PROXY STATEMENT SUMMARY| 1 | | | | GENERAL INFORMATION | | | | | | 13 | | | | | PROPOSALS TO BE VOTED ON | | | | | | 34 | | 8 | | 9 | | 10 | | 12 | | 1316 | | | | | SECURITY OWNERSHIP | | | | | | 1416 | | | | | CORPORATE GOVERNANCE | | | | | | 1618 | | 1819 | | 21 | | 22 | | 24 | | 33 | | | | EXECUTIVE OFFICERS | | | | | | 24 | | 34 | | 51 | | | | FINANCIAL | | | | | | 9041 | | 41 | | | | APPENDIXESAPPENDIX A | | | | | | 91 | | 10442 |
SOUTH JERSEY INDUSTRIES, INC. 1 South Jersey Plaza, Folsom, New Jersey 08037 This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting. Annual Meeting of Shareholders | Date: | April 30, 2015 | | Time: | 9:15 a.m. - doors will open to the public for continental breakfast 10:00 a.m. - meeting begins 11:00 a.m. - meeting adjourns | | Place: | Stockton Seaview Hotel and Golf Club, Bayview Room 401 South New York Road Galloway, New Jersey Please see the back of the Proxy for parking instructions. | | Admission to the meeting: | Attendance at the Annual Meeting will be limited to shareholders as of the record date, their authorized representatives and guests of SJI. If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket. | | Record Date: | March 2, 2015 | | Agenda: | Election of 10 directors each to serve a term of one year Approval, on an advisory basis, of our executive compensation Adoption of the 2015 Omnibus Equity Compensation Plan Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2015 Transaction of any other business that may properly come before the meeting | | Voting: | Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. |
Voting Matters and the Board’s Recommendation The following table summarizes the items that will be brought for a vote of our stockholders at the meeting, along with the Board’s recommendation as to how shareholders should vote on each of them. | Proposal No. | Description of Proposal | Board’s Recommendation | | 1 | Election of 10 director candidates nominated by the Board, each to serve a one-year term | FOR | | 2 | Approval, on an advisory basis, of our executive compensation | FOR | | 3 | Adoption of the 2015 Omnibus Equity Compensation Plan | FOR | | 4 | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2015 | FOR |
In addition to these matters, shareholders may be asked to vote on such other business as may properly be brought before the meeting or any adjournment or postponement of the meeting. Votes Required for Approval The table below summarizes the votes required for approval of each matter to be brought before the annual meeting, as well as the treatment of abstentions and broker non-votes. | Proposal No. | Description of Proposal | Vote Required for Approval | Abstentions | Broker Non Votes | | 1 | Election of directors | Plurality of votes cast | Not applicable | Not taken into account | | 2 | Executive compensation | Majority of votes cast | No effect | Not taken into account | | 3 | Adoption of the 2015 Omnibus Equity Compensation Plan | Majority of votes cast | No effect | Not taken into account | | 4 | Ratification of independent registered public accounting firm | Majority of votes cast | No effect | Not applicable |
Director Nominees The Board is currently comprised of: nine independent directors; our Chairman, who is also our Chief Executive Officer; and our President. The following table provides summary information about each of the 10 director nominees, including whether the Board considers the nominee to be independent under the New York Stock Exchange’s independence standards and our Corporate Governance Guidelines. Each director is elected annually by a plurality of votes cast. | Name | Age | Director Since | Occupation | Independent | Positions/Committee Memberships | | Sarah M. Barpoulis | 50 | 2012 | Owner of Interim Energy Solutions, LLC | Yes | 1, 4 | | Thomas A. Bracken | 67 | 2004 | President, New Jersey Chamber of Commerce | Yes | 1, 3, 5* | | Keith S. Campbell | 60 | 2000 | Chairman of the Board, Mannington Mills, Inc. | Yes | 2*, 3, 5 | | Victor A. Fortkiewicz | 63 | 2010 | Of Counsel, Cullen and Dykman, LLP | Yes | 4, 5 | | Sheila Hartnett-Devlin, CFA | 56 | 1999 | Senior Vice President, American Century Investments | Yes | 1*, 2, 3 | | Walter M. Higgins III | 70 | 2008 | Director, President and CEO at Ascendant Group Ltd. and President and CEO of Bermuda Electric Light Company Limited | Yes | 1, 3, 4* | | Sunita Holzer | 53 | 2011 | President, Human Capital insight, LLC | Yes | 2, 5 | | Joseph H. Petrowski | 61 | 2008 | Managing Partner and Founder, Mercantor Partners, LLC | Yes | 1, 3, 4 | | Michael J. Renna | 47 | 2014 | President and COO, South Jersey Industries | No | | | Frank L. Sims | 64 | 2012 | Retired, Corporate Vice President and Platform Leader, Cargill, Inc. | Yes | 1, 2 |
Key to Committee Memberships: | 1 | | Audit Committee | | | 2 | | Compensation Committee | | | 3 | | Executive Committee | | | 4 | | Governance Committee | | | 5 | | Corporate Responsibility Committee | | | * | | Committee Chair | |
This statement is furnished on behalf of SJI’s Board of Directors to solicit proxies for use at its 20122015 Annual Meeting of Shareholders. The meeting is scheduled for Friday,Thursday, April 20, 2012,30, 2015, at 10:00 a.m. at The Mansion on Main Street, 3000 Main Street, Voorhees,Stockton Seaview Hotel and Golf Club, 401 South New York Road, Galloway, New Jersey. The approximate date proxy materials will be sentmade available to shareholders is March 20, 2012.30, 2015. A copy of the proxy statement, proxy card and Annual Report to shareholders are available on our website at www.sjindustries.com under the heading “Investors”. PROXY SOLICITATION The Company bears the cost of this solicitation, which is primarily made by mail. However, the Corporate Secretary or company employees may solicit proxies by phone, fax, e-mail or in person, but they will not be separately compensated for these services. The Company may also use a proxy-soliciting firm at a cost not expected to exceed $6,000, plus expenses, to distribute to brokerage houses and other custodians, nominees, and fiduciaries additional copies of the proxy materials and Annual Report to Shareholders for beneficial owners of our stock. Record Date Only shareholders of record at the close of business on February 27, 2012March 2, 2015 may vote at the meeting. On that date, the Company had 30,249,81834,211,973 shares of Common Stock outstanding. Shareholders are entitled to one vote per share on each matter to be acted upon. Quorum and Vote Required A quorum is necessary to conduct the meeting’s business. This means holders of at least a majority of the outstanding shares of Common Stock must be present at the meeting, either by proxy or in person. Shareholders elect Directors by a plurality vote of all votes cast at the meeting. The other actions proposed herein require the affirmative vote of a majority of the votes cast at the meeting. The vote required to approve any other matter that may be properly brought before the Annual Meeting will be determined in accordance with the New Jersey Business Corporation Act. Abstentions and broker non-votes will be treated as present to determine a quorum but will not be deemed to be cast and, therefore, will not affect the outcome of any of the shareholder questions. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Voting of Proxies and Revocation Properly signed proxies received by the Company will be voted at the meeting. If a proxy contains a specific instruction about any matter to be acted on, the shares represented by the proxy will be voted according to those instructions. If you sign and return your proxy but do not indicate how to vote for a particular matter, your shares will be voted as the Board of Directors recommends. A shareholder who returns a proxy may revoke it at any time before it is voted by submitting a later-dated proxy or by voting by ballot at the meeting. If you attend the meeting and wish to revoke your proxy, you must notify the meeting’s secretary in writing prior to the proxy voting. If any other matters or motions properly come before the meeting, including any matters dealing with the conduct of the meeting, the persons named in the accompanying proxy card intend to vote the proxy according to their judgment. The Board of Directors is not aware of any such matters other than those described in this proxy statement. Other Matters Any proposal that a qualified shareholder of the Company wishes to include in the Company’s proxy statement to be sent to shareholders in connection with the Company’s 20132016 Annual Meeting of Shareholders that is received by the Company after November 20, 2012December 1, 2015 will not be eligible for inclusion in the Company’s proxy statement and form of proxy for that meeting. To be included, proposals can be mailed to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037. To be a qualified shareholder, a shareholder must have owned at least $2,000 in market value of the Company’s securities for at least one year before the date of the proposal’s submission to the Company. In compliance with the Company’s bylaws, shareholders must provide the Company with at least 60 days, but no more than 90 days, notice prior to an announced annual meeting date of (i) business the shareholder wishes to raise at the meeting and (ii) persons, if any, the shareholder wishes to nominate for election as directors at that meeting. The Board of Directors knows of no matters other than those set forth in the Notice of Annual Meeting of Shareholders to come before the 20122015 Annual Meeting. | | | | PROPOSAL 1
At the Annual Meeting, 10 directors are to be elected to the Board of Directors to hold office for a one-year term. The Board nominated the following eight persons: Sarah M. Barpoulis, Thomas A. Bracken, Keith S. Campbell, Victor A. Fortkiewicz, Edward J. Graham, Sheila Hartnett-Devlin, Walter M. Higgins III, Sunita Holzer, and Joseph H. Petrowski.Petrowski, Michael J. Renna and Frank L. Sims. The Board of Directors currently consists of nine11 members, including the eight nominees and Shirli M. Billings, who will retire from the Board in April 2012. With the exception10 of Director Holzer, all nominees previously were elected by the Company’s shareholders, and all nomineeswhich are currently serving as directors. A third party search firm recommended Director Holzer to the Board.nominees. We do not anticipate that, if elected, any of the nominees will be unable to serve. If any should be unable to accept the nomination or election, the persons designated as proxies on the proxy card willmay vote for the election of another person asa substitute nominee selected by the Board of Directors may recommend.Directors. In accordance with its charter,Charter, the Governance Committee reviewed the education, experience, judgment, diversity and other applicable and relevant skills of each nominee, and determined that each nominee possesses skills and characteristics that support the Company’s strategic vision. The Governance Committee determined that the key areas of expertise include: accounting; corporate governance; enterprise leadership; political/governmental; human resources; legal; utility/energy;enterprise and/or risk management; executive compensation; finance/financial management; accountinghuman resources; political/governmental; legal; and enterprise risk management.utility/energy. The Governance Committee concluded that the nominees possess expertise and experience in these areas, and the Board approved the slate of nominees. The Governance Committee determined that Director Bracken’s areas of Based on their expertise and experience, include enterprise leadership, finance/financial management, enterprise risk management, and political/governmental. In addition, the Board determined that Director Bracken is financially literate as required by New York Stock Exchange rules and qualifies as an audit committee financial expert as defined by the SEC. Based on Mr. Bracken’s expertise and experience in these areas, the Governance Committee determined that Mr. Brackenthe following directors should serve as a Directorbe elected for the 2012 – 20132015 - 2016 term.
The Governance Committee determined that Director Campbell’s areas of expertise include enterprise leadership, enterprise risk management, environmental, finance/financial management, human resources and sales/marketing. Based on Mr. Campbell’s expertise and experience in these areas, the Governance Committee determined that Mr. Campbell should serve as a Director for the 2012 – 2013 term.
The Governance Committee determined that Director Fortkiewicz’s areas of expertise include enterprise leadership, finance/financial management, political/governmental, legal, environmental, enterprise risk management, and the utility/energy industry. Based on Mr. Fortkiewicz’s expertise and experience in these areas, the Governance Committee determined that Mr. Fortkiewicz should serve as a Director for the 2012 – 2013 term.
The Governance Committee determined that Director Graham’s areas of expertise include energy risk management, enterprise leadership, enterprise risk management, environmental, finance/financial management, regulatory, and the utility/energy industry. In addition, the Board determined that Director Graham is financially literate as required by New York Stock Exchange rules and qualifies as a financial expert as defined by the SEC. Having served as the Company’s CEO since 2005, Mr. Graham has significant knowledge regarding the Company’s business and structure. Based on Mr. Graham’s expertise and experience in these areas, the Governance Committee concluded that Mr. Graham should serve as a Director for the 2012 – 2013 term.
The Governance Committee determined that Director Hartnett-Devlin’s areas of expertise and experience include enterprise leadership, enterprise risk management, and finance/financial management. In addition, the Board determined that Director Hartnett-Devlin is financially literate as required by New York Stock Exchange rules and qualifies as an audit committee financial expert as defined by the SEC. Based on Ms. Hartnett-Devlin’s expertise and experience in these areas, the Governance Committee determined that Ms. Hartnett-Devlin should serve as a Director for the 2012 – 2013 term.
The Governance Committee determined that Director Higgins’ areas of expertise include energy production, energy risk management, enterprise leadership, enterprise risk management, environmental, finance/financial management, human resources, and the utility/energy industry. In addition, the Board determined that Director Higgins is financially literate as required by New York Stock Exchange rules and qualifies as an audit committee financial expert as defined by the SEC. Based on Mr. Higgins’ expertise and experience in these areas, the Governance Committee concluded that Mr. Higgins should serve as a Director for the 2012 – 2013 term.
The Governance Committee determined that Director Holzer’s areas of expertise include enterprise leadership, human resources, organizational development, succession planning and executive compensation. Based on Ms. Holzer’s expertise and experience in these areas, the Governance Committee concluded that Ms. Holzer should serve as a Director for the 2012 - 2013 term.
The Governance Committee determined that Director Petrowski’s areas of expertise include energy risk management, enterprise leadership, enterprise risk management, environmental, finance/financial management, sales/marketing and the utility/energy industry. In addition, the Board determined that Director Petrowski is financially literate as required by New York Stock Exchange rules and qualifies as an audit committee financial expert as defined by the SEC. Based on Mr. Petrowski’s expertise and experience in these areas, the Governance Committee concluded that Mr. Petrowski should serve as a Director for the 2012 – 2013 term.
