief Executive Officer until
May 26, 2010. As of such date, Mr. Deeks retired as an
executive of the Company, and continues to serve as the
non-executive Chairman of the Board.
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. He is currently a
director of Federal National Mortgage Association
Fannie Mae and of Alterra Capital Holdings Limited and until May
2006 was a director of Axis Capital Holdings.
2
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 chairman of
Navigators Insurance Company.
Geoffrey E. Johnson retired from PricewaterhouseCoopers
(PwC) in 2010, where he had worked since 1969 in
both London and New York, having served major clients and held
senior management positions in the U.K., Europe and globally.
Most recently, from 2002 2010, he served as the
Chief Executive Officer of PwCs Bermuda-based professional
indemnity captive insurance company. Prior thereto, from
1998 2002, he was the Global Chief Financial
Officer/Operations Leader for PwC. Mr. Johnson is the
Senior Independent Director of and chair of the audit committee
of Omega Insurance Holdings Limited and the Chairman of the
Board of Professional Asset Indemnity Limited.
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.
Robert V. Mendelsohn most recently served as Worldwide Group
Chief Executive of Royal & Sun Alliance Insurance
Group, PLC (RSA) from 1997 2002, prior to which he
was Chief Executive Officer of Royal Insurance Group from
1993 1997. Before joining Royal Insurance Group,
Mr. Mendelsohn worked for W.R. Berkley Corporation for
20 years, ultimately serving as President and Chief
Operating Officer. Mr. Mendelsohn has also been actively
involved in a number of civic and industry organizations in
several capacities including as Director of the International
Insurance Society and of the Association Internationale pour
lEtude de lEconomie de lAssurance and as
former Chairman of the American Insurance Association and former
trustee of the Chartered Property Casualty Underwriters Society.
Mr. Mendelsohn is also on the Advisory Board of the Program
on Corporate Governance at Harvard Law School.
Marjorie D. Raines retired from the Chubb Group of Insurance
Companies in December 2008. She joined Chubb in 1975 as an
equity/portfolio manager, later becoming Executive Vice
President - Chief Investment Officer for Chubbs
international operations, the position she held upon her
retirement. Ms. Raines is certified as a Chartered
Financial Analyst. Ms. Raines is a non-executive director
of Vardana Fund Ltd.
Janice C. Tomlinson worked at the Chubb Group of Companies for
over 36 years, serving in various executive management
roles, most recently as Executive Vice President of
International Field Operations, until her retirement in December
2009. She has been actively involved in the community through
her service on numerous non-profit boards. Ms. Tomlinson
also serves on the boards of multiple subsidiaries of Firstcan
Management Inc.
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.
3
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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Francis W. McDonnell
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54
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Senior Vice President and Chief Financial Officer
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Richard P. Bardwell
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53
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Active Underwriter, Navigators Underwriting Agency Ltd.
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H. Clay Bassett, Jr.
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45
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Senior Vice President, Chief Underwriting Officer and Chief Risk
Officer
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Bruce J. Byrnes
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43
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Senior Vice President, General Counsel and Chief Compliance
Officer
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Michael L. Civisca
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48
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Executive Vice President and Chief Operating Officer, Navigators
Management Company, Inc.
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Stephen R. Coward
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57
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President, Navigators Technical Risk
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Christopher C. Duca
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45
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President and Chief Executive Officer, Navigators Management
Company, Inc.
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R. Scott Eisdorfer
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47
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Senior Vice President and Chief Administrative Officer
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Paul V. Hennessy
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63
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President, Navigators Holdings (UK) Ltd.
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LoriAnn Lowery-Biggers
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44
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Senior Vice President, Navigators Management Company, Inc.
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Anthony G. Martella
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44
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Senior Vice President and Chief Actuarial Officer
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Francis W. McDonnell has been our Senior Vice President and
Chief Financial Officer since August 2008. Prior to joining the
Company, Mr. McDonnell served as Chief Financial Officer of
ACE USA from 2003 to 2008. From 1995 to 2002 he served as the
Chief Financial Officer of PMA Capital Corporation and Chief
Financial Officer of PMA Reinsurance from 1993 to 1995. Prior
thereto, he held various financial management positions at
Reliance Insurance Company.
Richard P. Bardwell is the Active Underwriter for the
Companys Lloyds of London syndicate, managed by
Navigators Underwriting Agency Ltd., a wholly-owned subsidiary
of the Company. Mr. Bardwell has been with the Company and
its predecessor companies since 1980. Mr. Bardwell has held
various positions with the Company.
H. Clay Bassett, Jr. has been our Senior Vice
President and Chief Underwriting Officer since April 2008 and
our Chief Risk Officer since December 2009. Prior to joining the
Company, Mr. Bassett served as the Chief Underwriting
Officer of Folksamerica Re from 2005 to 2008. Mr. Bassett
served in various management positions with Argonaut Group, Inc.
from 2002 to 2005, Swiss Re from 1997 to 2002 and American
Insurance Group, Inc. from 1990 to 1997. Mr. Bassett began
his career at National Reinsurance Corp. in 1987.
Bruce J. Byrnes has been our Senior Vice President, General
Counsel and Secretary since June 2009. Prior to joining the
Company, Mr. Byrnes held the position of General Counsel at
PXRE Reinsurance Company from 2001 until it merged with Argonaut
Group, Inc. in August 2007, at which point he joined Hudson
Insurance Capital Partners, an insurance industry focused
private equity fund, as Principal, Chief Operating
Officer & General Counsel. Prior to joining PXRE,
Mr. Byrnes had practiced law in several New York law firms,
including Morgan, Lewis & Bockius and
Baker & McKenzie, specializing in corporate and
insurance matters.
Michael L. Civisca joined the Company in 1987 and since
September 2009 has been the Executive Vice President and Chief
Operating Officer of Navigators Management Company, Inc., a
wholly-owned subsidiary of the Company (Navigators
Management Company). Prior thereto, Mr. Civisca was
responsible for the marine, energy, inland marine and commercial
multi-peril business of Navigators Management Company.
Stephen R. Coward joined the Company in 2002 and oversees the
Companys global technical risk underwriting divisions
(NavTech). Mr. Coward has held various management positions
in Navigators Underwriting Agency Ltd. and prior to joining the
Company, Mr. Coward held senior underwriting management
positions at SCOR UK and Copenhagen Reinsurance Co. Ltd.
4
Christopher C. Duca joined the Company in 2001 and since
September 2009 has been the President and CEO of Navigators
Management Company. In addition, Mr. Duca oversees the
Companys global management and professional liability
business and specialty casualty business. Prior thereto,
Mr. Duca was President of Navigators Management
Companys professional liability division (NavPro), where
he oversaw the management liability, professional liability and
casualty business.
R. Scott Eisdorfer has been our Senior Vice President and
Chief Administrative Officer since October 2008, prior to which,
from 2001, he was our Senior Vice President and Chief
Information Officer and 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.
Paul V. Hennessy joined the Company in 2008 and as the President
of Navigators Holdings (UK) Ltd., a wholly-owned subsidiary of
the Company, is the head of the Companys operations in
Europe. Mr. Hennessy is also the Managing Director of
Navigators Underwriting Agency Ltd. Prior to joining the
Company, Mr. Hennessy was employed by Arch Insurance Group
from 2007 to 2008 as Vice President of Underwriting. Prior to
that he spend almost 10 years with CNA, including four
years as Chief Underwriting Officer of CNA Europe and, prior
thereto, 22 years with the Chubb Group of Insurance
Companies in a variety of assignments, including European
Commercial Customer Group Manager. Mr. Hennessy holds the
designation of Associate of the Chartered Insurance Institute.
LoriAnn Lowery-Biggers joined the Company in September 2009 as a
Senior Vice President of Navigators Management Company, and
oversees Field Operations for the Company.
Ms. Lowery-Biggers has 22 years of experience in the
insurance industry that most recently included serving as
President of Lloyds Inc., North America from 2008 to 2009.
Prior thereto, she held executive positions at Wells Fargo
Insurance Services USA, Inc. and worked as a Managing Director
at Marsh & McLennan Companies, Inc.
Anthony G. Martella joined the Company in May 2010 as Senior
Vice President and Chief Actuarial Officer. Prior to joining the
Company, Mr. Martella served as Senior Vice President,
Actuarial Operations for Selective Insurance Company from
2000-2010.
Prior thereto, Mr. Martella held actuarial positions at
Reliance Insurance Company and American Re-Insurance Company.
Mr. Martella is a fellow of the Casualty Actuarial Society
and a member of the American Academy of Actuaries.
5
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, 2011, 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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2,461,812
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14.2
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6 International Drive
Rye Brook, NY 10573
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Lord, Abbett & Co. LLC(2)
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1,174,351
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6.8
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90 Hudson Street
Jersey City, NJ 07302
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Dimensional Fund Advisors LP(3)
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1,127,379
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6.5
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Palisades West, Bldg. 1
6300 Bee Cave Road Austin, TX 78746
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Janus Capital Management LLC(4)
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1,122,050
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6.5
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151 Detrior Street
Denver, CO 80206
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BlackRock, Inc.(5)
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983,696
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5.7
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40 East 52nd Street New York, NY 10022
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Marc M. Tract(6)
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824,364
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4.8
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H. J. Mervyn Blakeney
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3,619
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*
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Peter A. Cheney
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6,696
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*
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Michael L. Civisca(7)
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64,124
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*
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Stephen R. Coward(8)
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12,070
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*
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W. Thomas Forrester
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2,295
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*
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Stanley A. Galanski(9)
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127,338
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*
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John F. Kirby
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4,452
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*
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Anthony G. Martella(10)
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*
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Francis W. McDonnell(11)
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19,720
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*
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Robert V. Mendelsohn
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1,298
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*
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Marjorie D. Raines
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1,596
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*
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Janice C. Tomlinson
|
|
|
|
|
|
|
*
|
|
All current directors and executive officers as a group
(21) persons)(1)(6)(7)(8)(9)(10)(11)(12)(13)
|
|
|
3,612,065
|
|
|
|
20.9
|
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Includes 429,277 shares and 930,367 shares which may
be deemed to be beneficially owned by Mr. Deeks as Settlor
of the Terence N. Deeks 2009 Qualified Three Year Annuity Trust
and the Terence N. Deeks 2010 Qualified Three Year Annuity
Trust, respectively, 67,342 shares owned jointly with his
wife, and 13,500 shares owned by the Deeks Family
Foundation. Excludes 813,946 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. |
|
(2) |
|
Based on Schedule 13G filed with the Securities and
Exchange Commission (the SEC) on February 14,
2011 by Lord, Abbett & Co. LLC. |
|
(3) |
|
Based on Schedule 13G filed with the SEC on
February 11, 2011 by Dimensional Fund Advisors LP. |
6
|
|
|
(4) |
|
Based on Schedule 13G filed with the SEC on
February 14, 2011 by Janus Capital Management LLC. Includes
900,000 shares, or 5.2% of the Companys outstanding
shares, that are beneficially owned by Perkins Small Cap Value,
a direct subsidiary of Janus Capital Management LLC. |
|
(5) |
|
Based on Schedule 13G filed with the SEC on
February 7, 2011 by BlackRock, Inc. |
|
(6) |
|
Includes 813,946 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 10,418 shares held directly. |
|
(7) |
|
Includes vested options to purchase 20,000 shares at
exercise prices ranging between $25,10 and $33.19 and excludes
14,692 unvested shares from Mr. Civiscas stock grants. |
|
(8) |
|
Includes vested options to purchase 500 shares at an
exercise price of $29.11 and excludes 10,669 unvested shares
from Mr. Cowards stock grants. |
|
(9) |
|
Includes vested options to purchase 30,000 shares at an
exercise price of $29.11. Excludes 97,753 unvested shares from
Mr. Galanskis stock grants. |
|
(10) |
|
Excludes 12,207 unvested shares from Mr. Martellas
stock grants. |
|
(11) |
|
Excludes 22,941 unvested shares from Mr. McDonnells
stock grants. |
|
(12) |
|
Includes Mr. Bardwells 6,742 shares and excludes
his 14,296 unvested stock grant shares; includes
Mr. Bassetts 5,319 shares and excludes his
11,173 unvested stock grant shares; includes
Mr. Byrnes 402 shares and excludes his 6,875
unvested stock grant shares; includes Mr. Ducas
34,806 shares, which include 500 shares owned by
Mr. Ducas spouse and vested options to purchase
25,000 shares at exercise prices ranging between $19.10 and
$33.19 per share and excludes his 15,654 unvested stock grant
shares; includes Mr. Eisdorfers 33,175 shares,
which include vested options to purchase 15,000 shares at
exercise prices ranging between $16.75 and $29.11, and excludes
14,611 unvested stock grant shares; includes
Mr. Hennessys 1,317 shares and excludes his
6,277 unvested stock grant shares; and includes
Ms. Lowery-Biggers 920 shares and excludes her
7,750 unvested stock share grants. |
|
(13) |
|
No current directors or executive officers have pledged shares
of the Companys stock. |
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 of Directors 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.
