UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
SCHEDULE
14A
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
¨
Check the
appropriate box:
o
Preliminary
proxy statement
¨
Confidential, for use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive
Proxy Statement
¨
Definitive
Additional Materials
¨
Soliciting
Material Pursuant to §240.14a-12
SELECTIVE INSURANCE 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):
x
No fee
required.
¨
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transactions
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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Fee
paid previously with preliminary
materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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Selective
Insurance Group, Inc.
40
Wantage Avenue
Branchville,
New Jersey 07890
(973)
948-3000
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March
25, 2010
NOTICE
OF 2010 ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
April
28, 2010
The 2010
Annual Meeting of Stockholders of Selective Insurance Group, Inc. (“Selective”)
will be held at 3:00 PM Eastern Time on Wednesday, April 28, 2010, in the
Auditorium at Selective’s principal offices, which have both a physical and
mailing address of 40 Wantage Avenue, Branchville, New Jersey
07890.
At the
meeting, we will ask stockholders to:
1.
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Approve
amendments to Selective’s Restated Certificate of Incorporation and
By-Laws to eliminate the classified Board over a period of three
years;
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2.
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Elect
four Class I directors for a one-year term expiring in 2011 if Proposal 1
is approved or for a three-year term expiring in 2013 if Proposal 1 is not
approved;
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3.
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Approve
an amendment and restatement of the Selective Insurance Group, Inc. 2005
Omnibus Stock Plan to, among other things, increase the number of shares
issuable under such plan, provide that awards may be granted to
consultants and service providers of subsidiaries of Selective that are
less than 80% owned by Selective, and approve and reapprove the
performance goals under the plan for purposes of Section 162(m) of the
Internal Revenue Code;
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4.
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Approve
an amendment and restatement of the Selective Insurance Group, Inc. Cash
Incentive Plan and approve and reapprove the performance goals under the
plan for purposes of Section 162(m) of the Internal Revenue Code;
and
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5.
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Ratify
the appointment of KPMG LLP as our independent registered public
accounting firm for the fiscal year ending December 31,
2010.
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We plan a
brief business meeting focused on these items and we will attend to any other
business as may properly come before the meeting and at any adjournments or
postponements of the meeting.
The Board of Directors recommends
that you vote in favor of Items 1, 2, 3, 4, and 5.
These
proposals are further described in the proxy statement.
Also
enclosed is Selective's 2009 Annual Report to Stockholders. At the
meeting, we will be making a brief presentation on operations and we will offer
time for your comments and questions.
Selective
stockholders of record at the close of business on March 5, 2010 are entitled to
notice of and to vote at the meeting and any adjournment of it. A
quorum is a majority of outstanding shares. YOUR VOTE IS
IMPORTANT. WE URGE YOU TO VOTE YOUR SHARES BY: (1) CALLING THE
TOLL-FREE TELEPHONE NUMBER LISTED ON THE PROXY CARD; (2) ACCESSING THE INTERNET
WEBSITE LISTED ON THE PROXY CARD; OR (3) COMPLETING, DATING, AND SIGNING THE
PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE. YOUR PROXY MAY
BE REVOKED AT ANY TIME, AS DESCRIBED IN THE PROXY STATEMENT, PRIOR TO THE TIME
IT IS VOTED AT THE 2010 ANNUAL MEETING.
Very
truly yours,
Gregory
E. Murphy
Chairman
of the Board, President and Chief Executive Officer
By Order
of the Board of Directors:
Robyn P.
Turner
Corporate
Secretary
TABLE
OF CONTENTS
PROXY
STATEMENT
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2
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GENERAL
INFORMATION ABOUT SELECTIVE’S ANNUAL MEETING
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2
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PROPOSALS
FOR STOCKHOLDER VOTE AND APPROVAL REQUIREMENTS
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3
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OTHER
MATTERS TO COME BEFORE THE ANNUAL MEETING
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5
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VOTING
AND PROXY PROCEDURE
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5
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IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING
OF
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STOCKHOLDERS
TO BE HELD ON APRIL 28, 2010
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6
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INFORMATION
ABOUT PROPOSAL 1
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6
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INFORMATION
ABOUT PROPOSAL 2
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8
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SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
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17
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EXECUTIVE
OFFICERS
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18
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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18
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SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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20
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CORPORATE
GOVERNANCE
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20
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BOARD
MEETINGS AND COMMITTEES
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20
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RISK
MANAGEMENT
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23
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STOCKHOLDER
COMMUNICATIONS
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24
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CODE
OF CONDUCT
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24
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EXECUTIVE
COMPENSATION
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25
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COMPENSATION
DISCUSSION AND ANALYSIS
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25
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Summary
Compensation Table
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37
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Grants
of Plan Based Awards
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39
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Outstanding
Equity Awards at Fiscal Year End
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40
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Option
Exercises and Stock Vested
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41
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Pension
Benefits
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42
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Nonqualified
Deferred Compensation
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43
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Employment
Agreements and Potential Payments upon Termination or Change of
Control
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44
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DIRECTOR
COMPENSATION
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46
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COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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47
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COMPENSATION
COMMITTEE REPORT
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47
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INFORMATION
ABOUT PROPOSAL 3
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48
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INFORMATION
ABOUT PROPOSAL 4
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53
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INFORMATION
ABOUT PROPOSAL 5
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57
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FEES
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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57
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AUDIT
COMMITTEE REPORT
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58
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STOCKHOLDER
PROPOSALS AND NOMINATIONS
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59
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DOCUMENTS
INCORPORATED BY REFERENCE
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61
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AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION OF SELECTIVE INSURANCE GROUP,
INC.
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A-1
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BY-LAWS
OF SELECTIVE INSURANCE GROUP, INC.
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B-1
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SELECTIVE
INSURANCE GROUP, INC. 2005 OMNIBUS STOCK PLAN
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C-1
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SELECTIVE
INSURANCE GROUP, INC. CASH INCENTIVE PLAN
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D-1
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PROXY
STATEMENT
FOR
THE 2010 ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD APRIL 28, 2010
GENERAL
INFORMATION ABOUT SELECTIVE’S ANNUAL MEETING
WHEN AND WHERE IS THE ANNUAL
MEETING?
The 2010
Annual Meeting of Stockholders (the “Annual Meeting”) of Selective Insurance
Group, Inc. (“Selective” or the “Company”) will be held on Wednesday, April 28,
2010, at 3:00 PM Eastern Time in the Auditorium at Selective’s principal offices
at 40 Wantage Avenue, Branchville, New Jersey 07890. Directions are
on the back of this Proxy Statement.
WHEN WAS THIS PROXY
STATEMENT MAILED?
This
Proxy Statement is being mailed to stockholders on or about March 25,
2010.
WHO IS ENTITLED TO VOTE AT
THE ANNUAL MEETING?
Anyone
who owned Selective common stock as of the close of business on March 5, 2010,
is entitled to one vote per share owned. There were 53,250,772
shares outstanding at the close of business on that date.
WHO IS SOLICITING MY PROXY
TO VOTE MY SHARES AND WHEN?
Selective’s Board of Directors
(“Board of Directors” or the “Board”) is soliciting your “proxy,” or your
authorization for our named proxies, A. David Brown and J. Brian Thebault, to
vote your shares.
Unless revoked by you, your proxy will be effective for
the Annual Meeting and for any adjournments or continuations of that
meeting.
WHAT IS THE COST OF
SOLICITING PROXIES AND WHO IS PAYING FOR THE COST?
Selective
is bearing the entire cost of soliciting proxies. Proxies will be
solicited principally through the mail, but may also be solicited personally or
by telephone, or special letter by directors, officers, and regular Selective
employees for no additional compensation. Selective has engaged
Georgeson Inc. (“Georgeson”), a proxy solicitation firm, to assist in the
solicitation of proxies and the distribution of proxy materials, including
reviewing Selective’s proxy materials, disseminating broker search cards,
soliciting a proxy service company, brokers, banks, and institutional holders,
and delivering executed proxies. Georgeson will provide such services
for an estimated fee of approximately $12,500 plus
expenses. Selective will reimburse banks, brokerage firms, and other
custodians, nominees, and fiduciaries for reasonable expenses incurred by them
in sending proxy materials to their customers or principals who are the
beneficial owners of shares of Selective common stock.
WHAT ARE THE REQUIREMENTS
FOR BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING?
For
business to be conducted at the Annual Meeting, owners of 26,625,387 shares
of Selective common stock (a majority of the issued and outstanding shares
entitled to vote) constituting a quorum, must be in attendance or represented by
proxy.
PROPOSALS
FOR STOCKHOLDER VOTE AND APPROVAL REQUIREMENTS
Management
is presenting five proposals for a stockholder vote.
PROPOSAL
1:
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AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION AND THE
BY-LAWS
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THE BOARD
RECOMMENDS THAT YOU VOTE
FOR
THE AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION AND THE
BY-LAWS TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS AND TO ELIMINATE THE
CLASSIFIED BOARD OVER A PERIOD OF THREE YEARS.
You can
find information about the amendments to Selective’s Restated Certificate of
Incorporation and By-Laws beginning on page 6.
New
Jersey law and Selective’s By-Laws govern the vote on Proposal 1, on which you
may:
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§
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Vote
in favor of Proposal 1;
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§
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Vote
against Proposal 1; or
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Since
these amendments alter Article Seventh of the Restated Certificate of
Incorporation, as amended, and Sections 7A and 7B of the By-Laws, the amendments
must receive the affirmative vote of 66 2/3% or more of the voting power of all
of the shares of Selective entitled to vote generally in the election of
directors, voting together as a single class. Abstentions are the
same as a vote "against" Proposal 1.
PROPOSAL
2.
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ELECTION OF
DIRECTORS
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THE BOARD
RECOMMENDS THAT YOU VOTE
FOR
THE FOLLOWING FOUR NOMINATED DIRECTORS FOR A TERM OF ONE YEAR IF PROPOSAL 1 IS
APPROVED, OR THREE YEARS IF PROPOSAL 1 IS NOT APPROVED: W. MARSTON
BECKER, GREGORY E. MURPHY, CYNTHIA S. NICHOLSON, AND WILLIAM M.
RUE.
You can
find information about these nominees, as well as information about Selective’s
Board of Directors, its committees, compensation for directors, and other
related matters beginning on page 8.
New
Jersey law and Selective’s By-Laws govern the vote on Proposal 2, on which you
may:
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§
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Vote
in favor of all the nominees;
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§
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Withhold
your votes as to all nominees; or
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§
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Withhold
your votes as to specific nominees.
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Assuming
a quorum is present, a candidate must receive a plurality of the votes cast at
the Annual Meeting in person or by proxy to be elected. Stockholders
may not cumulate their votes. Abstentions and broker non-votes will
have no effect on the outcome of the vote.
PROPOSAL
3.
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APPROVE THE AMENDMENT
AND RESTATEMENT OF THE SELECTIVE INSURANCE GROUP, INC. 2005 OMNIBUS STOCK
PLAN TO, AMONG OTHER THINGS, INCREASE THE NUMBER OF SHARES ISSUABLE UNDER
SUCH PLAN, PROVIDE THAT AWARDS MAY BE GRANTED TO CONSULTANTS AND SERVICE
PROVIDERS TO CERTAIN SUBSIDIARIES OF SELECTIVE, AND TO APPROVE AND
REAPPROVE THE PERFORMANCE GOALS SET OUT IN THE
PLAN
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THE BOARD
RECOMMENDS THAT YOU VOTE
FOR
THE AMENDMENT AND RESTATEMENT OF THE SELECTIVE INSURANCE GROUP, INC. 2005
OMNIBUS STOCK PLAN.
You can
find information about the amendment and restatement of the Selective Insurance
Group, Inc. 2005 Omnibus Stock Plan beginning on page 48.
New
Jersey law and Selective’s By-Laws govern the vote on Proposal 3, on which you
may:
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§
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Vote
in favor of Proposal 3;
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§
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Vote
against Proposal 3; or
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Assuming
a quorum is present, Proposal 3 will pass if approved by an affirmative vote of
a majority of votes cast at the Annual Meeting. Under New Jersey law,
in determining whether the proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will not be counted as votes
and, accordingly, will have no effect on the outcome of the vote. A
majority of votes cast is also required to approve Proposal 3 for purposes of
Sections 162(m) and 422 of the Internal Revenue Code of 1986, as amended
(“Internal Revenue Code”).
PROPOSAL
4.
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APPROVE THE AMENDMENT
AND RESTATEMENT OF THE SELECTIVE INSURANCE GROUP, INC. CASH INCENTIVE PLAN
AND APPROVE AND REAPPROVE THE PERFORMANCE GOALS SET OUT IN THE CASH
INCENTIVE PLAN
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THE BOARD
RECOMMENDS THAT YOU VOTE
FOR
THE AMENDMENT AND RESTATEMENT OF THE SELECTIVE INSURANCE GROUP, INC. CASH
INCENTIVE PLAN
You can
find information about the amendment and restatement of the Selective Insurance
Group, Inc. Cash Incentive Plan beginning on page 53.
New
Jersey law and Selective’s By-Laws govern the vote on Proposal 4, on which you
may:
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§
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Vote
in favor of Proposal 4;
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§
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Vote
against Proposal 4; or
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Assuming
a quorum is present, Proposal 4 will pass if approved by an affirmative vote of
a majority of votes cast at the Annual Meeting. Under New Jersey law,
in determining whether the proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will not be counted as votes
and, accordingly, will have no effect on the outcome of the vote. A
majority of votes cast is also required to approve Proposal 4 for purposes of
Section 162(m) of the Internal Revenue Code.
PROPOSAL
5.
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RATIFICATION OF
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
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THE BOARD
RECOMMENDS THAT YOU VOTE
FOR
THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31,
2010.
You can
find information about Selective’s relationship with KPMG LLP beginning on page
57.
New
Jersey law and Selective’s By-Laws govern the vote on Proposal 5, on which you
may:
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§
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Vote
in favor of Proposal 5;
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§
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Vote
against Proposal 5; or
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Assuming
a quorum is present, Proposal 5 will pass if approved by an affirmative vote of
a majority of the votes cast at the Annual Meeting. Under New Jersey
law, in determining whether the proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will not be counted as votes
cast and, accordingly, will have no effect on the outcome of the
vote.
OTHER
MATTERS TO COME BEFORE THE ANNUAL MEETING
The Board
of Directors is not aware of any other business to be presented for a vote of
the stockholders at the Annual Meeting. If any other matters are
properly presented for a vote, the people named as proxies will have
discretionary authority, to the extent permitted by applicable law and NASDAQ
Stock Market (“NASDAQ”) and United States Securities and Exchange Commission
(“SEC”) rules and regulations, to vote on such matters according to their best
judgment.
The
Chairman of the Annual Meeting may refuse to allow presentation of a proposal or
nominee for the Board of Directors if the proposal or nominee is not properly
submitted. The requirements for submitting proposals and nominations
for this year’s meeting were set forth in the proxy statement for our 2009
Annual Meeting of Stockholders under the heading "Stockholder Proposals and
Nominations".
VOTING
AND PROXY PROCEDURE
HOW DO I
VOTE?
You can
vote four ways:
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1.
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BY
MAIL
. Mark your voting instructions on, then sign and
date the proxy card. Then return the proxy card in the
postage-paid envelope provided. If you mail your proxy card, we
must receive it before the beginning of the
meeting.
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If we
receive your signed proxy card, but you do not give voting instructions, the
named proxies will vote your shares FOR Proposals 1, 2, 3, 4, and
5. If any other matters arise during the meeting which require a
vote, the named proxies will exercise their discretion, to the extent permitted
by applicable law and NASDAQ and SEC rules and regulations.
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2.
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BY
TELEPHONE
. Call the toll-free number on your proxy card
to vote by telephone. Follow the instructions on your proxy
card and the voice prompts. IF YOU VOTE BY TELEPHONE, YOU DO
NOT NEED TO RETURN YOUR PROXY CARD.
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3.
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BY
INTERNET
. Go to the website listed on your proxy card to
vote through the Internet. Follow the instructions on your
proxy card and the website. If you vote through the Internet, you may
incur telephone and/or Internet access charges from your service
providers. IF YOU VOTE BY INTERNET, YOU DO NOT NEED TO RETURN
YOUR PROXY CARD.
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4.
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IN
PERSON
. Attend the Annual Meeting, or send a personal
representative with an appropriate proxy, in order to
vote.
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HOW DO I REVOKE MY PROXY OR
CHANGE MY VOTING INSTRUCTIONS?
You may
revoke your proxy before the proxy is exercised by writing to Selective’s
Corporate Secretary, Robyn P. Turner, at the address in the meeting notice on
the cover of this Proxy Statement. You may also change your vote
before the proxy is exercised by entering a new vote via the Internet, by
telephone, or by returning a properly executed proxy bearing a later
date. Any subsequent timely and valid vote by any means will change
your prior vote. For example, if you voted by telephone, a subsequent
Internet vote will change your vote. The last vote received before
noon central time on April 27, 2010 will be the vote that is counted, except
that you may also change your vote by voting in person at the Annual
Meeting.
HOW WILL PROXIES BE VOTED IF
I GIVE MY AUTHORIZATION?
If you
properly execute your proxy on the accompanying form and return it to Selective
or submit your proxy by telephone or Internet, and do not subsequently revoke
your proxy, your shares of common stock will be voted at the Annual Meeting in
accordance with your instructions. In the absence of instructions,
the named proxies will vote your shares “FOR” Proposals 1, 2, 3, 4, and
5. If other matters should properly come before the meeting, the
named proxies will vote on such matters, to the extent permitted by applicable
law and NASDAQ and SEC rules and regulations, in accordance with their best
judgment.
HOW WILL VOTES BE
COUNTED?
The
inspectors of elections appointed for the Annual Meeting by the Board of
Directors will separately tabulate affirmative and negative votes, abstentions
and broker non-votes (shares held by a broker, bank or other nominee that does
not have authority, either express or discretionary, to vote on a particular
matter). Shares represented by proxies that reflect abstentions and
broker non-votes are counted for determining whether there is a
quorum. Brokers may exercise their discretionary voting power for
Proposals 1 and 5.
Approval
of Proposal 1 requires the affirmative vote of 66 2/3% of the outstanding shares
of Selective. For Proposal 2, abstentions and broker non-votes will
not be considered in determining whether director nominees have received the
requisite number of affirmative votes. Approval of Proposals 3, 4,
and 5 requires the affirmative vote of a majority of votes cast at the Annual
Meeting. Abstentions and broker non-votes have no effect on the
outcome of Proposals 3 and 4. Abstentions are the same as a vote
"against" Proposal 1 but have no effect on Proposal 5.
WHAT IF MY SHARES ARE NOT
REGISTERED IN MY NAME?
If you
own your shares in “street name,” meaning that your broker is actually the
record owner, you should contact your broker. When a broker does not
have voting instructions and withholds its vote on one of these matters, it is
called a “broker non-vote.” Broker non-votes count toward a quorum,
but otherwise do not affect the outcome of any proposal.
IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR
THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 2010
This
Proxy Statement is available on Selective’s internet website at
www.selective.com
.
INFORMATION
ABOUT PROPOSAL 1
Amendment
of the Restated Certificate of Incorporation and the By-Laws
Article
Seventh of our Restated Certificate of Incorporation and Section 7A of our
By-Laws establish three classes of Directors (Class I, Class II, and Class III)
with terms of three years each. Each year, our stockholders are
requested to elect the directors comprising one of the classes. The
term of the Class I directors is scheduled to expire at the 2010 Annual
Meeting. The term of the Class III directors is scheduled to
expire in 2011 and the term of the Class II directors is scheduled to
expire in 2012. Because of the classified Board structure,
stockholders have the opportunity to vote on only roughly one-third of the
directors each year.
At the
2009 Annual Meeting, a stockholder proposal requesting that the Board take the
necessary steps to declassify the Board was approved by
stockholders. Our Board of Directors has unanimously approved,
declared it advisable for the stockholders to adopt, and is proposing to the
stockholders for approval, the following:
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·
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Amendments
to Article Seventh and the deletion of Article Ninth of our Restated
Certificate of Incorporation, as amended, with the amendments and
revisions all incorporated into an amended and restated Certificate of
Incorporation (the “Charter”); and
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|
·
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Amendments
to Sections 7A and 7B of our By-Laws to declassify the Board of Directors
and phase in annual voting for each Director to serve a one-year
term.
|
If
approved by the stockholders, the amended and restated Charter will become
effective upon filing with the Treasurer of the State of New
Jersey. We intend to file the amended and restated Charter promptly
after stockholder approval is obtained. The amendment to our By-Laws
will be effective upon approval by the stockholders.
If
approved by the stockholders, the amendments will phase the declassification of
the Board over the next two years and the Board will not be fully declassified
until after the 2012 Annual Meeting. Directors elected before the
amendments are effective (which include all of our current directors) will stand
for election for one-year terms once their then-current terms
expire. The term of the current Class I directors (W. Marston Becker,
Gregory E. Murphy, Cynthia S. Nicholson, and William M. Rue) expires at the 2010
Annual Meeting. These directors will stand for election to a one-year
term at this Annual Meeting, if the amendments are approved, or a three-year
term, if the amendments are not approved. The Board of Directors
recommends the stockholders vote to elect Messrs. Becker, Murphy, and Rue and
Ms. Nicholson.
If the
amendments are approved, the eligible Class III directors (Paul A. Bauer, John
C. Burville, Michael J. Morrissey, Ronald L. O’Kelley, and Joan M. Lamm-Tennant)
will stand for election to a one-year term at the 2011 Annual Meeting, and the
eligible Class II directors (A. David Brown and J. Brian Thebault) will stand
for election to a one-year term at the 2012 Annual Meeting. S.
Griffin McClellan III will not be eligible to stand for election at the 2012
Annual Meeting because he will have surpassed the age of eligibility for
election as a director.
At every
subsequent annual meeting of stockholders thereafter, all directors will serve
for one-year terms and the Board will be fully declassified. As
amended, Section 7B of our By-Laws will provide that any director chosen as a
result of a newly created directorship or to fill a vacancy on the Board after
the 2010 Annual Meeting will hold office for a term expiring at the next annual
meeting of stockholders. In all cases, each director will hold office
until a successor has been elected and qualified or the director’s earlier
resignation or removal.
Article
Ninth of our Charter currently provides that our Directors may be removed only
for cause. Under New Jersey corporate law:
|
·
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Directors
of a company with a classified Board structure may only be removed by
stockholders for cause unless its certificate of incorporation provides
otherwise; and
|
|
·
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Directors
of a company without a classified Board structure may be removed for cause
or without cause unless otherwise provided in the certificate of
incorporation.
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The Board
of Directors proposes to only permit a director to be removed for cause by
deleting Article Ninth and by including in Article Seventh a limitation
specifying that, except as otherwise required by law, stockholders can only
remove a director from office for cause before the director’s term expires or
otherwise terminates. The Board of Directors also proposes to add to
Section 7B of our By-Laws a similar requirement that except as otherwise
required by law, until a director’s term expires or otherwise terminates, the
Director may only be removed from office by the Company's stockholders for
cause.
The form
of the proposed amended and restated Charter is attached to this Proxy Statement
as
Appendix A,
and the amended and restated By-Laws are attached to this Proxy Statement as
Appendix
B
. The amended and restated By-Laws are marked to show all
substantive changes, but clerical changes and corrections are not
highlighted.
Required
Vote
Pursuant
to the Charter and By-Laws, the affirmative vote of 66 2/3% or more of the
voting power of all of the shares of Selective entitled to vote generally in the
election of directors, voting together as a single class, is required to approve
this Proposal 1.
Reasons
for the Proposal
The Board
of Directors is committed to good corporate governance. Accordingly,
in determining whether to propose the declassification of the Board, the Board
carefully reviewed the various arguments for and against a classified Board
structure.
In
formulating its recommendation, the Board considered the view of some
stockholders who believe that classified boards have the effect of reducing the
accountability of directors to stockholders because classified boards limit the
ability of stockholders to evaluate and elect all directors on an annual
basis. The Board also gave considerable weight to the overwhelming
approval at the 2009 Annual Meeting of a stockholder proposal requesting that
the Board take the necessary steps to declassify the Board. The
election of directors is the primary means for stockholders to influence
corporate governance policies. The Board believes that implementing
annual elections for all Directors would support our ongoing effort to adopt
“best practices” in corporate governance as the Board noted that many U.S.
public companies have eliminated their classified Board structures in recent
years.
The Board
recognizes that a classified structure may offer several advantages, such as
promoting continuity and stability in the management of the business and affairs
of a company because a majority of directors always have prior experience as
directors of the company. Proponents of classified boards also assert
that such a structure reduces a company's vulnerability to coercive takeover
tactics, forcing an entity seeking control of a target company to initiate
arms-length discussions with the target's board because it cannot replace the
entire board in a single election. While the Board recognizes these
potential benefits, it also notes that even without a staggered board, we have
other means to compel a takeover bidder to negotiate with the Board, including
certain supermajority voting requirements in our Charter, our proposed retention
of the limitation on directors' removal only for cause and certain provisions of
New Jersey law.
In view
of these considerations and with the recommendation of the Corporate Governance
and Nominating Committee, the Board of Directors determined that it is in the
best interests of the Company and our stockholders to eliminate the classified
board structure. The Corporate Governance and Nominating Committee
and the Board also determined that the declassification should be implemented in
stages to ensure a smooth transition and to not shorten the terms of the
directors elected at the prior annual meetings. With the
recommendation of the Corporate Governance and Nominating Committee, the Board
adopted and declared advisable: (i) the proposed amended and restated
Charter, attached as
Appendix A
to
this Proxy Statement, to be effective upon its filing with the Treasurer of the
State of New Jersey; and (ii) the amendments to Sections 7A and 7B of the
By-Laws as reflected in
Appendix B
to this
Proxy Statement, to be effective immediately upon stockholder
approval. The Board believes that by taking this action, it can
provide stockholders further assurance that the directors are accountable to
stockholders while maintaining appropriate defenses to respond to inadequate
takeover bids.
Board
Recommendation
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “
FOR
”
THE PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION AND THE BY-LAWS
TO DECLASSIFY THE BOARD.
INFORMATION
ABOUT PROPOSAL 2
Election
of Directors
Selective’s
Board of Directors currently has 12 members and is divided into three classes
designated Class I, Class II, and Class III. Pursuant to Selective’s
Restated Certificate of Incorporation, as amended, and its By-Laws, Selective
may have a minimum of seven and a maximum of 20 directors. By
majority vote, the Board of Directors may set the number of directors within
this range at any time.
Relationship
of Proposal 2 to Proposal 1
As
discussed in Proposal 1, the stockholders are being asked to approve and adopt
amendments to our Charter and By-Laws to declassify our Board of
Directors. Because the Class I directors are nominated for election
at the 2010 Annual Meeting, if they are elected and Proposal 1 is approved, the
Class I directors will be elected for one-year terms at the 2010 Annual
Meeting. If Proposal 1 is not approved, however, the Class I
directors (if elected) will serve for three-year terms to expire at our 2013
annual meeting of stockholders.
Process
for Review and Nomination of Director Candidates:
The
Corporate Governance and Nominating Committee is responsible for the review and
nomination of candidates to the Board of Directors
1
. The Corporate
Governance and Nominating Committee seeks director candidates and reviews them
for possible nomination and election to the Board from any source,
including:
|
·
|
Directors
and management;
|
|
·
|
Third
party search firms that the Corporate Governance and Nominating Committee
may engage; and
|
Any
stockholder proposing Board candidate(s) must submit in writing all information
required to be disclosed pursuant to Regulation 14A under the Exchange Act in a
solicitation of proxies for the election of a director to the Chairman of the
Corporate Governance and Nominating Committee, c/o Corporate Secretary, 40
Wantage Avenue, Branchville, NJ 07890.
Regardless
of source, the Corporate Governance and Nominating Committee evaluates all
candidates based on, among other things, the following standards:
|
·
|
Personal
and professional ethics, integrity, character, and
values;
|
|
·
|
Professional
and personal experience;
|
|
·
|
Independence
and avoidance or limitation of potential or actual conflicts of
interest;
|
|
·
|
Dedication
and commitment to representing the long-term interests of Selective and
its stockholders;
|
|
·
|
Willingness
to dedicate and devote sufficient time to Board duties and
activities;
|
|
·
|
Other
appropriate and relevant factors, including the qualification and skills
of the current members of the Board;
and
|
Although
Selective has no formal diversity policy, its Corporate Governance Guidelines
provide that the composition of the Board should encompass a broad range of
skills, expertise, industry knowledge, and diversity of
opinion. Accordingly, diversity of thought, experience, gender, race,
and ethnic background are greatly considered in the director evaluation
process.
Director
Nominees
No family
relationships exist between any of Selective’s current directors, executive
officers, and persons nominated by Selective to become a director.
The Board
has ratified the Corporate Governance and Nominating Committee’s nomination of
the following four incumbent Class I directors to stand for election at the 2010
Annual Meeting for terms expiring at the 2011 Annual Meeting if Proposal 1 is
approved or at the 2013 Annual Meeting if Proposal
1
See chart on page 21 for
further discussion of the Corporate Governance and Nominating Committee’s other
responsibilities.
1 is not approved or until a successor has been duly elected and
qualified: W. Marston Becker, Gregory E. Murphy, Cynthia S.
Nicholson, and William M. Rue.
All four
nominees have consented to being named in this Proxy Statement and to serving if
elected and the Board does not know of any reason why any of these nominees
would decline or be unable to serve if elected. If a nominee becomes
unavailable or unable to serve before the Annual Meeting, the Board can either
reduce its size or designate a substitute nominee. If the Board
designates a substitute nominee, proxies that would have been cast for the
original nominee will be cast for the substitute nominee unless instructions are
given to the contrary.
NOMINEES
OF THE BOARD OF DIRECTORS
CLASS
I –
Directors
Nominated to Continue in Office Until the 2011 Annual Meeting of
Stockholders If Proposal 1 is Approved, or Until the 2013 Annual Meeting
of Stockholders If Proposal 1 is Not
Approved
|
Name, Age, Year Elected to
Board of Directors
|
|
Occupation and
Background
|
W.
Marston Becker
,
57
Independent
Director, 2006
|
|
·
|
Chairman
and Chief Executive Officer, Max Capital Group Ltd., since October 2006;
Director, since 2004.
|
|
|
·
|
Chairman
and General Partner of West Virginia Media Holdings, since
2001.
|
|
|
·
|
Chairman
and Chief Executive Officer of LaSalle Re Holdings Ltd., 2002 to
2008. In August 2003, LaSalle Re Holdings Limited and its
affiliate Trenwick Group Ltd. filed for protection under Chapter 11 of the
U.S. Bankruptcy Code.
|
|
|
·
|
Director,
BrickStreet Mutual Insurance Company, since 2008.
|
|
|
·
|
Director,
Dorado Insurance, Ltd., since 2007.
|
|
|
·
|
Director,
Coal Contractors Insurance, Ltd., since 2002.
|
|
|
·
|
Chairman
and Chief Executive Officer, Trenwick Group, Ltd., 2002 to 2005; Director,
Trenwick Group, Ltd., 1997 to 2003.
|
|
|
·
|
Director,
Mountain Companies, since 2007.
|
|
|
·
|
Director,
Beazley Group plc, 2006 to 2008.
|
|
|
·
|
Director,
West Virginia University, United Hospital System, 2004 to
2008.
|
|
|
·
|
Chief
Executive Officer, McDonough-Caperton Insurance Group, 1986 to
1994.
|
|
|
·
|
Advisory
Board Member, Conning Funds, since 1997.
|
|
|
·
|
Advisory
Board Member, American Securities Funds, since 1997.
|
|
|
·
|
Advisory
Board Member, International Catastrophe Insurance Managers, LLC (ICAT),
2005 to 2006.
|
|
|
·
|
Graduate
of West Virginia University (B.S. and J.D.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
Becker has extensive insurance industry expertise and leadership
experience. He is the Chairman and Chief Executive Officer of a
publicly-traded insurance and reinsurance group and has held similar
senior management and director positions with other insurance
groups. Mr. Becker also ran an independent insurance agency,
which is our principal distribution channel. He was trained as
both an attorney and an accountant and is financially
knowledgeable. He is active in a variety of business and public
policy issues in his native West Virginia. He also has strong
insurance industry contacts and analytical
skills.
|
NOMINEES
OF THE BOARD OF DIRECTORS
CLASS
I –
Directors
Nominated to Continue in Office Until the 2011 Annual Meeting of
Stockholders If Proposal 1 is Approved, or Until the 2013 Annual Meeting
of Stockholders If Proposal 1 is Not
Approved
|
Name, Age, Year Elected to
Board of Directors
|
|
Occupation and
Background
|
Gregory E. Murphy
,
54
|
|
·
|
Chairman,
President and Chief Executive Officer of Selective, since May
2000.
|
Employee
Director, 1997
|
|
·
|
President
and Chief Executive Officer of Selective, May 1999 to May
2000.
|
|
|
·
|
President
and Chief Operating Officer of Selective, 1997 to May
1999.
|
|
|
·
|
Other
senior executive, management, and operational positions at Selective,
since 1980.
|
|
|
·
|
Certified
Public Accountant (New Jersey) (Inactive).
|
|
|
·
|
Director,
Newton Memorial Hospital Foundation, Inc., since 1999.
|
|
|
·
|
Director,
Property Casualty Insurers Association of America, since
2008.
|
|
|
·
|
Director,
Insurance Information Institute, since 2000.
|
|
|
·
|
Director,
American Insurance Association (AIA), 2002 to 2006.
|
|
|
·
|
Trustee,
the American Institute for CPCU (AICPCU) and the Insurance Institute of
America (IIA), since 2001.
|
|
|
·
|
Graduate
of Boston College (B.S. Accounting).
|
|
|
·
|
Harvard
University (Advanced Management Program).
|
|
|
·
|
M.I.T.
Sloan School of Management.
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
Murphy, with 30 years of service at Selective and 11 as Chief Executive
Officer, is the Director most knowledgeable about our
operations. We consider his service on the Board extremely
valuable to informed business and strategic decision-making. He
has broad experience and knowledge in the areas of reinsurance, and
insurance pricing and industry fundamentals. Mr. Murphy has
extensive contacts in the insurance industry and serves as a director of
several important industry groups. He is an accountant, served
as our Chief Financial Officer prior to assuming other leadership
positions, and is extremely financially
sophisticated.
|
NOMINEES
OF THE BOARD OF DIRECTORS
|
CLASS
I –
Directors
Nominated to Continue in Office Until the 2011 Annual Meeting of
Stockholders If Proposal 1 is Approved, or Until the 2013 Annual Meeting
of Stockholders If Proposal 1 is Not
Approved
|
Name, Age, Year Elected to
Board of Directors
|
|
Occupation and Background
|
Cynthia S. Nicholson
,
45
|
|
·
|
Co-Founder,
Pup To Go, LLC, since 2009.
|
Independent
Director,
|
|
·
|
Principal
Strategist and Director, GamesThatGive, Inc., since
2009.
|
2009
|
|
·
|
Senior
Vice President and Chief Marketing Officer of Pepsi-Cola North America, a
division of PepsiCo, Inc., 2005 to 2008.
|
|
|
·
|
Various
Vice President and Director positions, PepsiCo, Inc., 1997 to
2004.
|
|
|
·
|
Various
Marketing positions, R.J. Reynolds Tobacco Company, 1988 to
1997.
|
|
|
·
|
Member,
Association of National Advertisers Board, 2006 to
2008.
|
|
|
·
|
Graduate
of Kelley School of Business, Indiana University
(M.B.A.).
|
|
|
·
|
Graduate
of University of Illinois (B.S.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Ms.
Nicholson is a marketing expert and served in a variety of senior
marketing positions at Pepsi, which is known for its brand marketing and
senior management training. We believe that her marketing
expertise is invaluable to us as we explore branding and marketing efforts
to address competitive issues in the property and casualty industry and
our distribution through independent agents. Ms. Nicholson was
appointed to the Board in 2009 after being identified by a third-party
firm specializing in diversity director searches, Diversified Search Ray
& Berndtson.
|
|
|
|
|
William M. Rue
,
62
|
|
·
|
President
and former Executive Vice President, Rue Insurance, general insurance
agency, since 1969.
|
Non-Independent
Director,
|
|
·
|
President,
Rue Financial Services, Inc., since 2002.
|
1977
|
|
·
|
Director,
1st Constitution Bank, since 1989, Secretary of the Board, since
2005.
|
|
|
·
|
Director,
1st Constitution Bancorp, since 1999, Secretary of the Board, since
2005.
|
|
|
·
|
Director,
Robert Wood Johnson University Hospital at Hamilton, since
1994.
|
|
|
·
|
Trustee,
Rider University, since 1993.
|
|
|
·
|
Director,
Robert Wood Johnson University Hospital Foundation, since
1999.
|
|
|
·
|
Member,
National Association of Securities Dealers.
|
|
|
·
|
Member,
Council of Insurance Agents & Brokers.
|
|
|
·
|
Member,
Society of CPCU.
|
|
|
·
|
Member,
Professional Insurance Agents Association.
|
|
|
·
|
President,
The Rue Foundation, since 2004.
|
|
|
·
|
Graduate
of Rider College (B.A.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
Rue has been one of our independent agents for 41 years, and the chief
executive of his agency for 25 years. We believe that, because
we distribute our products exclusively through independent agents, it is
extremely valuable for informed business and strategic decision-making for
the Board to have the feedback and input from an independent agent with
strong knowledge of our operations and the competitive
landscape.
|
CONTINUING
DIRECTORS
|
CLASS
II – Directors Continuing in Office Until the 2012 Annual Meeting of
Stockholders
|
Name, Age, Year Elected to
Board of Directors
|
|
Occupation and
Background
|
A. David Brown
,
67
|
|
·
|
Executive
Vice President, Urban Brands, Inc., since April 2009.
|
Independent
Director, 1996
|
|
·
|
Senior
Vice President, Human Resources, Linens ‘n Things, Inc., 2006 to
2009. In May 2008, Linens and Things, Inc. filed for protection
under Chapter 11 of the U.S. Bankruptcy Code.
|
|
|
·
|
Managing
Partner, Bridge Partners, LLC, an executive recruiting firm, 2003 to
2006.
|
Lead
Independent Director, 2009 – present
|
|
·
|
Partner,
Whitehead Mann, executive recruiters, 1997 to 2003.
|
|
|
·
|
Director,
Hanover Direct, 2003 to 2006.
|
|
|
·
|
Director,
Zale Corporation, 1997 to 2006.
|
|
|
·
|
Director,
The Sports Authority, Inc., 1998 to 2003.
|
|
|
·
|
Trustee,
Jackie Robinson Foundation.
|
|
|
·
|
Trustee,
Monmouth University.
|
|
|
·
|
Graduate
of Monmouth University (B.S.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
Brown has had a long career in human resources and executive development
and leadership. He has run his own business and worked for
large corporations. He also has a long commitment to diversity
and was the managing director of a search firm specializing in
diversity. Mr. Brown has extensive corporate governance
experience and has served on several public company boards. He
is active in several institutions based in New Jersey, where we are
headquartered. Mr. Brown’s strong leadership and inter-personal
skills have made him an effective Lead Independent
Director.
|
|
|
|
|
S. Griffin McClellan
III
, 72
|
|
·
|
Retired
Banking Executive.
|
Independent
Director, 1980
|
|
·
|
Self-employed
Consultant, 1994 to 2001.
|
|
|
·
|
Graduate
of Harvard University (B.A.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
McClellan is the former Chief Executive Officer of two federal savings
banks. He has extensive financial and investment experience and
knowledge, particularly in the area of structured products, leading him to
be a major contributor to the Finance Committee. After Mr. Rue,
Mr. McClellan is the longest tenured director and has an extensive
knowledge of our history and challenges.
|
|
|
|
|
J. Brian Thebault
,
58
|
|
·
|
Partner,
Thebault Associates, since 2007.
|
Independent
Director, 1996
|
|
·
|
Chairman,
Earth-Thebault, July 2007 to July 2009.
|
|
|
·
|
Chairman
and Chief Executive Officer, L.P. Thebault Company, 1998 to 2007;
President and Chief Executive Officer, L.P. Thebault Company, 1984 to
1998.
|
|
|
·
|
Trustee,
The Peck School, since 1994.
|
|
|
·
|
Trustee,
The Delbarton School, 1990 to 2007.
|
|
|
·
|
Graduate
of University of Southern California (B.S.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
For
most of his career, Mr. Thebault has run closely-held businesses, which is
the structure of many of our commercial customers. Through his
career in the printing industry, he has a strong background in sales,
marketing, finance matters, and business
strategy.
|
CONTINUING
DIRECTORS
|
CLASS
III –
Directors
Continuing in Office Until the 2011 Annual Meeting of
Stockholders
|
Name, Age, Year Elected to
Board of Directors
|
|
Occupation and
Background
|
Paul D. Bauer
,
66
|
|
·
|
Retired
financial executive.
|
Independent
Director, 1998
|
|
·
|
Executive
Vice President and Chief Financial Officer of Tops Markets, Inc., 1970 to
1993.
|
|
|
·
|
Director,
Rosina Holdings Inc., since 2002.
|
|
|
·
|
Director,
Catholic Health System of Western New York, 1998 to
2008.
|
|
|
·
|
Director,
R.P. Adams Co., 1991 to 2004.
|
|
|
·
|
Director,
IMC, Inc., 1995 to 2000.
|
|
|
·
|
Co-founder
and President, The Bison Scholarship Fund (formerly named the Buffalo
Inner-City Scholarship Opportunity Network), since
1995.
|
|
|
·
|
Trustee,
Holy Angels Academy, since 2005.
|
|
|
·
|
Graduate
of Boston College (B.S. Accounting).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
Bauer is the former Chief Financial Officer of a publicly-traded company
and the Audit Committee’s designated financial expert. Mr.