Director Terms
In 2009, the shareholders approved a proposal to amend the Certificate of Incorporation to require the annual election of each director. The Certificate was amended and all directors will stand for election for a one-year term as follows:
| Sarah M. Barpoulis |  | ●Age: 50
Director since 2012 Owner of Interim Energy Solutions, LLC, Potomac, MD | DirectorsSkills and Qualifications: Director Barpoulis’ areas of expertise include corporate governance, energy and enterprise risk management, enterprise leadership, executive compensation, finance/financial management, strategic/business planning, tradable commodities, and utility/energy industry. Director Barpoulis is a financial expert as defined by the SEC. She has also received a Certificate of Director Education from the National Association of Corporate Directors. | SJI Boards and Committees: Governance Committee Audit Committee Director of South Jersey Energy Company Executive Committee Member, SJI Midstream, LLC; South Jersey Energy Solutions, LLC; Marina Energy LLC; South Jersey Energy Service Plus, LLC; and South Jersey Resources Group, LLC | Since 2003, Ms. Barpoulis has provided asset management and advisory services to the merchant energy sector through Interim Energy Solutions, LLC, a company she founded. From 1991 to February 2003 she held several positions with PG&E National Energy Group, Inc., now known as National Energy & Gas Transmission, Inc., last serving as Senior Vice President, Commercial Operations and Trading. Ms. Barpoulis serves on the following boards: Director, SemGroup Corporation; and was previously assigned to Class I and Class III and elected at the Company’s 2011 Annual Meetinga director of Shareholders will stand for election in 2012 and will be elected for a one-year term;Reliant Energy, Inc. |
The Board of Directors recommends a vote “FOR” the above nominee. | Thomas A. Bracken |  | ●
| Directors previously assigned to Class II and elected at the 2009 Annual Meeting of Shareholders were elected for a three-year term will stand for election in 2012 and will be elected for a one-year term; and |
Age: 67 | ●
| Commencing in 2012, all Directors will stand for election annually and will be elected for one-year terms. |
NOMINEESDirector since 2004
 | Thomas A.Skills and Qualifications: Director Bracken’s areas of expertise and experience include corporate governance, enterprise leadership, enterprise risk management, executive compensation, finance/financial management, and political/governmental. Director Bracken age 64, has beenis a director since 2004. He is also a directorfinancial expert as defined by the SEC. | SJI Boards and Committees: Audit Committee Executive Committee Chairman of the Corporate Responsibility Committee Director of South Jersey Gas Company. Company | Mr. Bracken is a member of SJI’s Audit Committee, the Executive Committee and is chairman of the Corporate Responsibility Committee. He has served as president of the New Jersey Chamber of Commerce since February 2011; president of TriState Capital Bank-New Jersey from January 2008 to February 2011; as president and CEO of Sun Bancorp, Inc. and its wholly-ownedwholly owned subsidiary Sun National Bancorp, Inc., from 2001 to 2007; as executive director of the Public Sector Group, First Union Bank from 2000 to 2001; and, as executive vice president, head of Commercial and Governmental Banking for New Jersey, New York and Connecticut, First Union Bank from 1998 to 2000. Mr. Bracken is the:the former director of Rome Financial Corp.; former chairman, Economic Development Corporation of Trenton, Trenton, NJ; former chairman, New Jersey Chamber of Commerce; and former chairman, New Jersey Bankers Association. Currently, Mr. Bracken serves on the following boards: director and chairman, Finance Committee, Cancer Institute of N.J. Alliance for Action Foundation; director, New JerseyNJ Alliance for Action; director, Public Media NJ; director, Einsteins Alley;Rutgers Cancer Institute of N.J. Foundation; director, and secretary,Solix, Inc.; president, Bedens Brook Club.Club; member, advisory board, Investors Bankcorp. |
| Keith S. Campbell |  | |  Age: 60 Director since 2000 Chairman of the Board, Mannington Mills, Inc., Salem, NJ | Keith S. Campbell, age 57, has been a director since 2000. He is also a directorSkills and Qualifications: Director Campbell’s areas of expertise include corporate governance, enterprise leadership, enterprise risk management, environmental, executive compensation, finance/financial management, human resources and sales/marketing. | SJI Boards and Committees: Corporate Responsibility Committee Executive Committee Chairman of the Compensation Committee Director of South Jersey Energy Company. Mr. Campbell is a member of SJI’s Compensation Committee, the Executive Committee and the Corporate Responsibility Committee. He has served as chairman of the board for Mannington Mills, Inc. since 1995. Mr. Campbell serves on the following boards: trustee, Rowan University Foundation, Glassboro, NJ; director, Skytop Lodge, Inc.; director, Federal Reserve Bank of Philadelphia; director, Company Executive Committee Member, SJI Midstream, LLC; South Jersey Energy Solutions, LLC; Marina Energy LLC; South Jersey Energy Service Plus, LLCLLC; and South Jersey Resources Group, LLC. | | Mr. Campbell has served as chairman of the board for Mannington Mills, Inc. since 1995 and as director on the Federal Reserve Bank of Philadelphia from 2008 to 2013. Mr. Campbell serves on the following boards: board member, Rowan University, Glassboro, NJ; director, Skytop Lodge, Inc. |
The Board of Directors recommends a vote “FOR” each of the above nominees.nominee. | Victor A. Fortkiewicz |  | Age: 63  Of Counsel, Cullen and Dykman, LLP, New York, NY | Victor A. Fortkiewicz, age 60, has been a director since 2010. He is also a directorSkills and Qualifications:
Director Fortkiewicz’ areas of expertise include corporate governance, enterprise leadership, enterprise risk management, environmental, legal, political/governmental, and the utility/energy industry. | SJI Boards and Committees: Corporate Responsibility Committee Governance Committee Director of South Jersey Gas Company. Company | Mr. Fortkiewicz is a member of SJI’s Corporate Responsibility Committee and the Governance Committee. He has been Of Counsel, Cullen and Dykman, LLP since October 2011. He served as executive director, New Jersey Board of Public Utilities from 2005 to 2010; as assistant counsel, Office of the Governor in 2005; and as president and director, NUI Utilities & Elizabethtown Gas Company from 2003 to 2004. |
| Sheila Hartnett-Devlin, CFA | | | |   | Edward J. Graham, age 54, has beenAge: 56
Director since 1999 Senior Vice President, American Century Investments, New York, NY | Skills and Qualifications: Director Hartnett-Devlin’s areas of expertise and experience include corporate governance, enterprise leadership, enterprise risk management, executive compensation, and finance/financial management. Director Hartnett-Devlin is a director since 2004financial expert as defined by the SEC. | SJI Boards and has served as chairmanCommittees: Executive Committee Compensation Committee Chairman of the board since April 2005. He is also a director of South Jersey Gas Company. Mr. Graham is chairman of SJI’s Executive Committee. He has served as president and CEO of SJI and South Jersey Gas Company since February 2004. He previously served as president of South Jersey Gas Company from 2003 to 2004; as presidentAudit Committee Director of South Jersey Energy Company from 2000 to 2003; as Vice President of Executive Committee member, SJI from 2000 to 2001; as senior vice president, Energy Management, South Jersey Gas Company from 1998 to 2000. Mr. Graham serves on the following boards: member of the Economic Advisory Council of the Federal Reserve Bank of Philadelphia; director of Choose New Jersey; director, American Gas Association; director, New Jersey Manufacturers Insurance Company; director, New Jersey Business & Industry Association; director, Atlantic City Chamber of Commerce; director, Public Media NJ; member, William J. Hughes Center for Public Policy; and member, Lloyd Levenson Institute of Gaming, Hospitality & Tourism. | | |  | Sheila Hartnett-Devlin, CFA, age 53, has been a director since 1999. She is also a director ofMidstream, LLC; South Jersey Energy Company. Solutions, LLC; Marina Energy LLC; South Jersey Energy Service Plus, LLC; and South Jersey Resources Group, LLC. | Ms. Hartnett-Devlin is a member of SJI’s Executive Committee, the Compensation Committee and is chairman of the Audit Committee. She has been senior vice president, American Century Investments since 2008.2008 and senior vice president since 2011. She held several positionswas a managing director with Cohen, Klingenstein & Marks, Inc. including as managing director, from September 2005 to 2008; she held several positions with Fiduciary Trust Company International beginning in 1980: executive vice president from 1997 to 2004; senior vice president from 1991 to 1997; vice president from 1985 to 1991; and, chairman, Global Investment Committee from 1996 to 2004. She is a member of the NY Society of Security Analysts. She was also a member of the Investment Policy Committee of Fiduciary Trust Company International from 1995 to 2004. Ms. Hartnett-Devlin serves on the following boards: member, New York Society of Security Analysts; director, Mercy Investment Services, Inc.; member, Investment Committee; director, Mannington Mills, Inc.; |
The Board of Directors recommends a vote “FOR” the above nominee. | Walter M. Higgins III |  | Age: 70 Director since 2008 Director, President and CEO, Ascendant Group Ltd. and President and CEO, Bermuda Electric Light Company Ltd., Bermuda | Skills and Qualifications: Director Higgins’ areas of expertise include corporate governance, energy production, energy risk management, enterprise leadership, enterprise risk management, environmental, executive compensation, finance/financial management, human resources, and the utility/energy industry. Director Higgins is a financial expert as defined by the SEC. | SJI Boards and Committees: Executive Committee Audit Committee Chairman of the Governance Committee Lead Independent Director since 2010 Director of South Jersey Energy Company Executive Committee member,Member, SJI Midstream, LLC; South Jersey Energy Solutions, LLC; Marina Energy LLC; South Jersey Energy Service Plus, LLC; and South Jersey Resources Group, LLC. |
The Board of Directors recommends a vote “FOR” each of the above nominees.
 | Walter M.Mr. Higgins III, age 67,has served as a board member and has been a directorthe President and CEO at Ascendant Group Ltd. since 2008. He has been SJI’s Lead Independent DirectorMay 2012 and President and CEO of Bermuda Electric Light Company Limited since November 2010. He is also a director of South Jersey Energy Company. Mr. Higgins is a member of SJI’s Executive Committee, the Audit Committee and the Governance Committee.September 2012. He is the retired chairman, president, and CEO of Sierra Pacific Resources (now called NVEnergy). Mr. Higgins serves on the following boards:as a member of the board of Ram Power, Corp.;AEGIS. |
| Sunita Holzer |  | Age: 53 Director since 2011 President, Human Capital insight, LLC. McLean, Virginia | Skills and Qualifications: Director Holzer’s area of expertise include corporate governance, enterprise leadership, executive compensation, human resources, organizational development, and succession planning. | SJI Boards and Committees: Compensation Committee Corporate Responsibility Committee Director of South Jersey Gas Company | | Ms. Holzer has served as president, Human Capital insight, LLC since June 2014. She served as executive vice president and chief human resources officer, CSC from June 2012 to May 2014; and served as executive vice president, chief human resources officer, Chubb Insurance Company from 2003 to June 2012. Ms. Holzer is an advisory board member, Re:Gender. |
The Board of Directors recommends a vote “FOR” the above nominee. | Joseph H. Petrowski |  | Age: 61 Director since 2008 Managing Partner and Founder, Mercantor Partners, LLC, Framingham, MA | Skills and Qualifications: Director Petrowski’s areas of expertise include corporate governance, energy risk management, enterprise leadership, enterprise risk management, environmental, executive compensation, finance/financial management, sales/marketing and the boardutility/energy industry. Director Petrowski is a financial expert as defined by the SEC. | SJI Boards and Committees: Executive Committee Audit Committee Governance Committee Director of TASSouth Jersey Energy member of the board of AEGIS, director, Imperial Holdings; trustee of the Foundation of St. Mary’s Hospital of Reno, NV; trustee of Sierra Nevada College; chairman of the board of trustees of The Nature Conservancy - Nevada Chapter; Company Chairman, South Jersey Energy Solutions, LLC Executive Committee Member, SJI Midstream, LLC; South Jersey Energy Solutions, LLC; Marina Energy LLC; South Jersey Energy Service Plus, LLC; and South Jersey Resources Group, LLC. | | |  | Sunita Holzer, age 50, has been a director since 2011. She is also a director of South Jersey Gas Company. Ms. Holzer is a member of SJI’s Compensation Committee and the Governance Committee. She has served as executive vice president, chief human resources officer, Chubb Insurance Company since 2003. Ms. Holzer serves on the following boards: chairman of the Organization and Compensation Committee, New Jersey Battered Women Services; and, advisory board member, National Council for Research on Women. | | |  | Joseph H. Petrowski, age 57, has been a director since 2008. He is also a director of South Jersey Energy Company. Mr. Petrowski serves as a member of SJI’s Audit Committee andis the Compensation Committee. He serves asformer CEO of the Gulf Oil/Cumberland Farms Groups. Mr. Petrowski serves on the following boards: board member, Financial Economics Instituteis a Trustee of Claremont McKenna College; board member, Gulf Acquisition, LLC; board member, Cumberland Farms, Inc.; Boston College High School and Trinity Catholic Academy. |
| Michael J. Renna |  | Age: 47 Director since 2014 President and COO, South Jersey Industries, Folsom, NJ | Skills and Qualifications: Director Renna’s areas of expertise include enterprise leadership; enterprise and/or risk management; finance/financial management; political/governmental; and utility/energy. | SJI Boards and Committees: Director of South Jersey Energy Company Executive Committee Member, SJI Midstream, LLC; South Jersey Energy Solutions, LLC; Marina Energy LLC; South Jersey Energy Service Plus, LLC; and South Jersey Resources Group, LLC. | | Mr. Renna has been President and Chief Operating Officer of South Jersey Industries, Inc. since January 2014. He has served as President of South Jersey Energy Solutions since April 2011; as President of South Jersey Energy Company since 2004; as President of Marina Energy LLC since April 2011; as President of South Jersey Energy Service Plus, LLC since April 2007; as President of SJESP Plumbing Services, LLC since 2011; as President of South Jersey Resources Group, LLC since 2012; and as member of Executive Committee of Energenic-US, LLC since 2008. Mr. Renna previously served as Senior Vice President of South Jersey Industries, Inc. from January 2013 to January 2014; as Vice President of South Jersey Industries, Inc. from 2004 to 2013; as Chief Operating Officer of South Jersey Energy Solutions, LLC from 2005 to 2011; as Vice President of SJESP Plumbing Services, LLC from 2007 to 2011; and as Vice President of South Jersey Resources Group, LLC from 2008 to 2010. |