The Board of Directors has adopted a policy requiring a director
to offer his or her resignation from the Board upon a change in
employment. The Board of Directors 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, the Board of Directors annually reviews related
party transactions in connection with director independence and
determines whether the director has any relationship with the
Company that, in the Boards opinion, would interfere with
the exercise of his independent judgment in carrying out the
responsibilities of a director. During 2010, the following
relationships with two of our directors were reviewed and were
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 from
the Company for such services in approximately the amount of
$76,950 in 2010. In addition, one of the Companys
wholly-owned insurance company subsidiaries paid Katten Muchin
Rosenman LLP approximately $186,472 in 2010 on behalf of certain
insureds that selected the firm as their counsel, which amount
was payable pursuant to the terms of insurance policies issued
by such subsidiary. Mr. Tract is a member of the Finance
Committee of the Board of Directors.
7
H.J. Mervyn Blakeney served as a non-executive director of the
board of the Companys wholly-owned subsidiary, Navigators
Underwriting Agency Ltd. (NUAL) until
December 31, 2010, and was paid £26,017, or $40,587,
based on a conversion rate as of December 31, 2010 of
£1 = $1.56, and granted 310 shares of the
Companys common stock, having a fair market value as of
December 31, 2010 of £10,000, or $15,600 based on such
conversion rate, for his service on the NUAL board in 2010.
Mr. Blakeney is the Chairman of the Corporate Governance
and Nominating Committee of the Board of Directors and a member
of the Compensation and Finance Committees.
Board of
Directors and Committees
Board
Leadership Structure
As of April 1, 2011, the Board of Directors of the Company
had ten members, including eight independent members. The roles
of Chairman and President and Chief Executive Officer are
undertaken by separate individuals. Mr. Deeks, the
Companys founder and former President and Chief Executive
Officer until 2002, is the non-executive Chairman of the Board
of Directors, and Mr. Galanski is the Companys
current President and Chief Executive Officer. In light of the
active involvement by all independent directors, the Board has
not named a lead independent director. In order to promote open
discussion among the non-management directors, the Board
schedules regular executive sessions, at least four times each
year, in which those directors meet without management
participation. The chair of each executive session rotates
amongst the chairpersons of the Companys standing
committees in the following order: (1) Audit,
(2) Finance, (3) Compensation, (4) Corporate
Governance & Nominating, and (5) Underwriting
Advisory. Under the Companys Corporate Governance
Guidelines, the directors have complete access to Company
management as needed and each director is free to suggest topics
of discussion for Board or committee meetings.
Board
Risk Oversight
The Board of Directors is responsible for overseeing the
Companys risk policies including, but not limited to,
oversight of its risk tolerance and appetite. Risk management is
a collaborative effort of management, the Companys Board
of Directors and key functions within the Company that are
focused on risk. The Company has established an Enterprise Risk
Management (ERM) Steering Committee consisting of our Chief Risk
Officer (Chair), Chief Financial Officer, Chief Administrative
Officer, General Counsel & Chief Compliance Officer,
the President of our U.S. underwriting agency and the Managing
Director of our U.K. Operations. The ERM Steering Committee
plays a key role in risk oversight by coordinating,
facilitating, and overseeing the effectiveness and integrity of
the Companys risk management activities. The ERM Steering
Committee is also charged with establishing the methodology and
tools used to identify and evaluate risks and, where risks are
outside the Companys risk appetite, ensuring that there is
an appropriate response. The ERM Steering Committee has four
sub-committees
which are charged with the review and oversight of
Finance & Credit Risk, Operational Risk,
Underwriting & Claims Risk and Compliance &
Governance Risk. The Chief Risk Officer reports directly to the
Corporate Governance and Nominating Committee on a regular basis
and the Audit Committee on at least an annual basis, and more
frequently as needed.
In addition, the Board has an active role in risk oversight,
both as a whole and also at the committee level. The Board and
its committees receive periodic updates from members of senior
management on areas of material risk to the Company, including
operational, financial, strategic, competitive, reputational,
legal and regulatory risks. While the Corporate Governance and
Nominating Committee has been charged with broad and regular
oversight of the risk management process, in addition to their
considerations of issues associated with the independence of our
Board, corporate governance and potential conflicts of interest,
each of the other committees also plays a role in risk
management. For instance, our Audit Committee regularly reviews
our financial statements, financial and other internal controls,
and remediation of material weaknesses and significant
deficiencies in internal controls, if any. Our Compensation
Committee regularly reviews our executive compensation policies
and practices and the risks associated with each. Our Finance
Committee considers business risks relating to the
Companys strategic financial decisions as well as
investment strategies. Our Underwriting Advisory Committee
regularly assesses risks relating to the Companys
insurance operations. While each committee is responsible for
evaluating certain risks and risk
8
oversight, the entire Board of Directors is regularly informed
of risks relevant to the Companys business, as described
above.
The Companys Internal Audit department provides another
level of risk oversight by independently assessing the
effectiveness of various of the Companys processes,
practices and controls and by providing timely feedback on their
effectiveness. The Director of Internal Audit reports directly
to the Audit Committee. In addition, our independent outside
auditors regularly identify and discuss with our Audit Committee
risks and related mitigation measures that may arise during
their regular reviews of the Companys financial
statements, audit work and executive compensation policies and
practices, as applicable.
The Company believes that the foregoing corporate risk oversight
framework is structured in a way that enables the Company to
take an active approach to risk management. Through the efforts
of management, the Companys internal risk oversight
functions and the Board of Directors, the Company believes it is
able to limit unnecessary risks while accepting certain other
risks which may be beneficial to the Company and its
stockholders.
Board
Skills and Director Nominations
When considering whether directors and nominees have the
experience, qualifications, attributes and skills, taken as a
whole, to enable the Board of Directors to satisfy its oversight
responsibilities effectively, the Companys Corporate
Governance and Nominating Committee and the Board of Directors
focus primarily on the information included in each of the
directors individual biographies set forth above. The
Corporate Governance and Nominating Committee has not adopted a
formal policy with regard to the consideration of diversity in
identifying director nominees. In reviewing director candidates,
however, consideration is given to the diversity of professional
background, skills sets and other personal qualities of existing
directors and the potential candidates to evaluate whether the
director candidate would add diverse experience, skills or other
qualities that would further strengthen the Board of Directors.
Particular skills considered include those in the areas of
insurance, reinsurance, finance, accounting, investment and
general executive management.
The particular experience, qualifications, attributes or skills
that led the Board of Directors to conclude that each person
could serve as a director of the Company are summarized below.
|
|
|
|
|
Mr. Blakeneys knowledge of the U.K. insurance
market as well as his experience in senior management of a large
company is a valuable resource for the Board as the
Companys U.K. operations continue to grow.
|
|
|
|
Mr. Cheney provides significant experience,
expertise and background with regard to accounting and financial
matters in the reinsurance and insurance industries.
|
|
|
|
Mr. Deeks, as the Companys founder and former
President and Chief Executive Officer, provides extensive
knowledge of the Companys industry as well as an
historical perspective of the Company. Mr. Deeks has
experience both in the U.K. and the U.S. insurance markets,
providing broad insight on the Companys varied operations.
|
|
|
|
Mr. Forrester brings 25 years of experience in
the insurance sector and broad financial knowledge, having held
various positions, including as chief financial officer, at a
large insurance company. In addition, Mr. Forrester has
experience as a board member of other public companies.
|
|
|
|
Mr. Galanski provides the Board of Directors with
broad perspective on the Companys strategies, challenges
and opportunities through his role as the President and Chief
Executive Officer of the Company and his day to day oversight of
the Companys operations.
|
|
|
|
Mr. Johnson brings in-depth knowledge of the public
accounting and insurance fields, allowing for insightful advice
and counsel on financial strategies, internal audit practices
and the impact of major regulatory changes, together with a
thorough understanding of the Companys balance sheet.
|
9
|
|
|
|
|
Mr. Kirby provides a depth of experience in respect
of the Companys activities as a result of his nearly
40 years of experience in the property and casualty
insurance industry, including senior positions in the areas of
underwriting, reinsurance and management.
|
|
|
|
Mr. Mendelsohn brings in-depth knowledge and
experience from his many years of service as the head of
well-known companies within the insurance industry. His
knowledge regarding the industry and the underwriting process,
as well the opportunities and challenges in the overall
management of an insurance company, is a valuable resource for
management.
|
|
|
|
Ms. Raines provides valuable insight concerning the
Companys investment strategy due to her considerable
experience in managing the investment portfolio of a large
property and casualty insurance company.
|
|
|
|
Ms. Tomlinson brings many years of experience in
executive management of international insurance operations and
close familiarity with the human resources aspect of the
business, especially useful to a growing company.
|
|
|
|
Mr. Tract has worked for 25 years as a
corporate attorney concentrating on representation of the
insurance industry and as a result he brings deep knowledge of
the insurance regulatory and governance landscape to the Board
of Directors.
|
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.
The Corporate Governance and Nominating Committees policy
is to consider recommendations for potential Board of Directors
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.
Board
Meetings and Committees
The Board of Directors held six meetings in 2010 and met in
executive session without management present at four of those
meetings. During 2010, all incumbent directors attended or
participated in at least 75% of the meetings of the Board of
Directors 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 2010 Annual Meeting
attended that meeting. The Board of Directors 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 four times per year in executive
session without management present.
10
The following table shows each of the five standing committees
established by the Board of Directors and the members and
chairperson of each Committee:
MEMBERSHIP
AND MEETINGS OF BOARD COMMITTEES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committee Name
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governance
|
|
|
|
|
|
Underwriting
|
Director Name
|
|
|
Audit
|
|
|
Compensation
|
|
|
and Nominating
|
|
|
Finance
|
|
|
Advisory
|
H.J. Mervyn Blakeney
|
|
|
|
|
|
X
|
|
|
Chair
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter A. Cheney
|
|
|
X
|
|
|
|
|
|
|
|
|
Chair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terence N. Deeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Thomas Forrester
|
|
|
Chair
|
|
|
X
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley A. Galanski
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John F. Kirby
|
|
|
|
|
|
Chair
|
|
|
X
|
|
|
|
|
|
Chair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert V. Mendelsohn
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marjorie D. Raines
|
|
|
X
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janice C. Tomlinson
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc M. Tract
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2010 Meetings
|
|
|
6
|
|
|
7
|
|
|
5
|
|
|
4
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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. Cheney, Forrester and Raines have
been designated as the financial experts serving on the Audit
Committee. 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 of Directors 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 of Directors 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 executive officers. When requested by the
Compensation Committee, management advises the Compensation
Committee on the design and implementation of compensation plans
and programs. The Compensation Committee may engage compensation
consultants or other
11
advisors at its discretion and may form and delegate to
subcommittees when appropriate. In 2010, the Compensation
Committee engaged Exequity, Inc. as an independent compensation
consultant to advise on the President and Chief Executive
Officers compensation. The Compensation Committee
regularly reports and consults with the independent members of
the Board of Directors on executive compensation matters. The
Compensation 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. All members of the
Compensation Committee are independent as defined in the NASDAQ
listing standards.
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. Commencing in
2011, the Corporate Governance and Nominating Committee is also
responsible for the review and oversight of the Companys
enterprise risk management program. 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.
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 Finance
Committee also oversees the management of the Companys
investment related risks. 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 Underwriting Advisory Committee oversaw the
Companys enterprise risk management process throughout
2010 and continues to review risks associated with the
Companys underwriting 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.
Compensation
Discussion and Analysis
This section describes the compensation programs for our Chief
Executive Officer and Chief Financial Officer in fiscal year
2010 as well as each of our three most highly compensated
executive officers employed at the end of fiscal year 2010, all
of whom we refer to collectively as our Named Executive Officers
or NEOs. Our Named Executive Officers for fiscal year 2010 are:
|
|
|
|
|
President and Chief Executive Officer, Stanley A. Galanski
|
|
|
|
Senior Vice President and Chief Financial Officer, Francis W.
McDonnell
|
|
|
|
Executive Vice President and Chief Operating Officer of
Navigators Management Company, Inc., a wholly-owned subsidiary
of the Company, Michael L. Civisca
|
|
|
|
President of Navigators Technical Risk (NavTech), a
division of the Company encompassing the global technical risk
underwriting divisions, Stephen R. Coward
|
|
|
|
Senior Vice President and Chief Actuarial Officer, Anthony G.