Bauer is very active in the Buffalo community and knowledgeable of Upstate
New York, which is an important market for us.
|
|
|
|
|
John C. Burville
,
62
|
|
·
|
Insurance
Consultant to the Bermuda Government, 2003 to 2007.
|
Independent
Director, 2006
|
|
·
|
Bermuda
Insurance Advisory Committee, 1985 to 2003.
|
|
|
·
|
Chief
Actuary and Senior Rating Agency Manager of ACE Limited, 1992 to
2003.
|
|
|
·
|
Graduate
of Leicester University in the United Kingdom (BSc and
Ph.D.).
|
|
|
·
|
Fellow
of the Institute of Actuaries.
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
Burville has extensive insurance industry knowledge and served as chief
actuary of one of the world’s largest property and casualty
company. He is extremely knowledgeable about reserving and
numerous actuarial techniques to calculate ultimate reserve
levels. Mr. Burville is looked to as an actuarial subject
matter expert on the
Board.
|
Joan M. Lamm-Tennant
,
57
|
|
·
|
Vice
President, Marsh & McLennan Companies, Inc., since Feb.
2009.
|
Independent
Director, 1993
|
|
·
|
Global
Chief Economist & Risk Strategist, Guy Carpenter & Company, LLC,
since 2007.
|
|
|
·
|
Senior
Vice President, General Re Corporation, 1997 to 2007.
|
|
|
·
|
Adjunct
Professor, the Wharton School of the University of Pennsylvania, since
2006.
|
|
|
·
|
Professor
of Finance, Villanova University, 1988 to 2000.
|
|
|
·
|
Director,
IVANS, Inc., since 2004.
|
|
|
·
|
Member,
American Risk and Insurance Association.
|
|
|
·
|
Member,
International Insurance Society.
|
|
|
·
|
Member,
Association for Investment Management and Research.
|
|
|
·
|
Graduate
of St. Mary’s University (B.B.A. and M.B.A.).
|
|
|
·
|
Graduate
of the University of Texas (Ph.D.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Ms.
Lamm-Tennant has extensive insurance industry experience. She
is a recognized expert in the fields of enterprise risk management and
capital modeling. She is active in several industry
associations and a finance professor. Ms. Lamm-Tennant is a
financial expert and particularly knowledgeable regarding investments and
investment strategies.
|
|
|
|
|
Michael J. Morrissey
,
62
|
|
·
|
President
& Chief Executive Officer, International Insurance Society, Inc., 2009
to present.
|
Independent Director,
2008
|
|
·
|
Chairman
and Chief Executive Officer, Firemark Investments, 1983 to
2009.
|
|
|
·
|
Director,
CGA Group, Ltd., 1998 to 2009.
|
|
|
·
|
President,
Chief Operating Officer, Chief Investment Officer and Director, Manhattan
Life Insurance Company, 1985 to 1987.
|
|
|
·
|
Chief
Executive Officer, Manhattan Capital Management, 1985.
|
|
|
·
|
Senior
Vice President, Crum & Forster Insurance Group, 1978 to
1983.
|
|
|
·
|
Chartered
Financial Analyst.
|
|
|
·
|
Graduate
of Boston College (B.A.).
|
|
|
·
|
Graduate
of Dartmouth College (M.B.A.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
Morrissey has 37 years of insurance industry experience. He is
the head of an international insurance trade association, previously ran
an investment firm specializing in insurance companies, and was president
and chief investment officer of an insurance company. Mr.
Morrissey is very knowledgeable regarding the investment community,
investor relations, and the analysis of strategic
transactions.
|
Ronald L. O’Kelley
,
65
Independent
Director, 2005
|
|
·
|
Chairman
and Chief Executive Officer, Atlantic Coast Venture Investments Inc., 2003
to 2008 and 2009 to present; Director, Atlantic Coast Venture Investments
Inc., 2003 to 2009.
|
|
|
·
|
President
and Chief Executive Officer, U.S. Shipping Partners, L.P., 2008 to
2009. In April 2009, U.S. Shipping Partners, L.P. filed for
protection under Chapter 11 of the U.S. Bankruptcy Code
and
emerged reorganized as U.S. Shipping Corp in November
2009.
|
|
|
·
|
Executive
Vice President, Chief Financial Officer and Treasurer, State Street
Corporation, 1995 to 2002.
|
|
|
·
|
Director,
U.S. Shipping Partners L.P., 2004 to 2008.
|
|
|
·
|
Director,
Refco Inc., 2005 to 2006.
|
|
|
·
|
Advisory
Director, Donald H. Jones Center for Entrepreneurship, Tepper School of
Business, Carnegie Mellon University, since 2003.
|
|
|
·
|
Member,
National Association of Corporate Directors.
|
|
|
·
|
Graduate
of Duke University (A.B.).
|
|
|
·
|
Graduate
of Carnegie Mellon University (M.B.A.).
|
Discussion
of individual experience, qualifications, attributes, and
skills.
|
|
Mr.
O’Kelley is the former Chief Financial Officer of a large multi-national
financial services organization and qualifies as a financial
expert. He has extensive experience in corporate restructurings
for both manufacturing organizations and financial
institutions. Mr. O’Kelley has a demonstrated track record for
implementing corporate strategy through significant mergers and
acquisitions, divestitures, and debt and equity fund
raisings. He is active in the trade association for corporate
directors and has significant tenure as a director of other public
companies.
|
Board
Recommendation
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “
FOR
”
THE NOMINEES OF THE BOARD OF DIRECTORS.
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The
following table shows as of February 12, 2010:
|
§
|
The
number of shares of Selective common stock beneficially owned by each
director, the Chairman of the Board, President and Chief Executive Officer
(the “Chief Executive Officer” or “CEO”), the Chief Financial Officer, and
the three most highly compensated executive officers other than the CEO
and Chief Financial Officer (collectively, with the CEO and Chief
Financial Officer, referred to as our
“NEOs”).
|
|
§
|
The number of shares of Selective
common stock beneficially owned by the directors and executive officers of
Selective as a group.
|
|
|
Number of Shares
|
|
|
|
|
Name of Beneficial
Owner
|
|
Common Stock
(1)
|
|
Options Exercisable
Within 60 Days of
February 12, 2010
|
|
|
Total Shares
Beneficially Owned
|
|
|
Percent of
Class
|
|
Bauer,
Paul D.
|
|
|
44,443
|
|
|
|
66,156
|
|
|
|
110,599
|
|
|
|
*
|
|
Becker,
W. Marston
|
|
|
32,667
|
(2)
|
|
|
30,156
|
|
|
|
62,823
|
|
|
|
*
|
|
Brown,
A. David
|
|
|
44,887
|
|
|
|
60,156
|
|
|
|
105,043
|
|
|
|
*
|
|
Burville,
John C.
|
|
|
12,844
|
|
|
|
30,156
|
|
|
|
43,000
|
|
|
|
*
|
|
Connell,
Richard F.
|
|
|
52,206
|
|
|
|
21,900
|
|
|
|
74,106
|
|
|
|
*
|
|
Lamm-Tennant,
Joan M.
|
|
|
51,815
|
|
|
|
60,156
|
|
|
|
111,971
|
|
|
|
*
|
|
Lanza,
Michael H.
|
|
|
5,673
|
|
|
|
11,900
|
|
|
|
17,573
|
|
|
|
*
|
|
McClellan,
S. Griffin, III
|
|
|
45,504
|
(3)
|
|
|
42,156
|
|
|
|
87,660
|
|
|
|
*
|
|
Morrissey,
Michael J.
|
|
|
5,748
|
|
|
|
14,612
|
|
|
|
20,361
|
|
|
|
*
|
|
Murphy,
Gregory E.
|
|
|
122,848
|
|
|
|
74,718
|
|
|
|
197,566
|
|
|
|
*
|
|
Nicholson,
Cynthia S.
|
|
|
2,008
|
|
|
|
0
|
|
|
|
2,008
|
|
|
|
*
|
|
O’Kelley,
Ronald L.
|
|
|
20,955
|
|
|
|
36,156
|
|
|
|
57,112
|
|
|
|
*
|
|
Rue,
William M.
|
|
|
417,671
|
(4)
|
|
|
60,156
|
|
|
|
477,828
|
|
|
|
1%
|
|
Thatcher,
Dale A.
|
|
|
48,524
|
|
|
|
21,900
|
|
|
|
70,424
|
|
|
|
*
|
|
Thebault,
J. Brian
|
|
|
59,519
|
(5)
|
|
|
60,156
|
|
|
|
119,675
|
|
|
|
*
|
|
Zaleski,
Ronald J.
|
|
|
29,944
|
|
|
|
45,892
|
|
|
|
75,836
|
|
|
|
*
|
|
All
directors and executive officers, as a group (19 persons)
|
|
|
1,086,804
|
|
|
|
704,716
|
|
|
|
1,791,520
|
|
|
|
3%
|
|
* Less
than 1% of the common stock outstanding.
(1)
Certain
directors and executive officers hold Selective stock in margin accounts, but no
director or officer has pledged Selective stock for a loan or stock
purchase.
(2)
Includes
4,000 shares held by Becker Family LP.
(3)
Includes
4,000 shares held by Mr. McClellan’s wife, for which Mr. McClellan disclaims
beneficial ownership.
(4)
Includes: (i)
36,013 shares held by Chas. E. Rue & Sons, Inc. t/a Rue Insurance (“Rue
Insurance”), a general insurance agency of which Mr. Rue is President and owner
of more than a 10% equity interest (see page 18 of this Proxy Statement for more
information); and (ii) 1,980 shares held by Mr. Rue’s wife.
(5)
Includes: (i)
225 shares held in custody for and 323 shares held by Mr. Thebault’s son; (ii)
225 shares held in custody for and 215 shares held by a daughter of Mr.
Thebault; and (iii) 218 shares held in custody for another daughter of Mr.
Thebault.
The
following table lists the only persons or groups known to Selective to be the
beneficial owners of more than 5% of any class of Selective’s voting securities
as of December 31, 2009, based on Schedules 13G filed by the
beneficial owners on February 8, 2010 and January 29, 2010, respectively, with
the SEC.
Title of Class
|
|
Name & Address of Beneficial Owner
|
|
Amount & Nature of Beneficial
Ownership
|
|
Percentage of Class
|
Common
Stock
|
|
Dimensional
Fund Advisors LP
Palisades
West, Building One
6300
Bee Cave Road
Austin,
TX 78746
|
|
4,529,210
shares
of
common stock
|
|
8.53%
|
Common
Stock
|
|
BlackRock,
Inc.
40
East 52nd Street
New
York, NY 10022
|
|
4,015,987
shares
of
common stock
|
|
7.57%
|
EXECUTIVE
OFFICERS
Information
regarding Executive Officers is incorporated by reference to the section
entitled “Executive Officers of the Registrant” in Part I, Item 1. Business. of
Selective’s Annual Report on Form 10-K for the year ended December 31,
2009.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons
William M. Rue,
Director
. Mr. Rue is President and owns more than 10% of the
equity of Rue Insurance, a general independent insurance agency. Rue
Insurance has been an appointed independent agent of Selective’s insurance
subsidiaries since 1928 and Selective expects that relationship to continue in
2010. The appointment of Rue Insurance as an independent agent was
made on similar terms and conditions as other Selective agents and includes the
right to participate in the Selective Insurance Group, Inc. Stock Purchase Plan
for Independent Insurance Agencies, as amended. In 2009, Rue
Insurance:
|
·
|
Placed
insurance policies with Selective’s insurance
subsidiaries. Direct premiums written associated with these
polices was $7.6 million in 2009, $8.3 million in 2008, and $9.9 million
in 2007. In return, Selective’s insurance subsidiaries paid
commissions to Rue Insurance of $1.4 million in 2009 and $1.7 million in
2008 and 2007.
|
|
·
|
Placed
human resource outsourcing contracts with Selective HR Solutions,
Selective’s former human resources administration operations, resulting in
revenues to Selective HR Solutions of approximately $77,000 in 2009,
$79,000 in 2008, and $69,000 in 2007. In return, Selective HR
Solutions paid commissions to Rue Insurance of $10,000 in 2009, $12,000 in
2008, and $15,000 in 2007.
|
|
·
|
Placed
insurance coverage for Selective with non-Selective insurance companies
for which Rue Insurance was paid commission pursuant to its agreements
with those carriers. Selective paid premiums for such insurance
coverage of $0.5 million in 2009, 2008, and
2007.
|
Gregory E. Murphy,
CEO.
Kelly Salmon, daughter of Gregory E. Murphy, is a Fellow
of the Casualty Actuary Society and employed as an actuarial analyst by Guy
Carpenter & Company, LLC (“Guy Carpenter”), one of Selective’s reinsurance
brokers. Guy Carpenter receives commissions from Selective’s
reinsurers for business that Guy Carpenter places with such reinsurers on
Selective’s behalf. Ms. Salmon is not involved in the reinsurance
brokering relationship between Selective and Guy Carpenter.
The Selective Group
Foundation, a private foundation Selective established under Section 501(c)(3)
of the Internal Revenue Code (the “Selective Foundation”)
. The
Selective Foundation makes grants to charitable organizations in accordance with
the Selective Foundation’s By-Laws and funding guidelines, which guidelines are
available at www.selective.com. In 2009, the Selective Foundation
made grants in excess of $20,000 in the following amounts to the following
organizations with ties to Selective, all of which are located in Sussex County,
New Jersey, where Selective is headquartered and a large percentage of its
headquarter-based employees live:
|
·
|
$75,000
in grants to The Newton Memorial Hospital Foundation (“NMHF”), a
charitable organization affiliated with Newton Memorial
Hospital. Mr. Murphy serves on the Board of Directors of
NMHF. At the end of 2009, there were outstanding annually
renewable pledges to NMHF totaling
$225,000.
|
|
·
|
$45,000
in grants to Project Self-Sufficiency of Sussex County (“PSS”), a
non-profit, community-based organization dedicated to empowering
low-income adults and their children to achieve personal and economic
self-sufficiency. Susan Murphy, Mr. Murphy’s wife, serves on
the PSS Board of Directors.
|
|
·
|
$25,000
in grants to the United Way of Sussex County. Richard F.
Connell, Senior Executive Vice President and Chief Administrative Officer
of Selective, is a member of the Board of Trustees of the United Way of
Sussex County.
|
Review,
Approval, or Ratification of Transactions with Related Persons
Selective’s
Board of Directors adopted a written Related Person Transactions Policy and
Procedures (the “Related Person Policy”) on January 30, 2007. Prior
to that, such transactions were reported to, and considered by, the Board of
Directors pursuant to Selective’s Conflict of Interest Policy.
The
Related Person Policy defines “Related Person Transactions” as any transaction,
arrangement or relationship in which Selective or its subsidiaries was, is, or
will be a participant and the amount involved exceeds $20,000, and in which any
“Related Person” had, has, or will have a direct or indirect
interest. A “Related Person” under the Related Person Policy is
generally: (i) any director, executive officer, or nominee to become
director of Selective or an immediate family member of such person; (ii) a
beneficial owner of more than 5% of Selective’s common stock or an immediate
family member of such beneficial owner; and (iii) any firm, corporation, or
other entity in which any person included in (i) or (ii) is employed or is a
general partner or principal or in a similar position or in which such person
has a 5% or greater beneficial ownership interest.
Under the
Related Person Policy, the Audit Committee (or Chair of the Committee if between
meetings) must approve “Related Person Transactions.” In its review,
the Audit Committee considers all available relevant facts and circumstances of
the proposed transaction, including: (i) the benefits to Selective;
(ii) the impact on a director’s independence; (iii) the availability of other
sources for comparable products and services; (iv) the terms of the transaction;
and (v) the terms available to unrelated third parties or to employees
generally. No Audit Committee member may participate in any review,
consideration, or approval of any Related Person Transaction in which such
director or any of his or her immediate family members is the Related
Person. The Audit Committee only approves those Related Person
Transactions that it considers are in, or are not inconsistent with, the best
interests of Selective and its stockholders.
Director
Independence
The Board
of Directors has determined that all directors, except Messrs. Murphy and Rue,
are independent as defined by the applicable NASDAQ and SEC rules and
regulations. In making its determination, the Board considered
various transactions, relationships, or arrangements that relate to the
Directors. The Board determined that Mr. McClellan’s independence
under applicable NASDAQ and SEC rules and regulations was unimpaired by the
employment of Mr. McClellan’s son through January 16, 2009 by one of Selective’s
subsidiaries. For a description of the transactions, relationships,
or arrangements related to Mr. Rue, see the section entitled “Transactions with
Related Persons” on page 18.
In May
2007, Ms. Lamm-Tennant was appointed Global Chief Economist & Risk
Strategist of Guy Carpenter, a subsidiary of Marsh & McLennan Companies,
Inc. (“Marsh & McLennan”). The Board reviewed the material terms
of the broker service agreement between Selective’s insurance subsidiaries and
Guy Carpenter under which reinsurance is placed. In 2009, Guy
Carpenter earned approximately $1.6 million on Selective’s reinsurance
placements. Guy Carpenter’s total revenue in 2009 was approximately
$911 million. Accordingly, the transactions with Selective’s
insurance subsidiaries represent less than 0.2% of Guy Carpenter’s 2009 total
revenue. In February 2009, Ms. Lamm-Tennant was appointed Vice
President of Marsh. Occasionally, Selective and its subsidiaries use
the services of Marsh & McLennan subsidiaries other than Guy
Carpenter. In 2009, Selective made aggregate payments totaling less
than $10,000 to those other Marsh & McLennan subsidiaries. As Ms.
Lamm-Tennant had no involvement in these transactions and the amount of the
transactions is immaterial to the business of Marsh & McLennan, the Board
determined that these transactions do not affect Ms. Lamm-Tenant’s independence
under applicable NASDAQ and SEC rules and regulations.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires Selective’s directors and executive officers, and persons who
beneficially own more than 10% of a registered class of Selective’s equity
securities, to file initial reports of beneficial ownership and reports of
changes in beneficial ownership of Selective’s equity securities with the
SEC. Such executive officers, directors, and greater than 10%
stockholders are required by SEC regulation to furnish Selective with copies of
all of the Section 16(a) Exchange Act reports that they
file. Other than as set forth above, based solely on its review of
the copies of Forms 3, 4, and 5 or written representations from certain
reporting persons that no Forms 5 were required for those persons, Selective
believes that all reporting requirements under Section 16(a) for the fiscal
year ended December 31, 2009, were met in a timely manner by its directors,
executive officers, and greater than 10% beneficial owners.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
Selective
has established Corporate Governance Guidelines that are available for review in
the Corporate Governance section of Selective’s website,
www.selective.com. These guidelines provide for the election of a
Lead Independent Director, who supervises meetings of Selective’s independent
directors that occur at least semi-annually. Mr. Brown is presently
the Lead Independent Director. In 2009, Selective’s independent
directors met three times outside the presence of management.
All of
the members of the Audit Committee, the Corporate Governance and Nominating
Committee, and the Salary and Employee Benefits Committee are independent
directors as defined by NASDAQ and SEC rules and regulations.
BOARD
MEETINGS AND COMMITTEES
The Board
of Directors held eight meetings in 2009. All directors attended 75%
or more of the meetings of the Board of Directors and their respective
committees in 2009. It is Selective’s policy that all directors are
expected to attend the Annual Meeting, and all directors did so in
2009.
The Board
has five standing committees:
|
·
|
Corporate
Governance and Nominating
Committee;
|
|
·
|
Salary
and Employee Benefits Committee.
|
The
following tables provide information on each of the five
committees:
Audit
Committee
Written
Charter is available on the Corporate Governance section of
www.selective.com
|
2009
Meetings: 8
|
Responsibilities:
·
|
Oversee
the accounting and financial reporting processes and the audits of the
financial statements.
|
·
|
Review
and discuss with Selective’s management and independent auditors
Selective’s financial reports and other financial information provided to
the public and filed with the SEC.
|
·
|
Monitor
the activities of Selective’s Internal Audit Department and the
appointment, replacement, reassignment, or dismissal of the Director of
Internal Audit.
|
·
|
Monitor
Selective’s internal controls regarding finance, accounting, and legal
compliance.
|
·
|
Discuss
significant financial risk exposures and the steps management has taken to
monitor, control, and report such
exposures.
|
·
|
Appoint
Selective’s independent registered public accounting firm and supervise
the relationship between Selective and its independent auditors, including
reviewing their performance, making decisions with respect to their
compensation, retention and removal, reviewing and approving in advance
their audit services and permitted non-audit services, and confirming the
independence of the independent
auditors.
|
Director
Members:
|
Independent
|
Paul
D. Bauer, Chairperson and designated Audit Committee financial expert
under SEC safe harbor
|
Yes
|
John
C. Burville
|
Yes
|
Joan
M. Lamm-Tennant
|
Yes
|
Ronald
L. O’Kelley
|
Yes
|
J.
Brian Thebault
|
Yes
|
Corporate
Governance and Nominating Committee
Written
Charter is available on the Corporate Governance section of
www.selective.com
|
2009
Meetings: 4
|
Responsibilities
:
·
|
Establish
criteria for the selection of directors and identify and recommend to the
Board the nominees for director.
|
·
|
Review
and assess Selective’s Corporate Governance Guidelines and recommend any
changes to the Board.
|
·
|
Recommend
to the Board the directors to serve on the various Board committees and as
chairpersons of the respective
committees.
|
·
|
Advise
the Board with respect to Board composition, procedures, and
committees.
|
·
|
Review
and update Selective’s Code of Conduct and review conflicts of interest or
other issues that may arise under the Code of Conduct involving
Selective’s officers or directors.
|
·
|
Oversee
the self-evaluations of the Board and each committee of the
Board.
|
·
|
Review,
jointly with the Salary and Employee Benefits Committee, CEO and executive
staff succession planning and professional
development.
|
Director
Members:
|
Independent
|
W.
Marston Becker, Chairperson
|
Yes
|
A.
David Brown
|
Yes
|
S.
Griffin McClellan III
|
Yes
|
Cynthia
S. Nicholson
|
Yes
|
Executive
Committee
No
Charter. Responsibilities defined in By-Laws.
|
2009
Meetings: 1
|
Responsibilities:
·
|
Authorized
by By-Laws to exercise the Board of Directors’ powers and authority in the
management of Selective’s business and affairs between Board
meetings.
|
·
|
Has
the right and authority to exercise all the powers of the Board of
Directors on all matters brought before it
except matters
concerning Selective’s investments.
|
Director
Members:
|
Gregory
E. Murphy, Chairperson
|
W.
Marston Becker
|
Paul
D. Bauer
|
William
M. Rue
|
A.
David Brown
|
J.
Brian Thebault
|
Finance
Committee
Written
Charter is available on the Corporate Governance section of
www.selective.com
|
2009
Meetings: 5
|
Responsibilities:
·
|
Review
and approve changes to Selective’s investment policies, strategies, and
programs.
|
·
|
Review
investment transactions made on behalf of Selective and review the
performance of Selective’s investment
portfolio.
|
·
|
Review
matters relating to the investment portfolios of the benefit plans of
Selective and its subsidiaries, including the administration and
performance of such portfolios.
|
·
|
Appoint
members of Selective’s Management Investment
Committee.
|
·
|
Review
and make recommendations to the Board regarding payment of
dividends.
|
·
|
Review
Selective’s capital structure and provide recommendations to the Board
regarding financial policies and matters of corporate
finance.
|
Director
Members:
|
William
M. Rue, Chairperson
|
S.
Griffin McClellan III
|
W.
Marston Becker
|
Michael
J. Morrissey
|
Joan
M. Lamm-Tennant
|
Ronald
L. O’Kelley
|
Salary
and Employee Benefits Committee
Written
Charter is available on the Corporate Governance section of
www.selective.com
|
2009
Meetings: 6
|
Responsibilities:
·
|
Oversee,
review, and administer all compensation, equity, and employee benefit
plans and programs related to Selective’s and its subsidiaries’ employees
and management.
|
·
|
Review
annually and approve corporate goals and objectives relevant to executive
compensation and evaluate performance in light of those
goals.
|
·
|
Review
annually and approve Selective’s compensation strategy for
employees.
|
·
|
Review
annually and determine the individual elements of total compensation of
the CEO and other members of senior
management.
|
·
|
Review,
jointly with the Corporate Governance and Nominating Committee, CEO and
executive staff succession planning and professional
development.
|
·
|
Review
and approve compensation for non-employee
directors.
|
Director
Members:
|
Independent
|
J.
Brian Thebault, Chairperson
|
Yes
|
A.
David Brown
|
Yes
|
Paul
D. Bauer
|
Yes
|
John
C. Burville
|
Yes
|
Michael
J. Morrissey
|
Yes
|
Cynthia
S. Nicholson
|
Yes
|
RISK
MANAGEMENT
Board Leadership
Structure
Gregory
E. Murphy, our Chief Executive Officer, has served as Chairman of the Board
since April, 2000. Our Corporate Governance Guidelines provide that
the Board will designate a Lead Independent Director. A. David Brown
has served as the Lead Independent Director since April, 2009.
The Lead
Independent Director is responsible for coordinating the activities of the
independent directors and performing various other duties. The Lead
Independent Director’s general authority and responsibilities are as
follows:
|
·
|
Presiding
at all meetings of independent directors, as appropriate, and providing
prompt feedback to the Chairman, President and
CEO.
|
|
·
|
Serving
as point of contact for Board members to raise issues that they may not be
able to readily address with the Chairman, President and
CEO.
|
|
·
|
Ensuring
that matters of importance to the Directors are placed on the Board’s
meeting agendas.
|
|
·
|
Ensuring
that the Chairman, President and CEO understand the Board’s view on all
critical matters.
|
|
·
|
Ensuring
that the Board understands the Chairman, President and CEO’s views on all
critical matters.
|
|
·
|
Calling
executive sessions of the independent directors and serving as chairman of
such meetings.
|
The
defined role of Selective’s Lead Independent Director is very similar to the
role of an independent non-executive Chairman. We believe that our
current Board leadership structure provides effective oversight of management
and strong leadership of the independent directors. In addition, the
Corporate Governance and Nominating Committee, of which Mr. Brown is a member,
conducts annual self-assessment of the Board and its various committees to
evaluate their effectiveness. At this time, we believe there is a
benefit to having Mr. Murphy serve as both Chairman and Chief Executive
Officer. As the individual with primary responsibility for managing
our day-to-day operations, he is best positioned to chair regular Board meetings
and ensure that key business issues and risks are brought to our Board or Audit
Committee’s attention.
Enterprise Risk
Management
Our Board
oversees our overall enterprise risk management (“ERM”) process, which follows,
among other things, the
Enterprise Risk Management –
Integrated Framework
of the Treadway Commission of the Committee of
Sponsoring Organizations (“COSO”). We began our formal ERM process
approximately eight years ago. Its key components include
identification and measurement, reporting, and monitoring of major risks, and
the development of appropriate responses. In 2009, we further refined
our risk management structure and our process to review and report risk
metrics. Our Audit Committee reviewed our ERM processes and had
extensive discussion at a special Audit Committee meeting attended by 10 of our
12 Directors. The consensus of the Audit Committee and a majority of
our Board was that the Board should continue to oversee risk and that a special
risk committee was not appropriate for Selective at this time. The
Audit Committee and the Board, however, will continue to evaluate the
appropriateness of the structure of both the Board’s committees and management
to analyze and address risk.
In
addition to the Board’s oversight of the overall ERM process, various committees
of the Board oversee risks specific to their areas of supervision and report
their activities and findings to the Board:
|
·
|
The
Audit Committee, to operational, financial, and compliance
risks;
|
|
·
|
The
Corporate Governance and Nominating Committee, to governance and certain
compliance risk;
|
|
·
|
The
Finance Committee, to investment risk and associated financial risk;
and
|
|
·
|
The
Salary and Employee Benefits Committee, to employee, human capital, and
compensation strategy risk.
|
The Audit
Committee and Board also concluded that the Chief Executive Officer should
continue to be the executive responsible for risk. With the consent
of the Audit Committee and the Board, management created an Executive Risk
Committee (“ERC”) that is responsible for the holistic evaluation and
supervision of our risks. The ERC primarily consists of the Chief
Executive Officer and his direct reports, each of whom is responsible for
management of risk in their respective areas, and an ERM Manager who reports to
the Chief Financial Officer. The ERC meets at least quarterly and
provides a structured forum for the discussion of Selective’s major
risks.
In
overseeing the analysis and management of risk, the Board regularly receives,
analyzes, and makes due inquiry regarding reports from of its various committees
and management regarding risk. We believe our Board’s leadership
structure, with a Lead Independent Director, supports the Board’s ability to
effectively evaluate and manage risk.
STOCKHOLDER
COMMUNICATIONS
Stockholders
may send communications to the Board of Directors or individual directors in
writing c/o Corporate Secretary, Selective Insurance Group, Inc., 40 Wantage
Avenue, Branchville, NJ 07890 or by e-mail to
corporate.governance@selective.com. The Board has instructed the
Corporate Secretary to use discretion in forwarding unsolicited advertisements,
invitations to conferences, or other promotional material.
CODE
OF CONDUCT
Selective
has adopted a Code of Conduct stating business ethics guiding principles for all
Selective personnel, including executive officers. The Code of
Conduct can be found under the Corporate Governance section of Selective’s
website, www.selective.com. Any amendment to or waiver from the
provisions of the Code of Conduct that applies to Selective’s senior executive
officers will be posted to Selective’s website,
www.selective.com.
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
OVERVIEW
Selective’s Executive
Compensation Program Philosophy
Our
compensation philosophy and program design did not change in 2009. We
seek to attract and retain talented and qualified executives by paying
compensation that is generally targeted at the 50
th
percentile or greater of total compensation paid by comparable companies in the
property and casualty insurance industry. Our compensation programs
are designed to motivate executives to achieve our corporate objectives and
increase shareholder value in both the short and long
term. Accordingly, we tie our annual incentive awards to
pre-determined strategic and financial business objectives and individual
objectives, and we align our long-term compensation to the generation of
long-term stockholder value.
Process
The
Salary and Employee Benefits Committee (“SEBC”) of Selective’s Board of
Directors oversees executive compensation. The SEBC retains an
independent executive compensation consultant to advise on executive
compensation issues (“Compensation Consultant”). Representatives of
the Compensation Consultant: (i) review senior executive
compensation; (ii) prepare comprehensive competitive compensation analyses for
our named executive officers (“NEOs); (iii) make recommendations regarding the
components of compensation, amounts allocated to those components, and the total
compensation opportunities for the CEO and the other NEOs; and (iv) attend SEBC
meetings, as requested.
EXEQUITY,
LLP has served as the SEBC’s Compensation Consultant since April
2007. The Compensation Consultant’s only business with Selective is
to advise the SEBC on executive compensation matters.
The SEBC
has full autonomy in determining executive compensation and, primarily based on
information provided by the Compensation Consultant, makes all final
determinations regarding the CEO and other NEO compensation. While
the CEO makes compensation recommendations to the SEBC regarding all of the
senior executives that report directly to him based on the CEO’s assessment of
each executive officer’s annual performance, contributions to the Company, and
potential for advancement, the SEBC makes all final decisions on NEO
compensation. In making its compensation decisions, the SEBC also
considers the medians of the benchmark groups in addition to pre-established
guidelines regarding award amounts, Company performance, retention issues,
internal compensation parity, and advancement in abilities, experience, and
responsibilities. The Executive Vice President of Human Resources and
certain other human resources officers, as part of their usual duties and
responsibilities, provide the SEBC with information regarding the overall design
of the executive compensation program and its individual
components.
DESIGN
CONSIDERATIONS OF SELECTIVE’S EXECUTIVE COMPENSATION PROGRAM
Our
executive compensation program consists of the following key elements selected
to: (i) address the market-based realities of attracting and
retaining quality executives; and (ii) align the executives’ compensation with
our stockholders’ interests:
|
·
|
Annual
cash incentive payments under the Annual Cash Incentive Program (“ACIP”);
and
|
|
·
|
Long-term
incentive awards in the form of stock options, performance-based
restricted stock units, and performance-based cash incentive
units.
|
Benchmarking
When
making compensation decisions, the SEBC believes that it is important to be
informed generally on compensation practices at publicly-traded companies and
particularly at property and casualty insurance holding companies. The SEBC
believes that:
|
·
|
Measuring
Selective’s compensation against the practices in multiple groups helps
ensure that it has an ample and robust assessment of Selective’s
competitive compensation posture;
|
|
·
|
Benchmarking
provides the SEBC with relevant information to make appropriate
compensation decisions that will attract and retain the key talent
required to drive Company performance and long-term shareholder value;
and
|
|
·
|
Considering
multiple market references offsets inaccuracies inherent in a single
market data point and enhances the SEBC’s decisions by allowing it to rely
on a fuller set of market-competitive pay
measures.
|
Accordingly,
the SEBC receives from, and reviews with, the Compensation Consultant, the
following benchmarking information:
|
·
|
Benchmarking
analyses by the Compensation Consultant of annual compensation paid to the
NEOs, comparing base salary, annual cash incentives, total cash
compensation, long-term incentives, and total compensation that Selective
pays versus various external
groups;
|
|
·
|
Benchmarking
analyses by Selective’s Human Resources department for our NEOs against a
group of 17 property and casualty companies, except for our Executive Vice
President & Chief Actuary for which a property and casualty actuarial
survey is used; and
|
|
·
|
Benchmarking
analyses by Selective’s Human Resources department of supplemental survey
data from multiple survey sources for all NEOs to facilitate a
comprehensive understanding of the overall compensation
environment.
|
For 2009,
the Compensation Consultant furnished the SEBC with 2008 and 2009 NEO
compensation information on three market groups as follows:
Market/Product
Group
|
|
Peer
Size Group
|
|
Third-party
Vendor Surveys
|
Organizations
that compete with Selective
in
the sale of products and services
|
|
Companies
of similar revenue size
|
|
|
·
|
The
Chubb Corporation
|
|
|
Arch
Capital Group, Ltd.
|
|
|
Property
and Casualty Insurance
|
·
|
Cincinnati
Financial Corporation
|
|
|
The
Hanover Insurance Group, Inc.
|
|
|
Compensation
Survey
|
·
|
CNA
Financial Corporation
|
|
|
Max
Capital Group Ltd.
|
|
|
|
·
|
EMC
Insurance Group Inc.
|
|
|
Mercury
General Corporation
|
|
·
|
Clear
Solutions HR Actuarial Salary
|
·
|
The
Hanover Insurance Group, Inc.
|
|
|
Old
Republic International Corporation
|
|
|
Surveys
– Property & Casualty
|
·
|
Harleysville
Group, Inc.
|
|
|
Radian
Group Inc.
|
|
|
|
·
|
Hartford
Financial Services Group
|
|
|
Unitrin,
Inc.
|
|
|
|
·
|
PMA
Capital Corporation
|
|
|
Zenith
National Insurance Corp.
|
|
|
|
·
|
State
Auto Financial Corporation
|
|
|
|
|
|
|
Information
for the Market/Product Group and the Peer Size Group is gathered from proxy
statements filed with the SEC. This information includes data on
compensation components and analyses of the overall financial performance of the
organizations in each group, and compares Selective’s performance to
them. Third party vendor surveys in the property and casualty
industry provide supplemental data. As these third party vendor
surveys contain competitive market data from companies of various sizes, this
information is divided into segments that most accurately reflect the size of
our organization. Because we strive to engage the best talent, which
may require recruiting from organizations larger than Selective, we look at data
from: (i) the overall property and casualty insurance industry; and
(ii) organizations with direct written premium of at least $500 million, but
less than $2 billion.
ALLOCATION
BETWEEN CURRENT AND LONG-TERM COMPENSATION
Selective
allocates compensation among: (i) a fixed base salary; (ii) a
variable annual cash incentive; and (iii) a variable long-term
component. Together, these three components link compensation
opportunities for executives to both short-term and long-term financial and
strategic objectives. The chart below demonstrates the percentage of
total compensation for the CEO, Chief Financial Officer, and other NEOs that is
short-term compensation (base pay and ACIP) versus long-term incentive program
compensation (“LTIP”) and fixed (base pay) versus variable (ACIP and
LTIP). In 2009, NEO compensation was above the 50th percentile but
within the acceptable range of competitive pay practices.
NEO
|
|
2009
Base Pay
|
|
|
2009
ACIP
|
|
|
2009
LTIP
|
|
|
2009 Total
Compensation
|
|
Chief
Executive Officer
|
|
|
34.0%
|
|
|
|
15.1%
|
|
|
|
50.9%
|
|
|
|
100%
|
|
Chief
Financial Officer
|
|
|
40.0%
|
|
|
|
24.5%
|
|
|
|
35.5%
|
|
|
|
100%
|
|
Other
NEOs
|
|
|
40.1%
|
|
|
|
21.2%
|
|
|
|
38.7%
|
|
|
|
100%
|
|
Base
Salary
Our base
salary provides stable, competitive compensation and takes into account the
executive’s scope of responsibility, relevant background, training, and
experience. The SEBC also considers competitive market data for
similar positions and overall market demand for each position. The
SEBC generally believes base salaries should be aligned with market trends for
executives in similar positions with similar responsibilities at comparable
companies. When establishing the base salaries of NEOs, the SEBC also
considers:
|
·
|
the
functional role of the position;
|
|
·
|
the
level of responsibility;
|
|
·
|
growth
of the executive in the role, including skills and
competencies;
|
|
·
|
the
contribution and performance of the executive;
and
|
|
·
|
the
organization’s ability to replace the
executive.
|
When
determining 2009 base salaries for the CEO and other NEOs, the SEBC also
considered the challenging property and casualty insurance business environment,
overall Company results, and the competitive positioning of the base salaries of
the CEO and the other NEOs. Based on these factors, the SEBC decided
against an increase in base salary for the CEO and other NEOs in
2009.
Annual Cash Incentive
Program
Our ACIP
is intended to link a meaningful portion of annual cash compensation to the
near-term strategic and financial organizational performance goals and
pre-established individual and department performance goals and objectives, in
each case as described below. For 2009, all of Selective’s executives
(other than those in the Investment Department), including all of the NEOs, were
eligible to participate in the ACIP. ACIP awards are granted under
the Selective Insurance Group, Inc. Cash Incentive Plan, as amended (the “Cash
Incentive Plan”).
The SEBC
approves annual financial and strategic performance goals for the
ACIP. If none of the ACIP goals are achieved, no ACIP payments are
made. If ACIP goals are attained, the ACIP award pool is
funded. An individual’s ACIP award is based on: (i)
position grade level; (ii) corporate achievement of various ACIP annual
financial and strategic goals; and (iii) the achievement of individual and
departmental objectives.
2009 ACIP Targets and
Results
2009
Targets
For 2009,
the SEBC determined the ACIP funding opportunity to be between 0% to 112% of
target based on attainment of the overall Company financial and strategic
performance goals. The SEBC determined that between 0% and 67% of
this target would be attributable to a financial performance goal of achieving
between a 98% and 102% statutory combined ratio.