The Board of Directors recommends a vote “FOR” the above nominee. | Frank L. Sims |  | Age: 64 Director since 2012 Retired, Corporate Vice President and Platform Leader, Cargill, Inc., Minneapolis, MN | Skills and Qualifications: Director Sims’ areas of expertise include corporate governance, enterprise leadership, enterprise risk management, executive compensation, finance/financial management, and human resources. Director Sims is a financial expert as defined by the SEC. | SJI Boards and Committees: Compensation Committee Audit Committee Director of South Jersey Gas Company | | Mr. Sims has served as board member, PolyMet Mining Co. from 2008 through July 2014; board member, Piper Jaffray Co. from 2004 to June 2013; chairman of board, The Minneapolis Federal Reserve Bank from 2005 to 2007; corporate vice president and platform leader, Cargill, Inc. from 2002 to 2007. |
The Board of Directors recommends a vote “FOR” each of the above nominees. PROPOSAL 2 ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION | |
The Company’s executive compensation policies and procedures are designed to attract and retain highly qualified named executive officers while linking Company performance to named executive officer compensation which creates shareholder value. The Compensation Committee has a strong pay for performance philosophy; and, as a result, the compensation paid to our named executive officers is generally aligned with the Company’s performance on both a short-term and a long-term basis. Our performance over the last five10 years provides evidence that our executive compensation policies and procedures were effective in furthering these objectives. We have outperformed the S&P 500 index in foursix of the last five10 years, and we compare favorably to the S&P Utility index. We have alsoindex over the same period. SJI has outperformed ourthe median of the Company’s peer group used to benchmark long-term incentive compensation in terms of total shareholder return in seven of the last nine years.then three-year cycles. For 2011,2014, the executive compensation policies and procedures for our named executive officers consisted of three parts, two of whichbase salary, annual cash awards and long-term incentive compensation. The annual cash awards and long-term incentive compensation were again directly linked to the achievement of predefined short-term and long-term performance as follows: Annual cash awards are paid to our named executive officers werebased on both Company and individual performance, tied to Company performance, based on earnings per share, targetsfinancial performance of subsidiaries, and an individual balanced scorecard approach that measured both financial and non-financial goals. Long-term incentive compensation consistedconsists of performance-based restricted stock grants thatwhich are earned based on the Company’s relative total shareholder return and earnings per share growth, both measured against our peer group over a three-year3-year period. We believe these components of compensation for our named executive officers provide the proper incentives to align compensation with the Company’s performance while enhancing shareholder value. Our performance over the last several years confirms that our pay for performance philosophy is successful. Specifically, if the Company’s performance results meet or exceed pre-established performance targets, or if our relative shareholder return over a three-year period exceeds our peer group, named executive officers have an opportunity to realize significant additional compensation through annual cash awards and long-term equity awards. In addition, the Company’s stock ownership guidelines require our named executive officers to own shares of Company stock which align with shareholder interests. We believe this pay for performance philosophy is integral to the Company’s performance and will drive shareholder value over the long term. Please see the “Compensation Discussion and Analysis” beginning on page 2724 of this Proxy statement for a more detailed discussion of executive compensation policies and procedures for our named executive officers. Under SEC rules required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are required to provide shareholders with a separate non-binding shareholder vote to approve the compensation of our named executive officers, including the “Compensation Discussion and Analysis”, the compensation tables, and any other narrative disclosure in this Proxy statement. Such a proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive compensation policies and procedures as described in this proxy statement. Shareholders may also abstain from voting. Accordingly, shareholders are being asked to approve the following non-binding resolution: “RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rulesItem 402 of the Securities and Exchange Commission,Regulations S-K, including the compensation discussionCompensation Discussion and analysis, theAnalysis, compensation tables and related material disclosed in this proxy statement,narrative discussion is hereby APPROVED.” Because your vote is advisory, it will not be binding on the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee values the opinions expressed by shareholders and expects to take into account the outcome of the vote when considering future executive compensation decisions. The Board of Directors recommends a vote “FOR” the non-binding resolution approving the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the executiveCompensation Discussion and Analysis, compensation of our named executives.tables and narrative discussion.
PROPOSAL 3 APPROVAL OFPROPOSAL TO ADOPT THE EXECUTIVE MANAGEMENT INCENTIVE2015 OMNIBUS EQUITY COMPENSATION PLAN | |
General Upon recommendation
On January 23, 2015, our Board of Directors adopted, subject to approval by our shareholders at the Annual Meeting, the South Jersey Industries, Inc. 2015 Omnibus Equity Compensation Committee (“Committee”Plan (the “2015 Plan” or the “Plan”), the. Our Board of Directors has adopted the SJI 2012 Annual Incentive Compensation Plan (“Plan”), and recommendsdirected that the stockholdersproposal to approve the Plan effectivebe submitted to our shareholders for their approval at the Annual Meeting. Shareholder approval is being sought (i) in order to meet the New York Stock Exchange listing requirements, (ii) so that compensation attributable to awards under the Plan may qualify for an exemption from the deduction limit under section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the “Code”) (see discussion of “Federal Income Tax Consequences of the Plan” below), and (iii) in order for incentive stock options to meet the requirements of the Code. Our 1997 Stock-Based Compensation Plan, as amended and restated (the “1997 Plan”), terminated on January 1, 201226, 2015 by its terms. Our Board of Directors believes it is advisable to adopt a new comprehensive incentive compensation plan that will serve as the successor incentive compensation plan to the 1997 Plan and provide the Company with an omnibus plan to design and structure awards of stock awards, stock units, stock options, stock appreciation rights, dividend equivalents, other stock-based awards and cash incentive awards for awards earned duringselected individuals in our employ or service. Our Board of Directors believes that the availability of 1,200,000 new shares of our common stock for issuance under the 2015 Plan will ensure that we continue to have a five-year period thereafter (through December 31, 2016).sufficient number of shares available to achieve our compensation strategy. The principal provisionsmaterial terms of the 2015 Plan are summarized below. A copy of the full text of the 2015 Plan is attached to this Proxy Statement as Appendix 2.A. This summary of the 2015 Plan is not intended to be a complete description of the 2015 Plan and is qualified in its entirety by the actual text of the 2015 Plan to which reference is made. If approved by our shareholders, the 2015 Plan will become effective on the date of the Annual Meeting. Description of The Plan Types of Awards The Plan provides that awards may be made in any of the following forms: Nonqualified stock options 9
Stock appreciation rights (“SARs”) Shares Subject to the Plan The Plan authorizes a number of shares of our common stock for issuance equal to 1,200,000 new shares, subject to adjustment in certain circumstances as described below. The Plan provides that the maximum aggregate number of shares of our common stock with respect to which awards may be made to any individual during any calendar year is 200,000 shares, subject to adjustment in certain circumstances as described below. The Plan provides that the maximum aggregate number of shares of our common stock with respect to which awards may be made to any non-employee director during any calendar year is 10,000 shares, subject to adjustment in certain circumstances as described below. If dividend equivalents are granted, a grantee may not accrue more than $1,000,000 of such dividend equivalents during any calendar year. If and to the extent options and SARs granted under the Plan terminate, expire or are cancelled, forfeited, exchanged or surrendered without being exercised or if any stock awards, stock units, or other stock-based awards are forfeited, terminated or otherwise not paid in full, the shares subject to such awards will become available again for purposes of the Plan. To the extent that awards are to be paid in cash and not in shares of our common stock, such awards will not count against the share limits set forth above. Shares surrendered in payment of the exercise price of an option and shares withheld or surrendered for payment of taxes will not be available again for issuance or transfer under the Plan. Additionally, if SARs are exercised, the full number of shares subject to the SARs will be considered issued under the Plan, without regard to the number of shares issued upon settlement of the SARs. Purpose:Term of Plan
The purposePlan will terminate on the day immediately preceding the tenth anniversary of its effective date, unless sooner terminated by the Plan is to permit the Company to provide annual performance incentives that link the compensationBoard of selected key executives to certain key performance objectives and to reward them, when appropriate, for their efforts in optimizing the Company’s profitability and growth consistent with sound and ethical business practices. This Plan links the compensation of the executive with his/her performance, and provides a direct correlation with the Company’s performance and its value to our stockholders. Directors. Administration The Company has structured the Plan so that any compensation paid pursuant to the Plan will be “performance-based compensation” withinadministered and interpreted by the meaning of Section 162(m)Compensation Committee of the Internal Revenue Code.Board of Directors or another committee appointed by the Board of Directors to administer the Plan (the “Committee”). Administrative functions may be performed by officers of the Company appointed by the Committee. Under Section 162(m)The Committee has the authority to make recommendations regarding (i) the individuals to whom awards will be made under the Plan, (ii) the type, size, terms and conditions of the Internal Revenue Code, as amended, the amount of compensation earned by the Chief Executive Officer,awards, (iii) when awards will be made and the Company’s fourduration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) any restrictions on resale applicable to the shares of our common stock to be issued or transferred pursuant to an award, (v) whether any award shall be subject to any non-competition, non-solicitation, confidentiality, clawback or other most highly paid executive officers incovenant or conditions, (vi) amendment of the year for which a deduction is claimed by the Company (including its subsidiaries) is limited to $1 million per person, except that compensation that is performance-based will be excluded for purposesterms and conditions of calculating the amount of compensationany previously issued award, subject to the $1 million limitation.limitations described below, and (vii) or any other matters arising under the Plan.
Administration: The Committee will administerpresently consists of four members, each of whom is a non-employee member of our Board of Directors. The Committee’s recommendations are presented to the Planfull Board for consideration. Only the non-employee Directors act on the Committee recommendations with regard to the Plan.
Eligibility All of our employees, non-employee directors, consultants and advisors who perform services for us and our subsidiaries are eligible to receive awards under the Plan. As of March 2, 2015, approximately 50 persons are eligible as employees and non-employee directors to receive awards under the Plan. The Board is authorized to select the persons to receive awards from among those eligible and will have final authoritydetermine the number of shares of our common stock that are subject to construeeach award. Vesting The Board determines the vesting of awards granted under the Plan. Awards shall be subject to vesting over a period of not less than one year, subject to the following provisions as may be determined by the Board: (i) vesting of awards may be accelerated in connection with a grantee’s death or disability, or in the event of a change in control; and interpret it. (ii) an award agreement for a non-employee director may include vesting over a period of less than one year and/or accelerated vesting in connection with the non-employee director’s retirement. Types of Awards Stock Awards The Committee will annually select those executive officers and other key executivesBoard may grant stock awards to anyone eligible to participate in the Plan, upon such terms and conditions as the Board deems appropriate. The Board may require that grantees pay consideration for the stock awards and may impose restrictions on the stock awards. The Board will establishdetermine whether they will lapse over a period of time or according to such other criteria, including the achievement of specific Performance Targets and an objective formula or standard toperformance goals, as the Board determines. The Board will determine the maximumnumber of shares of our common stock subject to the grant of stock awards payableand the other terms and conditions of the award including whether the grantee will have the right to each participating executive. The Committee has sole discretion to determine the form, amountvote shares of our common stock and terms of each Award, which need not be uniform among the persons eligible to receive Awards.dividends paid on such shares during the restriction period. Unless the Board determines otherwise, all unvested stock awards are forfeited if the grantee’s employment or service is terminated for any reason. Participation: If the Plan is approved by stockholders, the CEO, Named Executive Officers and other Company Executive Officers will be eligible to be designated as Participants in the Plan by the Compensation Committee.Stock Units
Plan Benefits: As described above, on an annual basis, the Committee must select the executive officersThe Board may grant stock units to anyone eligible to participate in the Plan. For 2012Each stock unit provides the grantee with the right to receive a share of our common stock or an amount based on the value of a share of our common stock at a future date upon the Company’s achievement of performance goals established by the Board. The Board will determine the number of stock units that will be granted and the terms and conditions applicable to stock units, which will include payment based on achievement of specified performance goals.