Martella
|
12
Executive
Summary
The Companys compensation program is shaped by our
pay-for-performance
philosophy that is intended to align our executive
officers interests with those of our stockholders by
rewarding performance that meets or exceeds the goals the
Compensation Committee establishes with the objective of
increasing stockholder value. In line with this philosophy, the
total compensation received by the Named Executive Officers
varies based on individual and corporate performance, as well as
the performance of a particular underwriting division, if any,
for which such Named Executive Officer has responsibility,
measured against relevant annual and long-term performance
goals. The Named Executive Officers total compensation is
comprised of a mix of base salary, annual bonus and long-term
incentive awards.
Despite a challenging economic environment, the Company has
continued to grow book value per share and net income for
stockholders as seen in the year over year comparison of recent
financial results set forth below. Please see
Managements Discussion and Analysis of Financial
Conditions and Results of Operations in our Annual
Report on
Form 10-K
for a more detailed description of our 2010 financial results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
2010
|
|
|
Increase
|
|
|
2009
|
|
|
Increase
|
|
|
2008
|
|
|
Net Income Per Share
|
|
$
|
4.33
|
|
|
|
16
|
%
|
|
$
|
3.73
|
|
|
|
21
|
%
|
|
$
|
3.08
|
|
Book Value Per Share
|
|
$
|
52.69
|
|
|
|
11
|
%
|
|
$
|
47.58
|
|
|
|
16
|
%
|
|
$
|
40.89
|
|
The Companys 2010 corporate performance was a key factor
in the compensation decisions affecting the Named Executive
Officers for 2010. It also significantly affected the payout of
long terms incentive awards previously granted to the Named
Executive Officers. Examples are as follows:
|
|
|
|
|
Net income per share and growth in book value per share were the
key performance measures for determining the incentive
compensation payable to our President and Chief Executive
Officer for 2010. These measures were the sole measures used in
determining the award payable to our CEO under the Executive
Performance Incentive Plan or EPIP in 2010. The ultimate value
of the long term equity grant made to the CEO in 2010 will also
be determined solely by reference to the compound growth in book
value per share over the 2010 to 2012 performance period.
|
|
|
|
Net income per share and growth in book value per share were key
metrics for measuring the Companys corporate performance
for purposes of awards under the Companys Annual Incentive
Plan, and for 2010, these metrics were calculated excluding
realized and unrealized gains for each Named Executive Officer
other than the President and Chief Executive Officer. In
addition, the Compensation Committee adjusted the overall bonus
pool downwards because the Company failed to exceed return on
equity thresholds. Despite the growth noted in the chart above,
performance with respect to each of these metrics did not meet
the targets previously set by the Compensation Committee. As
such, the annual incentive bonus payment made to each of the
Named Executive Officers under the Companys Annual
Incentive Plan was below their respective target percentages.
|
|
|
|
Long-term equity incentives make up a significant portion of
each of the Named Executive Officers compensation and the
value of certain of their equity awards is directly linked to
the Companys financial performance over multi-year
measurement periods. For example, performance shares that vested
in February 2011 vested at 55% of their target amount because
the Company failed to achieve the targeted financial results for
the relevant three year performance period. It is expected that
this trend will continue with the previously granted performance
shares.
|
The Compensation Committee elected to make adjustments to
elements of the Companys compensation programs starting in
2011 to further align the executive compensation structure and
the
pay-for-performance
philosophy with stockholders interests and current market
practices, including:
|
|
|
|
|
The annual incentive bonus targets have been adjusted downward
and will be payable in full in cash, rather than a combination
of cash and stock. For example, prior to the change, the highest
annual incentive target for executives other then the President
and Chief Executive Offer was 85% of the executives annual
salary, payable 60% in cash and 40% in stock. Going forward,
such executives will have an annual incentive target of 60%,
payable in full in cash.
|
13
|
|
|
|
|
Named Executive Officers as well as other key members of
management will be eligible for an annual performance-based
long-term incentive equity award under the Companys
Admirals Program each year. Each Admirals Program
grant will consist of restricted stock units vesting in full in
three years from the date of grant and will consist of 50% of
restricted stock units that will vest in full subject only to
continued employment and 50% of restricted stock units that will
vest based on the Companys financial performance over the
three year vesting period. Previously, participants in the
Admirals Program were eligible for grants every other
year, and the initial grant to a participant was fixed, subject
only to continued employment, with each subsequent grant based
on Company performance. Tying each annual stock award to the
performance of the Company over a three year period further
encourages management to make decisions that align the
Companys long-term goals with stockholder interests.
|
|
|
|
The Compensation Committee elected to eliminate the
Companys Executive Performance Incentive Plan, which
provided an annual incentive payment to the President and Chief
Executive Officer payable in full in cash, and implemented an
annual incentive plan that will instead pay a performance-based
award to the President and Chief Executive Officer in a mix of
cash and restricted stock units vesting over time, providing
greater long-term alignment with stockholders.
|
The changes made to the Companys compensation program for
2011 continue to build upon the Companys
pay-for-performance
philosophy, as exemplified by:
|
|
|
|
|
The move away from
fixed-amount
stock awards vesting over the short-term to longer-term
performance-based equity awards.
|
|
|
|
The reduction in annual incentive award targets, shifting a
greater percentage of total compensation towards the longer-term
equity awards as noted above.
|
|
|
|
The Compensation Committees engagement of its own
independent consultant in 2010, which assisted the Committee
with an analysis of its President and Chief Executive
Officers compensation going forward in relation to the
Companys
pay-for-performance
and retention goals.
|
Compensation
Objectives and Philosophy
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,
(4) provide incentives and rewards for such employees to
enhance the profitability and growth of the Company, and
(5) 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 balance rewards to employees
based upon the annual performance of the Company and their
individual roles in achieving that level of corporate
performance and long term incentive awards whose value is tied
to corporate performance. The Companys Board of Directors
and its senior management believe that compensation decisions
for each Named Executive Officer 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.
Setting
Executive Compensation
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 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, taking into account any
recommendations of the Named Executive Officers direct
supervisor if such Named Executive Officer does not report
directly to the President and Chief Executive Officer, and
subject to
14
the review and approval of the Compensation Committee.
Compensation decisions for 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 and, in the case of Named Executive Officers
who do not report directly to the President and Chief Executive
Officer, their direct supervisor, no Named Executive Officer or
other officer plays a role in determining compensation for the
Named Executive Officers.
Among the factors considered by the Company in determining
appropriate base salary, bonus and total compensation levels for
the Named Executive Officers for 2010 was 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. The peer
companies considered in 2010 were Allied World Assurance Company
Holdings, AG, Alterra Capital Holdings Ltd., AmTrust Financial
Holdings, Inc., Argo Group International Holdings, Ltd., W. R.
Berkley Corp., Erie Indemnity Company, Harleysville Group, Inc.,
HCC Insurance Holdings, Inc., Markel Corp., OneBeacon Insurance
Group, Ltd., RLI Corp. and Tower Group, Inc.
Executive
Compensation Components
The components of the Companys executive compensation
program for the year ended December 31, 2010 are set forth
in the table below. Each of the components and why the Company
pays each element of compensation, how the Company arrived at
the amount of each element for the Named Executive Officers, and
how each element fits into the Companys overall
compensation objectives are more fully described in the sections
following the table.
|
|
|
|
|
Compensation Component
|
|
Objectives
|
|
Key Features
|
|
Base Salary
|
|
To provide a fixed level of cash compensation to reward
demonstrated experience, skills and competencies relative to the
market value of the job and impact of the individual on the
organization.
|
|
Adjustments are considered, but are not guaranteed,
periodically, based on individual performance, level of pay
relative to the market and internal pay equity.
|
Annual Incentive Awards
|
|
To reward individual, corporate and, where applicable, business
unit performance on an annual basis. Retains Named Executive
Officers by providing market-competitive compensation.
|
|
For 2010, awards were based on financial targets, including net
income per share and growth in book value per share, as well as,
for those with responsibility for a business unit, the relevant
gross written premium, loss ratio and operating expense ratio as
compared to plan.
|
Executive Performance Incentive Plan
|
|
To reward the President and Chief Executive Officer on an annual
basis based on the Companys financial performance over the
course of the year.
|
|
Target award at 100% salary, with a range of 0 to 150% based on
previously set targets for net income per share and growth in
book value per share.
|
Long-term Incentive Awards
|
|
To align the interests of executives with the performance of the
Company on a long-term basis. Aligns Named Executive Officer
interests with those of our stockholders by promoting strong
annual results.
|
|
The Admirals Program provides for stock awards to certain
key underwriters and other employees that, for awards granted in
2010 and prior, vest in three equal installments on the third,
fourth and fifth anniversaries of the grant date based. Any
subsequent Admirals Award granted to any one employee is
performance based and vests based on the Companys average
return on equity over a three year period.
|
15
|
|
|
|
|
Compensation Component
|
|
Objectives
|
|
Key Features
|
|
Retirement Plans
|
|
Plans to assist in saving for retirement in order to provide a
level of anticipated retirement income.
|
|
Includes the
401(k) Plan
and the Money Purchase Plan for U.S. employees and the U.K.
pension scheme for U.K. employees, each of which 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.
|
Chief Executive Officer Compensation. In 2010,
the compensation of our President and Chief Executive Officer,
Mr. Galanski, included base salary, a bonus award under our
EPIP and a long-term incentive grant of restricted stock units.
Each element of Mr. Galanskis compensation is
discussed separately below. In respect of
Mr. Galanskis 2010 compensation package, a number of
factors were considered, including (i) the business and
leadership skills and experience of Mr. Galanski,
(ii) the Companys performance and return to
shareholders since Mr. Galanski joined the Company in 2001,
(iii) Mr. Galanskis significant contributions to
the growth of the Company during his tenure, (iv) the
importance of Mr. Galanski to the continued growth,
success, and future of the Company, and (v) 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, including his participation in the EPIP,
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 annual diluted earnings per share have
increased from $0.84 to $4.24, its book value per share has
increased from $17.05 to $52.68, and its share price has
increased from $13.31 to $50.35. (All figures are as of
December 31, 2000 and December 31, 2010, respectively.)
In 2010, the Compensation Committee retained the services of
Exequity, Inc. as an independent consultant. This selection was
made without the input or influence of management. Exequity
assisted the Compensation Committee in a comprehensive review of
the compensation paid to our Chief Executive Officer, the
structure of his compensation program and how his compensation
compared to various other industry peers. As a result of this
review, the Compensation Committee restructured certain
components of the CEO compensation to align it more closely with
retention and pay for performance goals.
Commencing in 2010, Mr. Galanski became eligible for an
annual performance-based long-term incentive grant of restricted
stock units, granted under the Companys Amended and
Restated 2005 Stock Incentive Plan (the 2005 Stock
Incentive Plan), equal to 145% of his base salary as of
the date of the grant, or $1,051,250 in 2010 (the Long
Term Incentive Grant). Each Long Term Incentive Grant will
cliff vest upon the third anniversary of the grant, provided
that the actual number of restricted stock units that vest will
vary based on the Companys rate of compound growth in book
value per share during the three year performance period. For
the grant issued in 2010, if the rate of compound growth in book
value per share for the performance period is 12%, the award
will vest at 100% of its target. However, if the rate of
compound growth in book value per share is 16%, the award will
vest at 150% of its target; if the rate of compound growth in
book value per share is 9%, the award will vest at 50% of its
target; and if the rate of compound growth in book value per
share is 7%, the award will vest at 25% of its target.
Achievement of between 7% and 16% of compound grown in book
value per shares for the performance period would cause the Long
Term Incentive Grant to vest at the corresponding value between
25% and 150% of the target. If the rate of compound growth in
book value per share for the performance period is below 7%,
none of the restricted stock units will vest.
Mr. Galanskis base salary did not change in 2010.
Commencing in 2011, the Executive Performance Incentive Plan
will be discontinued (see Compensation Discussion and
Analysis Executive Performance Incentive
Plan) and Mr. Galanski will instead be eligible
for an annual bonus to be paid pursuant to the 2005 Stock
Incentive Plan. Mr. Galanskis annual target will be
100% of his base salary, with a range from 0 to 150% of his base
salary based on relative achievement against performance
measures selected annually by the Committee. Two-thirds of the
annual bonus will be payable in cash and one-third will be paid
in the form of restricted stock units issued under the 2005
Stock Incentive Plan that will cliff vest three
16
years from the date of grant. Prior to 2010, the Compensation
Committee had made equity awards to the CEO from time to time,
which generally had performance-based vesting criteria.
Base Salaries. The Company pays base salaries
to each Named Executive Officer to compensate the officer for
their 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. Base salaries were not increased for any Named
Executive Officer in 2010. 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. For
2010, the Companys Executive Performance Incentive Plan
provided for annual incentive payments 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 executive 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 2010, the EPIP
provided for a bonus award for Mr. Galanski of up to 150%
of his base salary. No other Named Executive Officer
participated in the EPIP in 2010.