2
The SEBC also
determined that between 0% and 45% of this target would be attributable to the
achievement of six strategic performance goals. The SEBC rated five
of the six strategic measures as being worth seven percentage points each and
one up to 10 percentage points if all elements were achieved. The
chart below reflects potential ACIP payout totals at various statutory combined
ratio percentages if all strategic goals were met:
Statutory Combined
|
|
ACIP
|
|
Ratio (%)
|
|
Financial (%)
|
|
|
Strategic (%)
|
|
|
Total (%)
|
|
102
|
|
|
0
|
|
|
|
45
|
|
|
|
45
|
|
101
|
|
|
10
|
|
|
|
45
|
|
|
|
55
|
|
100
|
|
|
21
|
|
|
|
45
|
|
|
|
66
|
|
99
|
|
|
42
|
|
|
|
45
|
|
|
|
87
|
|
98
|
|
|
67
|
|
|
|
45
|
|
|
|
112
|
|
2009
ACIP Results
|
·
|
With
regard to the 2009 ACIP financial performance goal, Selective had a
statutory combined ratio of 100.5%, which resulted in the financial
measure of the ACIP being funded at
15.5%.
|
|
·
|
With
regard to the six 2009 ACIP strategic performance goals, Selective met
four of the goals as shown on the table below, which resulted in the
strategic measure of the ACIP being funded 28% for strategic
performance.
|
|
·
|
Therefore,
the total 2009 ACIP award pool was established at 43.5% of the funding
target.
|
2009 Strategic Initiatives
|
|
Measures
|
|
Value
|
|
2009 Result
|
1. Pricing
(2 of 3, or 3 of 3)
|
|
·
|
4
of 5 regions – achieve commercial lines (excluding bonds premium) pure
rate target
3
|
|
10
(if 3
goals
met)
|
|
Not
Achieved
|
|
|
·
|
Company
wide – achieve an average pure rate increase of 8% on retained business
that performs in the lowest two internal categories of
profitability
|
|
7
(if 2
goals
met)
|
|
|
|
|
·
|
Implement
21 rate changes in the auto and home lines of +3% or more in
SelectPLUS
®
in
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
2. Retention
(2 of 3)
|
|
·
|
3
of 5 regions – achieve their CL (excluding bonds premium) retention
target
|
|
7
|
|
Not
Achieved
|
|
|
·
|
Company
wide – for the lowest internal category of profitability, achieve
retention of 20-points lower than overall retention for all modeled
business
|
|
|
|
|
|
|
·
|
Company
wide – for highest internal category of profitability, achieve 90%
retention rate or 5-points greater retention than overall retention for
all modeled business, whichever is lower
|
|
|
|
|
2
The statutory
combined ratio is the property and casualty insurance industry standard measure
of underwriting profitability. A statutory combined ratio under 100%
generally indicates that an insurance company is generating an underwriting
profit and a statutory combined ratio over 100% generally indicates that an
insurance company is generating an underwriting loss.
3
Although
Selective met its commercial lines pure price target on an overall basis, the
ACIP goal was based on 4 of the 5 regions meeting their individual commercial
lines pure rate target.
3.New
Business (2 of 3)
|
|
·
|
Achieve
total new policy count plan
|
|
7
|
|
Achieved
|
|
|
·
|
Write
$157 million of new business in the areas of Manufacturers &
Wholesalers, Mercantile & Services, and Specialty
Programs
|
|
|
|
|
|
|
·
|
90%
of new policy counts (modeled lines) are in the three highest internal
category of profitability
|
|
|
|
|
|
|
|
|
|
|
|
|
4.Growth/Profitability
(2 of 3)
|
|
·
|
Implement
Phases I and II of Company expansion by year-end
|
|
7
|
|
Achieved
|
|
|
·
|
Implement
one and build one additional in-house developed Decision Support Model by
year-end
|
|
|
|
|
|
|
·
|
Generate
One & Done
®
new business of at least $290,000 per average business day
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Financial/Operational
|
|
·
|
Meet
or beat the controllable expense budget of $274 million
|
|
7
|
|
Achieved
|
|
|
|
|
|
|
|
|
6. Claims
(2 of 3)
|
|
·
|
Creation
of centralized claims vendor management process, including completion of
an approved vendor panel for all regions and corporate claims by
12/31/09
|
|
7
|
|
Achieved
|
|
|
·
|
Completion
of the first four Claims Strategy Project plans: document
management, automated correspondence, fraud analytics, and recovery
analytics
|
|
|
|
|
|
|
·
|
All
regions meet their established litigation management plans
|
|
|
|
|
NEO 2009 ACIP Payment
Opportunities and Awards
The ACIP
payment opportunities for the NEOs earned in 2009 and paid in 2010 under the
Cash Incentive Plan were based on competitive market levels and set as a
percentage of annual base salary relative to corresponding levels of performance
against the annual performance goals. The SEBC can exercise
discretion to award no incentive payments or to award amounts lower than the
maximum opportunity. The following table sets forth the 2009 minimum
and maximum ACIP opportunity, the SEBC’s actual 2009 award for the NEOs as a
percentage of base salary, and the percentage increase or decrease in ACIP from
2008 to 2009:
NEO and Position
|
|
Minimum 2009 ACIP
Opportunity as % of
Base Salary
|
|
Maximum 2009 ACIP
Opportunity as % of
Base Salary
|
|
Actual 2009 ACIP as
% of Base Salary
|
|
% Change in ACIP
from 2008 to 2009
|
Gregory
E. Murphy
Chairman,
President & Chief Executive Officer
|
|
|
0
|
%
|
|
|
200
|
%
|
|
|
44.4
|
%
|
|
|
-
38.5
|
%
|
Dale
A. Thatcher
Executive
Vice President, Chief Financial Officer & Treasurer
|
|
|
0
|
%
|
|
|
150
|
%
|
|
|
61.3
|
%
|
|
|
+
16.5
|
%
|
Richard
F. Connell
Senior
Executive Vice President & Chief Administrative
Officer
|
|
|
0
|
%
|
|
|
175
|
%
|
|
|
54
|
%
|
|
|
-
11.7
|
%
|
Michael
H. Lanza
Executive
Vice President & General Counsel
|
|
|
0
|
%
|
|
|
150
|
%
|
|
|
50.2
|
%
|
|
|
+
9.3
|
%
|
Ronald
J. Zaleski
Executive
Vice President & Chief Actuary
|
|
|
0
|
%
|
|
|
150
|
%
|
|
|
54.6
|
%
|
|
|
+
9.3
|
%
|
DISCUSSION OF CEO ACIP
AWARD
In
evaluating Mr. Murphy’s 2009 performance, the SEBC reviewed the 2009 ACIP goal
results and a comprehensive written performance appraisal that was completed by
non-executive members of Selective’s Board of Directors. Mr. Murphy,
as CEO, has ultimate responsibility for the achievement of the annual financial
and strategic performance goals, discussed above, as well as attainment of
investment goals. Selective’s 2009 investment goals
were: (i) after-tax investment income compared to budget; (ii) total
return on its fixed income portfolio and equity portfolio (including alternative
investments) compared to external benchmarks; and (iii) other strategic
initiatives. Selective’s financial, strategic, and investment goals
are considered to be Mr. Murphy’s individual performance goals. For
2009, Selective:
|
·
|
Had
a statutory combined ratio of 100.5% and achieved four of the six
strategic ACIP goals; and
|
|
·
|
Did
not meet its investment income budget or beat its performance
benchmarks.
|
As a
result of Mr. Murphy’s role as CEO and his ultimate responsibility for leading
Selective in the attainment of its goals, his 2009 ACIP payment was
approximately 44% of base salary, in relation to his ACIP opportunity range of
0-200% of base salary. Mr. Murphy’s 2009 ACIP payment was
approximately 38% lower than his 2008 ACIP payment. Given that
Selective did not fully meet the 2009 ACIP financial and strategic goals and it
underperformed with respect to its 2009 investment goals, the SEBC felt the
reduction in Mr. Murphy’s ACIP payment was warranted and consistent with
Selective’s pay for performance philosophy.
DISCUSSION OF OTHER NEO ACIP
AWARDS
The SEBC
reviewed the performance appraisal of each of the other NEOs and determined
their 2009 ACIP payments based on: (i) the achievement of the 2009
ACIP financial and strategic performance goals; (ii) the achievement of
departmental objectives; and (iii) individual performance. A
discussion of the 2009 ACIP awards for the other NEOs follows:
Mr. Thatcher
– In
addition to his general management accountability as a member of the executive
management team, Mr. Thatcher, Executive Vice President, Chief Financial Officer
& Treasurer, has primary responsibility for all financial matters, including
investor relations, tax, capital and capital management planning, and treasury
activities. In addition, in 2009 Mr. Thatcher assumed responsibility
for Corporate Strategy, Corporate Communications, and was appointed chairman of
the ERC. Mr. Thatcher’s major 2009 departmental goals, which were
met, included, among other things:
|
·
|
In-depth
analysis and identification of corporate-wide cost-saving opportunities
based on third-party benchmarking;
|
|
·
|
Selection
of vendor for XBRL implementation for SEC filed financial
statements;
|
|
·
|
Support
efforts to decommission the prior statistical reporting system;
and
|
|
·
|
Request
for Proposal (“RFP”) and selection of a reinsurance system solution and
begin implementation of outsource or
purchase.
|
In
addition, Mr. Thatcher’s 2009 individual accomplishments included:
|
·
|
Thoughtfully
and timely planned and responded to the unprecedented financial market
turmoil and general economic situation and allowed Selective to maintain a
strong statutory surplus position;
|
|
·
|
With
the Investment Department, developed an enhanced liquidity plan to deal
with the unprecedented financial market turmoil by moving all short-term
investments into AAA rated instruments, and diversifying the number of
banking partners and money market
funds;
|
|
·
|
Played
a key role in the successfully negotiated sale of the Selective HR
Solutions operations, which was central to the corporate strategy of
focusing on Insurance Operations;
|
|
·
|
Achieved
a well-diversified reinsurance program, despite a difficult reinsurance
market; and
|
|
·
|
Enhanced
Selective’s existing ERM processes, built new management tools, and
supported the Audit Committee Chairman in preparation for a special Audit
Committee meeting on ERM that was attended by most of the
Directors.
|
Mr.
Connell
. In his role as Senior Executive Vice President &
Chief Administrative Officer, Mr. Connell is responsible for many integrated
functions, including Information Technology, which supports the achievement of
Company goals and objectives. Mr. Connell takes a very disciplined
approach in making business decisions and is responsible for Selective’s
Enterprise Project Management Office (“EPMO”), which is responsible for all
projects over $500,000. During 2009, Mr. Connell accomplished several
goals that were instrumental in supporting the attainment of the Company’s 2009
financial and strategic objectives, and have positioned Selective well for
future success. Mr. Connell’s major 2009 departmental goals, which
were met, included, among other things:
|
·
|
Pricing
tier expansion and automation;
|
|
·
|
Vendor
management initiative, including reviewing vendor performance against
price, quality, and delivery goals, identifying opportunities for
consolidation and replacement, and requiring the use of the competitive
bidding process for non-preferred
vendors;
|
|
·
|
Control,
compliance and security initiative, including issuing RFPs, selecting
vendors, installing products, and piloting and deploying
systems;
|
|
·
|
ITS
infrastructure process automation, including issuing RFPs, selecting
vendor, installing product, and piloting and deploying
products;
|
|
·
|
Complete
basic post-policy acquisition services for customer self-service
automation; and
|
|
·
|
Claims
strategy automation, including submitting project proposal to EPMO for the
content management and automated correspondence
initiatives.
|
Mr.
Connell’s key individual 2009 accomplishments included: (i) leading
the successful execution of discretionary technology investments; (ii)
delivering efficient and cost effective technology solutions; and (iii) leading
initiatives to enable improvements in technology, service, and core
operations. Examples include:
|
·
|
Supporting
the selection and implementation of a reinsurance system
solution;
|
|
·
|
Supporting
efforts to decommission the prior statistical reporting
system;
|
|
·
|
Installing
a new storage array and completing data migration to such
array;
|
|
·
|
Upgrading
infrastructure capacity in the Company’s data
center;
|
|
·
|
Negotiating
various contracts and agreements yielding approximately $1.5 million in
annual savings; and
|
|
·
|
Negotiating
renewal leases for our various leased facilities yielding approximately
$700,000 in savings for these locations over five
years.
|
Mr.
Lanza
. In addition to his general management accountability as
a member of the executive management team, Mr. Lanza has primary responsibility
for all legal, corporate governance, internal audit, government affairs,
regulatory, and compliance matters. Mr. Lanza’s major 2009
departmental goals, which were met, included, among other things:
|
·
|
Support
Investments in execution of strategies; review the securities lending
program; review of alternative investments; and Corporate Secretarial
support for Management Investment
Committee;
|
|
·
|
Continue
to support Insurance Operations leadership and staff in meeting
profitability and growth goals;
|
|
·
|
Corporate
Services: Continue to integrate Internal Audit Division as business
partner with operating units; continue work on stockholder matters;
support Board of Directors in corporate governance and corporate
secretarial matters; and foster a compliance mindset throughout
Selective;
|
|
·
|
Diversified
Services: Continue to support the Selective HR Solutions operations in
licensing and benefit issues; continue litigation and government affairs
support for the Flood area of the Insurance operations;
and
|
|
·
|
Support
Claims and Claims Legal operations in efforts to improve Claims processes
and reduce legal expenses.
|
Mr. Lanza
led his team to actively contribute toward many aspects of the business, and
significantly help drive positive changes during 2009, including the following
individual accomplishments:
|
·
|
Providing
significant legal and government affairs support to Selective’s Insurance
Operations in meeting their profitability and growth goals related to
product development, rating, and tiering
issues;
|
|
·
|
Making
significant contributions to increase the Company’s surplus and liquidity
through the design and implementation of several holding company
transactions and the admission of two insurance subsidiaries as members of
the Federal Home Loan Bank of Indianapolis;
and
|
|
·
|
Supporting
the negotiation and closing of the sale of the Selective HR Solutions
operations, which was central to the corporate strategy of focusing on
Insurance Operations.
|
Mr.
Zaleski
. As Chief Actuary and chief planning/budgeting
officer, Mr. Zaleski plays a key role in oversight of reserve adequacy and other
claims initiatives, monitoring pricing actions, and supporting underwriting
improvements and predictive modeling efforts. Mr. Zaleski’s major
2009 departmental goals, which were met, included, among other
things:
|
·
|
Commercial
Lines Pricing: Continue development of plan for Company pricing tier
expansion and loss cost multiplier
consolidation;
|
|
·
|
Knowledge
Management – Predictive Modeling: Assist in implementation of
in-house business owners policy, property, and general liability models in
accordance with implementation
schedule;
|
|
·
|
Reserving/Capital
Modeling: Implement risk-adjusted return on equity analyses
across actuarial functions and support Claims Operations’ initiatives with
a dedicated resource; and
|
|
·
|
Financial
Planning: Develop internal underwriting staffing models;
complete an in-depth analysis and identification of cost-saving
opportunities based on third-party benchmarking; and create expense ratios
for small, middle, and large risks to better assess profitability by
size.
|
During
2009, Mr. Zaleski’s individual accomplishments included leading the Actuarial
Department to, among other things:
|
·
|
Develop
several actuarially based “tools” for use by our field and corporate
underwriters that will improve underwriting
performance;
|
|
·
|
Direct
and lead our CL and personal lines predictive modeling efforts, including
development, implementation, and enhancement of several commercial lines
predictive models that continue to drive underwriting improvements and
enhance risk selection;
|
|
·
|
Complete
quarterly reserve analyses that include claim frequency and severity
trends, tail factors, and loss development
factors;
|
|
·
|
Analyze
current uncertainties, identifying key reserve issues that required the
development of Claims operations action plans;
and
|
|
·
|
Provide
reserve point estimates on a line of business basis and, during the
planning process, carefully analyze and make current accident year loss
ratio picks.
|
ELEMENTS OF LONG-TERM
COMPENSATION
Design
Elements
Our
long-term incentive opportunities reward, and assist with the retention of,
Company leaders. By aligning financial rewards with the economic
interests of our stockholders, leaders are encouraged to work toward achieving
our long-term strategic objectives and increase shareholder
value. Selective uses both cash and non-cash vehicles to deliver
long-term compensation, which is consistent with the market practices of
Selective’s benchmark insurance groups, and takes into account the financial and
accounting impact of the two components. For each employee eligible
to participate in Selective’s LTIP, including the NEOs, a dollar denominated
target award is established. To determine the amount of the total
LTIP award pool, all individual target award amounts are
aggregated.
For
certain executives, including the NEOs, LTIP awards are granted in over-lapping
three-year cycles, and allocated among three components: (i) stock
options; (ii) performance-based restricted stock units; and (iii)
performance-based cash incentive units. By granting performance-based
restricted stock units and performance-based cash incentive units with
three-year performance periods, and options with three-year ratable vesting
periods, Selective encourages executive officers to continue their tenure with
Selective and aligns their interests with those of our
stockholders.
Long-Term Incentive Program
Award Grants
Performance
goals for the performance-based long-term incentive program awards granted in
2005 through 2009 are as follows:
Performance Period
|
|
Restricted Stock/Restricted Stock Unit
Performance Measures
|
|
Cash Unit Measures
|
01/01/05 – 12/31/08
|
|
Cumulative
return on equity (“ROE”) or cumulative net premiums written
(“NPW”)
|
|
N/A
|
01/01/06
– 12/31/08
|
|
Cumulative
ROE or cumulative NPW
|
|
Total
shareholder return (“TSR”)/NPW/statutory combined ratio
(“SCR”)
|
01/01/07
– 12/31/09
|
|
Cumulative
ROE or cumulative NPW
|
|
TSR/NPW/SCR
|
01/01/08
– 12/31/10
|
|
Cumulative
ROE or cumulative NPW
|
|
TSR/NPW/SCR
|
01/01/09
– 12/31/11
|
|
Cumulative
ROE or cumulative growth in policy count
|
|
TSR/NPW/SCR
|
In
determining the amount of LTIP awards to the NEOs in 2009, the SEBC looked at
several factors, including: (i) each individual executive’s
performance during the previous year, including the achievement of department
initiatives and other projects and endeavors accomplished throughout the year,
as outlined above; (ii) each executive officer’s total compensation in
comparison to benchmark data; and (iii) Selective’s desire to encourage
long-term retention of high-performing executives. The SEBC compared
Selective’s performance, including SCR, revenue growth, NPW growth, and TSR, to
the performance of the companies in the benchmark insurance groups to help
ensure that Selective’s executive officers are appropriately and competitively
compensated for the results they achieved for Selective in 2009.
Stock
Options
: Stock options are allocated to the NEOs as a portion
of the monetized value of the executive’s LTIP award. As the value
delivered by a stock option is dependent on the increase in value of the
underlying shares, a stock option award aligns the interests of the NEOs with
those of our stockholders. Options are awarded under the Selective
Insurance Group, Inc. 2005 Omnibus Stock Plan, as amended (the “Omnibus Stock
Plan”) at the closing price of Selective’s common stock as quoted on NASDAQ on
the date of grant, if available (“Fair Market Value”), and they vest ratably
over three years, beginning on the first anniversary of the date of
grant. The value of any executive’s stock option grant is limited to
a Fair Market Value of $100,000 on date of grant, so that the grant may qualify
for incentive stock option tax treatment.
Performance-Based
Restricted Stock Units
: The Black-Scholes value of the options
awarded is deducted from the total monetary value of the LTIP award to determine
the “adjusted monetary value” of the award. 65% of the adjusted
monetary value of an executive’s LTIP award granted in 2009 (minus the value of
options granted) was delivered in performance-based restricted stock units
granted under the Omnibus Stock Plan. Performance-based restricted
stock unit awards are generally subject to vesting based on time and attainment
of certain performance measures that are set annually by the
SEBC. The 2009 grants are subject to the following
conditions:
|
·
|
Three-year
vesting period; and
|
|
·
|
Achievement
at the end of any calendar quarter during the three-year period beginning
on January 1, 2009 and ending on December 31, 2011 of
either: (i) a cumulative operating ROE of at least 15%
(computed by excluding from the determination of average equity any
unrealized gain occurring after December 31, 2008); or (ii) a 9%
cumulative growth in policy count.
|
Dividend
equivalent units (“DEUs”) are credited on performance-based restricted stock
units at the same dividend rate paid to all Selective
stockholders. Payment of DEUs remains subject to the same vesting
conditions and performance measures applicable to the underlying restricted
stock units. This use of performance-based restricted stock units
clearly aligns this component of NEOs’ compensation with overall corporate
performance and stockholder interests.
Performance-Based
Cash Incentive Units
: The remaining 35% of the adjusted
monetary value of an executive’s LTIP award granted in 2009 was delivered
through performance-based cash incentive units granted under the Cash Incentive
Plan. As the cash incentive unit grants take into account Selective’s
three-year performance relative to a peer group and TSR on its common stock,
this award is also directly linked to Company performance and the interests of
stockholders. Performance-based cash incentive units granted in 2009
are subject to the following terms:
|
·
|
Three-year
performance period;
|
|
·
|
The
value of each cash incentive unit initially awarded increases or decreases
to reflect TSR on Selective common stock over the three-year performance
period for the award; and
|
|
·
|
The
number of cash incentive units ultimately earned increases or decreases
based on the following table:
|
|
>
= 80
percentile
|
100
%
|
125%
|
150%
|
175%
|
200%
|
|
|
|
|
|
|
|
|
55
th
–
79.9
th
percentile
|
75%
|
100%
|
125%
|
150%
|
175%
|
|
|
|
|
|
|
|
Statutory
Net
|
45
th
–
54.9
th
percentile
|
50%
|
75%
|
100%
|
125%
|
150%
|
Premium Growth
|
|
|
|
|
|
|
Relative
to Peer
Index
|
35
th
–
44.9
th
percentile
|
25%
|
50%
|
75%
|
100%
|
125%
|
|
|
|
|
|
|
|
|
<
35
th
=
percentile
|
0%
|
25%
|
50%
|
75%
|
100%
|
|
|
|
|
|
|
|
|
|
<
35
th
=
percentile
|
35
th
–
44.9
th
percentile
|
45
th
–
54.9
th
percentile
(Target)
|
55
th
–
79.9
th
percentile
|
>
= 80
percentile
|
|
|
|
|
|
|
|
|
|
Cumulative
3-Year Statutory Combined Ratio Relative to Peer
Index
|
The peer
group (the “Cash Incentive Unit Peer Group”) established for 2009 for comparing
Selective’s performance for the purposes of determining the ultimate number of
performance-based cash incentive units awarded consists of the following
companies:
OneBeacon
Insurance Group, Ltd
|
United
Fire & Casualty
|
Main
Street America (National Grange)
|
Liberty
Mutual Group Inc.
|
CNA
Financial Corporation
|
The
Hanover Insurance Group, Inc.
|
Cincinnati
Financial Corporation
|
Harleysville
Group Inc.
|
Auto-Owners
Insurance Group
|
Utica
National Insurance Group
|
State
Auto Financial Corporation
|
Westfield
Group
|
2005 and 2006 Long-Term
Incentive Program Award Grant Results
The
following table summarizes the achievement on the performance metrics for the
2005 and 2006 LTIP award grants and the corresponding payout:
Performance Metrics
|
|
Performance Versus Metrics
|
|
Percentage
Achieved
|
2005
Grant Results
|
|
|
|
|
Restricted Stock
|
|
|
|
|
Generate
a cumulative fiscal year return on average equity of at least 25% at any
time during such period; or achieve a 20% cumulative growth NPW at any
time during the period of January 1, 2005 to December 31,
2008
|
|
Achieved
25% cumulative ROE
|
|
100%
|
|
|
|
|
|
2006
Grant Results
|
|
|
|
|
Restricted Stock
|
|
|
|
|
Generate
a cumulative fiscal year return on average equity of at least 15% at any
time during such period; or achieve a 10% cumulative growth in NPW at any
time during the period of January 1, 2006 to December 31,
2008
|
|
Achieved
15% cumulative ROE
|
|
100%
|
Cash
Incentive Units
(
1)
|
|
|
|
|
TSR
over the three-year performance period, and cumulative three-year
statutory NPW growth and SCR relative to peer index during the period of
January 1, 2006 to December 31, 2008
|
|
Achieved
a TSR factor of 91.71%, a SCR of 97.49% and NPW growth of
1.69%
|
|
100%
of units at
$91.71
|
(1)
Cash
incentive unit awards are denominated in units with an initial value of
$100. Appreciation or depreciation is based on TSR, which is
determined using the change in Selective’s common stock price and reinvested
dividends over the three-year performance period for the award. The
number of units ultimately earned increases or decreases based
on: (i) cumulative three-year statutory NPW growth relative to a peer
index; and (ii) cumulative three-year SCR relative to a peer index.
Timing
of LTIP Awards
: Stock option, restricted stock unit, and cash
incentive unit awards are generally granted each year in connection with the
SEBC’s regularly scheduled first quarter meeting after the release of year-end
earnings. It is at this time, at their respective meetings, that the
SEBC and the Board of Directors review final year-end results for the prior year
and the SEBC makes final determinations on compensation.
Stock
Ownership Requirements
: Selective believes that stock
ownership by directors and management encourages the enhancement of stockholder
value. Selective’s stock ownership guidelines are included in our
Corporate Governance Guidelines, which are available at
www.selective.com.
The
following table shows the common stock ownership guidelines for directors and
certain officers of Selective and its lead insurance subsidiary, Selective
Insurance Company of America (“SICA”), which must be met at the later of March
31, 2014 or within five years of attaining the specified position:
POSITION
|
|
REQUIREMENT
|
Directors
|
|
4 x
annual retainer
|
Chairman,
President & CEO
|
|
4 x
base salary
|
Senior
Executive Vice Presidents and Executive Vice Presidents
|
|
2.5
x base salary
|
Senior
Vice Presidents
|
|
1.5
x base
salary
|
In
calculating ownership under the guidelines:
|
·
|
Shares
of Selective common stock currently owned, awards of restricted stock or
restricted stock units (included related dividend equivalent units) not
yet vested, and shares of Selective common stock held in benefit plan
investments (
i.e.,
401(k) Plan) are
counted;
|
|
·
|
Unexercised
stock options are not counted; and
|
|
·
|
Deferred
shares of Selective common stock held in accounts of Directors are
counted.
|
Selective
believes that its directors and officers are on track to meet the required
ownership guidelines.
RETIREMENT AND DEFERRED
COMPENSATION PLANS
SICA
employs the personnel engaged in Selective’s Insurance Operations, including all
of the NEOs. SICA maintains a non-contributory defined benefit
pension program consisting of a tax qualified defined benefit pension plan named
the Retirement Income Plan for Selective Insurance Company of America (the
“Retirement Income Plan”) and a supplemental employee retirement plan for
certain executives and employees, and maintains health and welfare benefit plans
in which eligible employees, including the NEOs, participate. The
pension program is more fully described in the section entitled “Pension
Benefits” beginning on page 42.
SICA
offers a tax qualified defined contribution plan named the Selective Insurance
Retirement Savings Plan (the “Retirement Savings Plan”) to employees, including
the NEOs, who meet eligibility requirements. Participants, other than
highly compensated employees as defined by the Internal Revenue Service, can
contribute 50% of their defined compensation to the Retirement Savings Plan, up
to $16,500 in 2009. Highly compensated employees were limited to 8%
of their defined compensation, up to $16,500 in 2009. Contributions
by participants of up to a maximum of 7% of defined compensation are matched 65%
by SICA. Participants over the age of 50, including certain of the
NEOs, may make an additional $5,500 catch-up contribution to the Retirement
Savings Plan, pursuant to the Internal Revenue Code, which contribution is not
eligible for a company match. Effective January 1, 2006, the
Retirement Savings Plan was amended to include additional enhanced matching
contributions and non-elective contributions for otherwise eligible employees
who, because of a date of hire after December 31, 2005, are not eligible to
participate in the Retirement Income Plan. None of the NEOs are
eligible for the enhanced matching or the additional non-elective
contributions.
SICA
offers a non-qualified deferred compensation plan (“Deferred Compensation
Plan”), under which certain executives and employees, including the NEOs, may
defer up to 50% of their base salary and/or up to 100% of their ACIP
payment. To the extent not matched in the Retirement Savings Plan due
to limitations under the Internal Revenue Code, contributions to the Deferred
Compensation Plan by participants of up to 7% of base salary are matched 65% by
SICA. Additional information regarding the Deferred Compensation Plan
is included in the section entitled “Nonqualified Deferred Compensation” on page
43.
EMPLOYMENT
AGREEMENTS
SICA
entered into employment agreements with its key executive officers, including
the NEOs, which provide for severance in the event of
termination: (i) due to death or disability; (ii) without
“Cause”
4
; (iii) by
the executive for “Good Reason”
5
; or (iv) after a change
in control. The SEBC was advised by its Compensation Consultants that
the terms of these agreements are market competitive within our peer group, and
the SEBC believes that these agreements are important for recruitment and
retention of key executives. In the event of a change in control,
uncertainty may raise among our key executives as to their continued employment
after or in connection with such event, which may result in the departure or
distraction of our key executives. The purpose of the employment
agreements is to retain our key executives and reinforce and encourage their
continued attention and dedication during such a potentially critical time, even
if they fear that their position will be terminated after or in connection with
the change in control. The employment agreements are described in the
section entitled “Employment Agreements and Potential Payments upon Termination
or Change of Control” beginning on page 44.
4
“Cause”
is defined in the employment agreements, but generally means the
executive: (i) was convicted of or pled guilty to a felony; (ii)
breached a material provision of his or her employment agreement; or (iii)
engaged in misconduct which constitutes fraud in the performance of his or her
duties and obligations to the Company.
5
“Good
Reason” is defined in the employment agreements, but generally
means: (i) a material reduction in salary; (ii) a material negative
change in the executive’s benefits; (iii) a material reduction of the
executive’s position, duties, responsibilities, and status with the Company or
material negative change in title or office; (iv) requiring the executive to be
based at a location in excess of 50 miles from the location of the executive’s
office prior to a change in control; (v) failure of a counterparty to a
transaction resulting in a change in control to assume the employment agreement;
or (vi) a breach of the employment agreement by SICA within two years after a
change in control.
Tax Treatment and
Accounting
The SEBC
intends to preserve deductibility under the Internal Revenue Code for
performance-based compensation paid to its executive officers as
practicable. Section 162(m) of the Internal Revenue Code prohibits
publicly-owned companies from deducting compensation paid to certain of its
executive officers as expense to the extent that the officer’s compensation in
excess of $1 million is not performance-based and is not paid pursuant to a
stockholder approved plan. Selective has two performance-based
stockholder approved plans: (i) the Omnibus Stock Plan; and (ii) the
Cash Incentive Plan.
Generally
accepted accounting principles in the United States of America (“GAAP”) require
that compensation expense be measured on the income statement for all
share-based payments at grant date fair value of equity instruments (including
employee stock options and restricted stock and restricted stock unit awards)
and at market value on the day of vesting of liability instruments (including
cash incentive unit awards). The SEBC has considered the impact of
GAAP on our use of stock-based compensation as a key retention
tool. The SEBC has determined that the current estimated costs of
continuing to use stock-based compensation relative to the benefits our
compensation programs provide, does not warrant any change to our current
incentive framework.
We have
designed our compensation programs and awards to executive officers to comply
with the provisions of Section 409A of the Internal Revenue Code, where
applicable. For example, payments made to our executive officers
under our non-qualified deferred compensation plans on account of the
executives’ separation from service are not payable before the first day of the
seventh month following the date of separation from service.
Summary
Compensation Table
The
following Summary Compensation Table reflects the compensation earned by or paid
to the NEOs during 2007, 2008, and 2009.
Name
and
Principal Position
|
|
Year
|
|
Salary
($)
(1)
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive
Plan
Compen-
sation
|
|
|
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)
(5)
|
|
|
All Other
Compen-
sation
|
|
|
Total
($)
|
|
Gregory
E. Murphy
|
|
2009
|
|
|
934,616
|
|
|
|
1,329,413
|
|
|
|
20,602
|
|
|
|
400,000
|
|
|
|
448,515
|
|
|
|
42,525
|
|
|
|
3,175,671
|
|
Chairman,
President &
|
|
2008
|
|
|
900,000
|
|
|
|
1,576,973
|
|
|
|
23,139
|
|
|
|
650,000
|
|
|
|
459,931
|
|
|
|
61,071
|
|
|
|
3,671,114
|
|
Chief
Executive Officer
|
|
2007
|
|
|
900,000
|
|
|
|
1,775,079
|
|
|
|
24,979
|
|
|
|
900,000
|
|
|
|
85,449
|
|
|
|
133,399
|
|
|
|
3,818,906
|
|
Dale
A. Thatcher
|
|
2009
|
|
|
493,269
|
|
|
|
401,589
|
|
|
|
20,602
|
|
|
|
291,300
|
|
|
|
52,350
|
|
|
|
64,041
|
|
|
|
1,323,151
|
|
Executive
Vice
|
|
2008
|
|
|
465,769
|
|
|
|
505,484
|
|
|
|
23,139
|
|
|
|
250,000
|
|
|
|
43,062
|
|
|
|
33,370
|
|
|
|
1,320,824
|
|
President,
Chief Financial Officer & Treasurer
|
|
2007
|
|
|
405,000
|
|
|
|
590,152
|
|
|
|
24,979
|
|
|
|
300,000
|
|
|
|
13,696
|
|
|
|
29,903
|
|
|
|
1,363,730
|
|
Richard
F. Connell
|
|
2009
|
|
|
467,308
|
|
|
|
454,465
|
|
|
|
20,602
|
|
|
|
242,800
|
|
|
|
103,242
|
|
|
|
20,513
|
|
|
|
1,308,930
|
|
Senior
Executive Vice
|
|
2008
|
|
|
450,000
|
|
|
|
551,915
|
|
|
|
23,139
|
|
|
|
275,000
|
|
|
|
96,035
|
|
|
|
51,471
|
|
|
|
1,447,560
|
|
President
& Chief Administrative Officer
|
|
2007
|
|
|
411,538
|
|
|
|
575,102
|
|
|
|
24,979
|
|
|
|
350,000
|
|
|
|
49,037
|
|
|
|
30,694
|
|
|
|
1,441,350
|
|
Michael
H. Lanza
|
|
2009
|
|
|
451,731
|
|
|
|
354,832
|
|
|
|
20,602
|
|
|
|
218,500
|
|
|
|
28,929
|
|
|
|
43,883
|
|
|
|
1,118,477
|
|
Executive
Vice
|
|
2008
|
|
|
435,000
|
|
|
|
337,565
|
|
|
|
23,139
|
|
|
|
200,000
|
|
|
|
22,774
|
|
|
|
46,100
|
|
|
|
1,064,578
|
|
President
& General Counsel
|
|
2007
|
|
|
359,538
|
|
|
|
415,079
|
|
|
|
24,979
|
|
|
|
225,000
|
|
|
|
10,979
|
|
|
|
27,572
|
|
|
|
1,063,147
|
|
Ronald
J. Zaleski
|
|
2009
|
|
|
415,385
|
|
|
|
371,059
|
|
|
|
20,602
|
|
|
|
218,500
|
|
|
|
60,282
|
|
|
|
59,288
|
|
|
|
1,145,116
|
|
Executive
Vice
|
|
2008
|
|
|
395,385
|
|
|
|
415,220
|
|
|
|
23,139
|
|
|
|
200,000
|
|
|
|
54,649
|
|
|
|
28,597
|
|
|
|
1,116,990
|
|
President
& Chief Actuary
|
|
2007
|
|
|
367,385
|
|
|
|
505,082
|
|
|
|
24,979
|
|
|
|
275,021
|
|
|
|
19,157
|
|
|
|
31,864
|
|
|
|
1,223,488
|
|
(1)
Although
the CEO as well as all other NEOs did not receive a base salary increase in
2009, the Summary Compensation Table shows an increase in salary dollars for
2009. This increase is due to pay period timing which resulted in an
extra pay period in 2009 (27 vs. 26). This pay period timing occurs
approximately once every decade. Consequently, the NEOs, as well as
every employee in the organization, were paid an additional pay period in
2009. This will not result in an ongoing increase to the NEOs or any
employee’s annual base pay. The amounts in this column include any
salary that certain NEOs have deferred into SICA’s Deferred Compensation
Plan. Such amounts are also included in the Nonqualified Deferred
Compensation table on page 43.
(2)
This
column reflects the aggregate grant date fair value of the 2009 and 2008 grants
of performance-based restricted stock units, 2007 grants of performance-based
restricted stock, and 2009, 2008, and 2007 grants of performance-based cash
incentive unit awards. Grants of performance-based restricted stock
and performance-based restricted stock units were made pursuant to the Omnibus
Stock Plan, under which such shares vest three years from the date of grant,
conditioned upon the attainment of certain predetermined performance
goals. Grants of performance-based cash incentive unit awards were
made pursuant to the Cash Incentive Plan, under which such units vest at the
payment date, which is as soon as practicable in the calendar year following the
end of the calendar year coincident with the end of the three-year performance
period. The value of each cash incentive unit initially awarded
increases or decreases to reflect TSR on Selective common stock over the
three-year performance period for the award. The number of cash
incentive units ultimately earned increases or decreases based
on: (i) cumulative three-year statutory NPW growth relative to a peer
index, and (ii) cumulative three-year SCR relative to a peer
index. Restricted stock, restricted stock unit, and cash incentive
unit awards are subject to forfeiture should the grantee resign or be terminated
for cause prior to vesting.
The
aggregate grant date fair value for performance-based restricted stock unit and
performance-based cash incentive unit awards granted in 2009 to the NEOs are as
follows: Mr. Murphy: $864,113 restricted stock units and $465,300
cash incentive units; Mr. Thatcher: $251,289 restricted stock units and $150,300
cash incentive units; Mr. Connell: $295,365 restricted stock units and $159,100
cash incentive units; Mr. Lanza: $222,032 restricted stock units and $132,800
cash incentive units; and Mr. Zaleski: $238,259 restricted stock units and
$132,800 cash incentive units.
The
aggregate grant date fair value for performance-based restricted stock unit and
performance-based cash incentive unit awards granted in 2008 to the NEOs are as
follows: Mr. Murphy: $1,024,973 restricted stock units and $552,000 cash
incentive units; Mr. Thatcher: $320,984 restricted stock units and $184,500 cash
incentive units; Mr. Connell: $358,715 restricted stock units and $193,200 cash
incentive units; Mr. Lanza: $214,365 restricted stock units and $123,200 cash
incentive units; and Mr. Zaleski: $265,720 restricted stock units and $149,500
cash incentive units.
The
aggregate grant date fair value for performance-based restricted stock and
performance-based cash incentive unit awards granted in 2007 to the NEOs are as
follows: Mr. Murphy: $1,331,279 restricted stock and $443,800 cash incentive
units; Mr. Thatcher: $442,552 restricted stock and $147,600 cash incentive
units; Mr. Connell: $431,302 restricted stock and $143,800 cash incentive units;
Mr. Lanza: $311,279 restricted stock and $103,800 cash incentive units; and Mr.
Zaleski: $378,782 restricted stock and $126,300 cash incentive
units.
The
aggregate grant date fair value reported in this column assumes the
following: (i) the predetermined performance goals for the restricted
stock unit grants are probable of being attained; (ii) per unit values for the
cash incentive unit awards of $100.00; and (iii) a 100% peer group unit
multiplier for cash incentive unit awards. The maximum value assuming
the highest level of performance conditions for the performance-based restricted
stock and restricted stock units are consistent with the amounts
above. Although the maximum number of performance-based cash
incentive units potentially issuable is 200% of the original grant, the ultimate
maximum value of the grant cannot be determined due to the fact that, as stated
above, the value of each unit is adjusted based on the TSR of Selective common
stock, the maximum value of which is not determinable at this time.
(3)
This
column reflects the aggregate grant date fair value for the 2009, 2008, and 2007
option grants. The aggregate grant date fair value of these grants is
calculated using the Black-Scholes option valuation method. For a
discussion of the weighted-average assumptions used in the valuation of these
awards, see Item 8. Financial Statements and Supplementary Data, Note 17
Share-Based Payments, in Selective’s Annual Report on Form 10-K for the year
ended December 31, 2009; Item 8. Financial Statements and Supplementary Data,
Note 16, Share-Based Payments, in Selective’s Annual Report on Form 10-K for the
year ended December 31, 2008; and Item 8. Financial Statements and Supplementary
Data, Note 17, Share-Based Payments, in Selective’s Annual Report on Form 10-K
for the year ended December 31, 2007. Grants were made pursuant to
the Omnibus Stock Plan, under which such options vest one-third each year,
beginning the first anniversary of the grant date. The grants are
subject to forfeiture should the grantee resign or be terminated for cause prior
to vesting.