Stock units may be paid at the end of a specified period or deferred to a date authorized by the Board. If a stock unit becomes payable, it will be paid to the grantee in cash, in shares of our common stock, or in a combination of cash and shares of our common stock, as determined by the Board. All unvested stock units are forfeited if the grantee’s employment or service is terminated for any reason, unless the Board determines otherwise. The Board may grant dividend equivalents in connection with awards of stock units made under the plan. Dividend equivalents entitle the grantee to receive amounts equal to ordinary dividends that are paid on the shares underlying an award while the award is outstanding. The Board will determine whether dividend equivalents will be paid currently or credited to a bookkeeping account as a dollar amount or in the form of stock units. The Board may provide that dividend equivalents shall be payable based on the achievement of specific performance goals. Dividend equivalents may be paid in cash, in shares of our common stock, or in a combination of the two. The terms and conditions of dividend equivalents will be determined by the Board. Stock Options The Board may grant options intended to qualify as incentive stock options within the meaning of section 422 of the Code (“ISOs”) or “nonqualified stock options” that are not intended to so qualify (“NQSOs”) or any combination of ISOs and NQSOs. Anyone eligible to participate in the Plan may receive an award of NQSOs. Only our employees and employees of our subsidiaries may receive an award of ISOs. The maximum aggregate number of shares of our common stock with respect to which ISOs may be granted under the Plan is 1,200,000, subject to adjustment in accordance with the terms of the Plan. The Board will fix the exercise price per share of options on the date of grant. The exercise price of options granted under the Plan will not be less than the fair market value of our common stock on the date of grant. However, if the grantee of an ISO is a person who holds more than 10% of the total combined voting power of all classes of our outstanding stock, the exercise price per share of an ISO granted to such person must be at least 110% of the fair market value of our common stock on the date of grant. The Board will determine the term of each option, which will not exceed 10 years from the date of grant. Notwithstanding the foregoing, if the grantee of an ISO is a person who holds more than 10% of the combined voting power of all classes of our outstanding stock, the term of the ISO may not exceed five years from the date of grant. To the extent that the aggregate fair market value of shares of our common stock, determined on the date of grant, with respect to which ISOs become exercisable for the first time by a grantee during any calendar year exceeds $100,000, such ISOs will be treated as NQSOs. The Board will determine the terms and conditions of options, including when they become exercisable. The Board may accelerate the exercisability of any options, subject to the vesting restriction described above. Except as provided in the award agreement or as otherwise determined by the Board, an option may only be exercised while a grantee is employed by or providing service to us or our subsidiaries. A grantee may exercise an option by delivering notice of exercise to us. The grantee will pay the exercise price and any withholding taxes for the option: (i) in cash; (ii) in certain circumstances as permitted by the Board, by the surrender of shares of our common stock with an aggregate fair market value on the date the option is exercised equal to the exercise price; (iii) by payment through a broker in accordance with the procedures permitted by Regulation T of the Federal Reserve Board; (iv) if permitted by the Board, by surrender of the vested portion of the option to us for an appreciation distribution payable in shares of our common stock with a fair market value at the time of the option surrender equal to the dollar amount by which the then fair market value of the shares of our common stock subject to the surrendered portion exceeds the aggregate exercise price; (v) by another method approved by the Board; or (vi) by any combination of the foregoing. SARs The Board may grant SARs to anyone eligible to participate in the Plan. SARs may be granted in connection with, or independently of, any option granted under the Plan. Upon exercise of a SAR, the grantee will be paid an amount equal to the excess of the fair market value of our common stock on the date of exercise over the base amount for the SAR. Such payment to the grantee will be in cash, in shares of common stock, or in a combination of cash and shares of common stock, as determined by the Board. The Board will determine the term of each SAR, which will not exceed 10 years from the date of grant. The base amount of each SAR will be determined by the Board and will be equal to or greater than the fair market value of our common stock on the date the SAR is granted. The Board will determine the terms and conditions of SARs, including when they become exercisable. The Board may accelerate the exercisability of any SARs, subject to the vesting restrictions described above. Other Stock-Based Awards The Board may grant other stock-based awards, which are awards other than options, stock units, stock awards, SARs and cash incentive awards. The Board may grant other stock-based awards to anyone eligible to participate in the Plan. These awards will be based on or measured by shares of our common stock, and will be payable in cash, in shares of our common stock, or in a combination of cash and shares of our common stock. The terms and conditions for other stock-based awards will be determined by the Board. Cash Incentive Awards The Board may grant cash incentive awards, which are awards to be settled solely in cash. The terms and conditions for cash incentive awards will be determined by the Board. Qualified Performance-Based Compensation The Plan permits the Board to impose objective performance goals that must be met with respect to awards of stock units, stock awards, other stock-based awards or dividend equivalents granted to employees under the Plan, in order for the awards to be considered qualified performance-based compensation for purposes of section 162(m) of the Code (see “Federal Income Tax Consequences of the Plan” below). Prior to, or soon after the beginning of, the performance targetperiod, the Board will establish in writing the performance goals that must be set at growth of 5% over prior year final actual earnings per share.met, the applicable performance period, the amounts to be paid if the performance goals are met and any other conditions. Performance Targets: UnderThe performance goals, to the Plan,extent designed to meet the Performance Targets mayrequirements of section 162(m) of the Code, will be based on one or more of the following predeterminedmeasures: annual consolidated earnings per share; the price of shares of common stock; the market share of the Company (or any business unit thereof); sales by the Company (or any business unit thereof); return factors (including, but not limited to return on equity, capital employed, or investment; risk adjusted return on capital; return on investors’ capital; return on average equity; return on assets; and return on net assets); costs of the Company (or any business unit thereof); the Company’s total shareholder return; revenues; debt level; cash flow; capital expenditures; net income or gross income; operating income; expenses; net borrowing; goals related to mergers, acquisitions, dispositions or similar business transactions; assets; regulatory compliance; employee retention/attrition rates; individual business objectives; risk management activities; corporate value measures which may be objectively determined (including ethics, compliance, environmental, diversity commitment and safety); or implementation or completion of critical projects or processes; cost reduction targets; interest-sensitivity gap levels; weighted average cost of capital; working capital; operating or profit margin; pre-tax margin; contribution margin; book value; operating expenses (including, but not limited to lease operating expenses, severance taxes and other production taxes, gathering and transportation and general and administrative costs); unit costs; EBIT; EBITDA; debt to EBIT or EBITDA; interest coverage; comparative shareholder return; book value per share; net asset value per share; growth measures; debt to total capitalization ratio; asset quality levels; investments; economic value added; stock price appreciation; market capitalization; accounts receivables day sales outstanding; accounts receivables to sales; achievement of balance sheet or income statement objectives; assets; asset sale targets; non-performing assets; satisfactory internal or external audits; improvement of financial ratings; charge-offs; amount of the gas reserves; costs of finding gas reserves; reserve replacement ratio, reserve additions, or other reserve level measures; drilling results; natural gas production, production and reserve growth; production volume; sales volume; production efficiency; inventory to sales; and inventory turns; and to the extent that the performance goal is not designed to meet the requirements of section 162(m) of the Code, the goal may be established at the discretion of the Board.
Such performance goals may be particular to a grantee or the division, department, branch, line of business, subsidiary or other unit in which the grantee works, or may be based on attaining a specified absolute level of the performance goal, or a percentage increase or decrease in the performance goal compared to a pre-established target, previous years’ results, or a designated market index or comparison group, all as determined by the Board. Deferrals The Board may permit or require grantees to defer receipt of the payment of cash or the delivery of shares of our common stock that would otherwise be due to the grantee in connection with any awards under the Plan. The Board will establish the rules and procedures applicable to any such deferrals, consistent with the applicable requirements under the Code relating to deferrals. Adjustment Provisions If there is any change in the number or kind of shares of our common stock outstanding by reason of (i) a stock dividend, spinoff, recapitalization, stock split or combination or exchange of shares, (ii) a merger, reorganization or consolidation, (iii) a reclassification or change in par value, or (iv) any other extraordinary or unusual event affecting the outstanding shares of our common stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of our common stock is substantially reduced as a result of a spinoff or our payment of an extraordinary dividend or distribution, the maximum number of shares of our common stock available for issuance under the Plan, the maximum number of shares of our common stock for which any individual may receive awards in any year as described above, the kind and number of shares covered by outstanding awards, the kind and number of shares issued or transferred and to be issued or transferred under the Plan, and the price per share or the applicable market value of such grants will be equitably adjusted by the Board to reflect any increase or decrease in the number of, or change in the kind or value of, the issued shares of our common stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the Plan and such outstanding awards. Any fractional shares resulting from such adjustment will be eliminated. In addition, in the event of a change in control, the provisions applicable to a change in control, described below, will apply. Any adjustments to outstanding awards will be consistent with section 409A or 424 of the Code, to the extent applicable. Transferability Only the grantee may exercise rights under an award during the grantee’s lifetime. A grantee may not transfer those rights except by will or the laws of descent and distribution. The Board may also provide, in an award agreement, that a grantee may transfer NQSOs to his or her family members, or one or more trusts or other entities for the benefit of or owned by such family members, consistent with applicable securities laws, according to such terms as the Board may determine. Change in Control In the event of a change in control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding awards not previously exercised or paid will be assumed by, or replaced with awards that have comparable terms by, the surviving corporation (or a parent or subsidiary of the surviving corporation). Unless the award agreement provides otherwise, if a grantee’s employment is terminated by the Company without “Cause” or the grantee resigns for “Good Reason” (as such terms are defined in the Plan: (i) stock price; (ii) earnings per share (“EPS”); (iii) operating income; (iv) returnPlan), in either case within 12 months following a change in control, the grantee’s outstanding awards will become fully vested on equity or assets; (v) cash flows from operating activities; (vi) EBITDA; (vii) overall sales growth; (viii) expense reduction or expense management; (ix) market position; (x) total shareholder return (“TSR”); (xi) return on investment; (xii) earnings before interest and taxes (EBIT); (xiii) consolidated net income; (xiv) return on assets or net assets; (xv) economic value added; (xvi) shareholder value added; (xvii) cash flow return on investment; (xviii) net operating profit; (xix) net operating profit after tax; (xx) return on capital or equity; (xxi) membership goals; or (xxii) any combination, including one or more ratios,the date of the foregoing. The Committee may determine at the time the Performance Targets are established that certain adjustments will be made in evaluating whether the Performance Targets were met to take into account,any such awards is based, in whole or in part, on performance, the applicable award agreement will specify how the portion of the award that becomes vested under this paragraph will be calculated.
In the alternative, in any manner specifiedthe event of a change in control, if all outstanding awards are not assumed by, or replaced with awards that have comparable terms by, the Committee,successor corporation (or parent or subsidiary of the surviving corporation), the Board may take any of the following actions with respect to any or all outstanding awards, without the consent of any grantee: Determine that outstanding options and SARs automatically accelerate and become fully exercisable and the restrictions and conditions on outstanding stock awards immediately lapse; Determine that grantees receive a payment in settlement of outstanding stock units or other stock-based awards, in such amount and form as determined by the Board; Require that grantees surrender their options and SARs in exchange for payment by the Company, in cash or shares of our common stock as determined by the Board, in an amount equal to the amount, if any, by which the then fair market value of the shares subject to the grantee’s unexercised options and SARs exceeds the exercise price of the stock options or the base amount of the SARs, as applicable; or After giving grantees the opportunity to exercise their options and SARs, terminate any or all unexercised options and SARs at such time as the Board deems appropriate. Notwithstanding the foregoing, if the per share fair market value of our common stock does not exceed the exercise price or base amount, as applicable, the Company will not be required to make any payment to the grantee upon surrender of the option or SAR. For purposes of the Plan, a change in control will generally be deemed to have occurred if one of the following events occurs: Consummation of (i) a merger or consolidation as a result of which our stockholders immediately before the transaction do not own more than 50% of the voting power of the voting securities of the surviving company; or (ii) a sale or other disposition of all or substantially all of our assets; If at least a majority of the Board of Directors at any time does not consist of individuals who were members of the Board of Directors for at least two years, unless each such new director who was not a director at the beginning of such two year period stands for election as a management nominee (which does not include directors nominated by hostile shareholders) and is elected by shareholders immediately prior to the election of any such new majority; or Any person becomes the beneficial owner of securities representing more than 30% of the voting power of our securities, provided that a change in control will not be deemed to occur as a result of (i) a transaction in which we become a subsidiary of another corporation and in which our stockholders, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 30% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote) or (ii) an increase on an person’s beneficial ownership of our securities in connection with one or more of the following: (i) the gain, loss, income or expense resulting from changes in accounting principles that become effective during the Performance Period; (ii) the gain, loss, income or expense reported publicly by the Company with respect to the Performance Period that are extraordinary or unusual in nature or infrequent in occurrence; (iii) the gains or losses resulting from, and the direct expenses incurred in connection with, the disposition of a business or the sale of investments or non-core assets; (iv) the gain or loss from all or certain claims and/or litigation and all or certain insurance recoveries relating to claims or litigation; (v) the impact of impairment of tangible or intangible assets, including goodwill; (vi) the impact of restricting or business recharacterization activities, including but not limited to reductions in force, that are reported publicly by the Company; or (vii) the impact of investments or acquisitions made during the year or, to the extent provided by the Committee, any prior year. Each of the adjustments may relate to the Company as a whole or any part of the Company’s business operations. The adjustments are to be determined in accordance with generally accepted accounting principles and standards, unless another objective method of measurement is designated by the Committee. In addition to the foregoing, the Committee shall adjust any Performance Targets or other features of an Award that relate to the value of, any Shares of the Company, to reflect any stock dividend or split, recapitalization, combination or exchange of Shares or other similar changes in such stock. The Committee also has the discretion to decrease an award.
Award Payments: Under the Plan, all selected officers or key employees, including the Named Executive Officers could be eligible for a bonus each year. The precise percentage earned shall be based upon a schedule of achievement of Performance Targets determined each year by the Committee.
The Committee has sole discretion to determine whether to actually pay any or the entire permissible Award or to defer payment of any Award. The Committee is also authorized to establish additional conditions and terms of payment for Awards, including the achievement of other or additional financial, strategic or individual goals, which may be objective or subjective, as it deems appropriate. Although the Committee may waive any additional conditions and terms, it may not waive the basic Performance Targets as to the business criteria chosen for any Performance Period.
Awards earned will be paid on or before March 15 of the year following the year with respect to which it was earned, or such earlier date as may be required under the Internal Revenue Code to make the payments deductible under the Internal Revenue Code for the fiscal year in which they were earned.
Amendments: The CommitteeFor any awards subject to the requirements of section 409A of the Code (discussed below) that will become payable on a change in control, the transaction constituting a change in control must also constitute a change in control event for purposes of section 409A of the Code.