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 components each year
to determine what criteria to use in setting the annual bonus
awards under the EPIP for such year. For 2010, the EPIP bonus
award payable to Mr. Galanski 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 net income per share and year over year growth in
book value per share. For 2010, the Basic Bonus Target consisted
of net income per share of $4.50 and growth in book value per
share of 11.0%, with net income per share weighted at 35% of the
bonus calculation and growth in book value per share weighted at
65%. Achievement of 100% of the Basic Bonus Target would entitle
Mr. Galanski to receive the full EPIP bonus award of 100%
of his base salary. Achievement of 50% of the Basic Bonus Target
(net income per share of $2.85 and growth in book value per
share of 5.0%) would entitle Mr. Galanski to receive 50% of
his base salary as his EPIP bonus award. Achievement of 150% of
the Basic Bonus Target (net income per share of $5.95 and growth
in book value per share of 17.25%) would entitle
Mr. Galanski to receive the maximum of 150% of his base
salary for his EPIP bonus award. Achievement of between 50% and
150% of the Basic Bonus Target would entitle Mr. Galanski
to receive a corresponding EPIP bonus award of between 50% and
150% of his base salary, and achievement below 50% of the Basic
Bonus Target would mean that no bonus would be awarded to
Mr. Galanski. For 2010, the Company achieved net
income per share of $4.34 and growth in book value per share of
10.7%, which represented 96.3% of the Basic Bonus Target;
therefore, Mr. Galanski was entitled to an EPIP bonus
payment of 96.3% of his base salary, or $698,175.
17
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
in the first quarter. The Executive Performance Incentive Plan
supports the Companys retention compensation objectives by
enabling the Company to provide the participating executives
with fair, adequate and competitive compensation and appropriate
incentives to enhance the profitability and growth of the
Company.
As noted above, the Compensation Committee has decided to
discontinue the EPIP after 2010 and restructure the President
and Chief Executive Officers compensation package to
further emphasize the Companys compensation objectives.
Annual Incentive Program. The Companys
Annual Incentive Program (AIP), in which all
employees of the Company other than the President and Chief
Executive Officer participated in 2010, provides for the payment
of annual bonuses consisting of cash and, for employees at
relatively senior levels, stock awards that vest in equal
installments over four years, with a greater proportion of an
employees AIP award generally being paid in stock awards
at the more senior levels. All grants of stock awards are made
pursuant to the Companys 2005 Stock Incentive Plan.
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.
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.
The AIP supports the Companys recruitment objectives by
enabling the Company to attract qualified new employees. The
AIP, like the EPIP, 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 participating 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.
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 upward or downward, subject to the maximum award amounts
permitted under the AIP, to assure that such awards reflect the
contributions of participating executives.
The AIP categorizes 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 for
2010 ranged 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. 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 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.
18
In 2010, the targets for the corporate performance component of
the AIP bonus award were based on the extent to which the
Company achieved its 2010 budget plan with respect to net income
per share and growth in book value per share, with these two
elements being weighted at 35% and 65%, respectively, of
corporate performance. The targets for the divisional
performance component of the AIP bonus award were based on the
extent to which the applicable business division achieved its
2010 divisional budget plan with respect to gross written
premium, operating expense ratio, calendar year loss ratio and
accident year loss ratio, with these elements being weighted at
25% each of the divisional performance component.
For 2010, with respect to the corporate performance, the targets
for net income per share of $4.50 and growth in book value per
share of 11% would have resulted in 100% of the target corporate
performance component, while $5.95 net income per share and
17.5% growth in book value per share would have earned 150% of
the target corporate performance component, and the minimum
targets of $2.85 net income per share and 5% growth in book
value per share would have resulted in 50% of the target
corporate performance component. Any amount below the minimum
targets would have resulted in a zero for such target. For 2010,
the Compensation Committee elected to exclude the fiscal year
realized and unrealized investment gains from the calculations
of net income per share and growth in book value per share.
Calculated as such, the adjusted net income per share was $2.65,
resulting in a 0 degree of achievement for such target, and 7.9%
growth in book value per share, resulting in 72.2% relative
degree of achievement. Together, these converted to a 44.6%
achievement relevant to the corporate performance component of
the AIP.
Where divisional performance targets are applicable, for
employees at relatively senior levels, divisional performance is
weighted 50% of the AIP bonus award calculation, and corporate
and individual performance are each weighted 25%. Where
divisional performance targets are not applicable, corporate and
individual performance are each weighted at 50% for such
employees. In addition, the Compensation Committee set targets
for return on equity that dictate the amount of funding
available for the individual portion of the bonus calculation.
For a return on equity between 7.5% and 9.9%, the individual
portion would be funded to a maximum of 100%. For a return on
equity between 5% and 7.4%, the individual portion would be
funded to a maximum of 50%. For a return on equity less than
4.9%, the individual portion would be funded to a maximum of
25%. For 2010, the Compensation Committee elected to calculate
return on equity net of realized gains, providing for an
adjusted return on equity of 5.4%. This meant that the
individual portion of the bonus was funded at 50%.
The payment of a portion of the AIP awards in equity is
generally intended to align the long term interests of our
employees with those of our stockholders. However, the
Companys common stock has been recently trading at prices
below the Companys book value per share and below
historical trading multiples. While the Compensation Committee
endorses a pay for performance culture and supports the
inclusion of equity grants in annual performance awards in order
to link employee financial incentives with stockholder returns,
the Compensation Committee felt that it was in the best
interests of stockholders to reduce the portion of employee
annual compensation payable in equity for 2010 and therefore
elected to pay AIP bonus awards 100% in cash.
The relative weight of the corporate, divisional and individual
performance components used to determine the AIP bonus awards
for the Named Executive Officers varied as indicated above. For
each of Mr. Civisca, who has management responsibility for
the Companys United States-based business divisions, and
Mr. Coward, who has management responsibility for a
business division within the Company, 25% of his overall AIP
bonus award is determined by the Companys corporate
performance, 50% by the underwriting performance of the business
divisions for which he has responsibility, and 25% by his
individual performance. For 2010, the targets for the
Companys United States-based business divisions for which
Mr. Civisca has responsibility were a 25.8% decrease in
gross written premium relative to the prior year, a 10.9%
expense ratio and loss ratios of 63.7% and 39.1% for the
calendar year and accident year, respectively. For 2010, the
target for gross written premium was a 5.4% increase for the
business division run by Mr. Coward relative to that
divisions gross written premium for 2009, the target of
operating expense ratio was 8.4%, and the targets for calendar
year and accident year loss ratios were 50.7% and 49.1%,
respectively. For Mr. McDonnell, 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.
Mr. Martella was paid a previously
agreed-upon
AIP bonus award for 2010 as a condition of his hiring during
2010. The individual performance component of the AIP bonus
awards for Messrs. Civisca, Coward and McDonnell was
determined by Mr. Galanski, based upon his reasoned,
subjective evaluation of the
19
individual performance of each such Named Executive Officer. The
AIP bonus award for each participating Named Executive Officer
was reviewed and approved by the Compensation Committee.
The AIP bonus award paid to Mr. Coward for 2010 was in the
amount $192,965, paid in British pounds based on the conversion
rate as of the date of payment. The AIP bonus awards paid to
Messrs. Civisca and McDonnell were $160,000 and $210,000,
respectively. Mr. Martella was paid an AIP bonus award in
the amount of $281,250, 60% of which was paid in cash and 40% of
which was paid in restricted stock units that vest in equal
installments on the first, second, third and fourth
anniversaries of the date of the award. Other than
Mr. Martellas bonus award, each of the bonus awards
paid to such Named Executive Officers was paid in cash.
Admirals Program. In 2006, the
Compensation Committee, working with senior management of the
Company, established the Admirals Program, which provides
for special stock award grants under the Companys 2005
Stock Incentive Plan for certain key underwriters and other
employees of the Company (Admiral Awards). Only
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 AIP
generally receive Admiral Awards. Typically, recipients of
Admiral Awards receive an award every other year.
The Admirals Program is primarily designed to align the
interests of management and stockholders, as well as to retain
qualified employees and facilitate continuity of management by
providing significant long term incentive stock awards to key
employees. The Admirals Program also supports the
Companys recruitment objectives by enabling the Company to
attract qualified new employees, and it enhances the
Companys ability to provide Named Executive Officers and
others with competitive compensation and appropriate incentives
to enhance the profitability and growth of the Company. The size
of each Admirals Award 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 that individual to the continued
growth and success of the Company, the need to retain his or her
services and related factors. The Compensation Committee
determines the amount of any Admirals Program awards to
the President and Chief Executive Officer. The Compensation
Committee also determines the amount of any Admirals
Program awards to the other Named Executive Officers, and, as
part of this decision, will consider the recommendations of the
President and Chief Executive Officer. 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.
For awards granted in 2010 and prior, Admirals Awards vest in
equal installments on the third, fourth and fifth anniversaries
of the grant date. The number of shares of Common Stock that an
employee may receive from his or her initial Admirals Award was
fixed at the time of grant. For subsequent Admirals Awards to
that employee, the Compensation Committee set a target number of
shares for each vesting date and the actual number of shares
that employee receives on a vesting date will vary based on the
Companys return on equity over a three-year period. This
three-year period will be the three years prior to the year in
which a vesting date occurs. For example, if an employee
received his or her second Admirals Award on March 1, 2010,
the Companys return on equity for the
2010-2012
time period would determine how many shares that employee
receives when the first installment of that Admiral Award vests.
The chart below lists, for any vesting date of an Admirals Award
(other than an initial award), the three-year return on equity
of the Company amounts for a recipient to receive the threshold,
target and maximum amount of shares under an Admiral Award.
|
|
|
|
|
|
|
% of Target
|
|
3-Year Return on Equity
|
|
Shares Received
|
|
|
15%
|
|
|
150
|
%
|
13%
|
|
|
100
|
%
|
7%
|
|
|
25
|
%
|
For a return on equity value between 7% and 15% for any
three-year period, the employee will receive a corresponding
percentage of the target shares ranging between 25% and 150% of
target. For return on equity below 7%, the employee is not
entitled to any shares.
20
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 2010, the Compensation Committee approved a subsequent award
under the Admirals Program to Messrs. Civisca and Coward,
in each case in the target amount of 4,000 shares, which
will vary with the Companys return on equity as described
above. The amount of this grant and the decision to authorize it
after each of Messrs. Civisca and Coward had received a
prior award in 2008 reflect the Compensation Committees
consideration of each of their importance to the Company, the
importance of the functions they oversee to the Companys
success, and the need to provide each of them with long term
incentive and to retain their services.
No Admirals Program grants were made to any other Named
Executive Officer in 2010. However, the Compensation Committee
did award 6,000 restricted stock units to Mr. McDonnell in
2010 pursuant to the 2005 Stock Incentive Plan.
Mr. McDonnell had not been employed by the Company for the
requisite three year period necessary to be eligible for a grant
under the Admirals Plan, but the Compensation Committee
believed it was appropriate, in light of
Mr. McDonnells importance to the Companys long
term success and given his compensation relative to peers, to
make an additional equity grant to Mr. McDonnell.
Mr. McDonnells 6,000 restricted share unit award will
vest in equal installments on the first, second, third and
fourth anniversaries of the grant date and is not subject to
performance vesting criteria.
The Compensation Committee has decided to revise the structure
of the Admirals Program commencing with awards made in
2011. In reviewing the Admirals Awards that had been
granted pursuant to the performance vesting target described
above, the Compensation Committee realized that the
pay-for-performance
objectives were not being fully realized, as the performance of
the Company during the relevant performance period dictates that
most recent Admirals Awards will vest at substantially
less than the target amount on account of the continuing soft
market conditions that exist in the insurance markets. As a
result, however, the structure was undercutting the
Companys long-term retention goals as the value of
unvested equity under such Admirals Awards was
substantially reduced, making the Company more vulnerable to
competitors seeking to recruit our key executives.
In order to achieve a more appropriate balance between the dual
pay-for-performance
and retention goals of the Admirals Plan, the Compensation
Committee decided to reduce the annual bonus targets under the
Annual Incentive Plan as discussed above and made the following
changes to the Admirals Plan commencing with the 2011
Admirals Awards: (1) senior executives will now be
eligible to be considered for an award annually, rather than
biannually, and the three year eligibility requirement has been
eliminated; (2) Admirals Awards will cliff vest upon
the third anniversary of the grant date; and (3) 50% of the
restricted stock unit award will be fixed and vest subject only
to continued employment on the vesting date while the remaining
50% will be performance-based and the actual number of
restricted stock units vesting may vary from 0% to
150% subject to the Company meeting a compound annual
growth in book value per share target during the three year
performance period, as set by the Compensation Committee. For
Admirals Awards granted in 2011, the Compensation
Committee set the target growth in book value per share at 12%.