(4)
Amounts
in this column include ACIP awards to the NEOs earned in 2009 and paid in 2010,
earned in 2008 and paid in 2009, and earned in 2007 and paid in 2008 that were
granted under the Cash Incentive Plan.
(5)
Amounts
in this column reflect the actuarial increase in the present value of each NEO’s
pension benefits under all defined benefit pension plans of SICA, determined
using the same interest rate and mortality assumptions as those used for
financial statement reporting purposes. There were no changes to the benefit
formulas under the defined pension benefit plans in 2009. The
increases in pension values reported in this column are attributable to a
decrease in the discount rate used to calculate present value along with the
increase of years of service of the NEOs. There were no above-market
or preferential earnings on deferred compensation under SICA’s nonqualified
deferred compensation program.
(6)
For
2009, amounts in this column for each NEO reflect the following:
|
·
|
Mr.
Murphy: $31,800 of company matching contributions to his
Deferred Compensation Plan and $10,725 of company matching contributions
to his 401(k) plan.
|
|
·
|
Mr.
Thatcher: $11,719 of company matching contributions to his
Deferred Compensation Plan, $10,725 of company matching contributions to
his 401(k) plan, and $41,597 of cash dividend payments related to the 2007
restricted stock grant.
|
|
·
|
Mr.
Connell: $9,113 of company matching contributions to his
Deferred Compensation Plan, $675 for tax preparation services, and $10,725
of company matching contributions to his 401(k)
plan.
|
|
·
|
Mr.
Lanza: $8,809 of company matching contributions to his Deferred
Compensation Plan, $10,725 of company matching contributions to his 401(k)
plan, and $24,349 of cash dividend payments related to the 2007 restricted
stock grant.
|
|
·
|
Mr.
Zaleski: $8,175 of company matching contributions to his
Deferred Compensation Plan, $10,725 of company matching contributions to
his 401(k) plan, and $40,388 of cash dividend payments related to the 2007
restricted stock grant.
|
Grants
of Plan Based Awards
The
following table shows the grants of plan based awards to our NEOs in
2009:
|
|
|
|
|
|
|
Estimated Future Payouts under Equity
Incentive Plan
Awards
(2)
|
|
|
All Other
|
|
|
|
|
|
Grant Date
Fair Value
|
|
|
|
|
|
Estimated Future
Payouts under Non-
Equity In
cent
ive Plan
Awards
(1)
|
|
|
Cash
Incentive
Unit
|
|
|
Re-
stricted
Stock
Awards
(#)
|
|
|
Awards:
Number
of Secur-
ities
|
|
|
Exer-
cise or
Base
Price
|
|
|
of
Cash
Incentive
Unit,
Restricted
Stock, and
|
|
Name
|
|
|
|
Thres-
hold
($)
|
|
|
Maximum
($)
|
|
|
Thres-
hold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
Maximum
(#)
|
|
|
lying
Options
(#)
|
|
|
Option
Awards
($/Sh)
|
|
|
Option
($)
|
|
Gregory
E. Murphy
|
|
1/30/09
|
|
$
|
0
|
|
|
$
|
1,800,000
|
|
|
|
2,327
|
|
|
|
4,653
|
|
|
|
9,306
|
|
|
|
56,294
|
|
|
|
6,514
|
|
|
$
|
15.35
|
|
|
$
|
1,350,015
|
|
Dale
A. Thatcher
|
|
1/30/09
|
|
$
|
0
|
|
|
$
|
712,500
|
|
|
|
752
|
|
|
|
1,503
|
|
|
|
3,006
|
|
|
|
18,183
|
|
|
|
6,514
|
|
|
$
|
15.35
|
|
|
$
|
422,191
|
|
Richard
F. Connell
|
|
1/30/09
|
|
$
|
0
|
|
|
$
|
787,500
|
|
|
|
796
|
|
|
|
1,591
|
|
|
|
3,182
|
|
|
|
19,242
|
|
|
|
6,514
|
|
|
$
|
15.35
|
|
|
$
|
475,067
|
|
Michael
H. Lanza
|
|
1/30/09
|
|
$
|
0
|
|
|
$
|
652,500
|
|
|
|
664
|
|
|
|
1,328
|
|
|
|
2,656
|
|
|
|
16,066
|
|
|
|
6,514
|
|
|
$
|
15.35
|
|
|
$
|
375,434
|
|
Ronald
J. Zaleski
|
|
1/30/09
|
|
$
|
0
|
|
|
$
|
600,000
|
|
|
|
664
|
|
|
|
1,328
|
|
|
|
2,656
|
|
|
|
16,066
|
|
|
|
6,514
|
|
|
$
|
15.35
|
|
|
$
|
391,661
|
|
(1)
Amounts
represent minimum and maximum potential ACIP award to each NEO under our Cash
Incentive Plan for 2009. Maximum awards reflect the maximum ACIP
award established by the SEBC. ACIP awards are intended to qualify as
“performance-based compensation” under Section 162(m) of the Internal Revenue
Code. Actual payouts of the above-referenced awards are included in
the “Non-Equity Incentive Compensation Plan” column of the “Summary Compensation
Table.” For information regarding the ACIP, see the section of the
Compensation Discussion and Analysis beginning on page 27 entitled “Annual Cash
Incentive Program.”
(2)
Performance-based
cash incentive unit awards are granted under the Cash Incentive Plan, and
performance-based restricted stock unit awards and stock option awards are
granted under the Omnibus Stock Plan. For a description of the
material terms of such awards, see the section of the Compensation Discussion
and Analysis beginning on page 33 entitled, “Elements of Long-Term
Compensation.”
(3)
The
number of performance-based cash incentive units paid can range from 0-200%, and
therefore, the amount payable could be $0. The threshold selected represents
35-44.9
th
percentile of the Cash Incentive Unit Peer Group; the target represents
45-54.9
th
percentile of the Cash Incentive Unit Peer Group; and the maximum represents
greater than or equal to 80
th
percentile of the Cash Incentive Unit Peer Group.
(4)
This
column includes restricted stock unit awards calculated at grant date fair
value, cash incentive unit awards with an initial value of $100 per unit, and
stock options valued at the Black-Scholes value on the date of
grant.
Outstanding
Equity Awards at Fiscal Year End
The
following table shows the unexercised options and unvested stock awards to our
NEOs as of December 31, 2009:
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
No. of
Securities
Underlying
Unexer-
cised
Options (#)
Exercisable
|
|
|
No. of
Securities
Underlying
Unexer-
cised
Options (#)
Unexer-
cisable
(1)
|
|
|
Option
Exer-
cise
Price
($/Sh)
(2)
|
|
Option
Expiration
Date
|
|
No. of
Shares or
Units of
Stock
That Have
Not
Vested
(#)
(3)
|
|
Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards: No.
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested
($)
(10)
|
|
Gregory
E. Murphy
|
|
|
21,062
|
|
|
|
|
|
|
11.1875
|
|
02/06/2011
|
|
|
45,181
|
(4)
|
|
|
743,229
|
|
|
|
4,438
|
(7)
|
|
|
275,777
|
|
|
|
|
10,362
|
|
|
|
|
|
|
10.375
|
|
02/05/2012
|
|
|
58,377
|
(5)
|
|
|
960,302
|
|
|
|
5,520
|
(8)
|
|
|
418,858
|
|
|
|
|
11,394
|
|
|
|
|
|
|
11.6175
|
|
02/04/2013
|
|
|
|
|
|
|
|
|
|
|
4,653
|
(9)
|
|
|
345,811
|
|
|
|
|
10,000
|
|
|
|
|
|
|
17.395
|
|
02/03/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
22.025
|
|
02/01/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480
|
|
|
|
|
|
|
28.74
|
|
01/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,320
|
|
|
|
1,160
|
|
|
|
27.44
|
|
01/30/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,384
|
|
|
|
2,770
|
|
|
|
24.07
|
|
02/06/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,514
|
|
|
|
15.35
|
|
01/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dale
A. Thatcher
|
|
|
10,000
|
|
|
|
|
|
|
|
22.025
|
|
02/01/2015
|
|
|
16,128
|
(6)
|
|
|
265,306
|
|
|
|
1,476
|
(7)
|
|
|
91,719
|
|
|
|
|
3,480
|
|
|
|
|
|
|
|
28.74
|
|
01/30/2016
|
|
|
15,096
|
(4)
|
|
|
248,331
|
|
|
|
1,845
|
(8)
|
|
|
139,999
|
|
|
|
|
2,320
|
|
|
|
1,160
|
|
|
|
27.44
|
|
01/30/2017
|
|
|
18,856
|
(5)
|
|
|
310,178
|
|
|
|
1,503
|
(9)
|
|
|
111,703
|
|
|
|
|
1,384
|
|
|
|
2,770
|
|
|
|
24.07
|
|
02/06/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,514
|
|
|
|
15.35
|
|
01/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
F. Connell
|
|
|
10,000
|
|
|
|
|
|
|
|
22.025
|
|
02/01/2015
|
|
|
15,812
|
(4)
|
|
|
260,112
|
|
|
|
1,438
|
(7)
|
|
|
89,357
|
|
|
|
|
3,480
|
|
|
|
|
|
|
|
28.74
|
|
01/30/2016
|
|
|
19,954
|
(5)
|
|
|
328,243
|
|
|
|
1,932
|
(8)
|
|
|
146,600
|
|
|
|
|
2,320
|
|
|
|
1,160
|
|
|
|
27.44
|
|
01/30/2017
|
|
|
|
|
|
|
|
|
|
|
1,591
|
(9)
|
|
|
118,243
|
|
|
|
|
1,384
|
|
|
|
2,770
|
|
|
|
24.07
|
|
02/06/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,514
|
|
|
|
15.35
|
|
01/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
H. Lanza
|
|
|
3,480
|
|
|
|
|
|
|
|
28.74
|
|
01/30/2016
|
|
|
11,344
|
(6)
|
|
|
186,609
|
|
|
|
1,038
|
(7)
|
|
|
64,501
|
|
|
|
|
2,320
|
|
|
|
1,160
|
|
|
|
27.44
|
|
01/30/2017
|
|
|
10,082
|
(4)
|
|
|
165,845
|
|
|
|
1,232
|
(8)
|
|
|
93,484
|
|
|
|
|
1,384
|
|
|
|
2,770
|
|
|
|
24.07
|
|
02/06/2018
|
|
|
16,660
|
(5)
|
|
|
274,065
|
|
|
|
1,328
|
(9)
|
|
|
98,697
|
|
|
|
|
|
|
|
|
6,514
|
|
|
|
15.35
|
|
01/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
J. Zaleski
|
|
|
9,638
|
|
|
|
|
|
|
|
10.375
|
|
02/05/2012
|
|
|
12,231
|
(4)
|
|
|
201,206
|
|
|
|
1,263
|
(7)
|
|
|
78,483
|
|
|
|
|
8,606
|
|
|
|
|
|
|
|
11.6175
|
|
02/04/2013
|
|
|
16,660
|
(5)
|
|
|
274,065
|
|
|
|
1,495
|
(8)
|
|
|
113,441
|
|
|
|
|
5,748
|
|
|
|
|
|
|
|
17.395
|
|
02/03/2014
|
|
|
|
|
|
|
|
|
|
|
1,328
|
(9)
|
|
|
98,697
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
22.025
|
|
02/01/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480
|
|
|
|
|
|
|
|
28.74
|
|
01/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,320
|
|
|
|
1,160
|
|
|
|
27.44
|
|
01/30/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,384
|
|
|
|
2,770
|
|
|
|
24.07
|
|
02/06/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,514
|
|
|
|
15.35
|
|
01/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
The
options listed in this column vest ratably over three years beginning on the
first anniversary of the date of grant.
(2)
The
exercise price of option grants issued under the Omnibus Stock Plan is the
closing market price on the date of the grant. The exercise price on
options grants issued under previous equity plans is the average of the high and
the low market price on the date of grant.
(3)
In
the event of a termination of employment on or after an individual’s “Early
Retirement Date,” as defined under the Retirement Income Plan, holders of
performance-based restricted stock and restricted stock unit awards are vested
in such awards subject only to the attainment of applicable performance
measures. Early Retirement Dates for the NEOs are as
follows: Mr. Murphy, 11/11/2002; Mr. Thatcher, 12/10/2015; Mr.
Connell, 2/7/2008; Mr. Lanza, 12/16/2016; and Mr. Zaleski,
12/7/2009.
(4)
Reflects number of performance-based restricted stock units and related accrued
DEUs initially granted on February 6, 2008, which will vest and be payable,
subject to the attainment of applicable performance measures on February 6,
2011.
(5)
Reflects number of performance-based restricted stock units and related
accrued DEUs initially granted on January 30, 2009, which will vest and be
payable, subject to the attainment of applicable performance measures on January
30, 2012.
(6)
Reflects number of performance-based restricted stock initially granted on
January 30, 2007, which vested and was paid on January 30, 2010.
(7)
Reflects
number of performance-based cash incentive units initially granted in 2007 to
the NEOs for the three-year performance period ending December 31,
2009. In the event of a termination of employment on or after an
individual’s Early Retirement Date, as defined under the Retirement Income Plan,
holders of such awards are vested in such awards, with the initial number of
units and the value of each unit subject to adjustment, based on the attainment
of specified performance measures. Early Retirement Dates for the
NEOs are set forth in footnote 3. Settlement of the 2007 cash
incentive unit award will be made as soon as practicable in the 2010 calendar
year, following the determination of the attainment of the applicable
performance measures.
(8)
Reflects
number of performance-based cash incentive units initially granted in 2008 to
the NEOs for the three-year performance period ending December 31,
2010. In the event of a termination of employment on or after an
individual’s Early Retirement Date, as defined under the Retirement Income Plan,
holders of such awards are vested in such awards, with the initial number of
units and the value of each unit subject to adjustment, based on the attainment
of specified performance measures. Early Retirement Dates for the
NEOs are set forth in footnote 3. Settlement of the 2008 cash
incentive unit award will be made as soon as practicable in the 2011 calendar
year, following the determination of the attainment of the applicable
performance measures.
(9)
Reflects
number of performance-based cash incentive units initially granted in 2009 to
the NEOs for the three-year performance period ending December 31,
2011. In the event of a termination of employment on or after an
individual’s Early Retirement Date, as defined under the Retirement Income Plan,
holders of such awards are vested in such awards, with the initial number of
units and the value of each unit subject to adjustment, based on the attainment
of specified performance measures. Early Retirement Dates for the
NEOs are set forth in footnote 3. Settlement of the 2009 cash
incentive unit award will be made as soon as practicable in the 2012 calendar
year, following the determination of the attainment of the applicable
performance measures.
(10)
The
amounts in this column reflect: (i) the target 100% unit multiplier
for the number of cash incentive units granted for the 2007, 2008, and 2009
awards based on performance against the Cash Incentive Unit Peer Group; and (ii)
a $62.14 per unit value for the 2007 grant, a $75.88 per unit value for the 2008
grant, and a $74.32 per unit value for 2009 grant based on TSR at December 31,
2009. The target 100% unit multiplier is used in the calculation for
the 2007, 2008, and 2009 grants because performance through December 31, 2009 is
below target for the 2007 and 2008 grants and at target for the 2009
grant. The targets are identified for the 2009 grant in the Grants of
Plan Based Awards table on page 39.
Option
Exercises and Stock Vested
The
following table shows the option exercise and stock vesting of grants of plan
based awards to our NEOs in 2009:
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares Acquired
on Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
|
|
|
Number of
Shares Acquired
on Vesting
(1)
(#)
|
|
|
Value Realized
on Vesting
($)
(2)
|
|
Gregory
E. Murphy
|
|
|
0
|
|
|
|
0
|
|
|
|
10,642
|
|
|
|
975,982
|
|
Dale
A. Thatcher
|
|
|
0
|
|
|
|
0
|
|
|
|
28,432
|
|
|
|
676,355
|
|
Richard
F. Connell
|
|
|
0
|
|
|
|
0
|
|
|
|
3,292
|
|
|
|
301,911
|
|
Michael
H. Lanza
|
|
|
0
|
|
|
|
0
|
|
|
|
17,942
|
|
|
|
458,064
|
|
Ronald
J. Zaleski
|
|
|
0
|
|
|
|
0
|
|
|
|
41,240
|
|
|
|
860,817
|
|
(1)
Amounts
in this column include shares of performance-based restricted stock vested to
the NEOs in 2009 as well as performance-based cash incentive units paid to the
NEOs in 2009. The amounts reflected in the table attributable to
shares of performance-based restricted stock are as follows: Mr.
Thatcher, 25,290; Mr. Lanza, 15,550; and Mr. Zaleski, 38,398. The
amounts reflected in the table attributable to performance-based cash incentive
units are as follows: Mr. Murphy, 10,642; Mr. Thatcher, 3,142; Mr.
Connell, 3,292; Mr. Lanza, 2,392; and Mr. Zaleski, 2,842.
In the
event of a termination of employment on or after an individual’s Early
Retirement Date as defined under the Retirement Income Plan, holders of
restricted stock awards become vested in such awards, provided any related
performance measures are attained. As a result, the value becomes
subject to ordinary income taxation upon a holder attaining his Early Retirement
Date if the related performance measure has been met by such date,
notwithstanding the continued employment of the holder by Selective or its
subsidiaries. Due to the imposition of this accelerated income tax
liability, the SEBC determined it appropriate to fully vest and remove the
restrictions on such shares. Accordingly, the numbers and amounts
shown for Mr. Zaleski reflect a grant awarded to him in 2007.
(2)
Amounts
in this column include the value of shares of performance-based restricted stock
vested to the NEOs in 2009 as well as the amount paid for performance-based cash
incentive units to the NEOs in 2009. The amounts reflected in the
table that are attributable to shares of performance-based restricted stock are
as follows: Mr. Thatcher, $388,201; Mr. Lanza, $238,693; and Mr.
Zaleski, $600,176. The amounts reflected in the table attributable to
performance-based cash incentive units are as follows: Mr. Murphy,
$975,982; Mr. Thatcher, $288,154; Mr. Connell, $301,911; Mr. Lanza, $219,371;
and Mr. Zaleski, $260,641.
Pension
Benefits
SICA
maintains a tax qualified non-contributory defined benefit pension plan, the
Retirement Income Plan.
Most
SICA employees, including the NEOs and certain former employees whose employment
commenced on or before December 31, 2005, are eligible to receive benefits under
the Retirement Income Plan. Selective also maintains the unfunded
Selective Insurance Supplemental Pension Plan (“SERP”), as permitted under the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), to
provide payments to certain executives and other participants in the Retirement
Income Plan equal to the difference between: (i) the benefit payment to a
participant under the Retirement Income Plan calculated without regard to ERISA
and Internal Revenue Code limitations on annual amounts payable under the
Retirement Income Plan; and (ii) the benefit payable to the participant pursuant
to such limitations.
The
Retirement Income Plan was amended as of July 1, 2002 to provide for different
calculations based on age and company service as of that
date. Monthly benefits payable at normal retirement age under the
Retirement Income Plan and SERP are computed as follows. Defined
terms used in this section, but not defined in this Proxy Statement, have the
meanings given to them in the Retirement Income Plan.
|
1.
|
If
a participant: (i) attained age 50 and completed five years of
vesting service on or before July 1, 2002, or (ii) completed at least 25
years of vesting service on or before July 1, 2002, a participant’s
benefit is equal to 2% of Average Monthly Compensation, minus 1 3/7% of
Primary Social Security Benefits multiplied by years of Benefit Service
(up to 35 years), reduced by the annuity contract issued by the AXA
Equitable Life Insurance Company (“Equitable”) purchased under a prior
plan.
|
|
2.
|
If
a participant: (i) completed at least five years of Vesting
Service; and (ii) the sum of a participant’s age and Vesting Service is 55
or more, a participant’s benefit is equal to the sum of: (a) 2% of Average
Monthly Compensation, less 1 3/7% of Primary Social Security benefit
multiplied by the number of years of Benefit Service through June 30, 2002
(up to a maximum of 35 years) reduced by the monthly amount, if any of
retirement annuity payable under the group annuity contract issued by
Equitable that was purchased under a prior plan, based on Benefit Service
as of June 30, 2002, but including compensation earned after such date;
and (b) 1.2% of Average Monthly Compensation multiplied by the number of
years of Benefit Service after June 30,
2002.
|
|
3.
|
If
a participant first became eligible for the plan before July 1, 2002, but
did not qualify for either 1 or 2 above, the participant’s benefit is
equal to the greater of: (i) the benefit accrued as of June 30,
2002 equal to 2% of Average Monthly Compensation less 1 3/7% of Primary
Social Security Benefit multiplied by years of Benefit Service (up to 35
years) reduced by the monthly amount, if any of retirement annuity payable
under the group annuity contract issued by Equitable that was purchased
under a prior plan, based on Benefit Service as of June 30, 2002, but
including compensation earned after such date for purposes of determining
the participant’s Average Monthly compensation; and (ii) 1.2% of Average
Monthly Compensation multiplied by years of Benefit
Service.
|
|
4.
|
If
a participant first became a participant in the plan after July 1, 2002,
the benefit is equal to 1.2% of Average Monthly Compensation multiplied by
years of Benefit Service.
|
The
earliest retirement age is age 55 with 10 years of service or the attainment of
70 points (age plus years of service). If a participant chooses to
begin receiving benefits before his or her 65
th
birthday, the amount of the monthly benefit will be reduced as
follows:
|
·
|
By
1/180
th
for each complete calendar month for the first 60 months by which the
first early retirement benefit payment precedes the attainment of Normal
Retirement Age;
|
|
·
|
By
1/360
th
for each complete calendar month for the next 60 months by which the first
early retirement benefit payments precede Normal Retirement Age;
and
|
|
·
|
By
60% plus 1/600
th
per month for each month prior to age
55.
|
At
retirement, participants receive monthly pension payments. There are
four optional forms of payments that can be chosen as alternatives to the Normal
Form of Payment.
The
following table shows information regarding the pension benefits of our
NEOs:
Name
|
|
Early
Retirement
Eligible
|
|
Plan Name
|
|
Number of
Years Credited
Service
(#)
(1)
|
|
|
Present Value of
Accumulated
Benefit
($)
(2)
|
|
|
Payments
During Last
Fiscal Year
($)
|
|
Gregory
E. Murphy
|
|
Yes
|
|
Retirement
Income Plan
|
|
|
28.58
|
|
|
|
641,802
|
|
|
|
0
|
|
|
|
|
|
SERP
|
|
|
28.58
|
|
|
|
1,954,086
|
|
|
|
0
|
|
Dale
A. Thatcher
|
|
No
|
|
Retirement
Income Plan
|
|
|
8.67
|
|
|
|
97,942
|
|
|
|
0
|
|
|
|
|
|
SERP
|
|
|
8.67
|
|
|
|
74,574
|
|
|
|
0
|
|
Richard
F. Connell
|
|
Yes
|
|
Retirement
Income Plan
|
|
|
8.33
|
|
|
|
235,586
|
|
|
|
0
|
|
|
|
|
|
SERP
|
|
|
8.33
|
|
|
|
189,239
|
|
|
|
0
|
|
Michael
H. Lanza
|
|
No
|
|
Retirement
Income Plan
|
|
|
4.42
|
|
|
|
48,729
|
|
|
|
0
|
|
|
|
|
|
SERP
|
|
|
4.42
|
|
|
|
31,820
|
|
|
|
0
|
|
Ronald
J. Zaleski
|
|
Yes
|
|
Retirement
Income Plan
|
|
|
9.25
|
|
|
|
152,744
|
|
|
|
0
|
|
|
|
|
|
SERP
|
|
|
9.25
|
|
|
|
96,806
|
|
|
|
0
|
|
(1)
The
Retirement Income Plan imposes a one-year waiting period for plan participation,
which year is not included in years of credited service.
(2)
Present
value as of December 31, 2009 is calculated on the basis of normal retirement
age of 65. A 5.93% discount rate is applied and the 2009 Static
Mortality Table is used to calculate the values indicated.
Nonqualified
Deferred Compensation
The
Deferred Compensation Plan allows participants to defer receipt of up to 50% of
base salary and up to 100% of their ACIP payments. Participants may
choose from a variety of investment options that mirror the market performance
of the selected funds. Each year, participants elect whether to
schedule in-service withdrawals or withdrawals at separation of
service. For those funds to be distributed at separation of service,
participants may be paid in five, 10, or 15 annual installments, or a lump
sum. SICA may make matching contributions of $0.65 of each dollar
deferred, up to 7% of base salary, except that SICA will match the Retirement
Savings Plan contributions first, and in no event will a participant receive a
matching contribution in excess of $0.65 of each dollar, up to 7% of base
salary.
The
following table shows information regarding nonqualified deferred compensation
of our NEOs:
Name
|
|
Executive
Contributions
in 2009
($)
(1)
|
|
|
Selective
Contributions in
2009
($)
(2)
|
|
|
Aggregate
Earnings in 2009
($)
(3)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate Balance
at December 31,
2009
($)
(4)
|
|
Gregory
E. Murphy
|
|
|
56,077
|
|
|
|
31,800
|
|
|
|
135,490
|
|
|
|
0
|
|
|
|
794,167
|
|
Dale
A. Thatcher
|
|
|
49,327
|
|
|
|
11,719
|
|
|
|
49,200
|
|
|
|
0
|
|
|
|
277,838
|
|
Richard
F. Connell
|
|
|
14,019
|
|
|
|
9,113
|
|
|
|
195,905
|
|
|
|
0
|
|
|
|
1,266,647
|
|
Michael
H. Lanza
|
|
|
13,552
|
|
|
|
8,809
|
|
|
|
5,993
|
|
|
|
0
|
|
|
|
36,351
|
|
Ronald
J. Zaleski
|
|
|
141,538
|
|
|
|
8,175
|
|
|
|
320,621
|
|
|
|
0
|
|
|
|
1,618,602
|
|
(1)
Amounts
in this column are attributable to 2009 salary deferred by Messrs. Murphy,
Thatcher, Connell and Lanza and are included in the Salary column of the Summary
Compensation Table. Of the amounts in this column for Mr. Zaleski,
$41,538 is attributable to 2009 salary deferred, which is included in the Salary
column of the Summary Compensation Table, and $100,000 is attributable to the
deferral of a portion of his ACIP paid in March 2009.
(2)
100%
of the information in this column is included in the All Other Compensation
Column of the Summary Compensation Table.
(3)
The
information in this column is not included in the Summary Compensation Table
because such earnings are not above market earnings.
(4)
The
Aggregate Balance as of December 31, 2009 includes the following contributions
of the NEOs and SICA to the Deferred Compensation Plan, which are included in
the Summary Compensation Table:
|
·
|
For
2007: Mr. Murphy, $283,262; Mr. Thatcher, $56,069; Mr. Connell,
$342,899; Mr. Lanza, $11,988; and Mr. Zaleski,
$303,659.
|
|
·
|
For
2008: Mr. Murphy, $78,375; Mr. Thatcher, $57,695; Mr. Connell,
$222,547; Mr. Lanza, $0; and Mr. Zaleski,
$253,974.
|
|
·
|
For
2009: Mr. Murphy, $87,877; Mr. Thatcher, $61,046; Mr. Connell,
$23,132; Mr. Lanza, $22,361; and Mr. Zaleski,
$149,713.
|
Employment
Agreements and Potential Payments upon Termination or Change of
Control
SICA
entered into amended employment agreements (collectively, the “Employment
Agreements”) with the NEOs, as of December 23, 2008. The following
table summarizes the principal provisions of the Employment
Agreements.
Term
|
|
Continuation
of the prior agreements’ initial three-year term, automatically renewed
for additional one-year periods unless terminated by either party with
written notice.
(1)
|
Compensation
|
|
Base
salary.
(2)
|
Benefits
|
|
Eligible
to participate in incentive compensation plan, stock plan, 401(k) plan,
defined benefit pension plan and any other stock option, stock
appreciation right, stock bonus, pension, group insurance, retirement,
profit sharing, medical, disability, accident, life insurance, relocation
plan or policy, or any other plan, program, policy or arrangement of
Selective or SICA intended to benefit SICA’s employees
generally.
|
Vacation
and Reimbursements
|
|
Vacation
time and reimbursements for ordinary travel and entertainment expenses in
accordance with SICA’s policies.
|
Perquisites
|
|
Suitable
offices, secretarial and other services, and other perquisites to which
other executives of SICA are generally entitled.
|
Severance
and Benefits on Termination without Change in Control
|
|
·
|
For Cause or
Resignation by NEO other than for Good Reason
: Salary
and benefits accrued through termination date.
|
|
|
·
|
Death or
Disability
: Multiple
(
3)
of: (i) NEO’s salary; plus (ii) average of three most recent
annual cash incentive payments; provided that any such severance payments
be reduced by life or disability insurance payments under policies with
respect to which SICA paid premiums, paid in 12 equal
installments.
|
|
|
·
|
Without Cause by SICA,
Relocation of Office over 50 Miles (without NEO’s consent), Resignation
for Good Reason by NEO
:
|
|
|
|
o
|
Multiple
(3)
of: (i) NEO’s salary; plus (ii) average of three most recent
annual cash incentive payments paid in 12 equal
installments.
|
|
|
|
o
|
Medical,
dental, vision, disability, and life insurance coverage in effect for NEO
and dependents until the earlier of specified period of months
(4)
following termination or commencement of equivalent benefits from a new
employer.
|
|
|
·
|
Stock
Awards
: Except for termination for Cause or resignation
by the NEO other than for Good Reason, immediate vesting and possible
extended exercise period, as applicable, for any previously granted stock
options, stock appreciation rights, cash incentive units, restricted
stock, and stock bonuses.
|
Severance and
Benefits on Termination after
Change
in Control
|
|
For
termination without Cause or by NEO with Good Reason within two years
following a Change in Control (as defined in the Employment Agreement),
NEO is entitled to:
|
|
|
·
|
Severance
payment equal to multiple
(
5
)
of
the greater of: (i) NEO’s salary plus target annual cash
incentive payment; or (ii) NEO’s salary plus the average of NEO’s annual
cash incentive payments for the three calendar years prior to the calendar
year in which the termination occurs, paid in lump sum.
|
|
|
·
|
Medical,
dental, vision, disability, and life insurance coverage in effect for NEO
and dependents until the earlier of period of months
(
6
)
following termination or commencement of equivalent benefits from a new
employer.
|
|
|
·
|
Stock
Awards, same as above, except that the initial number of cash incentive
units is multiplied by 150%.
|
|
|
·
|
Tax
gross-up payment, if necessary, to offset any excise tax imposed on NEO
for such payments or
benefits.
|
Release;
|
|
·
|
Receipt
of severance payments and benefits conditioned upon:
|
Confidentiality
and
|
|
|
o
|
Entry
into release of claims; and
|
Non-Solicitation
|
|
|
o
|
No
disclosure of confidential or proprietary information or solicitation of
employees to leave Selective or its subsidiaries for a period of two years
following the termination of the Employment
Agreement.
|
(1)
The
Employment Agreements automatically renewed for additional one-year periods on
April 25, 2009 for Mr. Murphy, on July 26, 2009 for Mr. Lanza, and on July 31,
2009 for Messrs. Connell, Thatcher, and Zaleski.
(2)
As
of January 31, 2010, the annual base salaries for the NEOs were as
follows: Mr. Murphy, $900,000; Mr. Thatcher, $475,000; Mr. Connell,
$450,000; Mr. Lanza, $435,000; and Mr. Zaleski, $400,000.
(3)
For
Mr. Murphy the multiple is 2; for Mr. Connell the multiple is 1.75; and for
Messrs. Thatcher, Lanza, and Zaleski the multiple is 1.5.
(4)
For
Mr. Murphy the period is 24 months; for Mr. Connell the period is 21 months; and
for Messrs. Thatcher, Lanza, and Zaleski the period is 18 months.
(5)
For
Mr. Murphy the multiple is 2.99; for Mr. Connell the multiple is 2.5; and for
Messrs. Thatcher, Lanza, and Zaleski the multiple is 2.
(6)
For
Mr. Murphy the period is 36 months; and for Messrs. Connell, Thatcher, Lanza,
and Zaleski the period is 24 months.
The
following table shows information regarding payments and benefits to which our
NEOs would be entitled under the scenarios shown as of December 31,
2009:
Name
|
|
Resignation
(1)
or Termination
For Cause
($)
|
|
|
Retirement
(2)
($)
|
|
|
Death or
Disability
($)
(3)
|
|
|
Termination without
Cause or Resignation
with Good Reason
($)
(4)
|
|
|
Change in Control
($)
(5)
|
|
Gregory
E. Murphy
|
|
|
-
|
|
|
|
2,751,143
|
|
|
|
6,584,476
|
|
|
|
6,599,888
|
|
|
|
10,021,983
|
|
Dale
A. Thatcher
|
|
|
-
|
|
|
|
1,174,400
|
|
|
|
2,371,900
|
|
|
|
2,383,402
|
|
|
|
4,241,292
|
|
Richard
F. Connell
|
|
|
-
|
|
|
|
949,721
|
|
|
|
2,384,731
|
|
|
|
2,386,010
|
|
|
|
4,467,324
|
|
Michael
H. Lanza
|
|
|
-
|
|
|
|
890,366
|
|
|
|
1,912,866
|
|
|
|
1,928,862
|
|
|
|
3,732,877
|
|
Ronald
J. Zaleski
|
|
|
-
|
|
|
|
773,057
|
|
|
|
1,805,567
|
|
|
|
1,820,228
|
|
|
|
3,326,286
|
|
(1)
Other
than a resignation for Good Reason.
(2)
This
column includes the value of unvested performance-based restricted stock and
restricted stock units granted under the Omnibus Stock Plan and any related
accrued DEUs. These awards would normally vest upon: (i)
retirement or continuation in service through the end of the applicable
performance period; and (ii) the achievement of the specified performance goals
applicable to each such award, and be payable following the end of the
applicable three-year performance period. Also included in this
column is the value of performance-based cash incentive units awarded under the
Cash Incentive Plan to the NEOs. The value of such awards is
calculated using: (i) the target 100% unit multiplier for the number
of cash incentive units granted; and (ii) the per unit value at December 31,
2009. Under the Cash Incentive Plan, participants’ awards, including
the NEOs’ awards, would fully vest and be payable following the end of the
applicable three-year performance period.
(3)
This
column includes the value of unvested performance-based restricted stock and
restricted stock units granted under the Omnibus Stock Plan and any related
accrued DEUs. In the event of total disability, these awards would
normally vest for all participants, including the NEOs, upon the achievement of
the specified performance goals applicable to each such award, and be payable
following the end of the applicable three-year performance period. In
the event of death, the awards are immediately vested and payable for all
participants, including the NEOs. Also included in this column is the
value of performance-based cash incentive units awarded under the Cash Incentive
Plan to the NEOs. The value of such awards is calculated
using: (i) the target 100% unit multiplier for the number of cash
incentive units granted; and (ii) the per unit value at December 31,
2009. Under the Cash Incentive Plan, participants’ awards, including
the NEOs’ awards, would fully vest and be payable following the end of the
applicable three-year performance period. This column also includes
the severance payment provided for in each NEO’s Employment
Agreement. Payments in this column will be reduced by life or
disability insurance payments under policies with respect to which SICA paid
premiums.
(4)
This
column includes the value of unvested performance-based restricted stock and
restricted stock units granted under the Omnibus Stock Plan and any related
accrued DEUs. These awards would normally vest upon: (i) a
termination without Cause or for Good Reason; and (ii) the achievement of the
specified performance goals applicable to each such award, and be payable
following the end of the applicable three-year performance
period. Also included in this column is the value of
performance-based cash incentive units awarded under the Cash Incentive Plan to
the NEOs. The value is calculated using: (i) the target
100% unit multiplier for the number of cash incentive units granted; and (ii)
the per unit value at December 31, 2009. The awards would fully vest
and be payable following the end of the applicable three-year performance
period. Also included in this column are the severance payment and
the value of medical, dental, vision, disability, and life insurance coverage,
all as provided for in each NEO’s Employment Agreement.
(5)
This column includes the value of unvested performance-based restricted
stock and restricted stock units granted under the Omnibus Stock Plan and any
related accrued DEUs, which would immediately vest and be payable for all
participants, including the NEOs. This column also includes the value
of performance-based cash incentive units awarded under the Cash Incentive Plan
to the NEOs, all of which would vest upon a change in control for any
participant, including the NEOs, holding such awards under such
plans. The value of such awards is calculated using: (i) a
150% per unit multiplier; and (ii) the per unit value at December 31, 2009, all
of which would vest upon a change in control for any participant, including the
NEOs, holding such awards under such plans. This column also includes
the severance payment and the value of medical, dental, vision, disability, and
life insurance coverage, as provided for in each NEO’s Employment
Agreement. This column also includes the value of any tax gross-up
payment necessary to offset any excise tax imposed for the payment and benefits
disclosed in this column.
DIRECTOR
COMPENSATION
The
following table shows compensation earned or paid to our non-employee directors
during 2009 (employee directors do not receive compensation for serving on the
Board).
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Stock Awards
($)
(1)
|
|
|
Option Awards
($)
(2)
|
|
|
Total
($)
|
|
Paul
D. Bauer
|
|
|
33,000
|
|
|
|
82,535
|
|
|
|
32,497
|
|
|
|
148,032
|
|
W.
Marston Becker
|
|
|
18,006
|
|
|
|
82,535
|
|
|
|
32,497
|
|
|
|
133,038
|
|
A.
David Brown
|
|
|
49,506
|
|
|
|
57,536
|
|
|
|
32,497
|
|
|
|
139,539
|
|
John
C. Burville
|
|
|
30,500
|
|
|
|
62,534
|
|
|
|
32,497
|
|
|
|
125,531
|
|
William
M. Kearns, Jr.
|
|
|
12,488
|
|
|
|
49,000
|
|
|
|
32,497
|
|
|
|
93,985
|
|
Joan
M. Lamm-Tennant
|
|
|
15,500
|
|
|
|
82,535
|
|
|
|
32,497
|
|
|
|
130,532
|
|
S.
Griffin McClellan III
|
|
|
35,000
|
|
|
|
57,536
|
|
|
|
32,497
|
|
|
|
125,033
|
|
Michael
J. Morrissey
|
|
|
39,000
|
|
|
|
57,536
|
|
|
|
32,497
|
|
|
|
129,033
|
|
Cynthia
S. Nicholson
|
|
|
1,500
|
|
|
|
18,487
|
|
|
|
0
|
|
|
|
19,987
|
|
Ronald
L. O’Kelley
|
|
|
28,000
|
|
|
|
70,030
|
|
|
|
32,497
|
|
|
|
130,527
|
|
William
M. Rue
|
|
|
16,000
|
|
|
|
82,535
|
|
|
|
32,497
|
|
|
|
131,032
|
|
J.
Brian Thebault
|
|
|
30,500
|
|
|
|
82,535
|
|
|
|
32,497
|
|
|
|
145,532
|
|
(1)
This
column reflects the aggregate grant date fair value for the 2009 grants of
restricted stock units to directors, based on a grant date fair value of $11.60,
and the portion of each director’s annual retainer paid in
stock. Under the Omnibus Stock Plan, at least 50% of a director’s
annual retainer, as set forth below, must be paid in Selective common
stock.
(2)
This
column reflects the aggregate grant date fair value for the 2009 option grants
to directors using the Black-Scholes option valuation method and based on a
grant date fair value of $2.22. The aggregate number of options
outstanding at December 31, 2009 for each director was as
follows: Messrs. Bauer and Kearns: 66,156; Messrs. Becker and
Burville: 30,156; Mr. McClellan: 42,156; Mr. O’Kelley: 36,156; Mr. Morrissey:
14,612; and Messrs. Rue, Mr. Thebault, Mr. Brown, and Ms. Lamm-Tennant:
60,156.