Amendment and Termination of the Plan Our Board of Directors may from time to time amend suspend or terminate the Plan in whole or in part, but no amendment will be effectivean award at any time, however, the Board of Directors may not amend the Plan without Board and/or stockholdershareholder approval if such approval is required under any applicable laws or stock exchange requirements. Grantees Outside of the United States If any individual who receives an award under the Plan is subject to satisfytaxation in a country other than the United States, the Board may make the award on such terms and conditions as the Board deems appropriate to comply with the laws of the applicable country. No Repricing Except as set forth in the Plan, the Company cannot, without shareholder approval, (i) amend the price of outstanding options or SARs under the Plan to reduce the exercise price, (ii) cancel outstanding options or SARs in exchange for other awards of options or SARs with an exercise price that is less than the exercise price of the original options or SARs, or (iii) cancel outstanding options or SARs with an exercise price above the current stock price in exchange for cash or other securities. Clawback Policy All awards made under the Plan are subject to any compensation, share trading, clawback, recoupment or other policy that may be applicable to employees of the Company, as such policy may be in effect from time to time, whether or not approved before or after the effective date of the Plan. Shareholder Approval for Qualified Performance-Based Compensation If stock awards, stock units, other stock-based awards or dividend equivalents are granted as qualified performance-based compensation under section 162(m) of the Code, the Plan must be re-approved by our shareholders no later than the first shareholders meeting that occurs in the fifth year following the year in which our shareholders previously approved the Plan. Federal Income Tax Consequences Relating to Awards The federal income tax consequences of awards under the Plan will depend on the type of award. The following description provides only a general description of the application of federal income tax laws to awards under the Plan. This discussion is intended for the information of shareholders considering how to vote at the Annual Meeting and not as tax guidance to grantees, as the consequences may vary with the types of awards made, the identity of the grantees and the method of payment or settlement. The summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local or foreign tax laws. From the grantees’ standpoint, as a general rule, ordinary income will be recognized at the time of delivery of shares of our common stock or payment of cash under the Plan. Future appreciation on shares of our common stock held beyond the ordinary income recognition event will be taxable as capital gain when the shares of our common stock are sold. The tax rate applicable to capital gain will depend upon how long the grantee holds the shares. We, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the grantee, and we will not be entitled to any tax deduction with respect to capital gain income recognized by the grantee. Exceptions to these general rules arise under the following circumstances: (i) If shares of our common stock, when delivered, are subject to a substantial risk of forfeiture by reason of any employment or performance-related condition, ordinary income taxation and our tax deduction will be delayed until the risk of forfeiture lapses, unless the grantee makes a special election to accelerate taxation under section 83(b) of the Code. (ii) If an employee exercises a stock option that qualifies as an ISO, no ordinary income will be recognized, and we will not be entitled to any tax deduction, if shares of our common stock acquired upon exercise of the stock option are held until the later of (A) one year from the date of exercise and (B) two years from the date of grant. However, if the employee disposes of the shares acquired upon exercise of an ISO before satisfying both holding period requirements, the employee will recognize ordinary income at the time of the disposition equal to the difference between the fair market value of the shares on the date of exercise (or the amount realized on the disposition, if less) and the exercise price, and we will be entitled to a tax deduction in that amount. The gain, if any, in excess of the amount recognized as ordinary income will be long-term or short-term capital gain, depending upon the length of time the employee held the shares before the disposition. (iii) An award may be subject to a 20% tax, in addition to ordinary income tax, at the time the award becomes vested, plus interest, if the award constitutes deferred compensation under section 409A of the Code and the requirements of section 409A of the Code are not satisfied Section 162(m), of the Securities Exchange ActCode generally disallows a publicly held corporation’s tax deduction for compensation paid to its chief executive officer or certain other officers in excess of 1934, as amended,$1 million in any year. Qualified performance-based compensation is excluded from the $1 million deductibility limit, and therefore remains fully deductible by the corporation that pays it. We intend that options and SARs granted under the Plan will be qualified performance-based compensation. Stock units, stock awards, dividend equivalents and other stock-based awards granted under the Plan may be structured to meet the qualified performance-based compensation exception under section 162(m) of the Code if the Board determines to condition such awards on the achievement of specific performance goals in accordance with the requirements of section 162(m) of the Code. We have the right to require that grantees pay to us an amount necessary for us to satisfy our federal, state or any New York Stock Exchange regulation.local tax withholding obligations with respect to awards. We may withhold from other amounts payable to a grantee an amount necessary to satisfy these obligations. The Board may permit a grantee to satisfy our withholding obligation with respect to awards paid in shares of our common stock by having shares withheld, at the time the awards become taxable, provided that the number of shares withheld does not exceed the individual’s minimum applicable withholding tax rate for federal, state and local tax liabilities. SHAREHOLDER APPROVAL The affirmative vote of a majority of the votes cast at the Annual Meeting for the holders of our common stock is required to approve the adoption of the South Jersey Industries, Inc. 2015 Omnibus Equity Compensation Plan. No award has been or will be granted under the Plan that is contingent upon approval of this proposal by our shareholders at the Annual Meeting. Awards under the Plan are discretionary, so it is not currently possible to predict the number of shares of our common stock that will be granted or who will receive grants under the Plan after the Annual Meeting. The last reported sale price of a share of our common stock on March 2, 2015 was $55.89 per share. The Board of Directors recommends a vote “FOR” the approval of the Executive Management Incentive Compensation Plan. APPROVAL OF THE SOUTH JERSEY INDUSTRIES, INC. 1997 STOCK-BASED COMPENSATION PLAN | |
(As Amended and Restated Effective January 1, 2012)
Purpose: The purpose of the Plan is to enable the Company to recognize the contributions made to the Company by employees (including employees who are members of the Board of Directors) and non-employee directors of the Company by providing such persons with additional incentive to devote themselves to the Company’s future success and to improve the Company’s ability to attract, retain and motivate persons upon whom the Company’s sustained growth and financial success depend, by: (i) providing incentive compensation opportunities competitive with those of other major companies; (ii) providing performance-related incentives that motivate superior performance; and (iii) providing such persons with the opportunity to acquire or increase their ownership interest in the Company and to thereby acquire a greater stake in the Company and a closer identity with it.
This Plan is intended to comply with Section 162(m) of the Code with respect to qualified performance-based Awards that may be awarded by the Committee to Eligible Participants. For this purpose, an Award constitutes qualified performance-based compensation to the extent that it is granted by the Committee on account of the attainment of one or more pre-established, objective performance goals established by the Committee, the material terms of which are disclosed to the Company’s shareholders and satisfaction of such performance goals are certified by the Committee.
A copy of the Plan is attached as Appendix 1.
Administration: The Plan will be administered by the Board’s Compensation Committee or such other committee, consisting of two or more directors who, unless the Board determines otherwise, are “outside directors” (within the meaning of Section 162(m) of the Code) and “non-employee directors” (within the meaning of Rule 16b-3(b)(3)(i) under the Securities Exchange Act of 1934) as may be determined by the Board.
Participation: An Option, Stock Appreciation Right (“SAR”) or Restricted Stock Grant (“grant”) may be granted to those Eligible Participants who are designated by the Committee as eligible to receive an Option, SAR or grant.
Plan Benefits: As described above, the Committee must select executive officers eligible to participate in the Plan. For 2012, the performance target will be based on total shareholder return relative to a predetermined peer group and earnings per share goal.
Performance Goals: “Performance Goal” means the annual consolidated earnings per share from the Company’s continuing operations, or any other goal that is established at the Committee’s discretion including, among other things: (i) the price of Shares; (ii) the Company’s market share (or any business unit thereof); (iii) sales by the Company (or any business unit thereof); (iv) return on equity of the Company; (v) costs of the Company (or any business unit thereof); or (vi) the Company’s total shareholder return and earnings per share growth as measured against comparable returns/earnings of peer companies. The Committee shall have sole discretion to determine specific targets within each category of Performance Goals.
Award Payments: Under the Plan, all selected executive officers or key employees, including the Named Executive Officers could be eligible for a bonus each year. The precise percentage earned shall be based upon a schedule of achievement of Performance Targets determined each year by the Committee.
Awards earned will be paid on or before March 15 of the year following the year with respect to which it was earned, or such earlier date as may be required under the Internal Revenue Code to make the payments deductible under the Internal Revenue Code for the fiscal year in which they were earned.
Amendments: The Committee may from time to time amend, suspend or terminate the Plan in whole or in part, but no amendment will be effective without Board and/or stockholder approval if such approval is required to satisfy the requirements of Section 162(m), the Securities Exchange Act of 1934, as amended, or any New York Stock Exchange regulation.
The Board of Directors recommends a vote “FOR” the approvaladoption of the South Jersey Industries, Inc. 1997 Stock-based
2015 Omnibus Equity Compensation Plan.
RATIFICATION OF INDEPENDENT ACCOUNTANTS | |
The Audit Committee and the Board of Directors, subject to the approval of the shareholders, reappointed Deloitte & Touche LLP, as the Company’s independent registered public accounting firm for 2012.2015. Unless otherwise directed, proxies will be voted “FOR” approval of this appointment. If the shareholders do not ratify this appointment by the affirmative vote of a majority of the votes cast at the meeting, other auditors will be considered by the Audit Committee. Deloitte & Touche LLP served as the Company’s independent registered public accounting firm during 2011.2014. During 2011,2014, the audit services performed for the Company consisted of audits of the Company’s and its subsidiaries’ financial statements and attestation of management’s assessment of internal control, as required by the Sarbanes-Oxley Act of 2002, Section 404 and the preparation of various reports based on those audits, services related to filings with the Securities and Exchange Commission and the New York Stock Exchange, and audits of employee benefit plans as required by the Employee Retirement Income Security Act. A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and will have the opportunity to make a statement, if such representative desires to do so, and to respond to appropriate questions from shareholders. The Board of Directors recommends a vote “FOR” the ratification of the appointment of the Independent Registered Public Accounting Firm. The following table sets forth certain information with respect to the beneficial ownership of our common stock, as of February 27, 2012,March 2, 2015, of: (a) each current director and nominee for director; (b) our principal executive officer, principal financial officer, the three other most highly compensated executive officers during 20112014 (collectively, the “Named Executives”Executive Officers”); and (c) all of the directors and Named Executivesexecutive officers as a group. | | Number of Shares of Common Stock (1) | | | Percent of Class | | | Ann T. Anthony | | | 227 | | | | | * | | Sarah M. Barpoulis | | | 5,145 | (2) | | | | * | | Thomas A. Bracken | | | 21,913 | (2) | | | | * | | Keith S. Campbell | | | 18,182 | (2) | | | | * | | Stephen H. Clark | | | 13,107 | | | | | * | | Jeffrey E. DuBois | | | 15,542 | | | | | * | | Victor A. Fortkiewicz | | | 8,879 | (2) | | | | * | | Edward J. Graham | | | 48,908 | | | | | * | | Sheila Hartnett-Devlin | | | 4,062 | (2) | | | | * | | Walter M. Higgins III | | | 10,483 | (2) | | | | * | | Sunita Holzer | | | 6,593 | (2) | | | | * | | David A. Kindlick | | | 20,430 | | | | | * | | Kenneth Lynch | | | 2,598 | | | | | * | | Kathleen A. McEndy | | | 429 | | | | | * | | Gina Merritt-Epps | | | 6,015 | | | | | * | | Gregory M. Nuzzo | | | 949 | | | | | * | | Joseph H. Petrowski | | | 14,728 | (2) | | | | * | | Michael J. Renna | | | 24,868 | | | | | * | | David Robbins, Jr. | | | 9,704 | | | | | * | | Frank L. Sims | | | 29,146 | (2) | | | | * | | All directors, nominees for director and executive officers as a group (20 persons) | | | 261,908 | | | | | |
| | | Number of Shares of Common Stock (1) | | | Percent of Class | | | | | | | | | | | Shirli M. Billings | | | 12,633 | (2) | | | * | | | Thomas A. Bracken | | | 16,792 | (2) | | | * | | | Keith S. Campbell | | | 12,834 | (2) | | | * | | | Jeffrey E. DuBois | | | 19,386 | | | | * | | | Victor A. Fortkiewicz | | | 4,460 | (2) | | | * | | | Edward J. Graham | | | 68,478 | | | | * | | | Sheila Hartnett-Devlin | | | 7,406 | (2) | | | * | | | Walter M. Higgins III | | | 5,749 | (2) | | | * | | | Sunita Holzer | | | 1,238 | (2) | | | * | | | David A. Kindlick | | | 55,882 | | | | * | | | Kevin D. Patrick | | | 4,921 | | | | | | | Joseph H. Petrowski | | | 5,999 | (2) | | | * | | | Michael J. Renna | | | 25,320 | | | | * | | | All directors, nominees for director and executivofficers as a group (13 persons) | | | 241,098 | | | | 1 | % | | | | | | | | | | |
* Less than 1%. Notes: (1) | (1) | Based on information furnished by the Company’s directors and executive officers. Unlessotherwise indicated, each person has sole voting and dispositive power with respect to the Common Stock shown as owned by him or her. |
| (2) | Includes shares awarded to each director under a Restricted Stock Program for Directors. |
Stock Ownership Requirements The Board of Directors believes significant ownership of Company Common Stock better aligns the interests of management with that of the Company’s shareholders. Therefore, in 2001, the Board of Directors enacted the following stock ownershiprequirements listed below for officers and directors. The requirements for officers were effective through 2014 and directors:have been increased for 2015 as outlined on page 33 of this proxy statement. | ●The Chief Executive Officer is required to own shares of Company Common Stock with a market value equal to a minimum of three times his or her annual base salary; | The Chief Executive Officer is required to own shares of Company Common Stock with a market value equal to a minimum of three times his or her annual base salary; |
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| Other executive officers are required to own shares of Company Common Stock with a market value equal to a minimum of one and one-half times their annual base salary; |
Other executive officers are required to own shares of Company Common Stock with a market value equal to a minimum of one and one-half times their annual base salary; Other officers are required to own shares of Company Common Stock with a market value equal to a minimum of their annual base salary; | ●
| Other officers are required to own shares of Company Common Stock with a market value equal to a minimum of their annual base salary; |
Shares owned outright will be combined with vested restricted shares awarded under the Stock-Based Compensation Plan and vested shares beneficially owned through any employee benefit plan for purposes of determining compliance with the stock ownership requirement for officers. Current officers will have a period of six years from the original date of adoption and newly elected or promoted officers will have a period of six years following their election or promotion to a new position to meet these minimum stock ownership requirements; and | ●
| Shares owned outright will be combined with vested restricted shares awarded under the Stock-Based Compensation Plan and vested shares beneficially owned through any employee benefit plan for purposes of determining compliance with the stock ownership requirement for officers. Current officers will have a period of six years from the original date of adoption and newly elected or promoted officers will have a period of six years following their election or promotion to a new position to meet these minimum stock ownership requirements; and |
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| Members of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual cash retainer for board service. Shares owned outright will be combined with restricted shares awardedasMembers of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, or within six years of an increase in the share ownership guidelines, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual cash retainer for board service. Shares owned outright will be combined with restricted shares awarded as part of the annual stock retainer for the purpose of meeting these requirements. |
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, requires the Company’s directors and executive officers to file reports with the Securities and Exchange CommissionSEC relating to their ownership of, and transactions in, the Company’s Common Stock. Based on our records and other information, the Company believes that all Section 16(a) filing requirements were met for 2011.2014. Security Ownership of Certain Beneficial Owners The following table sets forth certain information, as of February 27, 2012,March 2, 2015, as to each person known to the Company, based on filings with the Securities and Exchange Commission,SEC, who beneficially owns 5%5 percent or more of the Company’s Common Stock. Based on filings made with the SEC, each shareholder named below has sole voting and investment power with respect to such shares.