Retirement Income Plans. The Companys
retirement income plans include the Money Purchase Plan, the
401(k) Plan, and the U.K. Plan. The Companys Money
Purchase Plan is a defined contribution plan that, in 2010,
provided for a mandatory annual contribution by the Company on
behalf of each eligible employee of 7.5% of such employees
base salary, subject to certain maximum contribution limits
under applicable law, as well as for an additional 7.5% of such
employees AIP award up to a maximum annual additional
contribution of $2,500. 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.
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
eligible employees base
21
salary for such year. For 2010, the Compensation Committee
elected not to make additional contributions under the 401(k)
Plan. The Companys entire 401(k) Plan matching
contribution and discretionary contribution vest 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 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 the
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,
including the Named Executive Officers, 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, whichever is
less. Employees purchase these shares through regular payroll
deductions. 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.
Benefits. Executive officers also participate
in those benefit arrangements which are available to our
employees, including health and welfare benefit plans and the
401(k) Plan. For a discussion of the Companys 401(k) Plan,
please see Compensation Discussion and
Analysis Retirement Income Plans above.
Each of Messrs. Galanski and Civisca receives an annual car
allowance from the Company in the amount of $12,000 and $9,000,
respectively, pursuant to the terms of their respective
employment agreement. In addition, the Company pays for the cost
of an annual physical examination for executive officers and
members of the Board of Directors.
Employment Agreements. The Company has entered
into employment agreements with Messrs. Galanski,
McDonnell, Civisca and Coward, which agreements are still in
effect. Mr. Martella does not have an employment agreement
with the Company. The Company believes that employment
agreements can be an effective tool to retain the expertise of
certain executives and to protect the interests of the Company.
For a discussion of the employment agreements with
Messrs. Galanski, McDonnell, Civisca and Coward, please see
Employment Agreements below.
Stock Ownership Guidelines. The Company
requires the Chief Executive Officer and Chief Financial Officer
of the Company to maintain ownership of common stock of the
Company equal to five and three times their respective base
salaries. This is equivalent to an investment in the Company by
Mr. Galanski of $3.6 million and Mr. McDonnell of
$1.2 million, representing 71,996 and 28,834 common shares,
respectively, based on the closing price of $50.35 per common
share as of December 31, 2010. We believe that the levels
of share ownership specified above provide a meaningful
alignment of the interests of our Chief Executive Officer and
Chief Financial Officer with the interests of our stockholders,
which furthers our goal to provide attractive long-term returns
for our stockholders. As of the date hereof,
Messrs. Galanski and McDonnell have achieved their target
ownership levels. Common stock owned outright, common stock that
is subject to vested unexercised share options, unvested
restricted shares and unvested share units are counted toward
fulfilling this requirement.
22
Tax Deductibility of Compensation. 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 Amended and Restated 2005 Stock 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.
Relationship between Compensation Policies and Risk
Management. The Company has assessed the
Companys compensation programs and does not believe that
there are any risks arising from the compensation policies and
practices for employees that are reasonably likely to have a
material adverse effect on the Company. Given (1) the
emphasis of underwriting profitability, rather than growth in
premium revenues, in measuring both corporate and individual
performance, (2) that a significant portion of compensation
is generally paid in equity that vests over a long period of
time, and (3) that the vesting of a significant portion of
such equity is dependent upon the return on equity or growth in
book value per share over an extended period of time, the
Company does not feel that this incentive compensation structure
encourages any unnecessary or excessive risk to be taken by
management.
Conclusion. 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 or her
compensation.
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.
Compensation
Committee Report
The Boards Compensation Committee is charged, among other
things, to perform 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 2011 Proxy Statement. 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 2011 Proxy Statement.
The Compensation Committee:
H. J. Mervyn Blakeney
W. Thomas Forrester
John F. Kirby (Chair)
Janice C. Tomlinson
The foregoing Report of the Compensation Committee shall not
be deemed to be soliciting material or
filed with the SEC or incorporated by reference in
any previous or future document filed by us with the SEC under
the Securities Act of 1933, as amended (the Securities
Act) or the Exchange Act, or subject to
Regulation 14A or 14C or to the liabilities of
Section 18 of the Exchange Act except to the extent that we
specifically request that such Report be treated as soliciting
material or specifically incorporates such Report by reference
in any such document.
23
Summary
Compensation Table
The following table sets forth a summary of the compensation
paid by the Company to the Chief Executive Officer, Chief
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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|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
Non
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Incentive
|
|
Deferred
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Compen-
|
|
All Other
|
|
|
and
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Compen-
|
|
sation
|
|
Compen-
|
|
|
Principal
|
|
|
|
Salary
|
|
Bonus(1)
|
|
Awards(2)
|
|
Awards
|
|
sation
|
|
Earnings
|
|
sation (3)
|
|
Total
|
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Stanley A. Galanski
|
|
|
2010
|
|
|
|
725,000
|
|
|
|
698,335
|
|
|
|
1,051,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,505
|
|
|
|
2,516,084
|
|
President & Chief
|
|
|
2009
|
|
|
|
646,875
|
|
|
|
362,500
|
|
|
|
1,239,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,050
|
|
|
|
2,287,675
|
|
Executive Officer
|
|
|
2008
|
|
|
|
600,000
|
|
|
|
517,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,700
|
|
|
|
1,162,900
|
|
Francis W. McDonnell
|
|
|
2010
|
|
|
|
425,000
|
|
|
|
210,000
|
|
|
|
223,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,015
|
|
|
|
890,335
|
|
SVP & Chief
|
|
|
2009
|
|
|
|
425,000
|
|
|
|
210,000
|
|
|
|
150,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,700
|
|
|
|
814,742
|
|
Financial Officer
|
|
|
2008
|
|
|
|
177,083
|
|
|
|
275,000
|
|
|
|
1,083,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,812
|
|
|
|
1,706,615
|
|
Michael L. Civisca
|
|
|
2010
|
|
|
|
375,000
|
|
|
|
160,000
|
|
|
|
148,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,625
|
|
|
|
721,505
|
|
EVP & COO
|
|
|
2009
|
|
|
|
320,833
|
|
|
|
106,356
|
|
|
|
90,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,450
|
|
|
|
552,685
|
|
Navigators Mgmt. Co.
|
|
|
2008
|
|
|
|
296,667
|
|
|
|
135,000
|
|
|
|
556,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,050
|
|
|
|
1,028,398
|
|
Stephen R. Coward(4)
|
|
|
2010
|
|
|
|
296,400
|
|
|
|
192,965
|
|
|
|
148,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,460
|
|
|
|
682,705
|
|
President, NavTech
|
|
|
2009
|
|
|
|
307,800
|
|
|
|
201,386
|
|
|
|
82,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,170
|
|
|
|
637,486
|
|
|
|
|
2008
|
|
|
|
271,317
|
|
|
|
124,830
|
|
|
|
568,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,698
|
|
|
|
1,005,306
|
|
Anthony G. Martella(5)
|
|
|
2010
|
|
|
|
234,375
|
|
|
|
168,750
|
|
|
|
403,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,069
|
|
|
|
882,294
|
|
SVP & Chief Actuarial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
(1) |
|
The Bonus amounts reflect the cash bonus paid for 2010 to each
Named Executive Officer. Information on the 2009 and 2008 Bonus
amounts paid to Named Executive Officers can be found in the
Companys 2010 and 2009 Proxy Statements, respectively. |
|
(2) |
|
The amounts shown in the Stock Awards column equal
the estimate of aggregate compensation cost to be recognized
with respect to incentive stock awards including
performance-based awards granted in such year determined as of
the grant date under Financial Accounting Standards Board
Accounting Standards Codification (ASC) Topic 718, Stock
Compensation (FASB ASC Topic 718) and excluding the
effect of estimated forfeitures. The following portion of the
value shown in the Stock Awards column represents
the grant date value of performance-based awards based upon the
probable outcome as of the grant date of such performance
criteria: for 2010, $1,051,244 for Mr. Galanski (based on
the closing stock price on the date of grant of $39.47), and
$148,880 for each of Messrs. Civisca and Coward (based on
the closing stock price on the date of grant of $37.22); for
2009, $1,239,500 for Mr. Galanski (based on the closing
stock price on the date of grant of $49.57), and for 2008,
$446,640 for each of Messrs. Civisca and Coward (based on
the closing stock price on the date of grant of $55.83). Each of
these performance-based awards vest in three equal installments
on the third, fourth and fifth anniversaries of their respective
grant dates in accordance with the terms of variable grant
awards under the Admirals Program, except for the
performance-based award granted to Mr. Galanski in 2010,
which vests in full on March 1, 2013. Assuming the highest
level of performance, the grant date fair value of the
performance-based award granted to Mr. Galanski in 2010
would equal $1,576,866 and the grant date fair value of the
performance-based awards granted to each of Messrs. Civisca
and Coward in 2010 would equal $223,320. The remaining amounts
reflected in the Stock Awards column represent the
grant date fair value of incentive stock awards that are not
subject to performance vesting conditions. These include an
award given to Named Executive Officers in such year as part of
their annual bonus paid in respect of the prior fiscal year,
which vest in four equal installments on the first, second,
third and fourth anniversaries of their respective grant |
24
|
|
|
|
|
dates, and stock grants made to Messrs. McDonnell and
Martella in 2008 and 2010, respectively, as consideration for
each of them joining the Company. No option or SARs awards were
granted in 2010, 2009 or 2008. |
|
(3) |
|
All Other Compensation includes: cash contributions made by the
Company pursuant to the terms of the Companys Money
Purchase Plan in 2010, 2009 and 2008 for Messrs. Galanski
and Civisca in the amount of $18,375, $17,250 and $17,250,
respectively, and for Mr. McDonnell in 2010 and 2009 in the
amounts of $18,375 and $17,250, respectively, which do not
become fully vested until the employee has been employed by the
Company for six years; matching contributions made by the
Company pursuant to the terms of the Companys 401(k) Plan
in 2010, 2009 and 2008 for each of Messrs. Galanski,
McDonnell and Civisca in the amounts of $9,800, $9,800 and
$13,800, respectively, for Mr. McDonnell in the amounts of
$9,800, $9,800 and $3,542, respectively, and for
Mr. Martella in 2010 in the amount of $7,500, which
contributions are fully vested; contributions made by the
Company to its U.K. Pension Scheme on behalf of Mr. Coward
in 2010, 2009 and 2008 in the amounts of $44,460, $46,170 and
$40,698, respectively; and a relocation expense payment to
Mr. Martella as a condition to his employment in the amount
of $65,829. In addition, All Other Compensation for 2010
includes payment by the Company of the cost of an annual
physical examination for Messrs. McDonnell and Martella in
the amount of $2,750 and $2,325, respectively; an annual
automobile allowance for Messrs. Galanski and Civisca in
the amount of $12,000 and $9,000, respectively; fitness expense
payments for Messrs. Galanski, McDonnell and Martella in
the amount got $640, $400 and $240, respectively; and group
long-term disability payments for each Named Executive Officer
other than Mr. Coward in amounts ranging from $175 to $690.
Information on the 2009 and 2008 Other Compensation amounts paid
to Named Executive Officers can be found in the Companys
2010 and 2009 Proxy Statements, respectively. |
|
(4) |
|
All amounts reported for Mr. Coward are paid to him in
British pounds. The dollar value of the amounts paid to him in
2010, 2009 and 2008 is calculated based on the conversion rate
as of December 31, 2010 of £1=$1.56, as of
December 31, 2009 of £1=$1.62 and as of
December 31, 2008 of £1=$1.46. |
|
(5) |
|
Mr. Martella was hired as the Companys Senior Vice
President and Chief Actuarial Officer effective May 2010. As
such, compensation information prior to 2010 has been excluded. |
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, 2010.