The
following table summarizes the types and amounts of compensation paid to our
non-employee directors in 2009:
Type of Compensation
|
|
Amount
|
|
Annual
Retainer Fee
|
|
$
|
50,000
|
|
Grant
Date Fair Value of Annual Equity Award
|
|
$
|
32,500
|
|
Black-Scholes
Value of Annual Option Grant
|
|
$
|
32,500
|
|
Board
Meeting Attendance
|
|
$
|
0
|
|
Committee
Attendance Fee
|
|
|
|
|
In
person
|
|
$
|
1,500
|
|
By
telephone
|
|
$
|
1,000
|
|
Annual
Chairperson Fee
|
|
|
|
|
Audit
Committee
|
|
$
|
15,000
|
|
Corporate Governance
and Nominating
Committee
|
|
$
|
7,500
|
|
Finance
Committee
|
|
$
|
7,500
|
|
Salary
and Employee Benefits Committee
|
|
$
|
12,500
|
|
Lead
Director Fee
|
|
$
|
15,000
|
|
Expenses
|
|
Reasonable
|
|
As the
Director Compensation table shows, the non-employee directors receive
compensation in the forms of restricted stock units, stock options, and cash for
their director service. The SEBC reviews and approves the
compensation for non-employee directors, including the Annual Retainer
Fee. Pursuant to the Omnibus Stock Plan, non-employee directors must
elect by December 20 of the prior year to receive the Annual Retainer Fee
either: (i) entirely in shares of Selective common stock; or (ii) in
cash for up to 50% of the Annual Retainer Fee with the balance in shares of
Selective common stock. The Annual Retainer Fee is paid in equal
quarterly installments. The portion of the Annual Retainer Fee that
is paid in shares of Selective common stock is valued based on fair market value
on the payment date, which is the
first business day of January, April, July, and October. The
number of shares of common stock issued in each quarterly installment
equals:
The amount of Annual
Retainer Fee to be paid in stock x .25
The Fair Market Value of Selective’s
common stock on the payment date.
In 2009,
under the director compensation program, each non-employee director received
restricted stock units of Selective’s common stock having a $32,500 Fair Market
Value on the date of grant and options on shares having a $32,500 Black-Scholes
value on the date of grant. The restricted stock units and options
are granted pursuant to the terms of the Omnibus Stock
Plan. Committee Attendance Fees and Annual Chairperson Fees are paid
in cash pursuant to the table above.
Pursuant
to the Omnibus Stock Plan, non-employee directors may elect by December 20 to
defer their receipt of director compensation to be earned in the following year
(including their Annual Retainer, committee fees, and committee chairperson fees
and any dividends and accrued interest thereon, but excluding restricted stock
units and options granted under the Omnibus Stock Plan) to a specified future
year, the attainment of age 70, or separation from service as a
director.
Effective
as of May 1, 2010, conditioned upon approval by Selective’s stockholders of
Proposal 3, the provisions of the Omnibus Stock Plan relating specifically to
the form and deferral of non-employee director compensation will be removed from
the Omnibus Stock Plan and restated as a separate plan, the Selective Insurance
Group, Inc. Non-Employee Directors’ Deferred Compensation Plan (the “Directors
Plan”). Any restricted stock units and stock options, and any common
stock issued pursuant to the Directors Plan, will continue to be issued under
the Omnibus Stock Plan.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member
of the Salary and Employee Benefits Committee: (i) was a Selective
officer or employee in 2009; (ii) is a former Selective officer; or (iii)
entered into any transaction in 2009 requiring disclosure under the section
entitled “Transactions with Related Persons.”
No
Selective executive officer served as a member of the compensation committee of
another entity, or as a director of another entity, one of whose executive
officers served on the Salary and Employee Benefits Committee or as a director
of Selective.
COMPENSATION
COMMITTEE REPORT
The
Salary and Employee Benefits Committee establishes general executive
compensation policies and establishes the salaries and bonuses of Selective’s
executive officers, including the Chief Executive Officer. The Board
of Directors did not modify any action or recommendation made by the Salary and
Employee Benefits Committee with respect to executive compensation in
2009. The Salary and Employee Benefits Committee: (i) has
reviewed and discussed the Compensation Discussion and Analysis with management;
and (ii) based on this review and discussion recommended to the Board of
Directors, and the Board approved, the inclusion of the Compensation Discussion
and Analysis in Selective’s Annual Report on Form 10-K for the year ended
December 31, 2009 and this Proxy Statement.
Submitted
by the Salary and Employee Benefits Committee of Selective’s Board of
Directors,
J. Brian
Thebault, Chairperson
Paul D.
Bauer
A. David
Brown
John C.
Burville
Michael
J. Morrissey
Cynthia
S. Nicholson
The
Compensation Committee Report does not constitute soliciting material, and shall
not be deemed to be filed or incorporated by reference into any other Selective
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
to the extent that Selective specifically incorporates the Compensation
Committee Report by reference therein.
INFORMATION
ABOUT PROPOSAL 3
Approval
of the Amendment and Restatement of the Selective Insurance Group, Inc. 2005
Omnibus Stock Plan
Selective's
stockholders are being asked to approve an amendment and restatement of the
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan ("Omnibus Stock
Plan"). The purpose of the amendment and restatement is
to:
|
·
|
Increase
the number of shares of common stock available for issuance under the
Omnibus Stock Plan to a maximum of 3,400,000 shares (including any shares
available for issuance under the Omnibus Stock Plan as of April 30,
2010);
|
|
·
|
Increase
the maximum number of shares of common stock that can be granted to any
participant in the Omnibus Stock Plan in a calendar year from 100,000 to
200,000;
|
|
·
|
Provide
that awards under the Omnibus Stock Plan may be granted to
consultants;
|
|
·
|
Provide
that awards under the Omnibus Stock Plan may be provided to employees and
consultants to subsidiaries of Selective that are less than 80% owned by
Selective;
|
|
·
|
Limit
the circumstances under which a “change in control” will occur under the
plan;
|
|
·
|
Reapprove
the performance goals under the plan for purposes of Section 162(m) of the
Internal Revenue Code (“Section
162(m)”);
|
|
·
|
Remove
certain provisions relating to the form and deferral of compensation to
non-employee directors; and
|
|
·
|
Make
certain other minor changes to the
plan.
|
Selective's
stockholders are being asked to reapprove the performance goals under the
Omnibus Stock Plan in accordance with Section 162(m). Section 162(m)
limits Selective’s federal income tax deduction for compensation to certain
specified senior executives (“covered employees”) to $1,000,000 per year, but
excludes from that limit compensation that qualifies as “performance-based
compensation." Certain awards made under the Omnibus Stock Plan to
Selective’s covered employees are intended to qualify as performance-based
compensation under Section 162(m). These awards will be made subject
to satisfaction of one or more of the performance goals listed below under
"Performance Goals."
Because
the administrator of the Omnibus Stock Plan has the authority to establish the
particular target(s) under the performance goals for each award to a covered
employee intended to constitute “performance-based compensation,” Section 162(m)
requires the material terms of the performance goals to be disclosed to, and
reapproved by, Selective’s stockholders no later than the first stockholder
meeting in the fifth year following the initial stockholder approval of the
performance goals. As the performance goals in the Omnibus Stock Plan
were initially approved by stockholders at the 2005 Annual Meeting, stockholder
approval and reapproval of the goals is required at the 2010 Annual Meeting to
ensure Section 162(m) qualification. For purposes of Section 162(m),
the material terms of the performance goals we are asking you to approve and
reapprove include: (i) the employees eligible to receive awards under
the Omnibus Stock Plan; (ii) a description of the available performance
measures; and (iii) the maximum amount that can be paid to any employee under
awards if the performance goals are achieved. If stockholder approval
is not received at the Annual Meeting, the Omnibus Stock Plan will remain
effective but we will not be able to deduct compensation under the Omnibus Stock
Plan that would have otherwise qualified as performance-based compensation under
Section 162(m).
The
purpose of the Omnibus Stock Plan is to attract and retain employees and
non-employee directors of Selective and its affiliates, to motivate them to
achieve Selective's long-term goals, and to further align their interests with
those of the Selective's stockholders. Under NASDAQ rules, the
amendment to the Omnibus Stock Plan must be approved by Selective's stockholders
to be effective.
In
designing the Omnibus Stock Plan, the Board of Directors was guided by best
practices that seek to identify specific performance metrics most closely tied
to achievement of Selective's growth and profitability goals and the enhancement
of stockholder value. The Omnibus Stock Plan is designed to work with
other elements of Selective's compensation program, including the Cash Incentive
Plan, to appropriately motivate and compensate executives and
employees. Under the Omnibus Stock Plan, vesting and payment of
certain of the awards may be directly linked to the achievement of specific
performance metrics, as outlined below under "Performance Goals.”
To
address any issues that stockholders may have regarding the number of shares
that Selective would be able to grant subject to awards under the Omnibus Stock
Plan, Selective's Board of Directors has determined that the average annual
number of shares that may be granted subject to awards during the three fiscal
years commencing January 1, 2010 under the Omnibus Stock Plan shall not be
greater than 2.12% (average of the 2009 and the 2010 burn-rate caps) of the
weighted average annual number of outstanding shares during such three fiscal
years. For purposes of calculating the number of shares granted in a
year, any full-value awards will count as equivalent to two
shares. The calculation shall be made as follows:
|
·
|
Average
annual number of shares granted = (A + B + C) ÷ 3 expressed as a
percentage, where A, B, and C = the Granted Share Percentage (as defined
below) for fiscal years 2010, 2011, and 2012,
respectively.
|
|
·
|
The
number of shares granted subject to awards under the Omnibus Stock Plan
for each fiscal year = X / Y expressed as a percentage (the “Granted Share
Percentage”), where X = the sum of the number of common shares granted
subject to awards during the fiscal year pursuant to stock options, stock
appreciation rights, restricted stock, restricted stock units, stock
grants, other stock-based awards, actual performance shares delivered
pursuant to long-term incentive plan awards, and earned deferred shares to
employees, non-employee directors and consultants (if not otherwise
included in one of the previously listed types of awards in the same or a
previous year); and Y = the number of weighted average common shares of
Selective outstanding for the fiscal
year.
|
The
following is a summary of the amended and restated Omnibus Stock Plan, which is
qualified in its entirety by the text of the amended and restated Omnibus Stock
Plan, a copy of which is attached to this Proxy Statement as
Appendix C
.
Plan
Administrator
|
·
|
The
Salary and Employee Benefits Committee ("SEBC") of the Board of
Directors.
|
Authority of Plan
Administrator
|
·
|
Grant
awards under the Omnibus Stock
Plan;
|
|
·
|
Determine
the persons to whom and the time or times at which awards will be
granted;
|
|
·
|
Determine
the type and number of awards to be granted, the number of shares to which
an award may relate and the terms, conditions, restrictions, and
performance criteria relating to any
award;
|
|
·
|
Determine
whether, to what extent, and under what circumstances an award may be
settled, cancelled, forfeited, exchanged, or
surrendered;
|
|
·
|
Construe
and interpret the Omnibus Stock Plan and any award under the Omnibus Stock
Plan;
|
|
·
|
Prescribe,
amend, and rescind rules and regulations relating to the Omnibus Stock
Plan;
|
|
·
|
Determine
the terms and provisions of the agreements evidencing awards under the
Omnibus Stock Plan; and
|
|
·
|
Make
all other determinations deemed necessary or advisable for the
administration of the Omnibus Stock Plan,
including:
|
|
o
|
Accelerate
the date on which any option or stock appreciation right granted under the
Omnibus Stock Plan becomes
exercisable;
|
|
o
|
Waive
or amend the operation of Omnibus Stock Plan provisions with respect
to
|
|
|
exercise
after termination of employment (provided that the term of an option or
stock appreciation right may not be extended beyond ten (10) years from
the date of grant);
|
|
o
|
Accelerate
the vesting date, or waive any condition imposed under the Omnibus Stock
Plan, with respect to any share of restricted stock, restricted stock
unit, stock grant, or other award;
and
|
|
o
|
Otherwise
adjust any of the terms applicable to any such award in a manner
consistent with the terms of the Omnibus Stock
Plan.
|
Term of
Plan
|
·
|
Ten
(10) years from the Omnibus Stock Plan's effective date of April 1,
2005.
|
Eligibility
|
·
|
Employees,
officers, non-employee directors, and consultants of Selective or any of
its subsidiaries and affiliates selected by the SEBC. As of
December 31, 2009, approximately 1,900 employees, 11 non-employee
directors, and no consultants were eligible to participate in the Omnibus
Stock Plan.
|
Shares Reserved for
Issuance
|
·
|
Maximum
number of common shares reserved for issuance is 3,400,000 (any or all of
which may be granted pursuant to options, including “incentive stock
options” within the meaning of Section 422 of the Internal Revenue Code),
with adjustments based on stock splits, dividends, recapitalizations, and
other changes or transactions. The shares may be authorized but
unissued Selective common stock or authorized and issued Selective common
stock held in Selective's treasury.
|
|
·
|
Maximum
number of shares subject to awards that can be made to one participant in
any year is 200,000, subject to adjustments based on stock splits,
dividends, recapitalizations, and other changes or
transactions.
|
|
·
|
Shares
forfeited, cancelled, exchanged, surrendered, tendered in payment of an
exercise price or withheld to satisfy tax obligations, or which are
covered by awards settled in cash, are available for future
awards.
|
Types of
Awards
|
·
|
Stock
options (including incentive stock options), provided that: (i)
the per share exercise price of each option may not be less than 100% of
the fair market value of a share of Selective common stock on the date of
grant; and (ii) the term of any option may not exceed ten (10)
years;
|
|
·
|
Stock
appreciation rights, which are the rights to receive, upon exercise, an
amount in cash or shares of Selective common stock as described in the
Omnibus Stock Plan, may be granted either at the time of grant or, with
respect to a nonqualified stock option, at any time thereafter during the
term of the option, or may be granted unrelated to an option, in which
case the term of the right may not exceed ten (10)
years;
|
|
·
|
Restricted
stock units, which are awards of the right to receive at a future date
either shares of Selective common stock, their cash value, or a
combination thereof, plus (if provided in the award agreement) an amount
in cash or shares of Selective common stock equal to the aggregate cash
dividends paid with respect to the number of shares underlying such
restricted stock units;
|
|
·
|
Other
stock-based awards.
|
Performance
Goals
|
·
|
The
SEBC may determine that vesting or payment of an award under the Omnibus
Stock Plan will be subject to the attainment of one or more performance
goals with respect to a fiscal year, including any of the
following:
|
|
o
|
Return
on total stockholder equity or operating return on total stockholder
equity;
|
|
o
|
Earnings
per share or book value per share of Selective's common
stock;
|
|
o
|
Net
income (before or after taxes);
|
|
o
|
Earnings
before all or any interest, taxes, depreciation, and/or
amortization;
|
|
o
|
Return
on assets, capital, or investment;
|
|
o
|
Earnings
from continuing operations;
|
|
o
|
Levels
of expense, costs, or liabilities;
|
|
o
|
Department,
division, or business unit level
performance;
|
|
o
|
Stock
price appreciation;
|
|
o
|
Growth
in NPW, including, without limitation, policy
count;
|
|
o
|
Implementation
or completion of critical projects or
processes;
|
|
o
|
Except
in the case of a "covered employee", any other performance criteria
established by the SEBC; or
|
|
o
|
Any
combination of the foregoing.
|
Termination of Employment or
Service
|
·
|
Unless
otherwise provided by the SEBC, upon termination for any reason other than
cause (as defined in the Omnibus Stock Plan), death or disability, the
grantee will have one year to exercise all vested nonqualified options and
stock appreciation rights, and 90 days to exercise incentive stock
options.
|
|
·
|
Unless
otherwise provided by the SEBC, upon termination due to death or
disability, the grantee will have one year to exercise all vested options
and stock appreciation rights.
|
|
·
|
Upon
a termination for cause, all options and stock appreciation rights,
whether or not vested, will be
forfeited.
|
|
·
|
Any
unvested options and stock appreciation rights will be forfeited upon any
termination of grantee's employment with, or service to, Selective, its
affiliates and subsidiaries.
|
|
·
|
Upon
termination for death or disability, any unvested shares of restricted
stock, the vesting of which is not subject to the achievement of
performance goals, will become fully vested and any unvested shares of
restricted stock that are subject to the achievement of performance goals
will become vested only if and when such performance goals are
satisfied.
|
|
·
|
Unless
otherwise provided by the SEBC, upon termination for any reason other than
death or disability, any unvested shares of restricted stock will be
forfeited.
|
|
·
|
Unless
otherwise provided by the SEBC, upon termination for any reason, all
restricted stock units will be
forfeited.
|
Change in Control and Other
Transactions
|
·
|
All
unvested awards become fully vested and exercisable upon a change in
control of Selective.
|
|
·
|
In
the event of a corporate transaction involving shares of Selective's
common stock, the SEBC may provide for: (i) assumption by the
successor entity of all outstanding awards; (ii) termination upon the
occurrence of the transaction of all outstanding awards that are not
exercised within a period specified by the SEBC; and/or (iii) cash-out of
the outstanding options and stock appreciation rights based on the
acquisition price, net of the exercise price of such awards, and the
cancellation without compensation of any such awards whose exercise price
exceeds the acquisition price.
|
Award
Transferability
|
·
|
Unless
otherwise determined by the SEBC, awards may be transferred only by will
or the laws of descent and distribution or (except in the case of
incentive stock options) to an immediate family
member.
|
Amendment or Termination of
the Omnibus Stock Plan
|
·
|
The
Omnibus Stock Plan may, at any time, be terminated, revised, or amended in
any respect whatsoever, provided that: (i) approval by
Selective's stockholders will be required for any such amendment if and to
the extent such approval is required to comply with applicable law or
stock exchange listing requirements; (ii) approval by Selective’s
stockholders will be required for the repricing of any option or other
award; and (iii) no such action may reduce a grantee's rights under an
outstanding award without the grantee's consent, except to comply with
Section 409A of the Internal Revenue
Code.
|
Federal Income Tax
Consequences of the Omnibus Stock Plan
|
·
|
The
following summarizes certain current U.S. federal income tax laws and
regulations generally applicable to awards pursuant to the Omnibus Stock
Plan, all of which are subject to change (possibly with retroactive
effect), and does not address any tax considerations under Section 409A of
the Internal Revenue Code, or the laws of any local, state, or foreign
jurisdiction. This summary does not purport to be
complete.
|
|
o
|
Incentive
Stock Options.
|
|
§
|
Not
taxable income upon grant.
|
|
§
|
Amounts
received in excess of the exercise price from the sale of shares received
("Option Shares") that are held for less than one year from receipt or two
years from the option grant ("Disqualifying Disposition") are treated as
ordinary income in the year of disposition, and Selective is entitled to
deduct the same amount as compensation
expense.
|
|
§
|
Amounts
received from the sale of Option Shares in a transaction that is not a
Disqualifying Disposition are treated as capital gain or loss, with the
basis being the exercise price. The amount by which the fair
market value of the Option Shares exceeds the exercise price, however,
will constitute an item that increases the participant's "alternative
minimum taxable income."
|
|
§
|
An
incentive stock option generally will not be treated as an incentive stock
option if it is exercised more than three months following termination of
employment; in which case the option will be treated as a nonqualified
stock option.
|
|
o
|
Nonqualified
Stock Options.
|
|
§
|
Not
taxable income upon grant.
|
|
§
|
Amounts
in excess of the exercise price at the time of exercise are treated as
ordinary income and Selective is entitled to deduct the same amount as
compensation expense.
|
|
§
|
Amounts
received from the sale of Option Shares following exercise are treated as
capital gain or loss, with the basis being the exercise price plus the
ordinary income incurred upon
exercise.
|
|
§
|
Generally,
not taxable income upon grant.
|
|
§
|
Ordinary
income is recognized on the date the restrictions are removed in an amount
equal to the fair market value of such shares on such date, less any
amount paid for the shares, at which time Selective is entitled to deduct
the same amount as compensation
expense.
|
|
§
|
An
Internal Revenue Code Section 83(b) election may be made by the grantee
within 30 days of receipt to recognize ordinary income in an amount equal
to the fair market value on the grant date; but the holder will not be
allowed a deduction for shares subsequently forfeited or returned. Amounts
received from
|
|
|
the
subsequent sale of the restricted stock are treated as capital gain or
loss, with the basis being the amount paid by the holder for the
restricted stock, if any, plus the amount included in the income by the
holder of the award as a result of the Internal Revenue Code 83(b)
election.
|
|
§
|
No
taxable income upon grant of a stock appreciation right or restricted
stock unit.
|
|
§
|
Upon
settlement of such a stock appreciation right, restricted stock unit,
stock grant, or any other stock-based award, ordinary income is recognized
in the aggregate value of the payment received, and Selective is entitled
to deduct the same amount as compensation
expense.
|
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “
FOR
”
THE PROPOSAL TO AMEND AND RESTATE THE OMNIBUS STOCK PLAN AS DESCRIBED IN THIS
SECTION.
INFORMATION
ABOUT PROPOSAL 4
Approval
of the Amendment and Restatement of the Selective Insurance Group, Inc. Cash
Incentive
Plan
Selective's
stockholders are being asked to approve the amendment and restatement of the
Selective Insurance Group, Inc. Cash Incentive Plan ("Cash Incentive
Plan"). The purpose of the amendment and restatement is to
incorporate the amendments made to the Cash Incentive Plan after its initial
effective date, to reapprove the performance goals under the Cash Incentive Plan
for purposes of Section 162(m), and to make minor, non-substantive,
clarifying changes.
The
purposes of the Cash Incentive Plan are to: (i) provide Selective
with an effective vehicle to assist in attracting, retaining, and motivating its
employees; (ii) reinforce corporate, organizational, and business development
goals; and (iii) promote year-to-year and long-range financial and other
business objectives by rewarding the performance of officers and other employees
in fulfilling their individual responsibilities for achieving these year-to-year
and long-range objectives.
In
designing the Cash Incentive Plan, the Board of Directors was guided by best
practices that seek to identify specific performance metrics that are most
closely tied to achievement of Selective's growth and profitability goals as
well as enhancement of stockholder value. The Cash Incentive Plan is
designed to work with other elements of Selective's compensation program,
including the Omnibus Stock Plan, to appropriately motivate and compensate
executives and employees consistent with the identified performance
metrics. Under the Cash Incentive Plan, vesting and payment of
certain of the awards may be directly linked to the achievement of these
specific performance metrics (outlined below under “Performance
Goals”).
Selective's
stockholders are being asked to reapprove the performance goals under the Cash
Incentive Plan in accordance with Section 162(m). Section 162(m)
limits Selective’s federal income tax deduction for compensation to certain
covered employees to $1,000,000 per year, but excludes from that limit
compensation that qualifies as “performance-based
compensation." Certain awards made under the Cash Incentive Plan to
Selective’s covered employees are intended to qualify as performance-based
compensation under Section 162(m).
Because
the administrator of the Cash Incentive Plan has the authority to establish the
particular target(s) under the performance goals for each award to a covered
employee intended to constitute “performance-based compensation,” Section 162(m)
requires the material terms of the performance goals to be disclosed to and
reapproved by Selective’s stockholders no later than the first stockholder
meeting in the fifth year following the initial stockholder approval of the
performance goals. As the performance goals in the Cash Incentive
Plan were initially approved by stockholders at the 2005 Annual Meeting,
approval and reapproval of the goals is required at the 2010 Annual Meeting to
ensure Section 162(m) qualification.
For purposes of Section 162(m), the material terms of the
performance goals we are asking you to approve and reapprove
include: (i) the employees eligible to receive awards under the Cash
Incentive Plan; (ii) a description of the available performance measures; and
(iii) the maximum amount that can be paid to any employee under awards if the
performance goals are achieved. If stockholder approval is not
received at the Annual Meeting, the Cash Incentive Plan will remain effective,
but we will not be able to deduct compensation under the Cash Incentive Plan
that would have otherwise qualified as performance-based compensation under
Section 162(m).
The
following is a summary of the amended and restated Cash Incentive Plan, which is
qualified in its entirety by the text of the amended and restated Cash Incentive
Plan, a copy of which is attached to this Proxy Statement as
Appendix D
.
Cash Incentive Plan
Administrator
|
·
|
The
SEBC is the Cash Incentive Plan
administrator.
|
Administrator's
Authority
|
·
|
Determine
the persons to whom and the time or times at which awards will be
granted;
|
|
·
|
Determine
the terms, conditions, restrictions, and performance criteria, including
performance goals, and the length of the performance period (which will be
no less than one year), relating to any
award;
|
|
·
|
Determine
whether, to what extent, and under what circumstances an award may be
settled, cancelled, forfeited, or
surrendered;
|
|
·
|
Make
adjustments in the performance goals in recognition of unusual or
non-recurring events affecting Selective or the financial statements of
Selective, or in response to changes in applicable laws, regulations, or
accounting principles, or for any other
reason;
|
|
·
|
Construe
and interpret the Cash Incentive Plan and any
award;
|
|
·
|
Prescribe,
amend, and rescind rules and regulations relating to the Cash Incentive
Plan;
|
|
·
|
Determine
the terms and provisions of any
award;
|
|
·
|
Make
all other determinations deemed necessary or advisable for the
administration of the Cash Incentive
Plan;
|
|
·
|
Delegate
to one or more of its members or to one or more agents such administrative
duties as it may deem advisable;
and
|
|
·
|
Employ
one or more persons to render advice with respect to any responsibility
the SEBC or delegated party may have under the Cash Incentive
Plan.
|
Eligibility
|
·
|
Officers
and other employees of Selective and its subsidiaries in the sole
discretion of the SEBC. As of December 31, 2009, approximately
1,900 employees were eligible to participate in the Cash Incentive
Plan.
|
Type of
Awards
|
·
|
Cash,
paid as soon as practicable in the calendar year following the calendar
year in which the performance period
ends.
|
Performance
Goals
|
·
|
Return
on total stockholder equity or operating return on total stockholder
equity;
|
|
·
|
Earnings
per share or book value per share
of
Selective's common stock;
|
|
·
|
Net
income (before or after taxes);
|
|
·
|
Earnings
before all or any interest, taxes, depreciation, and/or
amortization;
|
|
·
|
Return
on assets, capital, or investment;
|
|
·
|
Earnings
from continuing operations;
|
|
·
|
Levels
of expense, costs, or liabilities;
|
|
·
|
Department,
division, or business unit level
performance;
|
|
·
|
Stock
price appreciation;
|
|
·
|
Growth
in NPW, including, without limitation, policy
count;
|
|
·
|
Implementation
or completion of critical projects or
processes;
|
|
·
|
Except
in the case of a "covered employee", any other performance criteria
established by the SEBC; or
|
|
·
|
Any
combination of the foregoing.
|
Maximum Annual Award
Amount
|
·
|
No
participant may receive payments under the Cash Incentive Plan for any
performance period in amount of more than the product of: (i)
$7.5 million; and (ii) the number of full and partial years of the
performance period.
|
Reduction of
Awards
|
·
|
The
SEBC may reduce or eliminate any award under the Cash Incentive Plan, but
in no event may the SEBC increase the amount of an award payable to a
"covered employee" over such amount payable based on the objective
criteria established at the outset of the fiscal year for which the award
is made.
|
Employment
Requirements
|
·
|
Participants
must be employed by Selective or one of its subsidiaries as of the payment
date established for awards relating to the fiscal year for which payment
is to be made; provided that, if the participant's employment is
terminated prior to such payment date by reason of death, retirement on or
after "early retirement age," "normal retirement age" or "total
disability," as such terms are defined in SICA's Retirement Income Plan,
or for any other reason with the express consent of the SEBC, the SEBC, in
its sole discretion, may provide for an award payment to the participant
or, if applicable, the participant's designated
beneficiary.
|
Award
Transferability
|
·
|
Only
by will or the laws of descent and
distribution.
|
Plan Amendment or
Termination
|
·
|
At
any time by the SEBC or Board of Directors; provided that: (i)
no amendment that requires stockholder approval in order for the Cash
Incentive Plan to continue to comply with Section 162(m) will be effective
unless approved by the requisite vote of the stockholders of Selective;
and (ii) no amendment may adversely affect any of the rights of any
participant, without such participant's consent, under any award
previously granted under the Cash Incentive
Plan.
|
New Plan
Benefits
The
following table shows the range of amounts that would be payable with respect to
the 2010 plan year in 2011 to the NEOs, if the SEBC does not exercise its
discretion to reduce or eliminate the awards. Such range spans
from: (i) the amount that would be payable if the minimum level of
achievement of the performance goals is not attained; to (ii) the amount that
would be payable if the performance goals are fully
achieved. Non-employee directors are not eligible to participate in
the Cash Incentive Plan. There will also be payments made in 2011 for
cash incentive unit awards granted in 2008 under the Cash Incentive
Plan. The amounts of such awards are not determinable at this
time.
Name and Position
|
|
Dollar Amount ($)
|
Gregory
E. Murphy
Chairman,
President & Chief Executive Officer
|
|
$0
- $1,800,000
|
Dale
A. Thatcher
Executive
Vice President, Chief Financial Officer & Treasurer
|
|
$0
- $712,500
|
Richard
F. Connell
Senior
Executive Vice President & Chief Administrative
Officer
|
|
$0
- $787,500
|
Michael
H. Lanza
Executive
Vice President & General Counsel
|
|
$0
- $652,500
|
Ronald
Zaleski
Executive
Vice President & Chief Actuary
|
|
$0
- $600,000
|
Current
executive officers as a group
|
|
$0
- $5,521,250
|
Current
directors who are not executive officers as a group
|
|
$0
|
Non-executive
officer employees as a group
|
|
$0 – $37,510,144
|
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “
FOR
”
THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE CASH INCENTIVE
PLAN.
Securities Authorized for
Issuance under Equity Compensation Plans
The
following table provides information about Selective’s common stock authorized
for issuance under equity compensation plans as of December 31,
2009.
Plan Category
|
|
(a)
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
|
|
|
(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
|
(c)
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
|
Equity
compensation plans approved by security holders
|
|
|
1,381,350
|
|
|
|
17.90
|
|
|
|
5,843,868
|
(1)
|
(1)
Includes
1,404,195 shares available for issuance under the Selective Insurance Group,
Inc. Employee Stock Purchase Plan, 2,494,901 shares available for issuance under
the Selective Insurance Group, Inc. Stock Purchase Plan for Independent
Insurance Agencies, and 1,944,772 shares available for issuance under the
Omnibus Stock Plan. Future grants under this plan can be made, among
other things, as stock options, restricted stock units, or restricted
stock.
Ratification
of Appointment of
Independent
Registered Public Accounting Firm
The Audit
Committee has appointed KPMG LLP to act as Selective’s independent registered
public accounting firm for the fiscal year ending December 31,
2010. The Board of Directors has approved the appointment and has
directed that such appointment be submitted to Selective’s stockholders for
ratification at the Annual Meeting.
Stockholder
ratification of the appointment of KPMG LLP as Selective’s independent
registered public accounting firm is not required. The Board of
Directors, however, is submitting the appointment to the stockholders for
ratification as a matter of good corporate practice. If the
stockholders do not ratify the appointment, the Audit Committee and the Board of
Directors will reconsider whether to retain KPMG LLP or another
firm. Even if the appointment is ratified, the Board of Directors, in
its discretion, may direct the appointment of a different auditing firm at any
time during the 2010 fiscal year if the Board determines that such a change
would be in the best interests of Selective and its stockholders.
Representatives
of KPMG LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions. In 2009, Selective paid KPMG LLP
$1,457,000 for audit and audit-related services. No non-audit
services were provided by KPMG LLP to Selective in 2009.
FEES
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP,
Selective’s independent registered public accounting firm, provided services in
the following categories and amounts in 2009 and 2008:
Category
|
|
2009
|
|
|
2008
|
|
Audit
Fees
|
|
$
|
1,170,000
|
|
|
$
|
1,215,000
|
|
Audit-Related
Fees
(1)
|
|
$
|
287,000
|
|
|
$
|
497,150
|
|
Tax
Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
All
Other Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
TOTAL
|
|
$
|
1,457,000
|
|
|
$
|
1,712,150
|
|
(1)
Audit-Related
Fees for 2009 consisted primarily of: (i) amounts associated with
audits of our benefit plans for 2008; and (ii) the independent actuarial review
and reserve opinion related to the audit of the financial statements of
Selective and its subsidiaries. Audit-Related Fees for 2008 consisted
primarily of: (i) amounts associated with audits of our benefit plans
for 2007 and 2006; (ii) an audit of the flood area of our Insurance Operations;
and (iii) the independent actuarial review and reserve opinion related to the
audit of the financial statements of Selective and its
subsidiaries.
The Audit
Committee has a pre-approval policy that requires pre-approval of audit and
audit-related services on an annual basis and authorizes the Audit Committee to
delegate to one or more of its members pre-approval authority with respect to
permitted services. The Audit Committee delegated the authority to
pre-approve audit and audit-related services by KPMG LLP to the Audit Committee
Chairperson, who is required to report any pre-approvals to the Audit Committee
at its next meeting for ratification. In 2009, the Audit Committee
pre-approved 100% of audit and audit-related services and concluded that KPMG
LLP’s provision of such services was compatible with the maintenance of KPMG
LLP’s independence in the conduct of its auditing functions. KPMG LLP
provided no tax services or non-audit related services in 2009. Any
such future services also would require Audit Committee pre-approval on an
individual engagement basis.
AUDIT
COMMITTEE REPORT
The Audit
Committee oversees Selective’s financial reporting processes on behalf of the
Board of Directors. Management has the primary responsibility for
overseeing preparation of the financial statements and the overall reporting
processes, including the systems of internal controls. In fulfilling
its oversight responsibilities, the Audit Committee has:
|
·
|
Periodically
met with and held discussions with management regarding the quality, not
just the acceptability, of the accounting principles, the reasonableness
of significant judgments, and the clarity of disclosures in Selective’s
financial statements.
|
|
·
|
Reviewed
and discussed the audited financial statements for the year ended December
31, 2009, included in the Annual Report on Form 10-K, with management,
which represented to the Audit Committee that: (i) the
financial statements were prepared in accordance with U.S. generally
accepted accounting principles; and (ii) management had reviewed
Selective’s disclosure controls and procedures and believes those controls
are effective.
|
|
·
|
Reviewed
and discussed with KPMG LLP, Selective’s independent registered public
accounting firm, which is responsible for expressing an opinion on the
conformity of those audited financial statements in accordance with U.S.
generally accepted accounting principles, their judgments as to the
quality, not just the acceptability, of Selective’s accounting principles
and such other matters as are required to be discussed with the Audit
Committee under Statements of the Public Company Accounting Oversight
Board, including the Statement on Auditing Standards No. 61, as
amended.
|
|
·
|
Discussed
with KPMG LLP, the independent registered public accounting firm’s
independence from Selective and its management, including the matters in
the written disclosures from the independent accountants delivered to the
Audit Committee as required by the applicable requirements of the Public
Company Accounting Oversight Board.
|
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors, and the Board approved, the inclusion of
the audited financial statements in Selective’s Annual Report on Form 10-K for
the year ended December 31, 2009.
Submitted
by the Audit Committee of Selective’s Board of Directors,
|
Paul
D. Bauer, Chairperson
|
|
John
C. Burville, Ph.D.
|
|
Joan
M. Lamm-Tennant, Ph.D.
|
|
Ronald
L. O’Kelley
|
|
J.
Brian Thebault
|
STOCKHOLDER
PROPOSALS AND NOMINATIONS
Proposals
for Inclusion in 2011 Proxy
From
time-to-time, stockholders present proposals that may be proper subjects for
inclusion in the proxy statement and for consideration at an annual
meeting. Under the rules of the SEC (Rule 14a-8 under the Exchange
Act), stockholder proposals to be included in the proxy statement for the 2011
Annual Meeting must be received by Selective’s Corporate Secretary at 40 Wantage
Avenue, Branchville, NJ 07890 no later than November 25, 2010.
Other
Proposals and Nominations
In order
for proposals of stockholders made outside of Rule 14a-8 under the Exchange Act
to be considered “timely” within the meaning of Rule 14a-4(c) under the Exchange
Act, such proposals must be received by Selective’s Corporate Secretary at the
above address by January 28, 2011. Selective’s By-Laws require that a
stockholder who otherwise intends to present a proposal outside of Rule 14a-8
under the Exchange Act at Selective’s 2011 Annual Meeting must deliver notice to
the Corporate Secretary, in proper written form and in accordance with the
requirements of the By-Laws, not less than 90 days nor more than 120 days prior
to the first anniversary of the preceding year’s annual
meeting. Thus, a notice of a stockholder proposal for the 2011 Annual
Meeting, submitted outside of Rule 14a-8 under the Exchange Act, will be
untimely if received by the Corporate Secretary before December 29, 2010 or
after January 28, 2011.
Under
Section 3B of Selective’s By-Laws, stockholders may: (i) present
proposals that are proper subjects for consideration at an annual meeting, which
proposals are not submitted for inclusion in the proxy statement for such annual
meeting pursuant to Rule 14a-8 of the Exchange Act; or (ii) nominate a person
for election to our Board of Directors at the annual meeting. On
written request to Selective’s Corporate Secretary at 40 Wantage Avenue,
Branchville, NJ 07890, stockholders of record may receive a free copy of
Selective’s By-Laws. Procedures in the By-Laws are separate and
distinct from those required by Rule 14a-8 under the Exchange Act.
Selective’s
By-Laws require that the stockholder provide the following information in
writing regarding any nomination for director or other proposal for business to
be brought before the annual meeting:
|
·
|
as
to any business that a stockholder proposes to bring before the annual
meeting a brief description of the business proposed to be brought before
the annual meeting, the reasons for conducting such business at the annual
meeting; and any material interest of the stockholder in such
business;
|
|
·
|
as
to each person whom the stockholder proposes to nominate for election as a
director, all information relating to each such person as would be
required to be disclosed in a solicitation of proxies for the election of
such person as a director pursuant to Regulation 14A under the Exchange
Act (including such person’s written consent to being named in the proxy
statement as a nominee and to serving as a director if so
elected);
|
|
·
|
the
name and address of the stockholder giving the notice, as they appear on
our books;
|
|
·
|
the
name and address of any “Stockholder Associated Person” (as defined
below), if any, on whose behalf the proposal is made. A
“Stockholder Associated Person” is: (i) a
ny person controlling, controlled by, under common
control with, or acting in concert with, the stockholder; (ii) any
beneficial owner of shares of stock of Selective owned of record or
beneficially by the stockholder; (iii) any entity of which the stockholder
is an employee, officer, member, partner, trustee, director or, except for
entities the shares of which are registered under the Securities Exchange
Act of 1934, as amended, a stockholder
;
and (iv)
any person controlling, controlled by or under common control with, any of
the foregoing);
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the
class and number of shares which are owned beneficially and of record by
the stockholder and any Stockholder Associated Person on whose behalf the
proposal is made;
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a representation by the stockholder that it is a
holder of record of shares of stock of Selective entitled to vote at the
annual meeting and, if applicable, intends to appear in person or by proxy
at the annual meeting to nominate the person or persons specified in the
notice or make the proposal to the annual
meeting;
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a representation that the stockholder will notify
Selective in writing of the number and class of shares of stock owned
beneficially or of record by the stockholder and any Stockholder
Associated Person as of the close of business on the record date for the
annual meeting promptly, and in no event later than 10 days, following the
later of the record date or the date notice of the record date is first
publicly disclosed;
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a description of all agreements, arrangements, or
understandings between the stockholder and each nominee for director, as
applicable, or any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made or the
business is to be proposed, and a representation that the stockholder will
notify Selective in writing of any such agreement, arrangement, or
understanding in effect as of the close of business on the record date for
the annual meeting promptly, and in no event later than 10 days, following
the later of the record date or the date notice of the record date is
first publicly disclosed;
and
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a description in reasonable
detail, with respect to the stockholder or any Stockholder Associated
Person, of: (i) any option, warrant, convertible security,
stock appreciation right, or other right with an exercise or conversion
privilege or a settlement payment or mechanism at a price related to the
value of any class or series of shares of Selective stock or with a value
derived in whole or in part from the value of any class or series of
shares of Selective stock, whether or not such instrument or right is
subject to settlement in the underlying class or series of shares of
Selective stock or otherwise (“Derivative Instruments”), directly or
indirectly beneficially owned by the stockholder or a Stockholder
Associated Person, or any other direct or indirect opportunity for the
stockholder or Stockholder Associated Person to profit or share in any
profit derived from any increase or decrease in the value of shares of
stock of Selective; (ii) any interest in shares of stock of Selective or
Derivative Instruments held, directly or indirectly, by a general or
limited partnership in which the stockholder or Stockholder Associated
Person is a general partner or, directly or indirectly, beneficially owns
an interest in a general partner; and (iii) any hedging or other
transaction or series of transactions that has been entered into by or on
behalf of, or any other agreement, arrangement or understanding
(including, without limitation, any put, short position or any borrowing
or lending of shares of stock) that has been made by or on behalf of, a
stockholder or any Stockholder Associated Person, the effect or intent of
which is to mitigate loss to, or manage risk or benefit of stock price
changes for, or to increase or decrease the voting power of, the
stockholder or any Stockholder Associated Person with respect to any share
of stock of Selective (such statement, the “Disclosure of Hedged
Positions”), and a representation that the stockholder will notify
Selective in writing of any changes in such Disclosure of Hedged Positions
as of the close of business on the record date for the meeting promptly,
and in no event later than 10 days, following the later of the record date
or the date notice of the record date is first publicly
disclosed.