| Name and Address of Beneficial Owner | | Shares Beneficially Owned | | Percent of Class | BlackRock, Inc. 55 East 52nd Street, New York, NY 10022 | | | 3,201,312 | | 9.50 percent | | | | | | | The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 | | | 2,310,135 | | 6.86 percent |
| Name and Address of Beneficial Owner | | Shares Beneficially Owned | | | Percent of Class | | | | | | | | | | | Black Rock Inc. | | | 2,337,435 | | | | 7.76 | % | | 40 East 52nd Street | | | | | | | | | | New York, NY 10022 | | | | | | | | | | The Vanguard Group Inc. | | | 1,808,382 | | | | 5.99 | % | | 100 Vanguard Blvd. | | | | | | | | | | Malvern, PA 19355 | | | | | | | | | | Neuberger Berman Group LLC | | | 1,843,510 | | | | 6.116 | % | | 605 Third Avenue | | | | | | | | | | New York, NY 10158 | | | | | | | | | | EARNEST Partners, LLC | | | 1,640,100 | | | | 5.5 | % | | 1180 Peachtree Street NE, Suite 2300 | | | | | | | | | | Atlanta, GA 30309 | | | | | | | | |
Leadership Structure The Chairman of the Board, Edward J. Graham, also serves as the Company’s CEO. The Board of DirectorsCompany determined that this leadership structure is appropriate based on Mr. Graham’s tenure with the Company, his knowledge of the Company and the energy and utility industries, and his excellent relationship with the Board. Mr. Graham joined the Company as an Internal Auditor in 1981 and since that time has held various significant positions, including positions in accounting and gas management. He has also served as Vice President and President of the Company and its subsidiaries. As a result of his tenure and broad base of expertise, Mr. Graham successfully directs the Board as it advises management and monitors performance.
To ensure sustained leadership when it is inappropriate for Mr. Graham to act as Chairman, the Board elected Director Higgins to serve as Lead Independent Director in April 2011.2013. The Lead Independent Director is an independent memberIn December 2014, SJI announced that Mr. Graham will retire effective April 30, 2015, with Michael J. Renna assuming the role of president and CEO as of May 1, 2015. Walter M. Higgins III will become the Non-Executive Chairman of SJI’s board of directors on May 1, 2015.
In the role, Mr. Higgins will: Provide leadership to the Board Chair meetings of the Board elected annually by a majority of Directors Establish procedures to govern the independent directors. The Lead Independent Director presides over allBoard’s work Ensure the Board’s full discharge of its duties Schedule meetings of the Board’s independentfull Board and work with committee chairmen, CEO and Corporate Secretary for the schedule of meetings for committees Organize and present the agenda for regular or special Board meetings based on input from directors, CEO and Corporate Secretary Ensure proper flow of information to the Board, reviewing adequacy and timing of documentary materials in support of management’s proposals Ensure adequate lead time for effective study and discussion of business under consideration Help the Board fulfill the goals it sets by assigning specific tasks to members of the Board Identify guidelines for the conduct of the directors, and non-management directors. The Board convenes an executive session of the independent directors atensure that each meeting. The Lead Independent Director consults with the Chairman on agenda matters fordirector is making a significant contribution Act as liaison between the Board and aidsCEO Work with Governance Committee and assistsCEO, and ensure proper committee structure, including assignments and committee chairmen Set and monitor the Chair and the remainderethical tone of the Board in assuring effectiveof Directors Manage conflicts which may arise with respect to the Board Monitor how the Board functions and works together effectively Carry out other duties as requested by the CEO and Board as a whole, depending on need and circumstances Serve as resource to the CEO, Corporate Secretary and other Board members on corporate governance in managing the affairs of the Boardprocedure and the Company. The Lead Independent Director functions in an advisory capacity to, and works closely with, the Chair on issues related to the Board.policies Independence of Directors The Board adopted Corporate Governance Guidelines that require the Board to be composed of a majority of directors who are “independent directors” as defined by the rules of the New York Stock Exchange. No director will be considered “independent” unless the Board of Directors affirmatively determines that the director has no material relationship with the Company. When making “independence” determinations, the Board considers all relevant facts and circumstances, as well as any other facts and considerations specified by the New York Stock Exchange, by law or by any rule or regulation of any other regulatory body or self-regulatory body applicable to the Company. As a part of its Corporate Governance Guidelines, the Board established a policy that Board members may not serve on more than four other boards of publicly traded companies. SJI’s Corporate Governance Guidelines are available on our website at www.sjindustries.com under the heading “Investors”. The Board determined that directors Barpoulis, Bracken, Campbell, Fortkiewicz, Hartnett-Devlin, Higgins, Holzer, Petrowski and Petrowski,Sims, constituting all of the non-employee directors, meet the New York Stock Exchange standards and our own standards noted above for independence and are, therefore, considered to be independent directors. Accordingly, during 2011,2014, all but onetwo of the company’sCompany’s directors waswere considered to be “independent.” Mr. Graham isand Mr. Renna are not considered independent by virtue of histheir employment with the Company. Codes of Conduct The Company adopted codes of conduct for all employees, officers and directors, which include the code of ethics for our principal executive, our principal financial officer and principal accounting officer within the meaning of the SEC regulations adopted pursuant to the Sarbanes-Oxley Act of 2002. Additionally, the Company established a hotline and website for employees to anonymously report suspected violations. Copies of the codes of ethics are available on the Company’s website at www.sjindustries.com/108/corporate_governance.html.www.sjindustries.com under Investors > Corporate Governance. Copies of our codes of conduct are also available at no cost to any shareholder who requests them in writing at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037, Attention: Corporate Secretary. Communication with Directors The independent directors met fourfive times during 2011.2014. Topics of these independent sessions included CEO and officer performance and compensation, succession planning, strategy and discussions of corporate governance. Director Higgins, the Lead Independent Director, chaired the meetings of the independent directors. You may communicate with the Lead Independent Director and chairmen of the Audit, Compensation, Corporate Responsibility and Governance Committees by sending an e-mail to leadindependentdirector@sjindustries.com, auditchair@sjindustries.com, compchair@sjindustries.com, govchair@sjindustries.com, or corpresp@sjindustries.com, respectively, or you may communicate with our outside independent directors as a group by sending an e-mail to sjidirectors@sjindustries.com. The charters and scope of responsibility for each of the Company’s committees are located on the Company’s website at www.sjindustries.com. You may also address any correspondence to the chairmen of the committees or to the independent directors at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037. Corporate Governance Materials Shareholders can see the Company’s Corporate Governance Guidelines and Profile, Charters of the Audit Committee, Compensation Committee, Corporate Responsibility Committee, Executive Committee and Governance Committees,Committee, and the CodeCodes of Ethics on the Company’s website at www.sjindustries.com/108/corporate_governance.html.www.sjindustries.com under Investors > Corporate Governance. Copies of these documents, as well as additional copies of this Proxy Statement, are available to shareholders without charge upon request to the Corporate Secretary at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037. MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES The Board of Directors met eight times in 2011.2014. Each director attended 75%75 percent or more of the total number of Board meetings and the Board committee meetings on which he or she served. All current Board members and all nominees for election to the Company’s Board of Directors are required to attend the Company’s annual meetingsAnnual Meetings of stockholders.Shareholders. Attendance is not required if personal circumstances affecting the Board member or director nominee make his or her attendance impracticable or inappropriate. All of the directors attended the 20112014 Annual Meeting of Shareholders. During 2011,2014, each of the Company’s directors also served on the Boards or Executive Committees of one or more of South Jersey Gas Company, South Jersey Energy Company, South Jersey Energy Solutions, LLC, Marina Energy LLC, South Jersey Resources Group, LLC, South Jersey Energy Service Plus, LLC, Energy & Minerals, Inc. and, R&T Group, Inc., and SJI Midstream, LLC, all of which are Company subsidiaries. There are five standing committees of the Board: the Audit Committee; the Compensation Committee; the Corporate Responsibility Committee; the Executive Committee; and the Governance Committee. Audit Committee The Board’s Audit Committee, which met eight times during 2011,2014, was comprised of six “independent” directors through April 2011, five “independent” directors from May through December 2, 2011, and four “independent” directors for the remainder of 2011:in 2014: Sheila Hartnett-Devlin, Chairman; Helen R. Bosley (January – April 2011);Sarah M. Barpoulis; Thomas A. Bracken; Walter M. Higgins III; Shahid Malik (January – December 2, 2011) and Joseph H. Petrowski.Petrowski; and Frank L. Sims. The Board determined that no member of the Audit Committee has a material relationship that would jeopardize such member’s ability to exercise independent judgment. The Board of Directors designated each member of the Audit Committee as an “audit committee financial expert” as defined by applicable Securities and Exchange Commission’s rules and regulations. The Audit Committee: (1) annually engages an independent registered public accounting firm for appointment, subject to Board and shareholder approval, as auditors of the Company and has the authority to unilaterally retain, compensate and terminate the Company’s independent registered public accounting firm; (2) reviews with the independent registered public accounting firm the scope and results of each annual audit; (3) reviews with the independent registered public accounting firm, the Company’s internal auditors and management, the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget, and staffing; and (4) considers the possible effect on the objectivity and independence of the independent registered public accounting firm of any non-audit services to be rendered to the Company. The Audit Committee is also responsible for overseeing the Company’s Risk Management process. At each meeting, theThe Committee analyzes the guidelines and policies that management uses to assess and manage exposure to risk, and analyzes major financial risk exposures and the steps management has taken to monitor and control such exposure. The Committee presents its findings to the full Board, which is charged with approving the Company’s risk appetite. At each Audit Committee meeting, management presents an update of the Company’s risk management activities. The Company has two internal Risk Committees that report to the Audit Committee at least quarterly. The SJI Risk Management Committee (RMC), established by the SJI Audit Committee in 1998, is responsible for overseeing the energy transactions and the related risks for all of SJI’sthe SJI companies. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and business operations. The RMC establishes a general framework for measuring and monitoring business risks related to both financial and physical energy transactions, approves all methodologies used in risk measurement, ensures that objective and independent controls are in place, and presents reports to the Audit Committee reflecting risk management activity, including an annual evaluation of risk on an enterprise-wide basis. A South Jersey Gas Company RMC is responsible for gas supply risk management. Annually, the Board approves the RMC members. Committee members include management from key Company areas such as finance, risk management, legal and gas supply. This RMC meets at least quarterly. The Audit Committee established policies and procedures for engaging the independent registered public accounting firm to provide audit and permitted non-audit services. The Audit Committee evaluates itself on an annual basis. The Board of Directors has adopted a written charter for the Audit Committee, which is available on our website at www.sjindustries.com, under the heading “Investors.” You may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037. Compensation Committee The Board’s Compensation Committee, which met fivesix times during 2011,2014, was comprised five “independent” directors through April 2011,of four “independent” directors from May until November 17, 2011, and five “independent” directors for the remainder of 2011:in 2014: Keith S. Campbell, Chairman; Dr. Shirli M. Billings; Sheila Harnett-Devlin (May - December 2011); Walter M. Higgins III (January - April 2011);Harnett-Devlin; Sunita Holzer (November - December 2011); Shahid Malik (January - April 2011)Holzer; and Joseph H. Petrowski.Frank L. Sims. The Compensation Committee: (1) is responsible for making grants under and otherwise administering the Company’s Stock-Based Compensation Plan; (2) reviews and makes recommendations to the Board of Directors on the operation, performance and administration of the retirement plans, other employee benefit plans and employment policies; and (3) reviews and makes recommendations to the Board of Directors on forms of compensation, including the performance and levels of compensation of the Company’s officers.officers of the Company. The Committee’s charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037. Compensation Committee Interlocks and Insider Participation No member of the Compensation Committee has ever been a Companyan officer or employee of the Company, or any subsidiaryof its subsidiaries or affiliate.affiliates. During the last fiscal year, none of the Company’s executive officers served on a compensation committee or as a director for any other publicly traded company. Corporate Responsibility Committee The Board’s Corporate Responsibility Committee, , which met three timestwice during 2011,2014, was comprised five “independent” directors through April 2011 andof four “independent” directors for the remainder of 2011: William J. Hughes, Chairman (January - April 2011); Helen R. Bosley (January - April 2011);in 2014: Thomas A. Bracken;Bracken, Chairman; Keith S. Campbell; Shirli M. Billings (April – December 2011); and Victor A. Fortkiewicz. Thomas A. Bracken was elected Chairman in April 2011.Fortkiewicz; and Sunita Holzer. The Committee provides oversight, monitoring and guidance of matters related to corporate and social citizenship, public and legal policy, environmental stewardship and compliance, political activities, sustainability, quality of work life, and economic and social vitality in the communities and markets in which the Company operates. The Committee’s charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037. The Committee also oversees the production of the Company’s annual Corporate Sustainability Report, which conveys how the Company links the business with sustainable practices. The 20112014 report is available on our website at www.sjindustries.com or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037. Governance Committee The Board’s Governance Committee, which met sixfour times during 2011,2014, was comprised five “independent” directors through April 2011,of four “independent” directors from May through November 17, 2011, five “independent” directors from November 18, 2011 through December 2, 2011, and four “independent” directors for the remainder of the year: Dr. Shirli M. Billings, Chairman; Sheila Hartnett-Devlin (January – April 2011); Victor A. Fortkiewicz;in 2014: Walter M. Higgins III, (May – December 2011); William J. Hughes (January – April 2011); Sunita Holzer (November – December 2011);Chairman; Sarah M. Barpoulis; Victor A. Fortkiewicz; and Shahid Malik (January – December 2, 2011).Joseph H. Petrowski. Each Committee member satisfies the New York Stock Exchange’s independence requirements. Among its functions, the Governance Committee: (1) maintains a list of prospective candidates for director, including those recommended by shareholders; (2) reviews the qualifications of candidates for director (to review minimum qualifications for director candidates, please see the Company’s Corporate Guidelines available on our website at www.sjindustries.com under the heading “Investors.” These guidelines include consideration of education, experience, judgment, diversity and other applicable and relevant skills as determined by an assessment of the Board’s needs when an opening exists); (3) makes recommendations to the Board of Directors to fill vacancies and for nominees for election to be voted on by the shareholders; and (4) is responsible for monitoring the implementation of the Company’s Corporate Governance Policy. The Committee’s charter is available on our website at www.sjindustries.com under the heading “Investors” or you may obtain a copy by writing to the Corporate Secretary, South Jersey Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037. The Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics required of Board members in the context of the current Board make-up and the Company’s strategic forecast. This assessment includes issues of industry experience, education, general business and leadership experience, judgment, diversity, age, and other applicable and relevant skills as determined by an assessment of the Board’s needs. The diversity assessment includes a review of Board composition with regard to race, gender, age and geography. The Governance Committee will consider nominees for the Board of Directors recommended by shareholders and submitted in compliance with the Company’s bylaws, in writing, to the Corporate Secretary of the Company. Any shareholder wishing to propose a nominee should submit a recommendation in writing to the Company’s Corporate Secretary at 1 South Jersey Plaza, Folsom, New Jersey 08037, indicating the nominee’s qualifications and other relevant biographical information and providing confirmation of the nominee’s consent to serve as a director. Executive Committee The Board’s Executive Committee, which met three times during 2011, comprisesdid not meet in 2014, was comprised of the Chairman of the SJI Board, Chairmen of the subsidiary Boards, Committee Chairs and the Lead Independent Director, and is chaired by the Chairman of the Board. The Committee currently comprises six directors:current members are: Edward J. Graham, Chairman; Dr. Shirli M. Billings; Thomas A. Bracken; Keith S. Campbell; Sheila Hartnett-Devlin; and Walter M. Higgins, III.III; and Joseph H. Petrowski. The Executive Committee may act on behalf of the Board of Directors during intervals between Board meetings in managing the Company’s business and affairs. Pursuant to its charter, the Executive Committee meets on an “as needed” basis. The Board’s Audit Committee comprises foursix directors, each of whom is independent as defined under the listing standards of the New York Stock Exchange and satisfies the additional independence criteria applicable to Audit Committee members. The Board has determined that each member of the Committee is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission. The Audit Committee’s activities and scope of its responsibilities are set forth in a written charter adopted by the Board, and is posted on the Company’s website at www.sjindustries.com under the heading “Investors”. In accordance with its charter adopted by the Board of Directors, the Audit Committee, among other things, assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s accounting, auditing and financial reporting practices. Management is responsible for preparing the Company’s financial statements and for assessing the effectiveness of the Company’s internal control over financial reporting. The independent registered public accounting firm is responsible for examining those financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee reviewed the Company’s audited financial statements for the fiscal year ended December 31, 2011,2014, and management’s assessment of the effectiveness of the Company’s internal control over financial reporting with management and with Deloitte & Touche LLP, the Company’s independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm the mattersall communications required to be discussed by generally accepted auditing standards, including those described in Statement on Auditing Standards (SAS) No. 61 (AICPA Professional Standards, Vol. 1. AU section 380), as amended, and “Communication with Audit Committees,” as amendedadopted by SAS 89 and SAS 90, and Rule 2-07, “Communication with Audit Committees, of Regulation S-X”, and by standards of the Public Company Accounting Oversight Board - United States (PCAOB), relating to the audit’s conduct. in Rule 3200T. The Audit Committee also received written disclosures from Deloitte & Touche LLP regarding its independence from the Company that satisfy applicable PCAOB requirements for independent accountant communications with audit committees concerning auditor independence, and discussed with Deloitte & Touche LLP the independence of that firm. Based on the above-mentioned review and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Company’s audited financial statements and management assessment of the effectiveness of the Company’s internal controls over financial reporting be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2011,2014, for filing with the Securities and Exchange Commission. Audit Committee Sheila Hartnett-Devlin, Chairman Sarah M. Barpoulis Thomas A. Bracken Walter M. Higgins III Joseph H. Petrowski Frank L. Sims Fees Paid to the Independent Registered Public Accounting Firm As part of its duties, the Audit Committee also considered whether the provision of services other than the audit services by the independent registered public accountants to the Company is compatible with maintaining the accountants’ independence. In accordance with its charter, the Audit Committee must pre-approve all services provided by Deloitte & Touche LLP. The Audit Committee discussed these services with the independent registered public accounting firm and Company management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the U.S. Securities and Exchange Commission to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants. The fees for all services provided by the independent registered public accounting firm to the Company during 20112014 and 20102013 are as follows: | FY 2014 | | FY 2013 | | | Audit Fees (a) | | | $ | 2,152,750 | | Audit Fees (a) | | | $ | 1,902,400 | | | Fees per Engagement Letter | | | 1,790,000 | | | | | | Fees per Engagement Letter | | | 1,645,000 | | | | | | | FY 2013 Audit true up billed | | | 85,000 | | | | | | FY 2012 Audit true up billed | | | 207,400 | | | | | | | FY 2013 SJG Form 10-K SEC Comment Letter | | | - | | | | | | FY 2012 Form 10-K SEC Comment Letter | | | 50,000 | | | | | | | Audit work related to 2014 non-routine events | | | 274,000 | | | | | | | | | | | | | | | | Registration Form S-3 | | | 3,750 | | | | | | | | | | | | | | | | Audit-Related Fees (b) | | | | | | | 110,000 | | Audit-Related Fees (b) | | | | 108,000 | | | Benefit Plan Audits | | | 110,000 | | | | | | Benefit Plan Audits | | | 100,000 | | | | | | | SJESP Separate Report | | | - | | | | | | SJESP Separate Report | | | 4,000 | | | | | | | South Jersey Energy Company | | | - | | | | | | South Jersey Energy Company | | | 4,000 | | | | | | | Tax Fees (c) | | | | 214,557 | | Tax Fees (c) | | | | 80,800 | | | Form 5500 & Form 8955-SSA | | | 10,890 | | | | | | Form 5500 | | | 8,800 | | | | | | | Tax compliance | | | 153,667 | | | | | | Review of Federal Tax Return | | | 22,000 | | | | | | | Fees related to tangible property regulations phase II | | | 50,000 | | | | | | Fees related to tangible property regulations | | | 50,000 | | | | | | | All Other Fees | | | | | | All Other Fees | | | | | | | Total | | | $ | 2,477,307 | | Total | | | $ | 2,091,200 | |
| FY 2011 | | | FY 2010 | | | | | | | | | | | | | | | | | | | | | Audit Fees (a) | | | | | $ | 1,368,800 | | | Audit Fees (a) | | | | | $ | 1,120,776 | | | Fees per Engagement Letter | | | 1,268,400 | | | | | | | Fees per Engagement Letter | | | 1,053,000 | | | | | | | FY 2010 Audit true up billed | | | 100,400 | | | | | | | FY 2009 Audit true up billed | | | 67,776 | | | | | | | Audit-Related Fees (b) | | | | | | | 105,500 | | | Audit-Related Fees (b) | | | | | | | 91,000 | | | Benefit Plan Audits | | | 41,000 | | | | | | | Benefit Plan Audits | | | 39,000 | | | | | | | SJESP Separate Report | | | 12,000 | | | | | | | SJESP Separate Report | | | - | | | | | | | South Jersey Energy Company | | | 7,500 | | | | | | | South Jersey Energy Company | | | - | | | | | | | LVE Audit | | | 45,000 | | | | | | | LVE Audit | | | 52,000 | | | | | | | Tax Fees (c) | | | | | | | 27,000 | | | Tax Fees (c) | | | | | | | 25,000 | | | Form 5500 | | | 7,000 | | | | | | | Form 5500 | | | 6,000 | | | | | | | Review of Federal Tax Return | | | 20,000 | | | | | | | Review of Federal Tax Return | | | 19,000 | | | | | | | All Other Fees | | | | | | | | | | All Other Fees | | | | | | | | | | Total | | | | | | $ | 1,501,300 | | | Total | | | | | | $ | 1,236,776 | |
(a) Fees for audit services billed or expected to be billed relating to fiscal 20112014 and 20102013 include audits of the Company’s annual financial statements, evaluation and reporting on the effectiveness of the Company’s internal controls over financial reporting, reviews of the Company’s quarterly financial statements, comfort letters, consents and other services related to Securities and Exchange Commission matters. (b) Fees for audit-related services provided during fiscal 20112014 and 20102013 consisted of employee benefit plan audits, other, compliance audits, and registrar audits. (c) Fees for tax services provided during fiscal 20112014 and 20102013 consisted of tax compliance.compliance and compliance-related research. Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred to document, compute, and obtain government approval for amounts to be included in tax filings and Federal, state and local income tax return assistance. COMPENSATION OF DIRECTORS In 2010,2011, SJI’s Director Compensation Program was comprised of the following components: 1) An annual cash retainer for Board and Committee service payable monthly; 2) Meeting fees;fees for Committee meetings in excess of four per year; 3) Annual restricted stock grant with a three-year3-year vesting period and; 4) Additional retainers for the Lead Independent Director and Committee Chairs In 2010,2011, the Board engaged Frederic W. Cook & Co., Inc. (“Cook”)(Cook) as its consultant to review the Company’s Director Compensation Program (“Program”)(Program) to ensure that the Board attracts and retains highly qualified directors. Cook evaluated total compensation and the structure of the Director Compensation programs. Cook made findings regarding compensation levels and the Program structure, including a finding that two elements of SJI director compensation program were not consistent with emerging trends and potentially could be perceived as compromising director independence: Restricted stock unit vesting period is three years. The majority of SJI peer companies grant equity awards that have vesting periods of one year or less. Providing life insurance and accident insurance are no longer a prevalent practice. Cook was retained to perform the subsequent studies, including engagement in 2013 to review Director Compensation and provide any recommendations for 2014. For that study, the reference points were the director compensation for the following peer companies, consistent with the group used to assess the competitiveness of the Company’s peer companies - AGL Resources Inc., Atmos Energy Corp.,Executive Compensation Program: Black Hills Corp., CH Energy Group, Inc., Chesapeake Utilities Corp., Energen, Corp., Laclede Group Inc., New Jersey Resources Corp., Nicor Inc., Northwest Natural Gas Co., Piedmont Natural Gas Co., Southern Union Co.Questar Corp., Southwest Gas Corp., UIL Holdings Corp., Vectren Corp. and WGL Holdings Inc. In a study presented in November 2013, Cook made the following findings regarding the 2010 Program:found as follows: On a “per director” basis, the program approximated the median of peer group practice and was consistent with the Company’s targeted competitive positioning for non-employee director and executive compensation. 24