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GRANTS OF PLAN-BASED AWARDS
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All Other
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Estimated Future
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Estimated Future
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Stock
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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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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
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Awards
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of Shares
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Securities
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Price of
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Stock and
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Maxi-
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Maxi-
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of Stock
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Underlying
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Option
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Options
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Grant
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Threshold
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Target
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mum
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Threshold
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Target
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mum
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Units
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Options
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Awards
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Awards(5)
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Name
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Date
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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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$/Share
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($)
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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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(k)
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(l)
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Stanley A. Galanski
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5/26/10
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6,659
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26,634
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39,951
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(1)
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1,051,244
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Francis W. McDonnell
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3/1/10
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6,000
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(3)
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223,320
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Michael L. Civisca
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3/1/10
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2,000
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4,000
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6,000
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(2)
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148,880
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Stephen R. Coward
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3/1/10
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2,000
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4,000
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6,000
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(2)
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148,880
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Anthony G. Martella
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5/10/10
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10,000
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(4)
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403,100
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(1) |
|
These restricted stock units were issued under the 2005 Stock
Incentive Plan and vest on March 1, 2013. A return on
equity of 7% for the three-year period immediately preceding the
vesting date would result in a threshold plan award of 25% of
the target. A return on equity of 9% for such three-year period
would result in a plan award of 50% of the target. A return on
equity of 13% for such three-year period would result in a plan
award of 100% of the target. 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. |
|
(2) |
|
These restricted stock units were issued pursuant to the
Admirals Plan 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 |
25
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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 Plan, please see Compensation Discussion
and Analysis Admirals Plan above |
|
(3) |
|
These restricted stock units are issued under the Companys
2005 Stock Incentive Plan 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. |
|
(4) |
|
These restricted stock units were issued under the
Companys 2005 Stock Incentive Plan as a condition to
Mr. Martellas employment and vest in equal
installments on the first, second, third and fourth
anniversaries of the grant date. |
|
(5) |
|
Grant Date Fair Value has been calculated as of the date of the
grant under FASB ASC Topic 718, excluding the effect of
estimated forfeitures, based the closing price of the
Companys common stock on the date of grant. |
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 2010 for a
one-year period through March 2012.
Pursuant to his acceptance of an offer letter dated
July 11, 2008, Mr. McDonnell received a stock grant of
22,000 shares of Common Stock subject to vesting provisions
of 25% per year. To date, 11,000 shares have vested. In the
event of a change of control of the Company, the offer letter
provides that if Mr. McDonnell is terminated other than for
cause or suffers a substantial diminution of responsibilities
within one year following the change of control, then all of the
outstanding shares of Common Stock of the Company issued to him
in his initial stock grant as well as any shares of Common Stock
granted to him in March 2009 in connection with his annual bonus
in such year shall immediately become fully vested. The offer
letter further provides that if at any time during his
employment with the Company, Mr. McDonnells
employment is terminated other than for cause, then he shall be
entitled to receive a severance payment equal to one years
base salary plus the cash portion of his pro rata earned bonus
for the year in which such termination occurs.
On March 1, 1999, as amended on January 1, 2003,
Somerset Marine, Inc., which was subsequently merged into
Navigators Management Company, Inc., a wholly-owned subsidiary
of the Company, entered into an employment agreement with
Mr. Civisca providing for an initial two-year term of
employment that continues for successive one-year periods unless
either party elects to terminate the agreement upon
60 days notice to the other party prior to the
expiration of the then-current one-year period. In the event of
a change in control of the Company or Navigators Management
Company, Inc. or a material reduction in Mr. Civiscas
duties, if Mr. Civisca shall elect within one year to
terminate his employment, Mr. Civisca is entitled to
receive his base salary for one year from the date of
termination as well as continued health and major medical
insurance coverage, at the expense of Navigators Management
Company, Inc., for six months following such termination. If the
Company should
26
terminate Mr. Civiscas employment without cause,
Mr. Civisca is entitled to receive his base salary for one
year from the date of termination as well as continued health
and major medical insurance coverage, at the expense of
Navigators Management Company, Inc., for six months following
such termination. During the period of his employment, and for a
period of one year from the termination of his employment
agreement, Mr. Civisca is subject to restrictive covenants
with respect to nonsolicitation of the Companys employees
and noncompetition with the Companys business in the
eastern United States.
Effective December 9, 2010, 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 six months advance
notice of termination to the other party. The agreement provides
that NUAL may require that Mr. Coward not have dealings
with suppliers, customers, employees, agents or representatives
of NUAL or its affiliates or work for any other employer during
the six-month notice period. The agreement does not include
provisions regarding change of control or acceleration of
outstanding stock grants.
The remaining Named Executive Officer, Mr. Martella, is not
currently a party to an employment agreement with the Company or
any of its subsidiaries.
Amended
and Restated 2005 Stock Incentive Plan
The purposes of the Amended and Restated 2005 Stock Incentive
Plan (the 2005 Stock Incentive Plan) are to induce
certain individuals to remain in the employ of, or to continue
to serve as directors of, or to remain independent contractors
to, the Company and its present and future subsidiaries, to
attract new individuals to enter into such employment and
service, to encourage such individuals, upon whom, in large
measure, our sustained progress, growth and profitability
depend, to achieve long-term Company goals, and to align the
participants interests with those of Stockholders by
providing them with a proprietary interest in our growth and
performance. The Board of Directors believes that the ability to
grant options (both non-qualified and incentive), stock
appreciation rights (SARs), restricted stock,
restricted stock units, performance units, annual incentive
awards, dividend equivalents and substitute awards (each, an
Award) 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 the Companys continued growth and financial
success. Since 2005, the Company has issued stock awards under
the 2005 Stock Incentive Plan.
The 2005 Stock Incentive Plan authorizes the issuance of
1,500,000 shares of Common Stock pursuant to Awards. The
2005 Stock Incentive Plan was originally approved by
Stockholders at the May 20, 2005 Annual Meeting of
Stockholders and most recently the Stockholders approved an
amended and restated plan at the May 26, 2010 Annual
Meeting of Stockholders to give the Board more flexibility in
the manner and form in which it makes awards, especially with
respect to performance based awards that could qualify for more
favorable tax treatment under Section 162(m) of the Code.
Employees, non-employee directors, and independent consultants
to the Company and its subsidiaries are eligible to participate
in the 2005 Stock Incentive Plan. The 2005 Stock Incentive Plan
is the only plan under which the Compensation Committee
currently issues 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 Plan and
Compensation Discussion and Analysis
Admirals Program.
The 2005 Stock Incentive Plan is administered by the
Compensation Committee (unless the Board of Directors determines
otherwise), which interprets the 2005 Stock Incentive Plan and
has broad discretion to select the eligible persons to whom
awards will be granted, as well as the type, size and terms and
conditions of each award, including the exercise price of stock
options, the number of shares subject to awards and the
expiration date of, and the vesting schedule or other
restrictions applicable to, awards.
Upon a change in control, unless provided otherwise in an award
agreement, a participants awards will become vested, the
relevant restrictions will lapse, and the relevant performance
goals will be deemed to be met upon the involuntary termination
of such participants employment or service without cause
during the one-year period following the occurrence of the
change in control. The same treatment of a participants
awards will occur if he or she terminates employment or service
for good reason during such one-year period.
27
In the event of an employees or directors
termination of employment or service due to his or her death,
disability or retirement or, in the case of an independent
consultant, his or her death, unless the applicable award
agreement provides otherwise, such participants
outstanding stock options and SARs will fully vest and remain
exercisable until six months after such termination (but not
beyond the original term of the option or SAR) and all unvested
shares of such participants restricted stock will
immediately vest. In the event of a participants
termination of employment or service for cause, such
participants outstanding stock options, SARs and unvested
restricted stock will immediately be canceled and forfeited to
us. Unless the applicable award agreement provides otherwise, in
the event of a participants termination of employment or
service for any other reason, such participants vested
stock options and SARs (to the extent exercisable at the time of
such termination) will remain exercisable until 90 days
after such termination (but not beyond the original term of the
option or SAR).
Unless terminated sooner, the 2005 Stock Incentive Plan will
terminate on May 20, 2015. The Board of Directors may, at
any time, amend the 2005 Stock Incentive Plan. The Compensation
Committee is permitted to amend the terms and conditions of
outstanding awards, including to extend the exercise period and
accelerate the vesting schedule of such awards, but no such
action may adversely affect the rights of any participant with
respect to outstanding awards without the applicable
participants written consent. Stockholder approval of any
such amendment will be obtained if required to comply with
applicable law or the rules of the NASDAQ Global Select Market.
Stock Options. Options may be granted by the
Compensation Committee and may be either non-qualified options
or incentive stock options. Options are subject to the terms and
conditions, including vesting conditions, set by the
Compensation Committee (and incentive stock options are subject
to statutory restrictions that are set forth in the 2005 Stock
Incentive Plan). Unless the Compensation Committee determines
otherwise, options will vest in 25% increments on the first,
second, third and fourth anniversaries of the date the option is
granted. The exercise price for all stock options granted under
the 2005 Stock Incentive Plan will be determined by the
Compensation Committee, except that no stock options can be
granted with an exercise price that is less than 100% of the
fair market value of the Common Stock on the date of grant.
Also, Stockholders who own more than 10% of our voting stock
will not be granted incentive stock options that have an
exercise price less than 110% of the fair market value of the
Common Stock on the date of grant. The 2005 Stock Incentive Plan
prohibits the repricing of stock options.
The term of all stock options granted under the 2005 Stock
Incentive Plan will be determined by the Compensation Committee
and will generally not exceed 10 years. However, the term
of an incentive stock option may not exceed 10 years (five
years for incentive stock options granted to Stockholders who
own more than 10% of our voting stock). Each option gives the
participant the right to receive a number of shares of Common
Stock upon exercise of the option and payment of the exercise
price. The exercise price may be paid in cash (including cash
obtained through a broker selling the share acquired on
exercise), personal check or wire transfer.
Stock Appreciation Rights or SARs. All SARs
must be granted on a stand-alone basis (i.e., not in
conjunction with stock options) and will have a term of
10 years, unless the Compensation Committee determines
otherwise. SARs are subject to the terms and conditions,
including vesting conditions, set by the Compensation Committee.
Unless the Compensation Committee determines otherwise, SARs
will vest in 25% increments on the first, second, third and
fourth anniversaries of the date the SAR is granted. A SAR
granted under the 2005 Stock Incentive Plan entitles its holder
to receive, at the time of exercise, an amount per share equal
to the excess of the fair market value (on the date of exercise)
of a share of the Common Stock over a specified price, known as
the strike price, fixed by the Compensation Committee, which
will not be less than 100% of the fair market value of the
Common Stock on the grant date of the SAR. Payment may be made
in cash, shares of the Common Stock, or other property, in any
combination as determined by the Compensation Committee. The
2005 Stock Incentive Plan prohibits the repricing of SARs.
Restricted Stock and Restricted Stock
Units. Restricted stock is common stock that is
forfeitable until the restrictions lapse. Restricted stock units
are rights granted as an award to receive shares of common
stock, conditioned upon the satisfaction of restrictions imposed
by the Compensation Committee. Restrictions may include
time-based restrictions, the achievement of specific performance
goals or the occurrence of a specific event. Unless the
Compensation Committee determines otherwise, restricted stock
and restricted stock units will vest in 25% increments on the
first, second, third and fourth anniversaries of the date of the
grant. Participants have voting
28
rights on restricted stock but not on restricted stock units. If
the performance goals are not achieved, or if the restrictions
do not lapse within the time period provided in the award
agreement, the participant will forfeit his or her restricted
stock and/or
restricted stock units.
Performance Units. Performance units are any
grant of (1) a bonus consisting of cash or other property
the amount and value of which,
and/or the
receipt of which, is conditioned upon the achievement of certain
performance goals specified by the Compensation Committee, or
(2) a unit valued by reference to a designated amount of
property. Performance units may be paid in cash, shares of
Common Stock, restricted stock or restricted stock units. The
Compensation Committee will determine the number and terms of
all performance units, including the performance goals and
performance period during which such goals must be met. If the
performance goals are not attained during the performance period
specified in the award agreement, the participant will forfeit
all of his or her performance units.
Annual Incentive Awards. The 2005 Stock
Incentive Plan includes annual incentive awards. The
Compensation Committee will determine the amounts and terms of
all annual incentive awards, including performance goals, which
may be weighted for different factors and measures. In the case
of annual incentive awards intended to qualify for the
performance-based exception from the deductibility limitations
of Section 162(m), the Compensation Committee will
designate individuals eligible for annual incentive awards
within the first 90 days of the year for which the annual
incentive award will apply and will certify attainment of
performance goals within 60 days following the end of each
year. In addition, the Compensation Committee will establish the
threshold, target and maximum annual incentive award
opportunities for each participant. Annual incentive awards may
be paid in cash, shares of Common Stock, restricted stock,
options or any other award under the 2005 Stock Incentive Plan.
Substitute Awards. Substitute awards are
awards that may be granted in replacement of stock or
stock-based awards from another business held by current and
former employees or non-employee directors of, or consultants
to, such business that is acquired by us to preserve the
economic value of all or a portion of a replaced award on such
terms and conditions (including price), as the Compensation
Committee determines.