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It is
important that your shares be represented at the meeting, regardless of the
number of shares that you hold. YOU ARE THEREFORE URGED TO PROMPTLY
VOTE YOUR SHARES BY: (1) CALLING THE TOLL-FREE TELEPHONE NUMBER
LISTED ON THE PROXY CARD; (2) ACCESSING THE INTERNET WEBSITE LISTED ON THE PROXY
CARD; OR (3) COMPLETING, DATING, AND SIGNING THE ENCLOSED PROXY CARD AND
RETURNING IT IN THE ENCLOSED ENVELOPE. Stockholders who are present
at the meeting may revoke their proxies and vote in person or, if they prefer,
may abstain from voting in person and allow their proxies to be
voted.
By Order
of the Board of Directors:
Robyn P.
Turner
Corporate
Secretary
March 25,
2010
Branchville,
New Jersey
DOCUMENTS
INCORPORATED BY REFERENCE
Information
regarding Executive Officers is incorporated by reference to the section
entitled “Executive Officers of the Registrant” in Part I, Item 1. Business. of
Selective’s Annual Report on Form 10-K for the year ended December 31,
2009.
Appendix
A
AMENDED AND
RESTATED
CERTIFICATE OF
INCORPORATION
OF
SELECTIVE INSURANCE GROUP,
INC.
To: Treasurer
State of New Jersey
Pursuant
to the provisions of Title 14A:9-5, Corporations, General, of the New Jersey
Statutes, the undersigned corporation organized under the laws of the State of
New Jersey does hereby execute the following Amended and Restated Certificate of
Incorporation:
FIRST:
The
name of the corporation is: Selective Insurance Group, Inc.
SECOND:
The
purpose of the corporation is to engage in any activity within the purposes for
which corporations may be organized under the provisions of Title 14A,
Corporations, General, of the New Jersey Statutes.
THIRD:
The
address of the corporation’s current registered office is 830 Bear Tavern Road,
West Trenton, New Jersey 08628 and the name of the corporation’s current
registered agent at such address is Corporation Service Company.
FOURTH:
(a)
Authorized
Stock
. The corporation is authorized to issue 360,000,000
shares of common stock, having a par value of $2.00 per share (the “Common
Stock”) and 5,000,000 shares of preferred stock, without par value.
(b)
Series A Junior
Preferred Stock
.
(1)
Designation and
Amount
. The shares of such series shall be designated as “Series A
Junior Preferred Stock” (the “Series A Preferred Stock”) and the number of
shares constituting the Series A Preferred Stock shall be 300,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of such shares
then outstanding plus the number of such shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the corporation convertible into
Series A Preferred Stock.
(2)
Dividends and
Distributions
.
(A) Subject to the rights of the
holders of any shares of any series of Preferred Stock (or any similar stock)
ranking prior and superior to the Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock, in preference
to the holders Common Stock, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first
business day of March, June, September and December in
each year
(each such date being referred to herein as a “Quarterly Dividend Payment
Date”), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the greater of (a) $1
or (b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a sub-division or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The corporation shall
declare a dividend or distribution on the Series A Preferred Stock as
provided in subparagraph (A) of this Section immediately after it declares
a dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to
accrue and be cumulative on outstanding shares of Series A Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date of issue of
such shares, unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be not more than 60 days prior to the date fixed for the payment
thereof.
(3)
Voting Rights
. The
holders of shares of Series A Preferred Stock shall have the following
voting rights:
(A) Each share of Series A
Preferred Stock shall entitle the holder thereof to one vote on all matters
submitted to a vote of the stockholders of the corporation, and each fractional
share of Series A Preferred Stock shall have an equivalent fractional vote
on all matters submitted to a vote of the stockholders of the
corporation.
(B) Except as otherwise provided
herein, in any other certificate of amendment creating a series of Preferred
Stock or any similar stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the
corporation.
(C) Except as set forth in this
Amended and Restated Certificate of Incorporation, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
(4)
Certain
Restrictions
.
(A) Whenever quarterly dividends
or other dividends or distributions payable on the Series A Preferred Stock
as provided in paragraph (2) are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid in
full, the corporation shall not:
(i) declare or pay dividends, or
make any other distributions, on any shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends,
or make any other distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the
Series A Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or
otherwise acquire for consideration shares of any stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or
otherwise acquire for consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the Series A Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as
determined
by the Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The corporation shall not
permit any subsidiary of the corporation to purchase or otherwise acquire for
consideration any shares of stock of the corporation unless the corporation
could, under subparagraph (A) of this Paragraph (4), purchase or
otherwise acquire such shares at such time and in such manner.
(5)
Reacquired Shares
.
Any shares of Series A Preferred Stock purchased or otherwise acquired by
the corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of preferred stock and may be reissued as
part of a new series of preferred stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation,
or in any other Certificate of Amendment creating a series of preferred stock or
any similar stock or as otherwise required by law.
(6)
Liquidation, Dissolution or
Winding Up
. Upon any liquidation, dissolution or winding up of the
corporation, no distribution shall be made (1) to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the
holders of shares of Series A Preferred Stock shall have received $100 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that the
holders of shares of Series A Preferred Stock shall be entitled to receive
an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of shares of Common Stock, or (2) to the holders of
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(7)
Consolidation, Merger,
etc
. In case the corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A Preferred Stock
shall at the same time be similarly
exchanged
or changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(8)
No Redemption
. The
shares of Series A Preferred Stock shall not be redeemable.
(9)
Rank
. The
Series A Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other
class of the corporation’s Preferred Stock.
(10)
Amendment
. This
Amended and Restated Certificate of Incorporation shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two thirds of the
outstanding shares of Series A Preferred Stock, voting together as a single
class.
FIFTH:
The
number of directors constituting the current Board of Directors is 12 and the
names of said directors are as listed below. Each of such directors
has an address as follows: c/o Selective Insurance Group, Inc., 40 Wantage
Avenue, Branchville, New Jersey 07890.
Name
:
Paul D.
Bauer
W.
Marston Becker
A. David
Brown
John C.
Burville
Joan M.
Lamm-Tennant
S.
Griffin McClellan III
Michael
J. Morrissey
Gregory
E. Murphy
Cynthia
S. Nicholson
Ronald L.
O’Kelley
William
M. Rue
J. Brian
Thebault
SIXTH:
(a)
Vote Required for Business
Combinations
.
(1)
Higher Vote for Business
Combinations
. In addition to any affirmative vote required by law or this
Amended and Restated Certificate of Incorporation, and except as otherwise
expressly provided in Section (b) of this Article SIXTH, any Business
Combination (as hereinafter defined) shall require the affirmative vote of the
holders of at least 66 2/3% of the voting power of all of the then outstanding
shares of capital stock of the corporation entitled to vote generally for the
election of directors (the “Voting Stock”), voting together as a single class
(it being understood that for purposes of this Article SIXTH, each share of
the Voting Stock shall have the number of votes granted to it pursuant to
Article FOURTH of this Amended and Restated Certificate of Incorporation).
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(2)
Definition of “Business
Combination
”. The term “Business Combination” as used in this
Article SIXTH shall mean any transaction which is referred to in any one or
more of the following clauses (A) through (E):
(A) any merger or consolidation
of the corporation or any Subsidiary (as hereinafter defined) with (1) any
Interested Stockholder (as hereinafter defined) or (2) any other
corporation or person (whether or not itself an Interested Stockholder) which
is, or after such merger or consolidation would be, an Affiliate (as hereinafter
defined) of any Interested Stockholder; or
(B) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a series
of transactions) to or with, or proposed by or on behalf of, any Interested
Stockholder or any Affiliate of any Interested Stockholder of any assets of the
corporation or any Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) constituting not less than 10% of the total assets of the
corporation as reported in the consolidated balance sheet of the corporation as
of the end of the most recent quarter with respect to which such balance sheet
has been prepared; or
(C) the issuance or transfer by
the corporation or any Subsidiary (in one transaction or a series of
transactions) of any securities of the corporation or any Subsidiary in exchange
for cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value constituting not less than 10% of the total assets
of the corporation as reported in the consolidated balance sheet of the
corporation as of the end of the most recent quarter with respect to which such
balance sheet has been prepared, to, or proposed by or on behalf of, any
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
(D) the adoption of any plan or
proposal for the liquidation or dissolution of the corporation proposed by or on
behalf of an Interested Stockholder or any Affiliate of any Interested
Stockholder; or
(E) any reclassification of
securities (including any reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the corporation with any of its
Subsidiaries or any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding shares of
any class of equity or convertible securities of the corporation or any
Subsidiary which is directly or indirectly owned by any Interested Stockholder
or any Affiliate of any Interested Stockholder.
(b)
When Higher Vote is Not
Required
. The provisions of Section (a) of this Article SIXTH shall
not be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law and any other provision of this Amended and Restated Certificate of
Incorporation, if all of the conditions specified in either of the following
paragraphs (l) or (2) are met:
(1)
Approval by Continuing
Directors
. The Business Combination shall have been approved by a
majority of the total number of the Continuing Directors (as hereinafter
defined), it being understood that this condition shall not be capable of
satisfaction unless there is at least one Continuing Director.
(2)
Price, Form of Consideration
and Procedural Requirements
. All of the following conditions shall have
been met:
(A) The aggregate amount of the cash
and the Fair Market Value as of the date of the consummation of the Business
Combination (the “Consummation Date”) of consideration other than cash to be
received per share by holders of shares of Common Stock of the corporation in
such Business Combination shall be at least equal to the sum of:
(i) The greater of (l) (if applicable)
the highest per share price (including any brokerage commissions, transfer taxes
and soliciting dealers’ fees) paid by the Interested Stockholder for any shares
of Common Stock acquired or beneficially owned by it that were acquired within
the two year period immediately prior to the first public announcement of the
proposal of the Business Combination (the “Announcement Date”) or in the
transaction in which it became an Interested Stockholder, whichever is higher,
or (2) the Fair Market Value per share of the Common Stock on the day after
the Announcement Date or on the date on which the Interested Stockholder became
an Interested Stockholder (such latter date is referred to in this Article SIXTH
as the “Determination Date”), whichever is higher; and
(ii) Interest on the per share price
calculated at the rate for 90 day United States Treasury obligations in effect
on the Determination Date, compounded annually from that date until the
Consummation Date, less the per share amount of cash dividends payable to
holders of record on record dates occurring in the interim, up to the amount of
such interest.
(B) The aggregate amount of the
cash and the Fair Market Value as of the Consummation Date of consideration
other than cash to be received per share by holders of shares of any class of
outstanding Voting Stock, other than Common Stock, in such Business Combination
shall be at least equal to the sum of the following, unless such
Business
Combination
is one in which the corporation is to become the surviving entity and such class
of outstanding Voting Stock is to remain outstanding without any change in its
rights, preferences and limitations, in which case such aggregate amount shall
be at least equal to the sum of (x) the higher of the amounts set forth in
subparagraphs (i)(1) and (i)(3) below and (y) the amount set forth in
subparagraph (ii) below (it being intended that the requirements of this
subparagraph (2)(B) shall be required to be met with respect to every such class
of outstanding Voting Stock whether or not the Interested Stockholder has
previously acquired any shares of a particular class of Voting
stock):
(i) The greatest of (1) (if
applicable) the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder
for any shares of such class of Voting Stock acquired or beneficially owned by
it that were acquired within the two year period immediately prior to the
Announcement Date or in the transaction in which it became an Interested
Stockholder, whichever is higher, (2) (if applicable) the highest preferential
amount per share to which the holders of shares of such class of Voting Stock
are entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation, or (3) the Fair Market Value
per share of such class of Voting Stock on the day after the Announcement Date
or on the Determination Date, whichever is higher; and
(ii) Interest on the per share price
calculated at the rate of 90 day United States Treasury obligations in effect on
the Determination Date, compounded annually from that date until the
Consummation Date, less the per share amount of cash dividends payable on such
class to holders of record on record dates occurring in the interim, up to the
amount of such interest.
(C) The consideration to be received
by holders of a particular class of outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form as the Interested Stockholder has
previously paid for shares of such class of Voting Stock. If the Interested
Stockholder has paid for shares of any class of Voting Stock with varying forms
of consideration, the form of consideration for such class of Voting Stock shall
be either cash or the form used to acquire the largest number of shares of such
class of Voting Stock previously acquired by it.
(D) The holders of all outstanding
shares of Voting Stock not beneficially owned by the Interested Stockholder
immediately prior to the consummation of any Business Combination shall be
entitled to receive in such Business Combination cash or other consideration for
their shares meeting all of the terms and conditions of this paragraph (2)
(provided, however, that the failure of any stockholders who are exercising
their statutory rights to dissent from such Business Combination and receive
payment of the fair value of their shares to exchange their shares in such
Business Combination shall not be deemed to have prevented the condition set
forth in this subparagraph (2)(D) from being satisfied).
(E) After such Interested
Stockholder has become an Interested Stockholder and prior to the consummation
of such Business Combination: (a) except as approved by a majority of the
total number of Continuing Directors, there shall have been no
failure
to declare and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on the outstanding Preferred Stock of the
corporation, if any; (b) there shall have been (l) no reduction in the
annual rate of dividends paid on the shares of Common Stock (except as necessary
to reflect any subdivision of the shares of Common Stock) except as approved by
a majority of the total number of Continuing Directors, and (2) an increase
in such annual rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number of outstanding
shares of Common Stock, unless the failure so to increase such annual rate is
approved by a majority of the total number of Continuing Directors; and
(c) such Interested Stockholder shall not have become the beneficial owner
of any additional shares of Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested
Stockholder.
(F) After such Interested
Stockholder has become an Interested Stockholder, such Interested Stockholder
shall not have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax advantages
provided by the corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.
(G) A proxy or information
statement describing the proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (or any subsequent provisions replacing such Act,
rules or regulations) shall be mailed to public stockholders of the corporation
at least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions). Such proxy or information
statement shall contain, if a majority of the total number of Continuing
Directors so requests, an opinion of a reputable investment banking firm (which
firm shall be selected by a majority of the total number of Continuing
Directors, furnished with all information it reasonably requests, and paid a
reasonable fee for its services by the corporation upon the corporation’s
receipt of such opinion) as to the fairness (or lack of fairness) of the terms
of the proposed Business Combination from the point of view of the holders of
shares of Voting Stock (other than the Interested Stockholder).
(c)
Certain Definitions
.
For the purposes of this Article SIXTH:
(1) A “person” shall mean any
individual, firm, corporation, partnership or other entity, including, without
limitation, any syndicate or group deemed to be a person pursuant to
Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended.
(2) “Interested Stockholder”
shall mean any person (other than the corporation or any Subsidiary, any
employee benefit plan maintained by the corporation or any Subsidiary or any
trustee or fiduciary with respect to any such plan when acting in such capacity)
who or which:
(A) is the beneficial owner, directly
or indirectly, of 10% or more of the voting power of the then outstanding Voting
Stock; or
(B) is an Affiliate of the corporation
and at any time within the two year period immediately prior to the date in
question was the beneficial owner, directly or indirectly of 10% or more of the
voting power of the then outstanding Voting Stock; or
(C) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at any time within the two
year period immediately prior to the date in question beneficially owned by an
Interested Stockholder, if such assignment or succession shall have occurred in
the course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933; as
amended.
In determining whether a person is an
Interested Stockholder pursuant to paragraph (2) of this Section (c), the
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of paragraph (3) of this Section
(c) but shall not include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(3) A person shall be a “beneficial
owner” of any shares of Voting Stock:
(A) which such person or any of
its Affiliates or Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
(B) which such person or any of
its Affiliates or Associates has (a) the right to acquire (whether such
right is exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the
right to vote pursuant to any agreement, arrangement or understanding;
or
(C) which are beneficially
owned, directly or indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
(4) “Affiliate” or “Associate”
shall have the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.
(5) “Subsidiary” shall mean any
corporation of which a majority of any class of equity security is owned,
directly or indirectly, by the corporation; provided, however, that for the
purposes of the definition of Interested Stockholder set forth in paragraph
(2) of this Section (c), the term “Subsidiary” shall mean only a
corporation of which a majority of each class of equity security is owned,
directly or indirectly, by the corporation.
(6) “Continuing Director” shall
mean any member of the Board of Directors of the corporation who is not the
Interested Stockholder or an Affiliate, Associate, representative, nominee or
relative of the Interested Stockholder and who was a member of the Board of
Directors prior to the time that the Interested Stockholder became an Interested
Stockholder, and any successor of a Continuing Director who is not the
Interested Stockholder or an Affiliate, Associate, representative, nominee or
relative of the Interested Stockholder and who is recommended to succeed a
Continuing Director by a majority of the total number of Continuing Directors
then on the Board of Directors.
(7) “Fair Market Value” shall
mean: (i) in the case of stock, the highest closing sale price during the
30 day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the; New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934, as
amended, on which such stock is listed, or, if such stock is not listed on any
such exchange, the highest closing sale price or bid quotation with respect to a
share of such stock during the 30 day period preceding the date in question on
the National Association of Securities Dealers, Inc., Automated Quotations
System or any system then in use, or, if no such quotations are available, the
fair market value on the date in question of a share of such stock as determined
by a majority of the total number of Continuing Directors in good faith, in each
case with respect to any class of such stock, appropriately adjusted for any
dividend or distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a greater number of
share of such stock or any combination or reclassification of outstanding shares
of such stock into a smaller number of shares of such stock; and (ii) in
the case of property other than cash or stock, the fair market value of such
property on the date in question as determined by a majority of the total number
of Continuing Directors in good faith.
(8) In the event of any Business
Combination in which the corporation survives, the phrase “consideration other
than cash to be received” as used in paragraphs (2)(A) and (2)(B) of Section
(b) of this Article SIXTH shall include the shares of Common Stock
and/or the shares of any other class of outstanding Voting Stock retained by the
holders of such shares.
(9) References to “highest per
share price” shall in each case with respect to any class of stock reflect an
appropriate adjustment for any dividend or distribution in shares of such stock
or any stock split or reclassification of outstanding shares of such stock into
a greater number of shares of such stock or any combination or reclassification
of outstanding shares of such stock into a smaller number of shares of such
stock.
(d)
Powers of the Board and the
Continuing Directors
. A majority of the entire Board of Directors of the
corporation shall have the power and duty to determine for the purposes of this
Article SIXTH, on the basis of information known to them after reasonable
inquiry, whether a person is an Interested Stockholder. Once the Board of
Directors has made a determination, pursuant to the preceding sentence, that a
person is an Interested Stockholder, a majority of the total number of directors
of the corporation who would qualify as Continuing Directors shall have the
power and duty to interpret all of the terms and provisions of this
Article SIXTH, and to determine on the basis of information known to them
after reasonable inquiry all facts necessary
to
ascertain compliance with this Article SIXTH, including, without
limitation, (A) the number of shares of Voting Stock beneficially owned by
any person, (B) whether a person is an Affiliate or Associate of another,
(C) whether the assets which are the subject of any Business Combination
have, or the consideration to be received for the issuance or transfer of
securities by the corporation or any Subsidiary in any Business Combination has,
an aggregate Fair Market Value constituting not less than 10% of the total
assets of the corporation as reported in the consolidated balance sheet of the
corporation as of the end of the most recent quarter with respect to which such
balance sheet has been prepared and (D) whether all of the applicable
conditions set forth in paragraph (2) of Section (b) of this
Article SIXTH have been met with respect to any Business Combination. Any
determination pursuant to this Section (d) made in good faith shall be binding
and conclusive on all parties.
(e)
No Effect on Fiduciary
Obligations of Interested Stockholders
. Nothing contained in this
Article SIXTH shall be construed to relieve any Interested Stockholder from
any fiduciary obligation imposed by law.
(f)
Amendment, Repeal,
etc.
Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or the By-Laws of the corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Amended and Restated Certificate of Incorporation or the By-Laws of the
corporation), and in addition to any affirmative vote of the holders of
Preferred Stock or any other class of capital stock of the corporation or any
series of any of the foregoing then outstanding which is required by law or
pursuant to this Amended and Restated Certificate of Incorporation, the
affirmative vote of the holders of 66 2/3% or more of the voting power of all
the shares of then outstanding Voting Stock, voting together as a single class,
shall be required to amend or repeal, or adopt any provision inconsistent with,
this Article SIXTH of this Amended and Restated Certificate of
Incorporation.
SEVENTH:
(a)
Number, Election and
Terms
. The business and affairs of the corporation shall be
managed by a Board of Directors which shall have and may exercise all of the
powers of the corporation, except such as are expressly conferred upon the
stockholders by law, by this Amended and Restated Certificate of Incorporation
or by the By-Laws. Subject to the rights of the holders of shares of any series
of preferred stock then outstanding, the Board of Directors shall consist of not
less than seven nor more than 20 persons. The exact number of directors within
the minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the whole Board of Directors, and if such number is not
so fixed, the number shall be 12. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director. Commencing at the annual meeting of stockholders that is
held in calendar year 2010 (the “2010 Annual Meeting”), directors shall be
elected annually for terms of one year, except that any director in office at
the 2010 Annual Meeting whose term does not expire until the annual meeting of
stockholders held in calendar year 2011 or calendar year 2012 (a “Continuing
Classified Director”) shall continue to hold office until the end of the term
for which such Continuing Classified Director was previously elected and until
such Continuing Classified Director’s successor shall have been elected and
qualified. Except as otherwise
required
by law, until the term of a Continuing Classified Director or any other director
expires or otherwise terminates as aforesaid, such directors may be removed from
office by the stockholders of the Corporation or the Board of Directors only for
cause pursuant to the applicable provisions of the New Jersey Business
Corporation Act.
(b)
Amendment, Repeal,
etc.
Notwithstanding anything contained in this Amended and Restated
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 66 2/3% of the voting power of all of the shares of the
corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with, or repeal this Article SEVENTH or to alter,
amend, adopt any provision inconsistent with, or repeal Sections 7A, 7B or
20 of the By-Laws of the corporation.
EIGHTH:
(a)
Elimination of Certain
Liability
.
(1) A director of the corporation shall
not be personally liable to the corporation or its stockholders for damages for
breach of any duty owed to the corporation or its stockholders, except to the
extent such personal liability may not be eliminated or limited under the New
Jersey Business Corporation Act as the same exists or may hereafter be
amended.
(2) An officer of the corporation shall
not be personally liable to the corporation or its stockholders for damages for
breach of any duty owed to the corporation or its stockholders, except to the
extent and for the duration of any period of time such personal liability may
not be eliminated or limited under the New Jersey Business Corporation Act as
the same exists or may hereafter be amended.
(b)
Indemnification and
Insurance
.
(1)
Right to
Indemnification
. Each person who was or is made a party or is threatened
to be made a party to or is involved in any pending, threatened or completed
civil, criminal, administrative or arbitrative action, suit or proceeding, or
any appeal therein or any inquiry or investigation which could lead to such
action, suit or proceeding (a “proceeding”), by reason of his or her being or
having been a director or officer of the corporation or of any constituent
corporation absorbed by the corporation in a consolidation or merger, or by
reason of his or her being or having been a director, officer, trustee, employee
or agent of any other corporation (domestic or foreign) or of any partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise (whether or not for profit), serving as such at the request of the
corporation, or the legal representative of any such director, officer, trustee,
employee or agent, shall be indemnified and held harmless by the corporation to
the fullest extent permitted by the New Jersey Business Corporation Act, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the corporation to provide
broader indemnification rights than said Act permitted prior to such amendment),
from and against any and all reasonable costs, disbursements and attorneys’
fees, and any and all amounts paid or incurred in satisfaction
of
settlements,
judgments, fines and penalties, incurred or suffered in connection with any such
proceeding, and such indemnification shall continue as to a person who has
ceased to be a director, officer, trustee, employee or agent and shall inure to
the benefit of his or her heirs, executors, administrators and assigns;
provided, however, that, except as provided in paragraph (2) hereof, the
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was specifically authorized by the Board of
Directors of the corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
corporation the expenses incurred in connection with any proceeding in advance
of the final disposition of such proceeding as authorized by the Board of
Directors; provided, however, that if the New Jersey Business Corporation Act so
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer in advance of the final disposition of
a proceeding shall be made only upon receipt by the corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced unless it shall ultimately be determined that such director or
officer is entitled to be indemnified under this Section or otherwise. The
corporation may, by action of its Board of Directors, provide for
indemnification and advancement of expenses to employees and agents of the
corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
(2)
Right of Claimant to Bring
Suit
. If a claim under paragraph (1) of this Section is not paid in
full by the corporation within 30 days after a written request has been received
by the corporation, the claimant may at any time thereafter apply to a court for
an award of indemnification by the corporation for the unpaid amount of the
claim and, if successful on the merits or otherwise in connection with any
proceeding, or in the defense of any claim, issue or matter therein, the
claimant shall be entitled also to be paid by the corporation any and all
expenses incurred or suffered in connection with such proceeding. It shall be a
defense to any such action (other than an action brought to enforce a claim for
the advancement of expenses incurred in connection with any proceeding where the
required undertaking, if any, has been tendered to the corporation), that the
claimant has not met the standard of conduct which makes it permissible under
the New Jersey Business Corporation Act for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such proceeding that indemnification
of the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the New Jersey Business Corporation
Act, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, nor the termination of any
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of
conduct.
(3)
Non-Exclusivity of
Rights
. The right to indemnification and advancement of expenses provided
by or granted pursuant to this Section (b) shall not exclude or be
exclusive of any other rights to which any person may be entitled under a
certificate of incorporation, by-law, agreement, vote of stockholders or
otherwise, provided that no indemnification shall be made to
or on
behalf of such person if a judgment or other final adjudication adverse to such
person establishes that such person has not met the applicable standard of
conduct required to be met under the New Jersey Business Corporation
Act.
(4)
Insurance
. The
corporation may purchase and maintain insurance on behalf of any director,
officer, employee or agent of the corporation or another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any expenses incurred in any proceeding and any liabilities asserted
against him or her by reason of such person being or having been such a
director, officer, employee or agent, whether or not the corporation would have
the power to indemnify such person against such expenses and liabilities under
the provisions of this Section (b) or otherwise.
NINTH:
The
By-Laws of the corporation may be altered, amended or repealed by the
stockholders or the Board of Directors as provided for in the corporation’s
By-Laws. Any By-Law adopted, amended or repealed by the stockholders
as provided for in the By-Laws of the corporation may be amended or repealed by
the Board of Directors, unless the resolution of the stockholders adopting such
By-Law expressly reserves the right to amend or repeal it to the
stockholders.
[remainder
of page intentionally left blank – signature page to follow]
IN WITNESS WHEREOF
, the
corporation has caused this Amended and Restated Certificate of Incorporation to
be executed by its President on the ___ day of ___________, 2010.
|
Gregory
E. Murphy,
|
Chairman,
President and
|
Chief
Executive Officer
|
Appendix
B
BY-LAWS
OF
SELECTIVE
INSURANCE GROUP, INC.
EFFECTIVE
[__________]
[___], 2010
OFFICES
Section 1
. The
principal office of Selective Insurance Group, Inc. (the “Company”) shall be
located at 40 Wantage Avenue, Branchville, New Jersey, 07890. The Company may
also establish and have offices at such other place or places as may from time
to time be designated by the Board of Directors.
SEAL
Section 2
. The
Company shall have a seal with the name of the Company, the year of its
organization, the words "Corporate Seal" and the state of its incorporation
thereon.
MEETINGS
OF STOCKHOLDERS
Section 3A
. The
annual meeting of the stockholders shall be held
on a
business day and
at a time to be affixed by the Board of Directors
on
during
the
first
Friday
last
week
in
May
April
in each year at the principal office of the Company, or at such other time, date
and place within or without the State of New Jersey as a majority of the
Directors may previously designate for the election of Directors and for the
transaction of such other business as may properly be brought before the
meeting. Notice thereof shall be given by the Secretary by mailing a notice to
each stockholder to the address appearing on the Company records at least ten
(10) days prior to the meeting.
Any
stockholder that attends a meeting without objecting to a lack of notice of the
meeting prior to the meeting’s conclusion shall be deemed to have waived his/her
right to notice of the meeting.
Special
meetings of the stockholders may be held at the principal office of the Company,
or at such other place within or without the State of New Jersey as the
Directors may previously designate, whenever called, by the affirmative vote of
a majority of the whole Board of Directors or by the President. Notice of such a
special meeting, indicating briefly the object or objects thereof, shall be
mailed to each stockholder at his/her address as the same appears on the stock
books of the Company at least ten (10) days prior to the time of holding such
meeting. Such notice shall be completely given upon mailing.
A
majority in amount of the stock issued and outstanding represented by the
holders in person or by proxy shall be requisite and sufficient to constitute a
quorum at any meeting of the stockholders for the election of Directors or for
the transaction of other business.
Section 3B
. (a) (i)
The proposal of business by a stockholder to be considered at an annual meeting
of stockholders, which proposal is not in the form of a proposal requested by
such stockholder to be included pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934 (the "Exchange Act") in the Company's proxy statement for
such annual meeting, and/or nominations of persons for election to the Board of
Directors of the Company at an annual meeting of stockholders, may be made by a
stockholder who was a stockholder of record at the time of giving of notice
provided for in Section 3B(a)(ii) hereof, who is entitled to vote at such annual
meeting and who has complied with the notice procedures set forth in said
Section 3B(a)(ii).
(ii) For
any such business and/or nominations to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary, and such business must be a proper matter for
stockholder action. To be timely, a stockholder's notice shall be delivered to
the Secretary at the principal executive offices of the Company not less than
ninety (90) nor more than one hundred twenty (120) days prior to the first
anniversary of the preceding year's annual meeting;
provided
however
, that in
the event that the date of the annual meeting is more than thirty (30) days
before or more than sixty (60) days after such anniversary date, notice by the
stockholder to be timely shall be so delivered not less than ninety (90) days
nor more than one hundred twenty (120) days prior to such annual meeting or ten
(10) days following the day on which public announcement of the date of such
meeting is first made. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's notice shall set
forth (A) as to any such business that the stockholder proposes to bring before
the meeting, a brief description of such business, the reasons for conducting
such business at the meeting, any material interest of such stockholder in such
business and the
beneficial
owner
Stockholder
Associated Person (as defined below)
, if any,
on whose behalf the proposal is made; (B) as to each person whom the stockholder
proposes to nominate for election as a Director, all information relating to
such person that would be required to be disclosed in a solicitation of proxies
for the election of such person as a Director pursuant to Regulation 14A under
the Exchange Act (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Director if so elected); and
(C) as to the stockholder giving the notice and the
beneficial
owner
Stockholder
Associated Person
, if any,
on whose behalf the proposal or nomination is made (1) the name and address of
such stockholder, as they appear on the Company's books, and of such
beneficial
owner
Stockholder
Associated Person
, (2) the
class and number of shares of
stock of
the
Company which are owned beneficially and of record by such stockholder and such
beneficial
owner.
Stockholder
Associated Person, (3) a representation that such stockholder is a holder of
record of shares of stock of the Company entitled to vote at such meeting and,
if applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice or to make the proposal
to the meeting, (4) a representation that the stockholder will notify the
Company in writing of the number and class of shares of stock owned beneficially
or of record by the stockholder and any Stockholder Associated Person as of the
close of business on the record date for the meeting promptly, and in no event
later than ten (10) days, following the later of the record date or the date
notice of the record date is first publicly disclosed, (4) a description of all
agreements, arrangements, or understandings between the stockholder and each
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the stockholder or the
business is to be proposed, and a representation that the stockholder will
notify the Company in writing of any such agreement, arrangement, or
understanding in effect as of the close of business on the record date for the
meeting promptly, and in no event later than ten (10) days, following the later
of the record date or the date notice of the record date is first publicly
disclosed, (5) Disclosure of Hedged Positions (as defined below), and a
representation that the stockholder will notify the Company in writing of any
changes in such Disclosure of Hedged Positions as of the close of business on
the record date for the meeting promptly, and in no event later than ten (10)
days, following the later of the record date or the date notice of the record
date is first publicly disclosed. “Stockholder Associated Person” of
a stockholder means (i) any person controlling, controlled by, under common
control with, or acting in concert with, the stockholder, (ii) any beneficial
owner of shares of stock of the Company owned of record or beneficially by the
stockholder, (iii) any entity of which the stockholder is an employee, officer,
member, partner, trustee, director or, except for entities the shares of which
are registered under the Exchange Act, a stockholder, and (iv) any person
controlling, controlled by or under common control with, the Stockholder
Associated Person. “Disclosure of Hedged Positions” means a
description in reasonable detail, with respect to the stockholder or Stockholder
Associated Person, of: (A) any Derivative Instrument directly or indirectly
beneficially owned by the stockholder or a Stockholder Associated Person, or any
other direct or indirect opportunity for the stockholder or Stockholder
Associated Person to profit or share in any profit derived from any increase or
decrease in the value of shares of stock of the Company, (B) any interest in
shares of stock of the Company or Derivative Instruments (as defined below)
held, directly or indirectly, by a general or limited partnership in which the
stockholder or Stockholder Associated Person is a general partner or, directly
or indirectly, beneficially owns an interest in a general partner, and (C) any
hedging or other transaction or series of transactions that has been entered
into by or on behalf of, or any other
agreement,
arrangement or understanding (including, without limitation, any put, short
position or any borrowing or lending of shares of stock) that has been made by
or on behalf of, a stockholder or any Stockholder Associated Person, the effect
or intent of which is to mitigate loss to, or manage risk or benefit of stock
price changes for, or to increase or decrease the voting power of, the
stockholder or any Stockholder Associated Person with respect to any share of
stock of the Company. “Derivative Instrument” means an option,
warrant, convertible security, stock appreciation right, or other right with an
exercise or conversion privilege or a settlement payment or mechanism at a price
related to the value of any class or series of shares of the Company’s stock or
with a value derived in whole or in part from the value of any class or series
of shares of the Company’s stock, whether or not such instrument or right is
subject to settlement in the underlying class or series of shares of the
Company’s stock or otherwise.
(iii)
Notwithstanding anything
in Section 3B(a)(ii) hereof to the contrary, in the event that the number of
Directors to be elected to the Board of Directors of the Company is to be
increased and there is no public announcement naming all of the nominees for
Directors or specifying the size of the increased Board of Directors made by the
Company at least one hundred (100) days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required under Section
3B(a)(ii) hereof shall also be considered timely, but only with respect to
nominees for any new positions created by such increase in the number of
Directors, if it shall be delivered to the Secretary of the Company at the
principal executive offices of the Company not less than ten (10) days following
the day on which such public announcement is first made by the
Company.
(b)
Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Company's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which Directors are to be elected pursuant to the Company's
notice of meeting (i) by or at the direction of the Board of Directors or (ii)
by any stockholder of the Company who is a stockholder of record at the time of
giving of notice provided for in Section 3B(a)(ii) hereof and this Section
3B(b), who is entitled to vote at the meeting and who has complied with the
notice procedures set forth in said Section 3B(a)(ii) and this Section 10(b). In
the event the Company calls a special meeting of stockholders for the purpose of
electing one or more persons to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Company's notice of meeting if the stockholder's
notice required by said Section 3B(a)(ii) and this Section 3B(b) shall be
delivered to the Secretary of the Company at the principal executive offices of
the Company not less than ninety (90) days nor more than one hundred twenty
(120) days prior to such special meeting or ten (10) days following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(c)
Except as otherwise
provided by applicable law, the chairman of the meeting shall have the authority
to determine whether a nomination or any business proposed to be brought before
the meeting was made or proposed (as the case may be) in accordance with the
procedures set forth in this Section 3B, and, if any proposed nomination or
business is not in compliance with this By-Law, to declare that such defective
proposal or nomination shall be disregarded.
(d)
For purposes of this Section 3B, a "public announcement" shall mean
disclosure in a press release issued by the Company and reported by the Dow
Jones News Service, Associated Press or comparable national news service or in a
document publicly filed by the Company with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(e)
In addition to the
requirements of the foregoing provisions of this Section 3B, a stockholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth herein. Nothing
in this By-Law shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8
under the Exchange Act.
INSPECTORS
OF ELECTION
Section 4
. At the
annual meeting of the stockholders, two (2) stockholders, not candidates for the
office of Director, shall be appointed as inspectors of the election, whose duty
it shall be honestly and fairly to conduct such election, and who shall furnish
a certificate over their signatures of the result thereof, which certificate
shall be presented to and filed by the Secretary.
RIGHTS OF
STOCKHOLDERS
Section 5
. Every
stockholder shall be entitled at any meeting of the stockholders to one (1) vote
for each share of stock held by him/her.
Section 6
. The Board
of Directors shall have power to close the stock transfer books of the Company
for a period not exceeding fifty (50) days preceding the date of any meeting of
stockholders or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect; provided that, in lieu of so closing the
stock transfer books, the Board of Directors may fix in advance a date, not
exceeding fifty (50) days preceding the date of any meeting of stockholders, or
the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, as a record date for the determination of the stockholders
entitled to notice of, and to vote at, any such meeting, or entitled to receive
payment of any such dividend, or any such allotment of rights, or to exercise
the rights in respect to any such change, conversion or exchange of capital
stock, and in such case only stockholders of record on the date so fixed shall
be entitled to such notice of, and to vote at, such meeting or to receive
payment of such dividend, or allotment of rights or exercise of such rights, as
the case may be, and notwithstanding any transfer of any stock on the books of
the Company after any such record date fixed as aforesaid.
Certificates
of stock of the Company shall be in such form as the Board of Directors shall
from time to time prescribe and shall be signed by the President or a Vice
President and by either the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary. The Board of Directors shall have power to appoint
one or more Transfer Agents and/or one (1) or more Registrars for the transfer
and/or registration of the certificates of stock and may require that stock
certificates shall be countersigned and/or registered by a Transfer Agent and/or
Registrar; provided, that when any certificate is signed by a Transfer Agent and
registered by a Registrar, if the Board of Directors shall by resolution so
provide, the signatures of the officers of the Company who sign such certificate
may be facsimiles and the seal of the Company imprinted thereon
. The
Board of Directors has the authority to issue some or all stock of any class or
series of the Company’s capital stock with or without
certificates
.
Shares of
stock of the Company shall be transferable on the books of the Company by the
holder of record thereon in person or by duly authorized attorney and upon the
surrender of the certificate properly endorsed.
No
stockholder shall be personally liable for any of the debts or obligations of
the Company or for any assessment on his/her stock.
Stockholders
shall have no right to any division of the assets or profits of the Company or
to any dividends therefrom, except as the Board of Directors shall from time to
time declare.
The Company
shall be entitled to treat the holder of record of any share or shares of stock
as the holder in fact thereof and accordingly shall not be bound to recognize
any equitable or other claim to or interest in such share on the part of any
other person whether or not it shall have express or other notice thereof, save
as expressly provided by the laws of the State of New
Jersey.
DIRECTORS
Section 7A
. The
business and affairs of the Company shall be managed by a Board of Directors
which shall have and may exercise all of the powers of the Company, except such
as are expressly conferred upon the stockholders by law, by the Amended and
Restated Certificate of Incorporation or by these By-Laws. Subject to the rights
of the holders of shares of any series of preferred stock then outstanding, the
Board of Directors shall consist of not less than seven (7) nor more than twenty
(20) persons. The exact number of Directors within the minimum and maximum
limitations specified in the preceding sentence shall be fixed from time to time
by the Board of Directors pursuant to a resolution adopted by a majority of the
whole Board of Directors, and if such number is not so fixed, the number shall
be twelve (12). No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
At the
1987 Annual Meeting of Stockholders, the directors shall be divided into three
classes, equal or as nearly equal in number as possible (but with not less than
three directors in each class), with the term of office of the first class to
expire at the 1988 Annual Meeting of Stockholders, the term of office of the
second class to expire at the 1989 Annual Meeting of Stockholders and the term
of office of the third class to expire at the 1990 Annual Meeting of
Stockholders, and with the members of each class to hold office until their
successors
Commencing
at the annual meeting of stockholders that is held in calendar year 2010 (the
“2010 Annual Meeting”), Directors shall be elected annually for terms of one (1)
year, except that any Director in office at the 2010 Annual Meeting whose term
does not expire until the annual meeting of stockholders held in calendar year
2011 or calendar year 2012 (a “Continuing Classified Director”) shall continue
to hold office until the end of the term for which such Continuing Classified
Director was previously elected and until such Continuing Classified Director’s
successor shall
have been elected and qualified.
At each
Annual Meeting of Stockholders following such initial classification and
election, directors elected to succeed those directors whose terms expire shall
be elected for a term of office to expire at the third succeeding Annual Meeting
of Stockholders after their election.
Except as
otherwise required by law, until the term of a Continuing Classified Director or
any other Director expires or otherwise terminates as aforesaid, such Directors
may be removed from office by the stockholders of the Corporation only for cause
pursuant to the applicable provisions of the New Jersey Business Corporation
Act.
Section 7B
.
Vacancies, however caused, occurring in the Board of Directors, and newly
created directorships resulting from an increase in the authorized number of
Directors may be filled by the affirmative vote of a majority of the remaining
Directors at any regular or special meeting
and such
newly appointed Director shall serve a term expiring at the next annual meeting
of stockholders and until such Director’s successor shall have been elected and
qualified
.
Section 7C
. No person
who has attained his/her 72
nd
birthday shall be eligible for election as a Director.
Section 7D
. Members
of the Board of Directors shall receive such compensation as the Board of
Directors may from time to time direct or determine.
MEETINGS
OF THE BOARD OF DIRECTORS
Section 8
. Regular
meetings of the Board of Directors shall be held at a time and place to be fixed
by the Board of Directors.
The
Chairman or President may call a special meeting of the Board of Directors when
in his/her opinion the interests of the Company require it. It shall
be the duty of the President or Secretary to call a special meeting of the Board
of Directors at the request, in writing, of any three (3) of the Directors; and
if the President or Secretary fails or refuses to do so any three (3) Directors
may call a special meeting of the Board of Directors
.
In
the absence of the Chairman of the Board
of
Directors, the
Lead Independent
Director
(or his or her designee) shall
preside at all meetings of the Board of Directors and shall act as
temporary chairman at, and call to order
, all
meetings of the stockholders
.
At any
meeting of the Board of Directors a majority of the Directors shall constitute a
quorum but a lesser number may adjourn the meeting from time to time until a
quorum appears.
Twenty-Four
(24) hours notice of the time and place of any meeting of the Board of Directors
shall be given to all Directors but business transacted at any meeting at which
all Directors are present shall be legal even though no notice of the applicable
meeting was given.
Members of
the Board of Directors, or any committee designated by the Board of Directors,
may participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
provision shall constitute presence in person at such
meeting.
Any action
required or permitted to be taken pursuant to authorization voted at a meeting
of the Board of Directors, or any committee designated by the Board of
Directors, may be taken without a meeting, if, prior or subsequent to such
action, all members of the Board of Directors or of such committee, as the case
may be, consent thereto
in writing
(including by facsimile, electronic mail or any other electronic means) and such
written consents are filed with the minutes of the proceedings of the Board of
Directors or committee. Such consent shall have the same effect as a
unanimous vote of the Board of Directors or committee for all purposes and may
be stated as such in any certificate or other document filed with the Treasurer
of the State of New Jersey, or other equivalent body in a foreign
jurisdiction.
EXECUTIVE
COMMITTEE
Section 9
. The Board
of Directors shall annually at its organizational meeting elect an Executive
Committee consisting of the
Chief
Executive Officer
President,
Lead Independent Director
and a minimum of three (3) other Directors who
shall constitute the Executive Committee, as fixed by the Board of Directors.
The Executive Committee shall meet at the call of the
Chief
Executive Officer
President,
Lead Independent Director,
or any
two (2) members
of the
Executive Committee but business transacted at any meeting at which all
Directors comprising the Executive Committee are present shall be legal even
though no notice of the applicable committee meeting was
given
. The Executive Committee shall have authority, when the
Board of Directors is not in session, to take action upon any matters that may
be brought before it, excepting the Company's investments, and shall report its
proceedings to the Board of Directors at the Board of Director's next meeting. A
majority of the Executive Committee shall constitute a quorum
thereof.
The
Chief
Executive Officer
President
shall be Chairman of the Executive Committee.
The
action of
(i)
a
majority of the members of the Executive Committee expressed
in
at
meetings or
by
writing, cable or telegram
(ii) all of
the members of the Executive Committee expressed by a writing (including by
facsimile, electronic mail or any other electronic means)
, without a
meeting, shall, for all purposes, constitute the action of the Executive
Committee
and have
the same effect as if assented to by all
.
FINANCE
COMMITTEE
Section 9A
. The Board
of Directors shall annually elect from its members a chairman and a minimum of
three (3) other Directors, who shall constitute the Finance Committee, as fixed
by the Board of Directors. The Finance Committee shall meet on twenty-four (24)
hours' notice at the call of such chairman or any two (2) members
but
business transacted at any meeting at which all Directors comprising the Finance
committee are present shall be legal even though no notice of the applicable
committee meeting was given
. The Finance Committee shall have
authority to purchase and sell stocks, bonds, notes and other securities, to
sell properties acquired in foreclosure suits or in satisfaction of debts, and
otherwise to invest and reinvest the funds of the Company. All such purchases,
sales,
investments and reinvestments must be reported to the Board of
Directors at its next meeting. A majority of the Finance Committee shall
constitute a quorum thereof.
The
action of
(i)
a
majority of the members of the Finance Committee expressed
in
at
meetings
, or by
writing, cable or telegram
or (ii) all
of the members of the Finance Committee expressed by a writing (including by
facsimile, electronic mail or any other electronic means),
without a
meeting
,
shall, for all purposes, constitute the action of the Finance Committee
and have
the same effect as if assented to by all
.
AUDITING
AUDIT
COMMITTEE
Section 10
. The Board
of Directors shall annually arrange for an audit of the Company's accounts by a
certified public accountant. It shall fix the number of and elect from its
members an
Auditing
Audit
Committee none of whom shall be an officer of the Company. The
Audit
Committee shall meet on twenty-four (24) hours' notice at the call of such
chairman or any two (2) members but business transacted at any meeting at which
all Directors comprising the Audit Committee are present shall be legal even
though no notice of the applicable committee meeting was given. The
Audit
Committee shall examine the report of such audit and report to the
Board of Directors any matters therein requiring action or consideration. Such
Auditing
Audit
Committee or the accountant shall have the right of access at all reasonable
times to the accounts, books and vouchers of the Company, and the officers of
the Company shall supply such information and explanation as may be necessary
for the full performance of their duties.
The action
of (i) a majority of the members of the Audit Committee expressed at meetings or
(ii) all of the members of the Audit Committee expressed by a writing (including
by facsimile, electronic mail or any other electronic means), without a meeting,
shall, for all purposes, constitute the action of the Audit
Committee.
OTHER
COMMITTEES
Section 11
. The Board
of Directors shall have the power to create other committees
,
and
the President
shall have the power to appoint the members
thereof.
NOTICE TO
DIRECTORS, OFFICERS AND COMMITTEE MEMBERS
Section 12
. Any
notice required to be given to any Director, officer or committee member under
the provisions of these By-Laws or otherwise shall be duly and sufficiently
given if mailed to such Director, officer or committee member at his/her address
as the same appears on the stock books of the Company (or, in the case of an
officer who is not a stockholder, at his/her address appearing on the payroll
records), or if given personally or by telephone,
telegram
or e-mail
facsimile,
electronic mail or other electronic means
. Such notice shall
be completely given upon mailing, or upon personal or telephonic notification,
or upon the sending of a
telegram
or e-mail
facsimile,
electronic mail or other electronic transmission
, to such Director,
officer or committee member, as the case may be, at his/her
home
address
, telephone
number, facsimile number, electronic mail address or other electronic
transmission, in each case
as the same appears on the books of the
Company. Any such notice may be waived by any Director, officer or
committee member to whom it is required to be given either before or after the
meeting or occurrence for which such notice is required.
Any Director
that attends a meeting of the Board of Directors or a meeting of any committee
designated by of the Board of Directors without objecting to a lack of notice of
the meeting prior to the meeting’s conclusion shall be deemed to have waived
his/her right to notice of the meeting.
OFFICERS
Section 13A
. The
Board of Directors immediately after the annual meeting of the stockholders
shall meet and elect or appoint a Chairman of the Board of Directors,
Lead
Independent Director,
President, Vice President, Secretary and Treasurer.
They may appoint such other officers as the needs of the Company may from time
to time require. All officers shall serve for one (1) year, or until the
election and qualification of their successors, subject to the power of the
Directors to remove any officer at pleasure by a majority vote of the Board of
Directors. Any two (2) offices except those of the President and Vice President
may be held by the same person. The compensation of the executive officers shall
be fixed by the Board of Directors.
Section 13B
.
President.
In
the absence of the Chairman of the Board
, the
President
shall
preside at all meetings of the Board of Directors and shall act as temporary
chairman at
and call
to order all meetings of the stockholders.
If the Chairman of
the Board of Directors shall be designated as chief executive officer, the
President shall exercise such powers and duties as may be prescribed by the
Chairman of the Board of Directors. In the absence of the designation of the
Chairman of the Board of Directors as chief executive officer, the President
shall be chief executive officer of the Company and shall perform all duties
commonly incident to his/her office, and shall have general supervision of the
affairs of the Company, subject to the approval of the Board of Directors. At
the
first regular
a
meeting of the Board of Directors
during the
first quarter
of the
company
in each
Company’s
fiscal
year, the President shall submit a complete report of the
operations and the business of the Company for the previous fiscal year,
together with a statement of the Company's affairs at the close of such year,
and shall submit a similar report at each annual meeting of the
stockholders.
The
President shall also report to the Board of Directors from time to time all
matters coming to his/her notice, relating to the interests of the Company that
should be brought to the attention of the Board of Directors.
Section 13C
. Vice
President. The Vice President shall have and exercise all the powers and duties
of the President
in
case of his/her absence or inability to act,
and shall
perform
as
such
other
powers
and
duties
as may
be
are
prescribed by the Board of Directors.
Section 13D
.
Secretary. The Secretary shall attend all meetings of the Board of Directors and
of the stockholders, and shall record all votes and the minutes of all
proceedings in a book to be kept for that purpose. The Secretary shall give or
cause to be given notice of all meetings of the stockholders and the Board of
Directors, and shall affix the seal of the Company to such papers as may require
it. He shall have charge of the Company's seal, stock certificates and such
other books and papers as the Board of Directors may prescribe. The Secretary
shall make such reports of the Board of Directors as they may request, and shall
prepare and cause to be filed such reports and statements as may be required by
law.
Section 13E
.
Treasurer. The Treasurer shall have the care and custody of all the funds and
securities of the Company and shall deposit the same in the name of the Company
in such bank or banks as the Board of Directors may designate, and shall
disburse the same under such rules and regulations as may be made by the Board
of Directors, and shall perform such other duties as the Board of Directors may
from time to time prescribe. The Treasurer shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Company, and shall see
that all expenditures are duly authorized and are evidenced by proper receipts
and vouchers. The Treasurer shall render to the President and Directors at the
regular meetings of the Board of Directors, or whenever they may require it, an
account of all his/her transactions as Treasurer, and of the financial condition
of the Company, and shall also make a full report of the financial condition of
the Company at each annual meeting of the stockholders.
Section 13F
. Chairman
of the Board of Directors. The Chairman of the Board of Directors shall preside
at all meetings of the stockholders and the Board of Directors and he shall
perform such other duties and exercise such other powers as the Board of
Directors or the Executive Committee may prescribe.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Section 14
.
Elimination of Certain Liability. A Director of the Company shall not
be personally liable to the Company or its stockholders for damages for breach
of any duty owed to the Company or its stockholders, except to the extent such
personal liability may not be eliminated or limited under the New Jersey
Business Corporation Act as the same exists or may hereafter be
amended.
An
officer of the Company shall not be personally liable to the Company or its
stockholders for damages for breach of any duty owed to the Company or its
stockholders, except to the extent and for the duration of any period of time
such personal liability may not be eliminated or limited under the New Jersey
Business Corporation Act as the same exists or may hereafter be
amended.
Section 14A
.
Indemnification and Insurance
(a)
Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party to or
is involved in any pending, threatened or completed civil, criminal,
administrative or arbitrative action, suit or proceeding, or any appeal therein
or any inquiry or investigation which could lead to such action, suit or
proceeding (a "proceeding"), by reason of his/her being or having been a
Director or officer of the Company or of any constituent company absorbed by the
Company in a consolidation or merger, or by reason of his/her being or having
been a Director, officer, trustee, employee or agent of any other company
(domestic or foreign) or of any partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise (whether or not for profit),
serving as such at the request of the Company, or the legal representative of
any such Director, officer, trustee, employee or agent, shall be indemnified and
held harmless by the Company to the fullest extent permitted by the New Jersey
Business Corporation Act, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than New Jersey
Business Corporation Act permitted prior to such amendment), from and against
any and all reasonable costs, disbursements and attorney's fees, and any and all
amounts paid or incurred in satisfaction of settlements, judgments, fines and
penalties, incurred or suffered in connection with any such proceeding, and such
indemnification shall continue as to a person who has ceased to be a Director,
officer, trustee, employee or agent and shall inure to the benefit of his/her
heirs, executors, administrators and assigns;
provided
,
however
, that, except as provided in Section
14A(b) hereof, the Company shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was specifically
authorized by the Board of Directors of the Company. The right to
indemnification conferred in this subsection shall be a contract right and shall
include the right to be paid by the Company the expenses incurred in connection
with any proceeding in advance of the final disposition of such proceeding as
authorized by the Board of Directors;
provided
,
however
, that, if the New Jersey Business
Corporation Act so requires, the payment of such expenses incurred by a Director
or officer in his/her capacity as a Director or officer in advance of the final
disposition of a proceeding shall be made only upon receipt by the Company of an
undertaking, by or on behalf of such Director or officer, to repay all amounts
so advanced unless it shall ultimately be determined that such Director or
officer is entitled to be indemnified under this subsection or otherwise. The
Company may, by action of the Board of Directors, provide for indemnification
and advancement of expenses to employees and agents of the Company with the same
scope and effect as the foregoing indemnification of Directors and
officers.
(b)
Right of Claimant to Bring
Suit. If a claim under Section 14A(a) of this subsection is not paid in full by
the Company within thirty (30) days after a written request has been received by
the Company, the claimant may at any time thereafter apply to a court for an
award of indemnification by the Company for the unpaid amount of the claim and,
if successful on the merits or otherwise in connection with any proceeding, or
in the defense of any claim, issue or matter therein, the claimant shall be
entitled also to be paid by the Company any and all expenses incurred or
suffered in connection with such proceeding. It shall be a defense to any such
action (other than an action brought to enforce a claim for the advancement of
expenses incurred in connection with any proceeding where the required
undertaking, if any, has been tendered to the Company) that the claimant has not
met the standard of conduct which makes it permissible under the New Jersey
Business Corporation Act for the Company to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the Company.
Neither the failure of the Company (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such proceeding that indemnification of the
claimant is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the New Jersey Business Corporation Act, nor an
actual determination by the Company (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, nor the termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of
nolo
contendere
or its equivalent, shall be a defense
to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
(c)
Non-Exclusivity of Rights.
The right to indemnification and advancement of expenses provided by or granted
pursuant to this Section 14A shall not exclude or be exclusive of any other
rights to which any person may be entitled under a certificate of incorporation,
by-law, agreement, vote of stockholders or otherwise, provided that no
indemnification shall be made to or on behalf of such person if a judgment or
other final adjudication adverse to such person establishes that such person has
not met the applicable standard of conduct required to be met under the New
Jersey Business Corporation Act.
(d)
Insurance. The Company may
purchase and maintain insurance on behalf of any Director, officer, employee or
agent of the Company or another company, partnership, joint venture, trust,
employee benefit plan or other enterprise against any expenses incurred in any
proceeding and any liabilities asserted against him/her by reason of such person
being or having been such a Director, officer, employee or agent, whether or not
the Company would have the power to indemnify such person against such expenses
and liabilities under the provisions of this Section 14A or
otherwise.
GENERAL
COUNSEL
Section 15
. The Board
of Directors shall annually appoint a General Counsel of the Company whose duty
it shall be to afford and communicate to the officers, Directors and committees,
in writing or otherwise, whenever requested, such counsel, legal advice and
information as may be requested to guide them in the discharge and performance
of their duties.
OFFICIAL
BONDS
FISCAL
YEAR
Section 16
.
The
Treasurer, and such other officers and employees as the Board of Directors may
designate, shall give bonds in such sums and with such securities and conditions
as the Board may require. The President shall have custody of all
such bonds.
FISCAL
YEAR
Section 17
.
The fiscal year of the Company shall be fixed by resolution of the Board
of Directors.
SIGNATURES
Section
18
.
17.
All checks issued by the Company shall bear the signatures or facsimile
signatures of at least two (2) persons designated by the Board of
Directors.
All other
notes, drafts, orders for the payment of money and all other documents requiring
the signature of an officer or officers of the Company shall be signed by such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate.
BOOKS OF
THE COMPANY
Section
19
.
18.
No stockholders, other than an officer or Director, shall have any right to
inspect any account or book or document of the Company except as such right may
be conferred by law or authorized by the Board of Directors after evidence
satisfactory to the Board of Directors is presented that such inspection is
desired for a proper purpose.
AMENDMENTS
Section
20
.
19.
Notwithstanding any other provision contained in these By-Laws to the contrary,
Sections 7A and 7B and this Section 20 of these By-Laws may be altered, amended,
supplemented or repealed only by the affirmative vote of 66-2/3% or more of the
voting power of all of the shares of the Company entitled to vote generally in
the election of Directors, voting together as a single class.
Subject
to the foregoing, these By-Laws may be altered, amended, supplemented or
repealed and new By-Laws may be adopted by the Board of Directors at any
meeting, provided that ten (10) days' notice, in writing has been given to each
Director of any proposed alteration, amendment, supplemental repeal or adoption.
The affirmative vote of a majority of the whole Board of Directors shall be
necessary to accomplish any proposed alteration, amendment, supplement, repeal
or adoption. Any By-Law contained in these By-Laws may be altered, amended,
supplemented, repealed or adopted without such previous notice by the vote of
three-fourths (3/4ths) of the whole Board of Directors.
Appendix
C
SELECTIVE
INSURANCE GROUP, INC.
2005
OMNIBUS STOCK PLAN
As
Amended and Restated Effective as of May 1, 2010
1.
|
Purpose;
Establishment.
|
The
Selective Insurance Group Inc. 2005 Omnibus Stock Plan (the “
Plan
”) is intended to
attract and retain employees,
non-employee directors
and consultants of the Company and its Affiliates, to motivate them to achieve
long-term Company goals and to further align their interests with those of the
Company’s stockholders. The Plan was adopted and approved by the
Board effective as of April 1, 2005, and approved by the stockholders of the
Company on April 27, 2005. The Plan is hereby amended and restated,
effective as of May 1, 2010, subject to approval by the stockholders of the
Company.
As used
in the Plan, the following definitions apply to the terms indicated
below:
|
(a)
|
“
Administrative
Actions
” shall have the meaning set forth in Section 4(b)
hereof.
|
|
(b)
|
“
Affiliate
”
shall mean any Subsidiary of the Company, and any entity if, at the time
of granting of an Award: (i) the Company, directly or indirectly, owns at
least 80% of the combined voting power of all classes of stock of such
entity or at least 80 percent of the ownership interests in such entity;
or (ii) such entity, directly or indirectly, owns at least 80 percent of
the combined voting power of all classes of stock of the
Company.
|
|
(c)
|
“
Agreement
”
shall mean the written agreement between the Company and a Participant
evidencing an Award or a notice of an Award delivered to a Participant by
the Company in hard copy paper form, electronically via the Internet or
through other electronic means.
|
|
(d)
|
“
Award
” shall
mean any Option, Stock Appreciation Right, Restricted Stock, Restricted
Stock Unit, Stock Grant or Other Award granted pursuant to the terms of
the Plan.
|
|
(e)
|
“
Board
” shall
mean the Board of Directors of the
Company.
|
|
(f)
|
“
Cause
” shall
mean, unless otherwise defined in the Participant’s Agreement, employment
agreement, or other written agreement describing the Participant’s terms
of employment with the Company or its Affiliates, termination of the
Participant’s employment or service by the Company and its Affiliates if,
in the reasonable determination of the Company or its applicable
Affiliate, the Participant: (i) engages in conduct that violates written
policies of the Company or Affiliate; (ii) fails to perform the essential
functions of his or her job (except for a failure resulting from a bona
fide illness or incapacity); (iii) fails to carry out the Company’s or
Affiliate’s reasonable directions, issued through its
Chief
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Executive
Officer, the Board, other appropriate senior employee responsible for the
Participant’s business unit or area, or the Participant’s supervisor; (iv)
engages in embezzlement, misappropriation of corporate funds, any act of fraud,
dishonesty or self-dealing, or the commission of a felony or any significant
violation of any statutory or common law duty of loyalty to the Company or
Affiliate; (v) commits an act or omission that could adversely and materially
affect the Company’s or an Affiliate’s business or reputation or involves moral
turpitude; or (vi) breaches a material provision of this Plan or the Agreement
evidencing an Award.
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(g)
|
“
Change in
Control
” shall mean the first occurrence of an event of a nature
that would be required to be reported in response to Item 5.01 of a
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Sections 13 or 15(d) of the Exchange Act;
provided
,
however
, that a Change
in Control shall, in any event, conclusively be deemed to have occurred
upon the first to occur of any one of the following
events:
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(i)
|
The
acquisition by a person or group, including, without limitation, any
current stockholder or stockholders of the Company, of securities of the
Company resulting in such person or group owning, of record or
beneficially, 25 percent or more of any class of voting securities of the
Company;
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(ii)
|
The
acquisition by a person or group, including, without limitation, any
current stockholder or stockholders of the Company, of securities of the
Company resulting in such persons or groups owning, of record or
beneficially, 20 percent or more, but less than 25 percent, of any class
of voting securities of the Company, if the Board adopts a resolution that
such acquisition constitutes a Change in
Control;
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(iii)
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The
sale or disposition of all or substantially all of the assets of the
Company;
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(iv)
|
The
reorganization, recapitalization, merger, consolidation or other business
combination involving the Company, the result of which is the ownership by
those persons who were stockholders of the Company immediately prior to
such business combination of less than 80 percent of those voting
securities of the resulting or acquired entity having the power to elect a
majority of the board of directors of such entity;
or
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(v)
|
A
change in the membership of the Board, which, taken in conjunction with
any other prior or concurrent changes, results in 50 percent or more of
the membership of the Board being persons not nominated by the Board as
set forth in the Company’s then most recent proxy statement, excluding
changes resulting from substitutions by
the
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Board because of retirement or death of a director or directors,
removal of a director or directors by the Board or resignation of a director or
directors due to demonstrated disability or incapacity.
Provided, however,
that: (A)
for each Award subject to Section 409A of the Code, a Change in Control shall be
deemed to have occurred under this Plan with respect to such Award, if and to
the extent necessary to comply with Section 409A of the Code, only if a change
in the ownership or effective control of the Company or a change in the
ownership of a substantial portion of the assets of the Company shall also be
deemed to have occurred under Section 409A of the Code; and (B) notwithstanding
anything in this definition to the contrary, no Change in Control shall be
deemed to have occurred for the purpose of a Participant’s Award by virtue of
any transaction which results in such Participant, or a group of persons which
includes such Participant, acquiring, directly or indirectly, voting securities
of the Company.
For the
purpose of this Section 2(g), the following definitions shall
apply:
(I) the
terms “person” and “beneficial owner” shall have the meanings set forth in
Regulation 13D under the Exchange Act, as such regulation exists on the date
hereof;
(II)
the term “voting security” shall include any
security that has, or may have upon an event of default or in respect of any
transaction, a right to vote on any matter on which the holder of any class of
common stock of the Company would have a right to vote;
(III) the
term “group” shall have the meaning set forth in Section 13(d) of the Exchange
Act; and
(IV)
the term “substantially all of the assets of the Company”
shall mean more than 50 percent of the Company’s assets on a consolidated basis,
as shown in the Company’s most recent audited balance sheet.
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(h)
|
“
Code
” shall
mean the Internal Revenue Code of 1986, as amended from time to time, and
any regulations promulgated
thereunder.
|
|
(i)
|
“
Committee
”
shall mean the Company’s Salary and Employee Benefits Committee, which
shall consist of two or more persons appointed by the Board, each of whom
shall qualify as an “outside director” within the meaning of Section
162(m) of the Code, and a “nonemployee director” within the meaning of
Rule 16b-3.
|
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(j)
|
“
Company
” shall
mean Selective Insurance Group, Inc., a New Jersey
corporation.
|
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(k)
|
“
Company Stock
”
shall mean the common stock of the Company, par value $2.00 per
share.
|
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(l)
|
“
Consultant
”
shall mean any consultant, agent, advisor, or independent contractor who
renders services to the Company or an Affiliate that: (i) are not in
connection with the offer and sale of the Company’s securities in a
capital raising transaction; and (ii) do not directly or indirectly
promote or maintain a market for the Company’s
securities.
|
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(m)
|
“
Covered
Employee
” shall mean a “covered employee” within the meaning of
Section 162(m) of the Code and regulations and other guidance
thereunder.
|
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(n)
|
“
Directors’
Plan
” shall mean the Selective Insurance Group, Inc. Non-Employee
Directors’ Deferred Compensation Plan, as effective as of May 1, 2010, as
amended and in effect from time to
time.
|
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(o)
|
“
Effective Date
”
shall mean April 1, 2005, the original effective date of the
Plan.
|
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(p)
|
“
Exchange Act
”
shall mean the Securities Exchange Act of 1934, as amended from time to
time.
|
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(q)
|
“
Fair Market
Value
” of the Company Stock shall be calculated as follows: (i) if
the Company Stock is listed on a national securities exchange or traded on
the NASDAQ National Market or the NASDAQ SmallCap Market and sale prices
are regularly reported for the Company Stock, then the Fair Market Value
shall be the closing selling price for the Company Stock reported on the
applicable composite tape or other comparable reporting system on the
applicable date, or if the applicable date is not a trading day, on the
most recent trading day immediately prior to the applicable date; or (ii)
if closing selling prices are not regularly reported for the Company Stock
as described in clause (i) above but bid and asked prices for the Company
Stock are regularly reported, then the Fair Market Value shall be the
arithmetic mean between the closing or last bid and asked prices for the
Company Stock on the applicable date or, if the applicable date is not a
trading day, on the most recent trading day immediately prior to the
applicable date; or (iii) if prices are not regularly reported for the
Company Stock as described in clause (i) or (ii) above, then the Fair
Market Value shall be such value as the Committee in good faith
determines;
provided,
however,
that, for purposes of determining the exercise price of a
Nonqualified Stock Option, if prices are not regularly reported for the
Company Stock as described in clause (i) or (ii) above, the Fair Market
Value of the Company Stock shall be determined in accordance with Section
409A and regulations thereunder.
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(r)
|
“
Immediate Family
Member
” shall have the meaning set forth in Section 21(c)
hereof.
|
|
(s)
|
“
Incentive Stock
Option
” shall mean an Option that qualifies as an “incentive stock
option” within the meaning of Section 422 of the Code, or any successor
provision, and which is designated by the Committee as an Incentive Stock
Option.
|
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(t)
|
“
Non-Employee
Director
” shall mean a member of the Board or a member of the board
of directors of an Affiliate who is not an employee of the Company or any
Affiliate.
|
|
(u)
|
“
Nonqualified Stock
Option
” shall mean an Option other than an Incentive Stock
Option.
|
|
(v)
|
“
Option
” shall
mean an option to purchase shares of Company Stock granted pursuant to
Section 7 hereof.
|
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(w)
|
“
Other Award
”
shall mean an Award granted pursuant to Section 12
hereof.
|
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(x)
|
“
Participant
”
shall mean an employee of the Company or any Affiliate, a Non-Employee
Director
or
a
Consultant to whom
an Award is granted pursuant to the
Plan.
|
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(y)
|
“
Performance
Goals
” shall mean performance goals based on one or more of the
following criteria: (i) return on total stockholder equity or operating
return on total stockholder equity; (ii) earnings per share or book value
per share of Company Stock; (iii) net income (before or after taxes); (iv)
earnings before all or any interest, taxes, depreciation and/or
amortization; (v) return on assets, capital or investment; (vi) market
share; (vii) cost reduction goals; (viii) earnings from continuing
operations; (ix) levels of expense, costs or liabilities; (x) department,
division or business unit level performance; (xi) operating profit; (xii)
sales or revenues; (xiii) stock price appreciation; (xiv) total
stockholder return; (xv) growth in net premiums written, including,
without limitation, policy count; (xvi) combined ratios; (xvii)
implementation or completion of critical projects or processes; (xviii)
except in the case of a Covered Employee, any other performance criteria
established by the Committee; or (xix) any combination of the
foregoing. Where applicable, the Performance Goals may be
expressed in terms of attaining a specified level of the particular
criteria or the attainment of a percentage increase or decrease in the
particular criteria, and may be applied to one or more of the Company, a
subsidiary or affiliate, or a division or strategic business unit of the
Company or a combination thereof, or may be applied to the performance of
the Company relative to a market index, a group of other companies or a
combination thereof, all as determined by the Committee. The
Performance Goals may be subject to a threshold level of performance below
which no vesting will occur, levels of performance at which specified
vesting will occur, and a maximum level of performance above which full
vesting will occur. To the extent possible, each of the
foregoing Performance Goals shall be determined, as appropriate, in
accordance with generally accepted accounting principles or statutory
accounting principles and shall be subject to certification by the
Committee;
provided
that the Committee shall have the authority to make
equitable adjustments to the Performance Goals in recognition of unusual
or non-recurring events affecting the Company or any subsidiary or
affiliate or the financial statements of the Company or any subsidiary or
affiliate, in response to changes in applicable laws or regulations, or to
account for items of realized and
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unrealized gain, loss or expense determined to be extraordinary or
unusual in nature or infrequent in occurrence or related to the disposal of a
segment of a business or related to a change in accounting principles.
|
(z)
|
“
Plan
” shall
have the meaning set forth in Section 1
hereof.
|
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(aa)
|
“
Prior Plan
”
shall mean each of the Selective Insurance Stock Option Plan III, the
Selective Insurance Group, Inc. Stock Option Plan for Directors and the
Selective Insurance Group, Inc. Stock Compensation Plan for Nonemployee
Directors, as Amended.
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|
(bb)
|
“
Prior Plan
Awards
” shall mean awards outstanding under the Prior Plans as of
April 27, 2005.
|
|
(cc)
|
“
Restricted
Stock
” shall mean a share of Company Stock which is granted
pursuant to the terms of Section 9 hereof and which is subject to
restrictions as set forth in Section 9(c) and (d)
hereof.
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|
(dd)
|
“
Restricted Stock
Unit
” shall mean an Award valued by reference to shares of Company
Stock (also known as “phantom stock” or a “stock unit”), granted pursuant
to Section 10 hereof, which upon or following vesting provides the right
to receive either cash or shares of Company
Stock.
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(ee)
|
“
Rule 16b-3
”
shall mean the Rule 16b-3 promulgated under the Exchange Act, as amended
from time to time.
|
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(ff)
|
“
Securities Act
”
shall mean the Securities Act of 1933, as amended from time to
time.
|
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(gg)
|
“
Stock Appreciation
Right
” shall mean the right to receive, upon exercise of the right,
the applicable amounts as described in Section 8
hereof.
|
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(hh)
|
“
Stock Grant
”
shall mean an unrestricted share of Company Stock which is granted
pursuant to the terms of Section 11
hereof.
|
|
(ii)
|
“
Subsidiary
”
shall mean a “subsidiary corporation” of the Company within the meaning of
Section 424(f) of the Code.
|
3.
|
Stock
Subject to the Plan.
|
|
(a)
|
Shares Available for
Awards
. The maximum number of shares of Company Stock
reserved for issuance under the Plan shall be 3,400,000 shares (subject to
adjustment as provided herein). Such shares may be authorized
but unissued shares of Company Stock or authorized and issued shares of
Company Stock held in the Company’s
treasury.
|
|
(b)
|
Individual Limitation;
Limitation on Certain Awards; Limitation on Incentive Stock
Options
. The maximum number of shares of Company Stock
to which Awards (including Options and Stock Appreciation Rights) relate
that may be granted to any Participant during any calendar year shall not
exceed 200,000 shares, subject to adjustment as provided in Section 3(c)
hereof. The maximum number of shares of Company Stock to which
Options relate that may be granted under the Plan shall be 3,400,000
(subject to adjustment as provided in Section 3(c) hereof), any or all of
which may relate to Incentive Stock
Options.
|
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(c)
|
Adjustment for Change
in Capitalization
. In the event that any dividend or
other distribution is declared (whether in the form of cash, Company
Stock, or other property), or there occurs any recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation,
spin-off, combination, repurchase, share exchange or other similar
corporate transaction or event, the Committee shall equitably adjust, in
its sole and absolute discretion: (i) the number and type of shares (or
other securities or property) with respect to which Awards may be granted;
(ii) the number and type of shares (or other securities or property)
subject to outstanding Awards; and (iii) the grant or exercise price with
respect to any Award. Any adjustment to Incentive Stock Options
under this Section 3(c) shall be made only to the extent not
constituting a “modification” within the meaning of Section 424(h)(3)
of the Code. Any adjustment to Awards subject to Section 409A
of the Code shall conform to the requirements of Section 409A of the
Code. Furthermore, with respect to Awards intended to qualify
as “performance-based compensation” under Section 162(m) of the Code,
any adjustments to Awards shall be made only to the extent that the
Committee determines that such adjustments may be made without causing the
Company to be denied a tax deduction on account of Section 162(m) of
the Code.
|
|
(d)
|
Corporate
Transactions
. In the event of a proposed corporate
transaction, the Committee may provide for any or a combination of the
following:
|
|
(i)
|
provide
for the assumption of outstanding Awards by the surviving or successor
entity;
|
|
(ii)
|
terminate
all or a portion of any outstanding Award, effective upon the closing of
the corporate transaction, if it determines that such termination is in
the best interests of the Company (if the Committee decides to terminate
outstanding Options or Stock Appreciation Rights, the Committee shall give
each participant holding an Option or Stock Appreciation Right to be
terminated not less than seven days’ notice prior to any such termination,
and any Option or Stock Appreciation Right that is to be so terminated may
be exercised (if and only to the extent that it is then exercisable) up
to, and including the date immediately preceding, such termination);
or
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(iii)
|
with
respect to the outstanding Options and Stock Appreciation Rights, provide
for cash payments, net of applicable tax withholdings, to be made to
holders equal to the excess, if any, of: (A) the acquisition price times
the number of shares of Company Stock subject to an Option or Stock
Appreciation Right (to the extent the exercise price does not exceed the
acquisition price), over (B) the aggregate exercise price for all such
shares of Company Stock subject to the Option or Stock Appreciation Right,
in exchange for the termination of such Option or Stock Appreciation
Right;
provided,
however,
that if the acquisition price does not exceed the exercise
price of any such Option or Stock Appreciation Right, the Committee may
cancel that Option or Stock Appreciation Right without the payment of any
consideration therefor prior to or upon the transaction. For
this purpose, “
acquisition
price
” means the amount of cash, and the market value of any other
consideration, received in payment for a share of Company Stock
surrendered in a transaction.
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Notwithstanding
the foregoing, with respect to Awards of Incentive Stock Options, no adjustment
shall be authorized to the extent that such adjustment would cause the Plan to
violate Section 422(b)(1) of the Code or any successor provision thereto; and
with respect to Options and Stock Appreciation Rights, such adjustment shall be
made in accordance with the provisions of Section 424(h) of the
Code.
|
(e)
|
Reuse of
Shares
. For purposes of calculating the number of shares
of Company Stock issued under the
Plan:
|
|
(i)
|
Except
to the extent that to do so would prevent the grant of Incentive Stock
Options hereunder, any shares of Company Stock subject to an Award or a
Prior Plan Award that remain unissued upon the cancellation, surrender,
exchange or termination of such Award or Prior Plan Award without having
been exercised or settled shall again become available for
Awards.
|
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(ii)
|
To
the extent an Award or a Prior Plan Award is paid or settled in cash, the
number of shares of Company Stock with respect to which such payment or
settlement is made shall again be available for grants of Awards pursuant
to the Plan.
|
|
(iii)
|
If
any Option is exercised by delivering previously owned shares of Company
Stock in payment of the exercise price therefor, only the net number of
shares, that is, the number of shares of Company Stock issued minus the
number received by the Company in payment of the exercise price, shall be
considered to have been issued pursuant to an Award granted under the
Plan.
|
|
(iv)
|
Any
shares of Company Stock reacquired in satisfaction of tax withholding
obligations of the Company shall again be available for issuance under the
Plan.
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Notwithstanding
the foregoing, with respect to any Covered Employee, Options and Stock
Appreciation Rights granted and subsequently canceled or deemed to be canceled
in a calendar year shall count against the limit set forth in Section 3(b) on
the maximum number of shares of Company Stock to which such Awards may be
granted to such Covered Employee during any calendar year, even after their
cancellation
4.
|
Administration
of the Plan.
|
|
(a)
|
General
. The
Plan shall be administered by the Committee. The Committee
shall have the authority in its sole discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically
granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority
to: (i) grant Awards; (ii) determine the persons to whom and the time or
times at which Awards shall be granted; (iii) determine the type and
number of Awards to be granted, the number of shares of Company Stock or
cash or other property to which an Award may relate and the terms,
conditions, restrictions and performance criteria relating to any Award;
(iv) determine whether, to what extent, and under what circumstances an
Award may be settled, cancelled, forfeited, exchanged, or surrendered; (v)
construe and interpret the Plan and any Award; (vi) prescribe, amend and
rescind rules and regulations relating to the Plan; (vii) determine the
terms and provisions of Agreements; and (viii) make all other
determinations deemed necessary or advisable for the administration of the
Plan. The Committee may, in its sole and absolute discretion,
without amendment to the Plan: (A) accelerate the date on which any Option
or Stock Appreciation Right becomes exercisable; (B) waive or amend the
operation of Plan provisions respecting exercise after termination of
employment (provided that the term of an Option or Stock Appreciation
Right may not be extended beyond ten years from the date of grant); (C)
accelerate the vesting date, or waive any condition imposed hereunder,
with respect to any Award of Restricted Stock, Restricted Stock Units,
Stock Grant or Other Award; and (D) otherwise adjust any of the terms
applicable to any such Award in a manner consistent with the terms of the
Plan.
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(b)
|
Indemnification
. No
member of the Committee (or a delegate of the Committee), and no officer
of the Company, shall be liable for any action taken or omitted to be
taken by such individual or by any other member of the Committee or
officer of the Company in connection with the performance of duties under
this Plan, except for such individual’s own willful misconduct or as
expressly provided by law (the “
Administrative
Actions
”). Further, the Committee (and all delegates of
the Committee), in addition to such other rights of indemnification as
they may have as members of the Board or officers of the Company or an
Affiliate, any individual serving as a Committee member shall be
indemnified and held
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harmless by the Company to the fullest extent allowed by law
against all costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be party by
reason of any Administrative Action.
The
persons who shall be eligible to receive Awards pursuant to the Plan shall be
such employees of the Company or any Affiliate (including officers of the
Company or any Affiliate, whether or not they are directors of the Company or
any Affiliate), Non-Employee Directors, and Consultants, in each case as the
Committee shall select from time to time. The grant of an Award
hereunder to any employee, Non-Employee Director or Consultant shall impose no
obligation on the Company or any Affiliate to continue the employment or
services of a Participant and shall not lessen or affect the Company’s or such
Affiliate’s right to terminate the employment or services of such
Participant. No Participant or other person shall have any claim to
be granted any Award, and there is no obligation for uniformity of treatment of
Participants, or holders or beneficiaries of Awards, or of multiple Awards
granted to a Participant. The terms and conditions of Awards and the
Committee’s determinations and interpretations with respect thereto need not be
the same with respect to each Participant (whether or not such Participants are
similarly situated). Notwithstanding any provision of the Plan, no
Award may be granted if it would be subject to, but fail to comply with, the
requirements set forth in Section 409A of the Code and any regulations or
guidance promulgated thereunder.
6.
|
Awards
Under the Plan; Agreement.
|
The
Committee may grant Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Stock Grants and Other Awards in such amounts and with
such terms and conditions as the Committee shall determine, subject to the
provisions of the Plan. Each Award granted under the Plan (except
unconditional Stock Grants or Stock Grants issued pursuant to the terms of the
Directors’ Plan) shall be evidenced by an Agreement which shall contain such
provisions as the Committee may in its sole discretion deem necessary or
desirable and which are not in conflict with the terms of the
Plan. By accepting an Award, a Participant shall be deemed to agree
that the Award shall be subject to all of the terms and provisions of the Plan
and the applicable Agreement.