Dividend Equivalents. Dividend equivalents are
rights to receive payments equal to dividends on shares or
restricted stock units, if and when we pay dividends to
Stockholders. The Compensation Committee may award dividend
equivalents on a stand-alone basis or in conjunction with
another award (other than options and SARs). If the dividend
equivalent is issued in conjunction with another award and if
the participant forfeits all or a part of the award, the
participant also forfeits the portion of the dividend
equivalents award related to other award the participant
forfeited.
In any calendar year, no participant may be granted awards for
options or SARs that exceed, in the aggregate, 500,000
underlying shares of Common Stock. In any calendar year, no
participant may be granted awards for restricted stock,
restricted stock units or performance units (or any other award
other than options or SARs that is determined by reference to
the value of shares or appreciation in the value of shares) that
exceed, in the aggregate, 250,000 underlying shares of Common
Stock. No participant may be granted a cash award for any
calendar year, the maximum payout for which would exceed
$3 million. No participant may be granted a cash award for
a performance period of more than one year, the maximum payout
for which would exceed $5 million. These limits are higher
than we expect to be needed for awards under the 2005 Stock
Incentive Plan, and are included in the 2005 Stock Incentive
Plan to comply with the requirements for deductibility of awards
subject to Section 162(m).
2002
Stock Incentive Plan
At the May 30, 2002 Annual Meeting, the Stockholders
approved the 2002 Stock Incentive Plan (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 our Compensation
Committee, which shall consist of two or more members of the
Board. The members of the Compensation Committee are appointed
annually by, and serve at the
29
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 granted since such date 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
(the 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 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 date no further options have been
granted since such date and no additional grants will be made
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 granted since such date and no additional grants
will be made under the SARs Plan.
30
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth information for each of the Named
Executive Officers with respect to their outstanding equity
awards as of December 31, 2010.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
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|
|
|
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|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
Plan Awards:
|
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|
|
|
|
|
|
Market
|
|
Incentive
|
|
Plan Awards:
|
|
|
Number of
|
|
Number of
|
|
Number
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Plan Awards:
|
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Market
|
|
|
Securities
|
|
Securities
|
|
of Securities
|
|
|
|
|
|
Shares or
|
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Shares or
|
|
Number
|
|
or Payout Value of
|
|
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Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
of Unearned Shares,
|
|
Unearned Shares,
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
Units or Other
|
|
Units or Other
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
Rights That Have
|
|
Rights That Have
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested(1)
|
|
Not Vested
|
|
Not Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)
|
|
(1)($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Stanley A. Galanski
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
29.11
|
|
|
|
2/28/14
|
|
|
|
8,334
|
(2)
|
|
|
419,617
|
|
|
|
16,667
|
(3)
|
|
|
839,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(4)
|
|
|
1,258,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,634
|
(5)
|
|
|
1,341,022
|
|
Francis W. McDonnell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,161
|
(6)
|
|
|
964,756
|
|
|
|
|
|
|
|
|
|
Michael L. Civisca
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
25.10
|
|
|
|
1/29/13
|
|
|
|
6,131
|
(7)
|
|
|
308,696
|
|
|
|
8,000
|
(8)
|
|
|
402,800
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
29.11
|
|
|
|
2/28/14
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
(9)
|
|
|
201,400
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
33.19
|
|
|
|
3/8/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen R. Coward
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
29.11
|
|
|
|
2/26/14
|
|
|
|
6,070
|
(10)
|
|
|
305,625
|
|
|
|
8,000
|
(8)
|
|
|
402,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
(9)
|
|
|
201,400
|
|
Anthony G. Martella
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(11)
|
|
|
503,500
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Market Value based on December 31, 2010 closing price of
the Companys common stock of $50.35. |
|
(2) |
|
Shares of stock vest on 9/12/11. |
|
(3) |
|
Shares of stock vest in two equal installments on 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. |
|
(4) |
|
Shares of stock vest in three equal installments on 8/6/12,
8/6/13 and 8/6/14 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. |
|
(5) |
|
Shares of stock vest on March 1, 2013 subject to meeting
corporate performance targets. For further discussion, please
see Compensation Discussion and Analysis
Chief Executive Officer Compensation above. |
|
(6) |
|
Includes 1,500 shares that vested on 3/1/2011 and a balance
of 4,500 shares that vest in three equal installments on
3/1/2012, 3/1/2013 and 3/1/2014; 720 shares that vested on
2/25/11 and a balance of 1,441 shares that will vest in two
equal installments on 2/25/12 and 2/25/13; and
11,000 shares that vest in two equal installments on 8/5/11
and 8/5/12. |
|
(7) |
|
Includes 514 shares that vested on 3/2/10;
3,334 shares that vested on 3/22/11; 493 shares that
vested on 2/11/11 and a balance of 493 shares that will
vest on 2/11/12; and 432 shares that vested on 2/25/11 and
a balance of 865 shares that will vest in two equal
installments on 2/25/12 and 2/25/13. |
|
(8) |
|
Includes 1,466 shares that vested and 1,200 shares
that were forfeited on 2/11/11 on account of corporate
performance and a balance of 5,334 shares that will vest in
two equal installments on 2/11/12 and 2/11/13, all 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. |
|
(9) |
|
Shares of stock vest in three equal installments on 3/1/13,
3/1/14 and 3/1/15 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. |
31
|
|
|
(10) |
|
Includes 462 shares that vested on 3/2/11;
3,334 shares that vested on 3/22/11; 546 shares that
vested on 2/11/11 and a balance of 546 shares that will
vest on 2/11/12; and 394 shares that vested on 2/25/11 and
a balance of 789 share that will vest in two equal
installments on 2/25/12 and 2/25/13. |
|
(11) |
|
Shares of stock that vest in four equal installments on 5/10/11,
5/10/12, 5/10/13 and 5/10/14. |
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, 2010.
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
|
|
Acquired on Vesting
|
|
Vesting (1)
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
Stanley A. Galanski
|
|
|
|
|
|
|
|
|
|
|
16,666
|
|
|
|
710,972
|
|
Francis W. McDonnell
|
|
|
|
|
|
|
|
|
|
|
6,220
|
|
|
|
270,641
|
|
Michael L. Civisca
|
|
|
|
|
|
|
|
|
|
|
5,139
|
|
|
|
204,848
|
|
Stephen R. Coward
|
|
|
|
|
|
|
|
|
|
|
5,005
|
|
|
|
199,796
|
|
Anthony G. Martella
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
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. |
32
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, 2010.
POTENTIAL
PAYMENTS UPON TERMINATION OF EMPLOYMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of
|
|
|
|
|
|
|
Cash
|
|
Medical/Welfare
|
|
Acceleration and
|
|
Total
|
|
|
Severance
|
|
Benefit
|
|
Continuation of
|
|
Termination
|
|
|
Payment
|
|
(present value)
|
|
Equity Awards
|
|
Benefits
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Stanley A. Galanski
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
725,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
725,000
|
|
Voluntary Termination
|
|
|
725,000
|
(1)
|
|
|
|
|
|
|
637,200
|
(2)
|
|
|
1,362,200
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
725,000
|
(1)
|
|
|
|
|
|
|
637,200
|
(2)
|
|
|
1,362,200
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
725,000
|
(1)
|
|
|
|
|
|
|
4,495,772
|
(3)
|
|
|
5,220,772
|
|
Termination on Death or Disability
|
|
|
|
|
|
|
|
|
|
|
4,495,772
|
(4)
|
|
|
4,495,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Francis W. McDonnell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
425,000
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
425,000
|
|
|
|
|
|
|
|
964,756
|
(3)
|
|
|
1,389,756
|
|
Termination on Death or Disability
|
|
|
|
|
|
|
|
|
|
|
964,756
|
(4)
|
|
|
964,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Civisca
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
404,050
|
(2)
|
|
|
404,050
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
404,050
|
(2)
|
|
|
404,050
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
|
|
|
|
|
|
|
|
1,316,946
|
(3)
|
|
|
1,316,946
|
|
Termination on Death or Disability
|
|
|
|
|
|
|
|
|
|
|
1,316,946
|
(4)
|
|
|
1,316,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen R. Coward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
10,620
|
(2)
|
|
|
10,620
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
10,620
|
(2)
|
|
|
10,620
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
|
|
|
|
|
|
|
|
920,445
|
(3)
|
|
|
920,445
|
|
Termination on Death or Disability
|
|
|
|
|
|
|
|
|
|
|
920,445
|
(4)
|
|
|
920,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony G. Martella
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary or Good Reason Termination after Change
in Control
|
|
|
|
|
|
|
|
|
|
|
503,500
|
(3)
|
|
|
503,500
|
|
Termination on Death or Disability
|
|
|
|
|
|
|
|
|
|
|
503,500
|
(4)
|
|
|
503,500
|
|
|
|
|
(1) |
|
This cash severance payment, as provided in
Mr. Galanskis employment agreement with the Company
and based upon Mr. Galanskis annual base salary of
$725,000 as of December 31, 2010, 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 |
33
|
|
|
|
|
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. |
|
(2) |
|
Assumes the exercise of all outstanding vested options within
90 days of the date of termination pursuant to the
Companys Amended 2005 Stock Incentive Plan and 2002 Stock
Incentive Plan, based on the December 31, 2010 closing
price of the Companys common stock of $50.35. |
|
(3) |
|
Assumes both a change of control as of December 31, 2010
and termination of employment with the Company within one year
thereafter. Under these assumptions, the Companys Amended
2005 Stock Incentive Plan provides for immediate vesting of all
outstanding restricted 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. Amounts are based on the December 31,
2010 closing price of the Companys common stock of $50.35. |
|
(4) |
|
Assumes death or an employees inability to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous
period of not less than 12 months. Under these assumptions,
the Companys Amended 2005 Stock Incentive Plan provides
for immediate vesting of all outstanding restricted 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.
Amounts are based on the December 31, 2010 closing price of
the Companys common stock of $50.35. |
Compensation
of Directors
During 2010, each director who was not an officer or employee of
the Company, other than Mr. Deeks, received an annual
payment consisting of $30,000 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 $45,000 in cash,
payable in quarterly installments. In addition, members of the
Audit Committee of the Board were paid an additional annual
retainer of $10,000. The chairmen of the Audit Committee and the
Compensation Committee were paid annual retainers of $30,000 and
$20,000, respectively. Chairmen of other Board committees did
not receive annual retainers for their services as chairmen.
Mr. Deeks, our Chairman, retired as Executive Chairman and
left the employ of the Company in May 2010. At that time, the
Compensation Committee determined to pay Mr. Deeks an
annual retainer of $325,000 per annum, payable in cash, to
provide Mr. Deeks with supplemental retiree medical
coverage and to reimburse Mr. Deeks for the cost of any
premiums paid to Medicare. Prior to his retirement,
Mr. Deeks was paid $162,500 in salary during 2010 and
participated in the various other employee benefits plans
described herein.
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 $30,000 in fully vested
restricted shares of the Companys Common Stock as part of
his annual compensation for Board service, and is required to
hold such shares for a minimum of one year. Our directors have
generally retained ownership of their Common Stock after such
restrictions have lapsed.
34
Shown below is a table that sets forth the total compensation
paid to each independent Board member for service in 2010.
Director
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
or Paid
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
in Cash
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
H. J. Mervyn Blakeney
|
|
|
45,000
|
|
|
|
30,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,187
|
(3)
|
|
|
131,196
|
|
Peter A. Cheney
|
|
|
55,000
|
|
|
|
30,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,009
|
|
Terence N. Deeks
|
|
|
162,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176,721
|
(4)
|
|
|
339,221
|
|
W. Thomas Forrester
|
|
|
75,000
|
|
|
|
30,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,009
|
|
John F. Kirby
|
|
|
66,000
|
|
|
|
30,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,009
|
|
Robert V. Mendelsohn
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
Marjorie D. Raines
|
|
|
52,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,500
|
|
Marc M. Tract
|
|
|
45,000
|
|
|
|
30,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,009
|
|
Robert F. Wright(5)
|
|
|
27,500
|
|
|
|
30,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,509
|
|
|
|
|
(1) |
|
Includes an annual cash retainer of $45,000 paid quarterly to
each director other than Mr. Deeks for 2010 Board service
in addition to annual retainer fees for the Audit Committee
chairman and members and the Compensation Committee chairman.