The
following provisions govern Options.
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(a)
|
Identification of
Options
. Each Option shall be clearly identified in the
applicable Agreement as either an Incentive Stock Option or a Nonqualified
Stock Option. All Options shall be non-transferable, except by
will or the laws of descent and distribution or except as otherwise
determined by the Committee as provided by Section 21(c) hereof with
respect to a Nonqualified Stock
Option.
|
|
(b)
|
Exercise
Price
. Each Agreement with respect to an Option shall
set forth the amount per share (the “option exercise price”) payable by
the Participant to the Company upon exercise of the Option;
provided
,
however
, in no event
shall the option exercise price be less than the Fair Market Value of a
share of Company Stock as of the date of grant of such
Option.
|
|
(c)
|
Term and Exercise of
Options
.
|
|
(i)
|
Each
Option shall become exercisable at the time determined by the Committee
and set forth in the applicable Agreement. At the time of grant of an
Option, the Committee may impose such restrictions or conditions to the
exercisability of the Option as it, in its absolute discretion, deems
appropriate, including, but not limited to, achievement of one or more
Performance Goals. Subject to Section 7(d) hereof, the Committee shall
determine the expiration date of each Option, which shall be no later than
the tenth anniversary of the date of grant of the
Option.
|
|
(ii)
|
An
Option shall be exercised by delivering the form of notice of exercise
provided by the Company. Payment for shares of Company Stock
purchased upon the exercise of an Option shall be made on the effective
date of such exercise by one or a combination of the following means: (A)
in cash or by personal check, certified check, bank cashier’s check or
wire transfer; (B) in shares of Company Stock owned by the Participant for
at least six months prior to the date of exercise; (C) by broker assisted
cashless exercise; (D) with the approval of the Committee, by “net
exercise,” meaning that upon the exercise of an Option or any portion
thereof, the Company shall deliver the greatest number of whole shares of
Company Stock having a Fair Market Value on the date of exercise not in
excess of the difference between: (x) the aggregate Fair Market Value
of the shares of Company Stock subject to the Option (or the portion of
such Option then being exercised); and (y) the aggregate exercise
price for all such shares of Company Stock under the Option (or the
portion thereof then being exercised) plus (to the extent it would not
give rise to adverse accounting consequences pursuant to applicable
accounting principles) the amount of withholding tax due upon exercise,
with any fractional share that would result from such equation to be
payable in cash, to the extent practicable, or cancelled; or (E) by any
such other methods as the Committee may from time to time authorize;
provided
,
however
, that in the
case of a Participant who is subject to Section 16 of the Exchange Act,
the method of making such payment shall be in compliance with applicable
law. Any payment in shares of Company Stock shall be effected
by the delivery of such shares to, and in a form approved by, the
Secretary of the Company or his or her designee (including by way of
electronic delivery), accompanied by any other documents and evidences as
the Secretary of the Company or his or her designee shall
require.
|
|
(iii)
|
Shares
of Company Stock purchased upon the exercise of an Option shall be issued
in book entry form in the name of or for the account of the Participant or
other person entitled to receive such shares and shall be entered on the
books of the Company’s transfer agent in the name of the Participant or
such other person (unless otherwise determined by the Committee), as soon
as practicable following the effective date on which the Option is
exercised.
|
|
(d)
|
Provisions Relating to
Incentive Stock Options
. Incentive Stock Options may
only be granted to employees of the Company and its Affiliates, in
accordance with the provisions of Section 422 of the Code. The
option exercise price for each Incentive Stock Option shall be equal to or
greater than the Fair Market Value of a share of Company Stock on the date
of grant. To the extent that the aggregate Fair Market Value of
shares of Company Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year
under the Plan and any other stock option plan of the Company or a
Subsidiary shall exceed $100,000, such Options shall be treated as
Nonqualified Stock Options. For purposes of this Section 7(d),
Fair Market Value shall be determined as of the date on which each such
Incentive Stock Option is granted. No Incentive Stock Option
may be granted to an individual if, at the time of the proposed grant,
such individual owns (or is deemed to own under the Code) stock possessing
more than ten percent of the total combined voting power of all classes of
stock of the Company unless: (A) the exercise price of such Incentive
Stock Option is at least 110% of the Fair Market Value of a share of
Company Stock at the time such Incentive Stock Option is granted; and (B)
such Incentive Stock Option is not exercisable after the expiration of
five years from the date such Incentive Stock Option is
granted.
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|
(e)
|
Effect of Termination
of Employment (or Provision of Services)
. Unless
otherwise provided by the Committee, in the event that the employment of a
Participant with the Company and its Affiliates (or the Participant’s
service to the Company and its Affiliates) shall terminate for any reason
other than Cause, death or disability, then: (i) each Option granted to
such Participant, to the extent that it is exercisable at the time of such
termination, shall remain exercisable for: (x) in the case of Incentive
Stock Options, the 90 day period following such termination, but in no
event following the expiration of its term; and (y) in the case of
Nonqualified Stock Options, the one year period following such
termination, but in no event following the expiration of its term; and
(ii) each Option that remains unexercisable as of the date of such a
termination shall be terminated at the time of such
termination. Unless otherwise provided by the Committee, in the
event that the employment of a Participant with the Company and its
Affiliates (or the Participant’s service to the Company and its
Affiliates) shall terminate on account of the death or disability of the
Participant, except as otherwise determined by the Committee, all Options
held by the Participant immediately prior to the Participant’s death or
disability, as the case may be, to the extent then exercisable, may be
exercised by the Participant or by the Participant’s legal representative,
executor, administrator or transferee by will or the laws of descent
and
|
distribution, at any time within the one year period ending on the
first anniversary of the Participant’s death or disability, and shall thereupon
terminate. In no event, however, shall an Option remain exercisable
following the expiration of its term. In the event that the
employment of a Participant with the Company and its Affiliates (or the
Participant’s service to the Company and its Affiliates) shall terminate on
account of Cause, each Option that is outstanding as of the date of such
termination, whether or not then exercisable, shall be terminated at the time of
such termination.
8.
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Stock
Appreciation Rights.
|
|
(a)
|
General
. A
Stock Appreciation Right may be granted in connection with an Option,
either at the time of grant or, with respect to a Nonqualified Stock
Option, at any time thereafter during the term of the Option, or may be
granted unrelated to an Option. At the time of grant of a Stock
Appreciation Right, the Committee may impose such restrictions or
conditions to the exercisability of the Stock Appreciation Right as it, in
its absolute discretion, deems appropriate, including, but not limited to,
achievement of performance goals based on one or more Performance
Goals. The term of a Stock Appreciation Right granted without
relationship to an Option shall not exceed ten years from the date of
grant.
|
|
(b)
|
Surrender of
Option
. A Stock Appreciation Right related to an Option
shall require the holder, upon exercise, to surrender such Option with
respect to the number of shares as to which such Stock Appreciation Right
is exercised, in order to receive payment of any amount computed pursuant
to Section 8(d). Such Option will, to the extent surrendered,
then cease to be exercisable.
|
|
(c)
|
Timing and
Transferability
. Subject to Section 8(g) and to such
rules and restrictions as the Committee may impose, a Stock Appreciation
Right granted in connection with an Option will be exercisable at such
time or times, and only to the extent, that a related Option is
exercisable, and will not be transferable except to the extent that such
related Option may be transferable.
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|
(d)
|
Exercise of Stock
Appreciation Rights Related to Options
. Upon the
exercise of a Stock Appreciation Right related to an Option, the holder
will be entitled to receive payment of an amount determined by
multiplying:
|
|
(i)
|
the
excess of the Fair Market Value of a share of Company Stock on the date of
exercise of such Stock Appreciation Right over the option exercise price
specified in the related Option; by
|
|
(ii)
|
the
number of shares as to which such Stock Appreciation Right is
exercised.
|
The
payment upon exercise of a Stock Appreciation Right granted with a relationship
to an Option shall be made in shares of Company Stock which have an aggregate
Fair Market Value (as of the date of exercise of the Stock Appreciation Right)
equal to the amount of the payment as set forth in such
Agreement
or, only if and to the extent set out in the Agreement for the Award, in
cash.
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(e)
|
Exercise of Stock
Appreciation Rights Not Related to Options
. A Stock
Appreciation Right granted without relationship to an Option will entitle
the holder, upon exercise of the Stock Appreciation Right, to receive
payment of an amount determined by
multiplying:
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|
(i)
|
the
excess of: (A) the Fair Market Value of a share of Company Stock on the
date of exercise of such Stock Appreciation Right; over (B) the greater of
the Fair Market Value of a share of Company Stock on the date the Stock
Appreciation Right was granted or such greater amount as may be set forth
in the applicable Agreement; by
|
|
(ii)
|
the
number of shares as to which such Stock Appreciation Right is
exercised.
|
The
payment upon exercise of a Stock Appreciation Right granted without a
relationship to an Option shall be made in shares of Company Stock which have an
aggregate Fair Market Value (as of the date of exercise of the Stock
Appreciation Right) equal to the amount of the payment as set forth in such
Agreement or, only if and to the extent set out in the Agreement for the Award,
in cash.
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(f)
|
Limitations on Amounts
Payable
. Notwithstanding subsections (d) and (e) above,
the Committee may place a limitation on the amount payable upon exercise
of a Stock Appreciation Right. Any such limitation must be
determined as of the date of grant and noted in the applicable
Agreement.
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|
(g)
|
Effect of Termination
of Employment (or Provision of Services)
. Unless
otherwise provided by the Committee, in the event that the employment of a
Participant with the Company and its Affiliates (or the Participant’s
service to the Company and its Affiliates) shall terminate for any reason
other than Cause, death or disability, then: (i) each Stock Appreciation
Right granted to such Participant, to the extent that it is exercisable at
the time of such termination, shall remain exercisable for the one year
period following such termination, but in no event following the
expiration of its term; and (ii) each Stock Appreciation Right that
remains unexercisable as of the date of such a termination shall be
terminated at the time of such termination. In the event that
the employment of a Participant with the Company and its Affiliates (or
the Participant’s service to the Company and its Affiliates) shall
terminate on account of the death or disability of the Participant, except
as otherwise determined by the Committee, all Stock Appreciation Rights
held by the Participant immediately prior to the Participant’s death or
disability, as the case may be, to the extent then exercisable, may be
exercised by the Participant or by the Participant’s legal representative,
executor, administrator or transferee by will or the laws of descent and
distribution, at any time within the one year period ending on the first
anniversary of the Participant’s
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death or disability, and shall thereupon terminate. In
no event, however, shall a Stock Appreciation Right remain exercisable following
the expiration of its term. In the event that the employment of a
Participant with the Company and its Affiliates (or the Participant’s service to
the Company and its Affiliates) shall terminate on account of Cause, each Stock
Appreciation Right that is outstanding as of the date of such termination,
whether or not then exercisable, shall be terminated at the time of such
termination.
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(a)
|
Price
. At
the time of the grant of shares of Restricted Stock, the Committee shall
determine the price, if any, to be paid by the Participant for each share
of Restricted Stock subject to the
Award.
|
|
(b)
|
Vesting
Date
. At the time of the grant of shares of Restricted
Stock, the Committee shall establish a vesting date or vesting dates with
respect to such shares. The Committee may divide such shares
into classes and assign a different vesting date for each
class. Provided that all conditions to the vesting of a share
of Restricted Stock are satisfied, and subject to Section 9(h), upon the
occurrence of the vesting date with respect to a share of Restricted
Stock, such share shall vest and the restrictions of Section 9(d) shall
lapse.
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|
(c)
|
Conditions to
Vesting
. At the time of the grant of shares of
Restricted Stock, the Committee may impose such restrictions or conditions
to the vesting of such shares as it, in its absolute discretion, deems
appropriate, including, but not limited to, achievement of performance
goals based on one or more Performance Goals. The Committee may
also provide that the vesting or forfeiture of shares of Restricted Stock
may be based upon the achievement of, or failure to achieve, certain
levels of performance and may provide for partial vesting of Restricted
Stock in the event that the maximum level of performance is not met if the
minimum level of performance has been equaled or
exceeded.
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|
(d)
|
Restrictions on
Transfer Prior to Vesting
. Prior to the vesting of a
share of Restricted Stock, such Restricted Stock may not be transferred,
assigned or otherwise disposed of, and no transfer of a Participant’s
rights with respect to such Restricted Stock, whether voluntary or
involuntary, by operation of law or otherwise, shall be
permitted. Immediately upon any attempt to transfer such
rights, such shares, and all of the rights related thereto, shall be
forfeited by the Participant.
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(e)
|
Voting Rights;
Dividends on Restricted Stock
. Unless the Committee
determines otherwise, a Participant who has been awarded shares of
Restricted Stock shall be entitled to vote such shares. The
Company shall pay to each Participant, in cash, any dividends paid on
Restricted Stock awarded to such Participant. Such payment
shall be made on the date that such dividend would be paid to the
Company’s stockholders, generally; provided, however, that if the vesting
of any shares of Restricted Stock awarded to a Participant is based on
achievement of
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one or more Performance Goals, such dividends shall be accrued and
shall be paid to the Participant only if and when such shares become
vested.
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(f)
|
Book
Entry
. Unless otherwise determined by the Committee, the
shares of Company Stock underlying Restricted Stock awards shall be
registered by the Company in book entry form, with such notation
specifying that such shares are not transferable and are subject to the
provisions of the Plan and the restrictions, terms and conditions set
forth in the applicable Agreement as the Committee determines to be
appropriate. The Committee may, upon such terms and conditions
as it determines, provide that a certificate or certificates representing
the shares underlying a Restricted Stock award shall be registered in the
Participant’s name which shall: (i) bear an appropriate legend specifying
that such shares are not transferable and are subject to the provisions of
the Plan and the restrictions, terms and conditions set forth in the
applicable Agreement; and (ii) shall be held in escrow by the Company on
behalf of the Participant until such shares become vested or are
forfeited.
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(g)
|
Consequences of
Vesting
. Upon the vesting of a share of Restricted Stock
pursuant to the terms hereof, the restrictions of Section 9(d) shall lapse
with respect to such share. Following the date on which a share
of Restricted Stock vests, the Company shall cause to be entered on the
books of the Company's transfer agent an entry reflecting the lapse of
such restrictions with respect to such share of Restricted Stock vested in
the name of the Participant.
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(h)
|
Effect of Termination
of Employment (or Provision of Services)
. Unless
otherwise provided by the Committee, upon the termination of a
Participant’s employment with the Company and its Affiliates for any
reason other than death or disability, any and all shares to which
restrictions on transferability apply shall be immediately forfeited by
the Participant and transferred to, and reacquired by, the
Company. In the event of a forfeiture of shares pursuant to
this Section 9(h), the Company shall repay to the Participant (or the
Participant’s estate) any amount paid by the Participant for such
shares. In the event that the Company requires a return of
shares, it shall also have the right to require the return of all
dividends paid on such shares, whether by termination of any escrow
arrangement under which such dividends are held or
otherwise. In the event that the employment of a Participant
with the Company and its Affiliates (or the Participant’s service to the
Company and its Affiliates) shall terminate on account of the death or
disability:
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|
(i)
|
all
shares of Company Stock subject to restrictions on transferability as set
forth in Section 9(d), the vesting of which is not subject to the
achievement of Performance Goals, shall no longer be subject to any
restrictions on transferability;
and
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|
(ii)
|
all
shares of Company Stock subject to restrictions on transferability, the
vesting of which is subject to the achievement of Performance Goals, shall
continue to be subject to such restrictions on transferability unless and
until the conditions of vesting of such Company Stock contained in
the
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applicable Participant Agreement are satisfied. Any and
all shares which fail to become vested pursuant to the terms of the Participant
Agreement evidencing the award of such Company Stock shall be forfeited by the
Participant (or the Participant’s estate) and transferred to, and reacquired by,
the Company as described in the first paragraph of Section 9(h) above.
10.
|
Restricted
Stock Units.
|
|
(a)
|
Vesting
Date
. At the time of the grant of an Award of Restricted
Stock Units, the Committee shall establish a vesting date or vesting dates
with respect to such Restricted Stock Units. The Committee may
divide such Restricted Stock Units into classes and assign a different
vesting date for each class. Provided that all conditions to
the vesting of a Restricted Stock Unit imposed pursuant to Section 10(d)
are satisfied, and subject to Section 10(e), upon the occurrence of the
vesting date with respect to a Restricted Stock Unit, such Unit shall
vest.
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(b)
|
Settlement of
Awards
. Following the vesting of a Participant’s
Restricted Stock Units, the Participant shall be paid, at such time or
times as shall be set forth in the Award Agreement, a number of shares of
Company Stock equal to the number of the Restricted Stock Units, or, only
if and to the extent set forth in the Award Agreement, the Fair Market
Value of an equal number of shares of Company Stock in cash, or a
combination thereof.
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|
(c)
|
Dividend
Equivalents
. If so provided in the Award Agreement,
following the vesting of a Restricted Stock Unit, the Participant shall
also be entitled to dividend equivalents as follows: (i) an amount equal
to the aggregate dividends paid with respect to a share of Company Stock
during the period commencing on the date on which the Restricted Stock
Unit was granted and terminating on the date on which the Participant is
entitled to settlement of such Restricted Stock Unit; or (ii) the Fair
Market Value of that number of shares of Company Stock that would have
been payable had the aggregate dividends paid with respect to a share of
Company Stock during the period commencing on the date on which the
Restricted Stock Unit was granted and terminating on the date on which the
Participant is entitled to settlement of such Restricted Stock Unit been
immediately reinvested in Company Stock on the dividend payment
date. Any such dividend equivalents shall be payable either in
cash or shares of Company Stock, with any fractional shares payable in
cash, and at such time or times, as is provided in the applicable
Agreement.
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|
(d)
|
Conditions to
Vesting
. At the time of the grant of an Award of
Restricted Stock Units, the Committee may impose such restrictions or
conditions to the vesting of such Restricted Stock Units as it, in its
absolute discretion, deems appropriate, including, but not limited to,
achievement of performance goals based on one or more Performance
Goals.
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|
(e)
|
Effect of Termination
of Employment (or Provision of Services)
. All Restricted
Stock Units held by a Participant which are not vested upon the
termination of such Participant’s employment with the Company and its
Affiliates (or upon
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cessation of such Participant’s services to the Company and its
Affiliates) shall be forfeited to the Company unless otherwise provided by the
Committee as set forth in the Agreement evidencing the grant of such Restricted
Stock Units.
Stock
Grants may be awarded: (i) as, or in payment of, a bonus (including without
limitation any compensation that is intended to qualify as performance-based
compensation for purposes of Section 162(m) of the Code), or to provide
incentives or recognize special achievements or contributions; or (ii) as that
portion of the annual retainer of any Non-Employee Director that is paid in
shares of Company Stock pursuant to the Directors’ Plan. In the event
that the Committee makes a Stock Grant to a Participant, the shares of Company
Stock granted pursuant to such Stock Grant shall be issued in the form of
book-entry shares in the name of the Participant as soon as reasonably
practicable after the grant date.
Other
forms of Awards (“
Other Awards
”) valued
in whole or in part by reference to, or otherwise based on, Company Stock may be
granted either alone or in addition to other Awards under the
Plan. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the persons to whom and the time or
times at which such Other Awards shall be granted, the number of shares of
Company Stock to be granted pursuant to such Other Awards, and the conditions to
the vesting and/or payment of such Other Awards (which may include, but not be
limited to, achievement of performance goals based on one or more Performance
Goals) and all other terms and conditions of such Other Awards,
provided
,
however
, that to the extent
the Committee determines that an Other Award is subject to Section 409A of the
Code, the terms and conditions of such Other Award must comply with the
applicable provisions of such section.
13.
|
Special
Provisions Regarding Certain
Awards.
|
The
Committee may make Awards hereunder to Covered Employees (or to individuals whom
the Committee believes may become Covered Employees) that are intended to
qualify as performance-based compensation under Section 162(m) of the
Code. The exercisability and/or payment of such Awards may be subject
to the achievement of one or more Performance Goals and to certification of such
achievement in writing by the Committee. Such Performance Goals shall
be established in writing by the Committee not later than the time period
prescribed under Section 162(m) and the regulations thereunder. All
provisions of such Awards which are intended to qualify as performance-based
compensation shall be construed in a manner to so comply.
Notwithstanding
any other provisions of the Plan, if a Change of Control occurs,
then:
|
(a)
|
the
Participant’s Restricted Stock that was forfeitable shall thereupon become
nonforfeitable;
|
|
(b)
|
any
unexercised Option or Stock Appreciation Right, whether or not exercisable
on the date of such Change of Control, shall thereupon be fully
exercisable and may be exercised, in whole or in part;
and
|
|
(c)
|
any
other Award granted pursuant to the Plan, to the extent not previously
vested, shall thereupon become fully
vested.
|
15.
|
Rights
as a Stockholder.
|
Except as
specifically provided by the Plan or an Agreement, no person shall have any
rights as a stockholder with respect to any shares of Company Stock covered by
or relating to any Award until the date on which the Company shall cause to be
entered on the books of the Company’s transfer agent an entry recording the name
of the person to whom such shares were granted and the number of shares of
Company Stock granted. Except for adjustments provided in Section
3(c) or as otherwise specifically provided by the Plan or an Agreement, no
adjustment to any Award shall be made for dividends or other rights for which
the record date occurs prior to the effective date of such book
entry.
16.
|
No
Employment Rights; No Right to
Award.
|
Nothing
contained in the Plan or any Agreement shall confer upon any Participant any
right with respect to the continuation of employment by or provision of services
to the Company and its Affiliates or interfere in any way with the right of the
Company and its Affiliates, subject to the terms of any separate agreement to
the contrary, at any time to terminate such employment or service or to increase
or decrease the compensation of the Participant. No person shall have
any claim or right to receive an Award hereunder. The Committee’s
granting of an Award to a Participant at any time shall neither require the
Committee to grant any other Award to such Participant or other person at any
time nor preclude the Committee from making subsequent grants to such
Participant or any other person.
|
(a)
|
Notwithstanding
anything herein to the contrary, the Company shall not be obligated to
cause its transfer agent to enter in its records the transfer of shares of
Company Stock to any person or to be issued or delivered any certificates
evidencing shares of Company Stock pursuant to the Plan unless and until
the Company is advised by its counsel (which may be the Company’s in-house
counsel) that such book entry or such issuance and delivery of
certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on
which shares of Company Stock are traded. The Committee may
require, as a condition of such book entry or issuance and delivery of
certificates evidencing shares of Company Stock pursuant to the terms
hereof, that the recipient of such shares make such agreements and
representations, and that such book entry contain such notations or that
such certificates bear such legends, as the Committee, in its sole
discretion, deems necessary or
advisable.
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|
(b)
|
The
transfer of any shares of Company Stock hereunder shall be effective only
at such time as counsel to the Company (which may be the Company’s
in-house counsel) shall have determined that the issuance and delivery of
such shares is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on
which shares of Company Stock are traded. The Committee may, in
its sole discretion, defer the effectiveness of any transfer of shares of
Company Stock hereunder in order to allow the issuance of such shares to
be made pursuant to registration or an exemption from registration or
other methods for compliance available under federal or state securities
laws. The Committee shall inform the Participant in writing of
its decision to defer the effectiveness of a transfer. During
the period of such deferral in connection with the exercise of an Option,
the Participant may, by written notice, withdraw such exercise and obtain
the refund of any amount paid with respect
thereto.
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Whenever
cash is to be paid pursuant to an Award, the Company shall have the right to
deduct therefrom an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. Whenever shares of
Company Stock are to be delivered pursuant to an Award, the Company shall have
the right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy any federal, state and local withholding tax requirements
related thereto. With the approval of the Committee, a Participant
may satisfy the foregoing requirement by electing to have the Company withhold
from delivery shares of Company Stock having a Fair Market Value equal to the
minimum statutory amount of tax required to be withheld, as determined by the
Committee. Fractional share amounts shall be settled in
cash. Such a withholding election may be made with respect to all or
any portion of the shares to be delivered pursuant to an Award.
19.
|
Notification
of Election Under Section 83(b) of the
Code.
|
If any
Participant shall, in connection with the acquisition of shares of Company Stock
under the Plan, make the election permitted under Section 83(b) of the Code,
such Participant shall notify the Company of such election within 10 days of
filing notice of the election with the Internal Revenue Service.
20.
|
Amendment
or Termination of the Plan.
|
The Board
may, at any time, suspend or terminate the Plan or revise or amend it in any
respect whatsoever;
provided
,
however
, that stockholder
approval shall be required for any such amendment if and to the extent such
approval is required in order to comply with applicable law (including, but not
limited to, the incentive stock options regulations and any amendments thereto)
or stock exchange listing requirements. Nothing herein shall restrict
the Committee’s ability to exercise its discretionary authority pursuant to
Sections 3 and 4, which discretion may be exercised without amendment to the
Plan. Except as described in Section 31 of this Plan, no action
hereunder may, without the consent of a Participant, reduce the Participant’s
rights under any outstanding Award. In addition, the Board shall not,
without the prior approval of the
Company’s
stockholders, amend any Award outstanding under the Plan to reduce the exercise
price of such Award (other than equitable adjustments made in accordance with
Section 3(c) hereof); nor shall the Board, without the prior approval of the
Company’s stockholders, cancel any Award outstanding under the Plan and then
subsequently regrant to the Participant the same Award with a lower exercise
price.
21.
|
Nontransferability
of Awards.
|
|
(a)
|
Except
as provided below, each Award, and each right under any Award, shall be
exercisable only by the Participant during the Participant’s lifetime, or,
if permissible under applicable law, by the Participant’s guardian or
legal representative.
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|
(b)
|
Except
as provided below, no Award, and no right under any Award, may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of
descent and distribution, and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate;
provided
, that the
designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or
encumbrance.
|
|
(c)
|
To
the extent and in the manner permitted by the Committee, and subject to
such terms, conditions, restrictions or limitations that may be prescribed
by the Committee, a Participant may transfer an Award (other than an
Incentive Stock Option) to: (i) a spouse, sibling, parent, stepparent,
child, stepchild, grandchild, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships (any of which, an “
Immediate Family
Member
”) of the Participant; (ii) a trust, the primary
beneficiaries of which consist exclusively of the Participant or Immediate
Family Members of the Participant; or (iii) a corporation, partnership or
similar entity, the owners of which consist exclusively of the Participant
or Immediate Family Members of the
Participant.
|
In the
case of any Participant on an approved leave of absence, the Committee may make
such provisions respecting the continuance of Awards while such Participant is
in the employ or service of the Company as it may deem equitable, except that in
no event may any Option or Stock Appreciation Right be exercised after the
expiration of its term.
23.
|
Expenses
and Receipts.
|
The
expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Award may be used for general
corporate purposes.
24.
|
Effective
Date and Term of Plan.
|
The Plan
was approved by the stockholders of the Company on April 27,
2005. The Plan, As Amended and Restated Effective as of May 1, 2010
(the “
Restated
Plan
”), shall be subject to the requisite approval of the stockholders of
the Company. In the absence of such approval, any Awards granted on
or after May 1, 2010 with respect to the additional shares reserved for issuance
under the Restated Plan shall be null and void. Unless earlier
terminated by the Board, the right to grant Awards under the Plan shall
terminate on the tenth anniversary of the Effective Date. Awards
outstanding at Plan termination shall remain in effect according to their terms
and the provisions of the Plan.
Except to
the extent preempted by any applicable federal law, the Plan shall be construed
and administered in accordance with the laws of the State of New Jersey without
reference to its principles of conflicts of law.
No
Participant shall have any claim to be granted any award under the Plan, and
there is no obligation for uniformity of treatment for
Participants.
27.
|
Unfunded
Status of Awards.
|
The Plan
is intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Agreement
shall give any such Participant any rights that are greater than those of a
general creditor of the Company.
28.
|
No
Fractional Shares.
|
No
fractional shares of Company Stock shall be issued or delivered pursuant to the
Plan. The Committee shall determine whether cash, other Awards, or
other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
A
Participant may file with the Committee a written designation of a beneficiary
on such form as may be prescribed by the Committee and may, from time to time,
amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant’s
estate shall be deemed to be the Participant’s beneficiary.
If any
provision of the Plan is held to be invalid or unenforceable, the other
provisions of the Plan shall not be affected but shall be applied as if the
invalid or unenforceable provision had not been included in the
Plan.
Notwithstanding
anything to the contrary contained in the Plan or in any Agreement, to the
extent that the Committee determines that the Plan or any Award is subject to
Section 409A of the Code and fails to comply with the requirements of Section
409A of the Code, the Committee reserves the right to amend or terminate the
Plan and/or amend, restructure, terminate or replace the Award in order to cause
the Award to either not be subject to Section 409A of the Code or to comply with
the applicable provisions of such section. Notwithstanding any
provision of this Plan to the contrary, in no event shall the Company or any
Affiliate be liable to a Participant on account of an Award’s failure to:
(i) qualify for favorable U.S., State or other tax treatment; or
(ii) avoid adverse tax treatment under U.S., State or other law, including,
without limitation, Section 409A of the Code.
Appendix
D
SELECTIVE
INSURANCE GROUP, INC.
As
Amended and Restated as of May 1, 2010
The
purpose of the Cash Incentive Plan of Selective Insurance Group, Inc. is to
provide the Company with an effective vehicle to assist in attracting,
retaining, and motivating its employees; to reinforce corporate, organizational
and business development goals; and to promote year-to-year and long-range
financial and other business objectives by rewarding the performance of officers
and other employees in fulfilling their individual responsibilities for
achieving these year-to-year and long-range objectives.
The
following terms, as used herein, shall have the following meanings:
(a) “Award”
shall mean an incentive compensation award granted pursuant to the Plan that is
contingent upon the individual performance of a Participant and the attainment
of Performance Goals with respect to a Performance Period.
(b) “Board”
shall mean the Board of Directors of Selective Insurance Group,
Inc..
(c) “Code”
shall mean the Internal Revenue Code of 1986, as amended.
(d) “Committee”
shall mean the Salary and Employee Benefits Committee of the Board.
(e) “Company”
shall mean Selective Insurance Group, Inc., a New Jersey corporation, and its
subsidiaries.
(f) “Covered
Employee” shall have the meaning set forth in Section 162(m)(3) of the
Code.
(g) “Participant”
shall mean an officer or other employee of the Company who is, pursuant to
Section 4 of the Plan, selected to participate in the Plan.
(h) “Performance
Goals” means performance goals based on one or more of the following criteria:
(i) return on total stockholder equity or operating return on total stockholder
equity; (ii) earnings per share or book value per share of the Company's stock;
(iii) net income (before or after taxes); (iv) earnings before all or any
interest, taxes, depreciation and/or amortization; (v) return on assets, capital
or investment; (vi) market share; (vii) cost reduction goals; (viii) earnings
from continuing operations; (ix) levels of expense, costs or liabilities; (x)
department, division or business unit level performance; (xi) operating profit;
(xii) sales or revenues; (xiii) stock price appreciation; (xiv) total
stockholder return; (xv) growth in net premiums written, including, without
limitation, policy count; (xvi) combined ratios; (xvii)
implementation
or completion of critical projects or processes; (xviii) except in the case of a
“Covered Employee,” any other performance criteria established by the Committee;
or (xix) any combination of the foregoing. Where applicable, the
Performance Goals may be expressed in terms of attaining a specified level of
the particular criteria or the attainment of a percentage increase or decrease
in the particular criteria, and may be applied to one or more of the Company, or
affiliate, or a division or strategic business unit of the Company or a
combination thereof, or may be applied to the performance of the Company
relative to a market index, a group of other companies or a combination thereof,
all as determined by the Committee. The Performance Goals may include
a threshold level of performance below which no payment will be made, levels of
performance at which specified payments will be made, and a maximum level of
performance above which no additional payment will be made. To the
extent possible, each of the foregoing Performance Goals shall be determined, as
appropriate, in accordance with generally accepted accounting principles or
statutory accounting principles and shall be subject to certification by the
Committee;
provided
that the
Committee shall have the authority to make equitable adjustments to the
Performance Goals in recognition of unusual or non-recurring events affecting
the Company or any affiliate or the financial statements of the Company or any
affiliate, in response to changes in applicable laws or regulations, or to
account for items of realized and unrealized gain, loss or expense determined to
be extraordinary or unusual in nature or infrequent in occurrence or related to
the disposal of a segment of a business or related to a change in accounting
principles.
(i) “Performance
Period” shall mean a period of time determined by the Committee that is no less
than one year.
(j) “Plan”
shall mean this Selective Insurance Group, Inc. Cash Incentive
Plan.
The Plan
shall be administered by the Committee. Subject to the provisions of
the Plan, the Committee shall have the authority in its sole discretion, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the terms, conditions, restrictions and
performance criteria, including Performance Goals and the length of the
Performance Period relating to any Award; to determine whether, to what extent,
and under what circumstances an Award may be settled, cancelled, forfeited, or
surrendered; to make adjustments in the Performance Goals in recognition of
unusual or non-recurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles, or for any other reason; to construe and
interpret the Plan and any Award; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of any
Award; and to make all other determinations deemed necessary or advisable for
the administration of the Plan.
The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations
and interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any shareholder.
4.
Eligibility
.
Awards
may be granted to officers and other employees of the Company in the sole
discretion of the Committee. In determining the persons to whom
Awards shall be granted and the Performance Goals relating to each Award, the
Committee shall take into account such factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan.
5.
Terms of
Awards
.
(a)
Form of
Award
. Awards granted pursuant to the Plan shall be evidenced
in such form as the Committee shall from time to time approve and the terms and
conditions of such Awards shall be set forth therein.
(b)
Performance
Goals
. For each Performance Period, the Committee shall
specify the Performance Goals applicable to each Award. Performance
Goals may include a level of performance below which no payment shall be made
and levels of performance at which specified percentages of the Award shall be
paid. Award levels for any Performance Period may be expressed as a
dollar amount or as a percentage of the Participant's annual base
salary.
(c)
Payment of
Awards
. Unless otherwise determined by the Committee, all
payments in respect of Awards granted under this Plan shall be made, in cash, as
soon as practicable in the calendar year following the end of the calendar year
during which the Performance Period concludes. Participants must be
employed by the Company as of the payment date established for Awards relating
to the Performance Period for which payment is to be made; provided that, if the
Participant's employment is terminated prior to such payment date by reason of
death, retirement on or after “Early Retirement Age” or “Normal Retirement Age,”
as each is defined in the Retirement Income Plan For Selective Insurance Company
of America, “Total Disability” as such is defined in the aforementioned
Retirement Income Plan, or for any other reason with the express consent of the
Committee, the Committee, in its sole discretion, may provide for an Award
payment to the Participant or, if applicable, the Participant's designated
beneficiary.
(d)
Limitations
and
Reductions
. Notwithstanding anything to the contrary contained
herein, in no event shall payments in respect of Awards be made in any
Performance Period to a Participant in an amount that exceeds the product of (i)
seven million five hundred thousand dollars ($7.5 million), multiplied by (ii)
the number of full and partial years of the Performance Period. The
Committee may reduce or eliminate any Award under the Plan, but in no event may
the Committee increase the amount of an Award payable to a Covered Employee
over such amount payable based on the objective criteria
established at the outset of the fiscal year for which the Award is made.
6.
General
Provisions
.
(a)
Compliance with Legal
Requirements
. The Plan and the granting and payment of Awards,
and the other obligations of the Company under the Plan or other agreement made
with respect to any Award shall be subject to all applicable federal and state
laws, rules and regulations, and to such approvals by any regulatory or
governmental agency as may be required.
(b)
Nontransferability
. Awards
shall not be transferable by a Participant except by will or the laws of descent
and distribution.
(c)
No Right To Continued
Employment
. Nothing in the Plan or in any Award granted or
other agreement entered into pursuant hereto shall confer upon any Participant
the right to continue in the employ of the Company or to be entitled to any
remuneration or benefits not set forth in the Plan or other agreement or to
interfere with or limit in any way the right of the Company to terminate such
Participant’s employment.
(d)
Withholding
Taxes
. Where a Participant or other person is entitled to
receive a cash payment pursuant to an Award hereunder, the Company shall have
the right to withhold from such Award or require the Participant or such other
person to pay to the Company the amount of any taxes that the Company may be
required to withhold before delivery to such Participant or other person of such
payment.
(e)
Amendment, Termination and
Duration of the Plan
. The Board or the Committee may at any
time and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part; provided that, no amendment that requires shareholder approval in
order for the Plan to continue to comply with Code Section 162(m) shall be
effective unless the same shall be approved by the requisite vote of the
shareholders of the Company. Notwithstanding the foregoing, no
amendment shall affect adversely any of the rights of any Participant, without
such Participant’s consent, under any Award previously granted under
the Plan.
(f)
Participant
Rights
. No Participant shall have any claim to be granted any
Award under the Plan, and there is no obligation for uniformity of treatment for
Participants.
(g)
Unfunded Status of
Awards
. The Plan is intended to constitute an “unfunded” plan
for incentive and deferred compensation. With respect to any payments
not yet made to a Participant pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are greater
than those of a general creditor of the Company.
(h)
Governing
Law
. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New Jersey without
giving effect to the conflict of laws principles thereof.
(i)
Effective
Date
. The Plan was originally effective as of April 1,
2005. This amended and restated Plan shall be effective as of May 1,
2010, subject to approval by the Company’s shareholders.
(j)
Beneficiary
. A
Participant may file with the Committee a written designation of a beneficiary
on such form as may be prescribed by the Committee and may, from time to time,
amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant’s
estate shall be deemed to be the grantee’s beneficiary.
(k)
Interpretation
. The
Plan is designed and intended to comply, to the extent applicable, with Section
162(m) of the Code, and all provisions hereof shall be construed in a manner to
so comply.
(l)
Other Plans or
Payments.
Nothing in this Plan shall be construed (i) to limit
the authority of the Committee, the Board, or the Company, to establish any
other compensation plan, or (ii) to limit their authority to pay bonuses or
other supplemental compensation to any persons employed by the Company, whether
or not such person is a Participant in this Plan and regardless of how such
compensation or bonus is determined.
DIRECTIONS
Selective
Insurance Group, Inc.
Directions
to Principal Offices
40
Wantage Avenue
Branchville,
NJ 07890-1000
From
East:
Route
I-80 West to Route 15 North to Route 206 North. Go about 2 miles from Route
15/Route 206 intersection, turn right at traffic light, then left on Route 630
(Broad Street). Turn right at Post Office onto Wantage Avenue (Route
519). 1st entrance on right - Northeast Operations. 2nd
entrance on right - Corporate office/main reception area.
From
West:
Route
I-80 East to Route 94 North to Route 206 North. Turn right at Branchville
traffic light opposite "Our Lady Queen of Peace" Catholic church, then left on
Route 630 (Broad Street). Turn right at Post Office onto Wantage
Avenue (Route 519). 1st entrance on right - Northeast
Operations. 2nd entrance on right - Corporate office/main reception
area.
-
or -
Route
I-78 East to Pa. Route 611 North to Route 94 North to Route 206 North. Turn
right at Branchville traffic light opposite "Our Lady Queen of Peace" Catholic
church, then left on Route 630 (Broad Street). Turn right at Post
Office onto Wantage Avenue (Route 519). 1st entrance on right -
Northeast Operations. 2nd entrance on right - Corporate office/main
reception area.
-
or -
Route
I-78 East to Route 31 North to Route 46 West to Route 94 North to Route 206
North. Turn right at Branchville traffic light opposite "Our Lady Queen of
Peace" Catholic church, then left on Route 630 (Broad Street). Turn
right at Post Office onto Wantage Avenue (Route 519). 1st entrance on
right - Northeast Operations. 2nd entrance on right - Corporate
office/main reception area.
From
North:
Route
I-84 (East or West) to PA Route 209 South to Route 206 South. Left at
Branchville traffic light opposite "Our Lady Queen of Peace" Catholic church,
then turn left on Route 630 (Broad Street). Turn right at Post Office
onto Wantage Avenue (Route 519). 1st entrance on right - Northeast
Operations. 2nd entrance on right - Corporate office/main reception
area.
From
South:
Route 206
North or Route I-80 West to Route 15 North to Route 206 North. Turn
right at Branchville traffic light opposite "Our Lady Queen of Peace" Catholic
church, then left on Route 630 (Broad Street). Turn right at Post
Office onto Wantage Avenue (Route 519). 1st entrance on right -
Northeast Operations. 2nd entrance on right - Corporate office/main
reception area.