Effective May 26, 2010, Mr. Deeks retired as an
executive from the Company and became the non-executive Chairman
of the Board, for which he receives an annual cash retainer of
$325,000 paid quarterly. The amount reported in Column 1 for
Mr. Deeks includes the pro rata portion of his annual cash
retainer paid subsequent to such date. |
|
(2) |
|
The amounts shown in the Stock Awards column equal
the estimate of aggregate compensation costs recognized with
respect to stock awards granted in 2010 for 2009 Board service,
determined as of the grant date under FASB ASC Topic 718, and
excluding the effect of estimated forfeitures. The fair value
has been calculated using the closing price of the common stock
on December 31, 2009 ($47.11 per share). |
|
(3) |
|
The amount under All Other Compensation was paid to
Mr. Blakeney as compensation for his service on NUALs
board of directors. For a discussion of this compensation,
please see Related Party Transactions above. |
|
(4) |
|
Other Compensation paid to Mr. Deeks in 2010 includes the
base salary that he received prior to his retirement as an
executive as well as matching contributions made by the Company
pursuant to the terms of the Companys 401(k) Plan in the
amount of $6,500, payment by the Company of an annual physical
examination for Mr. Deeks in the amount of $2,825 and a
gross up amount for Medicare benefits payable by Mr. Deeks
in the amount of $4,896. |
|
(5) |
|
Mr. Wright retired as a director from the Board on
May 26, 2010. At the request of the Board, Mr. Wright
continues in the role of Director Emeritus, a non-voting Board
position. Commencing upon his retirement, Mr. Wright no
longer receives directors fees. |
35
Equity
Compensation Plan Information
The following chart includes information as of December 31,
2010 with respect to equity compensation plans where equity
securities of the Company may be issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
|
B
|
|
|
C
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
securities to be
|
|
|
|
|
|
securities
|
|
|
|
issued upon
|
|
|
|
|
|
remaining available
|
|
|
|
exercise of
|
|
|
Weighted-
|
|
|
for future issuance
|
|
|
|
outstanding
|
|
|
average exercise
|
|
|
under equity
|
|
|
|
stock options,
|
|
|
price of
|
|
|
compensation plans
|
|
|
|
warrants and
|
|
|
outstanding
|
|
|
(excluding securities
|
|
Plan Category
|
|
rights
|
|
|
stock options
|
|
|
reflected in column A)
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
157,500
|
|
|
$
|
27.13
|
|
|
|
544,829
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
157,500
|
|
|
|
|
|
|
|
544,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Consists of the Amended and Restated 2005 Stock Incentive Plan,
the 2002 Stock Incentive Plan and the Stock Option Plans. For a
description of each of these plans, please see disclosure above. |
Compensation
Committee Interlocks and Insider Participation
None of Ms. Tomlinson or Messrs. Blakeney, Forrester
or Kirby, each of the members 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.
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 three
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 2010 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, 2010 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 amended and 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.
36
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, 2010, filed with the SEC.
The Audit Committee:
Peter A. Cheney
W. Thomas Forrester (Chairman)
Marjorie D. Raines
37
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The recently enacted Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, or the Dodd-Frank Act, enables our
stockholders to vote to approve, on an advisory (nonbinding)
basis, the compensation of our named executive officers as
disclosed in this Proxy Statement in accordance with the
SECs rules.
As described in detail under the heading Compensation
Discussion and Analysis, our executive compensation
programs are designed to attract, motivate, and retain our named
executive officers, who are critical to our success. Under these
programs, our named executive officers are rewarded for the
achievement of specific annual and long-term corporate
performance targets that promote the realization of increased
stockholder value. Please read the Compensation Discussion
and Analysis included elsewhere in this Proxy Statement
for additional details about our executive compensation
programs, including information about the fiscal year 2010
compensation of our named executive officers.
We are asking our stockholders to indicate their support for our
named executive officer compensation as described in this Proxy
Statement. This proposal, commonly known as a
say-on-pay
proposal, gives our stockholders the opportunity to express
their views on our named executive officers compensation.
This vote is not intended to address any specific item of
compensation, but rather the overall compensation of our named
executive officers and the philosophy, policies and practices
described in this proxy statement. Accordingly, we will ask our
stockholders to vote FOR the following resolution at
the Annual Meeting:
RESOLVED, that the Companys stockholders approve, on
an advisory basis, the compensation of the named executive
officers, as disclosed in the Companys Proxy Statement for
the 2011 Annual Meeting of Stockholders pursuant to the
compensation disclosure rules of the Securities and Exchange
Commission, including the Compensation Discussion and Analysis,
the 2010 Summary Compensation Table and the other related tables
and disclosure.
The
say-on-pay
vote is advisory, and therefore not binding on the Company, the
Compensation Committee or our Board of Directors, nor will it
create or imply any change in the fiduciary duties of, or impose
any additional fiduciary duty on, the Company, the Compensation
Committee or the Board. However, the Compensation Committee will
take into account the outcome of the vote when considering
future executive compensation decisions.
THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE TO
APPROVE THE OVERALL COMPENSATION OF THE COMPANYS NAMED
EXECUTIVE OFFICERS BY VOTING FOR THIS
RESOLUTION.
38
PROPOSAL 3
ADVISORY VOTE ON THE FREQUENCY OF
AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables our stockholders to indicate how
frequently we should seek an advisory vote on the compensation
of our named executive officers, as disclosed pursuant to the
SECs compensation disclosure rules, such as
Proposal 2 included elsewhere in this proxy statement. By
voting on this Proposal 3, stockholders may indicate
whether they would prefer an advisory vote on named executive
officer compensation once every one, two, or three years.
After careful consideration of this Proposal, our Board of
Directors has determined that an advisory vote on executive
compensation that occurs every year is the most appropriate
alternative for the Company, and therefore our board of
directors recommends that you vote for a one-year interval for
the advisory vote on executive compensation.
In formulating its recommendation, our Board of Directors
considered that an annual advisory vote on executive
compensation will allow our stockholders to provide us with
their direct input on our compensation philosophy, policies and
practices as disclosed in the proxy statement every year. The
Board of Directors further felt that this approach is consistent
with the Companys practice of annual elections for each of
its directors. We understand that our stockholders may have
different views as to what is the best approach for the Company,
and we look forward to hearing from our stockholders on this
Proposal.
You may cast your vote on your preferred voting frequency by
choosing the option of one year, two years, three years or
abstain from voting. The option of one year, two years or three
years that receives the highest number of votes cast by
stockholders will be the frequency for the advisory vote on
executive compensation that has been selected by stockholders.
However, because this vote is advisory and not binding on the
Board of Directors or the Company in any way, the Board may
decide that it is in the best interests of our stockholders and
the Company to hold an advisory vote on executive compensation
more or less frequently than the option approved by our
stockholders.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE OPTION OF ONCE EVERY YEAR
AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE PROVIDED AN
ADVISORY VOTE ON EXECUTIVE COMPENSATION.
39
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, 2011 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 2010 and 2009,
and fees billed for other services rendered by KPMG LLP related
to those periods.
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Audit Fees(1)
|
|
$
|
1,569,505
|
|
|
$
|
1,706,580
|
|
Audit Related Fees(2)
|
|
|
|
|
|
|
5,000
|
|
Tax Fees(3)
|
|
|
126,615
|
|
|
|
132,463
|
|
Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,696,120
|
|
|
$
|
1,844,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 for 2009 included providing a consent for the
filing of the Companys
Form S-3
with the Securities and Exchange Commission. |
|
(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.
40
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.
Stockholders are entitled to one vote per share on all matters
submitted for consideration at the Annual Meeting. If you own
shares through a bank or broker in street name, you may instruct
your bank or broker how to vote your shares. A broker
non-vote occurs when you fail to provide your bank or
broker with voting instructions and the bank or broker does not
have the discretionary authority to vote your shares on a
particular proposal because the proposal is not a routine matter
under the applicable rules. Proposals 1, 2 and 3 are not
considered routine matters under applicable rules, so your bank
or broker will not have discretionary authority to vote your
shares held in street name on those items. Abstentions and
broker non-votes count for quorum purposes, but not for the
voting of these proposals. A broker non-vote may also occur if
your broker fails to vote your shares for any reason.
Proposal 4 (ratification of the appointment of our
independent registered public accounting firm) is considered a
routine matter, so your bank or broker will have discretionary
authority to vote your shares held in street name on that item.
Inspectors of election appointed for the annual meeting will
tabulate all votes cast in person or by proxy at the annual
meeting. In the event a quorum is not present at the annual
meeting, we expect that the annual meeting will be adjourned or
postponed to solicit additional proxies.
The following table indicates the vote required for approval of
each item to be presented to the stockholders at the annual
meeting and the effect of withhold votes,
abstentions, and broker non-votes.
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Withhold Votes,
|
Item
|
|
|
Required Vote
|
|
|
Abstentions, Broker Non-Votes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 1 Election of Directors
|
|
|
Affirmative vote of a majority of the shares of common stock
present and voting.
|
|
|
Withhold votes will have the effect of
a vote AGAINST the election of directors.
Broker non-votes will have no effect on the voting
for the election of directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2 Advisory Vote on Executive Compensation
|
|
|
Affirmative vote of a majority of the shares of common stock
present and voting.
|
|
|
Abstentions will have the effect of a vote AGAINST
this proposal.
Broker non-votes will have no effect on the voting
for this item.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 3 Advisory Vote on Frequency of Advisory Vote
on Executive Compensation
|
|
|
Affirmative vote of a plurality of the shares of common stock
present and voting.
|
|
|
Abstentions will have no effect on the voting for
this item.
Broker non-votes will have no effect on the voting
for this item.
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Withhold Votes,
|
Item
|
|
|
Required Vote
|
|
|
Abstentions, Broker Non-Votes
|
|
|
|
|
|
|
|
Item 4 Ratification of the appointment of KPMG LLP
as the Corporations independent registered public
accounting firm for fiscal year 2011
|
|
|
Affirmative vote of a majority of the shares of common stock
present and voting.
|
|
|
Abstentions will have the effect of a vote AGAINST
ratification.
Broker non-votes will have no effect on the voting
for this item.
|
|
|
|
|
|
|
|
If you sign and return your proxy card or complete the Internet
or telephone voting procedures, but do not specify how you want
to vote your shares, we will vote them as follows:
|
|
|
|
|
FOR each of the director nominees (Proposal 1);
|
|
|
|
FOR the approval, on an advisory basis, of the
compensation of our named executive officers (Proposal 2);
|
|
|
|
FOR the approval, on an advisory basis, of an annual
advisory vote on executive compensation
(Proposal 3); and
|
|
|
|
FOR ratification of the Boards appointment of KPMG
LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2011 (Proposal 4).
|
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, other than certain Forms 3 for
newly appointed executive officers filed in April 2010, which
were filed four days late on account of a technical filing
issue, based solely on review of the copies of such reports
furnished to us and written representations that no further
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.
Stockholders
Proposals and Communications
Any proposal by a Stockholder of the Company intended to be
presented at the 2012 Annual Meeting of Stockholders must be
received by the Company at its principal administrative office
no later than December 15, 2011 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,
42
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 2010 WHICH IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES
THERETO. The
Form 10-K
Annual Report for 2010 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: 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 Investor
Relations 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
Bruce J. Byrnes
Secretary
Rye Brook, New York
April 13, 2011
43
THE NAVIGATORS GROUP, INC.
6 INTERNATIONAL DRIVE
RYE BROOK, NY 10573
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions
and for electronic delivery of information up until
11:59 P.M. Eastern Time 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.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our
company 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 proxy materials electronically in future
years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to
Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY |
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For
All
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Withhold
All
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For All
Except
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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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The Board of Directors recommends you vote
FOR the following: |
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1.
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Election of Directors |
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Nominees |
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01
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H.J. Mervyn Blakeney
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02
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Terence N. Deeks
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W. Thomas Forrester
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Stanley A. Galanski
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Geoffrey E. Johnson |
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John F. Kirby
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Robert V. Mendelsohn
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Marjorie D. Raines
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09
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Janice C. Tomlinson
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Marc M. Tract |
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The Board of Directors recommends you vote FOR the following proposal: |
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For |
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Abstain |
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2.
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Approval of the advisory resolution on executive compensation.
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The Board of Directors recommends you vote 1 YEAR on the following proposal: |
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1 year |
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2 years |
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3 years |
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Abstain |
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3.
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Recommendation, by non-binding vote, of the frequency of future executive compensation advisory votes.
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The Board of Directors recommends you vote FOR the following proposal: |
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Abstain |
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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 2011.
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Please sign exactly as your name
(s) appear(s) hereon. When
signing as attorney, executor, administrator, or other
fiduciary, please give full title as such. Joint owners should
each sign personally. All holders must sign. If a corporation
or partnership, please sign in full corporate or partnership
name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The
Annual Report, Notice & Proxy Statement is/ are available at www.proxyvote.com.
THE NAVIGATORS GROUP, INC.
6 International Drive
Rye Brook, New York 10573
PROXY FOR THE MAY 26, 2011 ANNUAL MEETING OF STOCKHOLDERS
Bruce J. Byrnes and Emily B. Miner, 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., Thursday, May 26, 2011, 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, 4, AND FOR ONE YEAR WITH RESPECT TO PROPOSAL 3.
Continued and to be signed on reverse side