Cash compensation was between the median and the 75th percentile. | ●
| SJI director total compensation approximated the peer group median on a “per director” basis, consistent with the Company’s targeted competitive positioning. |
| ●
| Cash compensation was between the 25th percentile and median. |
| ●
| Equity compensation was between the median and the 75th percentile. |
| ●
| The structure of SJI’s director compensation program was generally consistent with peer group practice, however, SJI’s differentiated Committee meeting fee structure was administratively complex and was not consistent with peer group practice (i.e., majority of peers have a flat fee structure). |
| | Audit and Compensation Committee chair retainers approximated the median. |
| | Governance Committee chair retainer of $5,000 was at the 25th percentile; peer group median retainer was $6,000. |
| | Two elements of SJI director compensation program were not consistent with emerging trends and potentially could be perceived as compromising director independence: |
| | Restricted stock unit vesting period was three years. The majority of SJI peer companies grant equity awards that have vesting periods of one year or less. |
| | Providing life insurance and accident insurance are no longer a prevalent practice. |
Cook substantiated their findings with regard to Director compensation with the following information:
Director Cash Compensation
| | | Board | | | Committee | | | | | | | | | | | | | | | | | | | Annual Cash Retainers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | Presiding Director1 | | Non- Executive Chairman(1) | | | Board Member | | | Fees per Meeting | | | Total Mtg. Fees(2) | | | Member Retainers | | | Fees per Meeting | | | Total Mtg. Fees(3) | | | Total Cash Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | A | | | | B | | | C=B*12 | | | | D | | | | E | | | F=E*9 | | | G=A+C+D+F | | | AGL Resources | | $ | 20,000 | | | | | $ | 35,000 | | | $ | 2,000 | | | $ | 24,000 | | | | | | | $ | 2,000 | | | $ | 18,000 | | | $ | 77,000 | | | Atmos Energy | | | 25,000 | | | | | | 75,000 | | | | | | | | | | | | | | | | | | | | | | | | 75,000 | | | Black Hills | | | 15,000 | | | | | | 36,000 | | | | 1,250 | | | | 15,000 | | | | | | | | 1,250 | | | | 11,250 | | | | 62,250 | | | CH Energy Group | | | 7,500 | | | | | | 60,000 | | | | | | | | | | | | | | | | | | | | | | | | 60,000 | | | Chesapeake Utilities | | | | | $ | 80,000 | | | | 18,500 | | | | 1,200 | (4) | | | 14,400 | | | | | | | | 750 | (4) | | | 6,750 | | | | 39,650 | | | Energen | | | 3,000 | | | | | | | 51,000 | | | | 1,500 | | | | 18,000 | | | | 1,500 | | | | 1,500 | | | | 13,500 | | | | 84,000 | | | Laclede Group | | | 12,000 | | | | | | | 55,000 | | | | 2,000 | | | | 24,000 | | | | | | | | 1,000 | | | | 9,000 | | | | 88,000 | | | New Jersey Resources | | | 10,000 | | | | | | | 35,000 | | | | 1,500 | | | | 18,000 | | | | | | | | 1,500 | | | | 13,500 | | | | 66,500 | | | Nicor | | | | (5) | | | | | | 50,000 | | | | 1,500 | | | | 18,000 | | | | | | | | | | | | | | | | 68,000 | | | Northwest Natural Gas | | | | | | 60,000 | | | | 80,000 | | | | 1,500 | | | | 18,000 | | | | | | | | 1,500 | | | | 13,500 | | | | 111,500 | | | Piedmont Natural Gas | | | 10,000 | | | | | | | 28,000 | | | | 1,500 | | | | 18,000 | | | | | | | | 1,500 | | | | 13,500 | | | | 59,500 | | | Southern Union | | | 10,000 | | | | | | | 90,000 | | | | | | | | | | | | | | | | | | | | | | | | 90,000 | | | Southwest Gas | | | 50,000 | | | | | | | 40,000 | | | | 1,650 | | | | 19,800 | | | | | | | | 1,650 | | | | 14,850 | | | | 74,650 | | | Vectren | | | | (5) | | | | | | 30,000 | | | | 1,250 | | | | 15,000 | | | | | | | | 1,250 | | | | 11,250 | | | | 56,250 | | | WGL Holdings | | | 5,000 | | | | | | | 50,000 | | | | 1,500 | (6) | | | 18,000 | | | | | | | | 1,500 | (6) | | | 13,500 | | | | 81,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Prevalence | | | 67 | | | 20 | % | | | 100 | % | | | 80 | % | | | 80 | % | | | 7 | % | | | 73 | % | | | 73 | % | | | 100 | % | | 75th Percentile | | $ | 14,250 | | | | | | $ | 57,500 | | | $ | 1,538 | | | $ | 18,450 | | | $ | 1,500 | | | $ | 1,500 | | | $ | 13,500 | | | $ | 82,750 | | | Median | | | 10,000 | | | | | | | 50,000 | | | | 1,500 | | | | 18,000 | | | | 1,500 | | | | 1,500 | | | | 13,500 | | | | 74,650 | | | 25th Percentile | | | 8,125 | | | | | | | 35,000 | | | | 1,438 | | | | 17,250 | | | | 1,500 | | | | 1,250 | | | | 11,250 | | | | 61,125 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SJI | | $ | 12,500 | | | | | | $ | 40,000 | | | $ | 1,500 | | | $ | 18,000 | | | $ | 0 | | | $ | 750 | (7) | | $ | 9,525 | (8) | | $ | 67,525 | |
Notes:
Percentiles exclude zeros, are independently arrayed, and therefore do not add across
1 | Amounts shown here represent retainers in excess of regular Board retainer |
2 | Assumes attendance at 12 Board meetings (number of SJI Board meetings in fiscal 2009) |
3 | Assumes attendance at 9 committee meetings (number of estimated committee meetings per director in fiscal 2009) |
4 | Represents fees for Board and Committee meetings held on the same day. If more than one Committee meeting is held (without a Board meeting) directors receive $1,000 for the first Committee meeting and an additional $750 for each subsequent Committee meeting attended on that same day |
5 | Company has a presiding director, but does not provide additional compensation for the position |
6 | Represents fees for Board and Committee meetings held on the same day. If meetings are held on different days the fee is $1,200 per meeting |
7 | $750 on Board meeting day, $1,500 meeting fee for first committee meeting held on a non-board day, $750 per additional committee meeting held on a non-board day |
8 | Average committee meeting fee per director based on aggregate fees divided by the number of non-employee directors |
Director Equity Compensation
| | | | | | | | Stock Options | | | Full-Value Shares | | | | | | | | | | | | | | | | | | | | | | Company | | Description of Grants | | Share Price1 | | | Annual | | | Present Value | | | Annual | | | Initial2 | | | Present lue | | | Total Equity Value | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | A | | | | B | | | E=A*(B*4 +C)/5*D | | | | F | | | | G | | | H=A*(F*4+ G)/5 | | | I=E+H | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AGL Resources | | Initial grant of 1,000 common shares and an annual grant of common stock valued at $70,000; immediately vested | | $ | 38.36 | | | | | | | | | | | | 1,825 | | | | 1,000 | | | $ | 63,672 | | | $ | 63,672 | | Atmos Energy | | Annual grant of 2,500 phantom stock units; immediately vested | | $ | 29.25 | | | | | | | | | | | | 2,500 | | | | | | | $ | 73,125 | | | $ | 73,125 | | Black Hills | | Annual grant of restricted stock valued at $50,000; 1-year vesting on a quarterly basis | | $ | 31.20 | | | | | | | | | | | | 1,603 | | | | | | | $ | 50,000 | | | $ | 50,000 | | CH Energy Group | | Annual grant of phantom shares valued at $65,000; immediately vested and deferred until termination of Board service | | $ | 44.16 | | | | | | | | | | | | 1,472 | | | | | | | $ | 65,000 | | | $ | 65,000 | | Chesapeake Utilities | | Annual grant of 650 shares of common stock; immediately vested | | $ | 36.22 | | | | | | | | | | | | 650 | | | | | | | $ | 23,543 | | | $ | 23,543 | | Energen | | Annual grant of common stock valued at $72,000; immediately vested | | $ | 45.72 | | | | | | | | | | | | 1,575 | | | | | | | $ | 72,000 | | | $ | 72,000 | | Laclede Group | | Initial grant of 800 restricted shares and an annual grant of 1,600 restricted shares; shares vest on directors 65th birthday | | $ | 34.42 | | | | | | | | | | | | 1,600 | | | | 800 | | | $ | 49,565 | | | $ | 49,565 | | | New Jersey Resources | | Annual grant of 1,200 common shares; immediately vested | | $ | 39.22 | | | | | | | | | | | | 1,200 | | | | | | | $ | 47,064 | | | $ | 47,064 | | Nicor | | Annual cash award with value equal to 1,200 common shares; immediately vested | | $ | 45.82 | | | | | | | | | | | | 1,200 | | | | | | | $ | 54,984 | | | $ | 54,984 | |
| Northwest Natural Gas | | Directors do not receive equity grants | | $ | 47.45 | | | | | | | | | | | | | | | | | | | | Piedmont Natural Gas | | Annual grant of $30,000 required to be invested in company stock; immediately vested | | $ | 29.00 | | | | | | | | | | 1,034 | | | | | | $ | 30,000 | | | $ | 30,000 | | Southern Union | | Annual grant of 1,000 restricted shares and stock options equal to the grant date value of 4,000 restricted shares; 1-year vesting | | $ | 24.06 | | | | 14,648 | | | $ | 96,240 | | | | 1,000 | | | | | | $ | 24,060 | | | $ | 120,300 | | Southwest Gas | | Annual grant of 1,550 restricted stock units; 3-year vesting | | $ | 33.59 | | | | | | | | | | | | 1,550 | | | | | | $ | 52,065 | | | $ | 52,065 | | Vectren | | Annual grant of stock unit awards valued at $40,000; 1-year vesting | | $ | 25.87 | | | | | | | | | | | | 1,546 | | | | | | $ | 40,000 | | | $ | 40,000 | | | WGL Holdings | | Annual grant of 1,800 common shares; immediately vested | | $ | 37.78 | | | | | | | | | | | | 1,800 | | | | | | $ | 68,004 | | | $ | 68,004 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Prevalence | | | | | | | | | 7 | % | | | 7 | % | | | 93 | % | | | 13 | % | | | 93 | % | | | 93 | % | | 75th Percentile | | | | | | | | | | | | | | | | | | | | | | | | $ | 64,668 | | | $ | 67,253 | | | Median | | | | | | | | | | | | | | | | | | | | | | | | | 51,032 | | | | 53,524 | | | 25th Percentile | | | | | | | | | | | | | | | | | | | | | | | | | 41,766 | | | | 47,689 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SJI | | Annual grant of restricted stock valued at $60,000; 3-year vesting | | $ | 49.47 | | | | | | | | | | | | 1,213 | | | | | | | $ | 60,000 | | | $ | 60,000 | |
Percentiles exclude zeros, are independently arrayed, and therefore do not add across
1 | Closing share price on 09/30/10; binomial values calculated using ASC Topic 718 assumptions from most recent annual report |
2 | Initial grants are annualized over a five-year period; assumes directors do not receive both an initial grant and an annual grant in the same year unless otherwise stated |
Director Total Compensation
| | | Cash Compensation | | | Equity Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | Board Retainer | | | Total Cash | | | Options | | | Full-Value Shares | | | Total Equity | | | Total Comp. | | | Non- Employee Directors | | | Aggregate Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AGL Resources | | $ | 35,000 | | | $ | 77,000 | | | | | | | $ | 63,672 | | | $ | 63,672 | | | $ | 140,672 | | | | 11 | | | $ | 1,547,392 | | | Atmos Energy | | | 75,000 | | | | 75,000 | | | | | | | | 73,125 | | | | 73,125 | | | | 148,125 | | | | 13 | | | | 1,925,625 | | | Black Hills | | | 36,000 | | | | 62,250 | | | | | | | | 50,000 | | | | 50,000 | | | | 112,250 | | | | 9 | | | | 1,010,250 | | | CH Energy Group | | | 60,000 | | | | 60,000 | | | | | | | | 65,000 | | | | 65,000 | | | | 125,000 | | | | 8 | | | | 1,000,000 | | | Chesapeake Utilities | | | 18,500 | | | | 39,650 | | | | | | | | 23,543 | | | | 23,543 | | | | 63,193 | | | | 11 | | | | 695,123 | | | Energen | | | 51,000 | | | | 84,000 | | | | | | | | 72,000 | | | | 72,000 | | | | 156,000 | | | | 10 | | | | 1,560,000 | | | Laclede Group | | | 55,000 | | | | 88,000 | | | | | | | | 49,565 | | | | 49,565 | | | | 137,565 | | | | 8 | | | | 1,100,518 | |
| New Jersey Resources | | | 35,000 | | | | 66,500 | | | | | | | 47,064 | | | | 47,064 | | | | 113,564 | | | | 10 | | | | 1,135,640 | | | Nicor | | | 50,000 | | | | 68,000 | | | | | | | 54,984 | | | | 54,984 | | | | 122,984 | | | | 12 | | | | 1,475,808 | | | Northwest Natural Gas | | | 80,000 | | | | 111,500 | | | | | | | | | | | | | | | 111,500 | | | | 10 | | | | 1,115,000 | | | Piedmont Natural Gas | | | 28,000 | | | | 59,500 | | | | | | | 30,000 | | | | 30,000 | | | | 89,500 | | | | 12 | | | | 1,074,000 | | | Southern Union | | | 90,000 | | | | 90,000 | | | | 96,240 | | | | 24,060 | | | | 120,300 | | | | 210,300 | | | | 8 | | | | 1,682,400 | | | Southwest Gas | | | 40,000 | | | | 74,650 | | | | | | | | 52,065 | | | | 52,065 | | | | 126,715 | | | | 11 | | | | 1,393,860 | | | | | | 30,000 | | | | 56,250 | | | | | | | | 40,000 | | | | 40,000 | | | | 96,250 | | | | 10 | | | | 962,500 | | | WGL Holdings | | | 50,000 | | | | 81,500 | | | | | | | | 68,004 | | | | 68,004 | | | | 149,504 | | | | 7 | | | | 1,046,528 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Prevalence | | | 100 | % | | | 100 | % | | | 7 | % | | | 93 | % | | | 93 | % | | | 100 | % | | | | | | | 100 | % | | 75th Percentile | | $ | 57,500 | | | $ | 82,750 | | | | | | | | | | | $ | 67,253 | | | $ | 144,399 | | | | 11 | | | $ | 1,511,600 | | | Median | | | 50,000 | | | | 74,650 | | | | | | | | | | | | 53,524 | | | | 125,000 | | | | 10 | | | | 1,115,000 | | | 25th Percentile | | | 35,000 | | | | 61,125 | | | | | | | | | | | | 47,689 | | | | 111,875 | | | | 9 | | | | 1,028,389 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SJI | | $ | 40,000 | | | $ | 67,525 | | | | | | | $ | 60,000 | | | $ | 60,000 | | | $ | 127,525 | | | | 10 | | | $ | 1,275,250 | |
Percentiles exclude zeros, are independently arrayed, and therefore do not add across
Equity compensation was between the 25th percentile and the median. 29
Significant changes to director compensation levels were not warranted; however, the Committee could consider an increase to the RSU grant in anticipation of market movement.| | | | | | Equity Compensation | | | | | | | | | | | | | | | | | Company | | Cash Comp. | | | Options | | | Full-Value Shares | | | Total | | | Total Comp. | | | | | | | | | | | | | | | | | | | | AGL Resources | | | 55 | % | | | | | | | 45 | % | | | 45 | % | | | 100 | % | | Atmos Energy | | | 51 | % | | | | | | | 49 | % | | | 49 | % | | | 100 | % | | Black Hills | | | 55 | % | | | | | | | 45 | % | | | 45 | % | | | 100 | % | | CH Energy Group | | | 48 | % | | | | | | | 52 | % | | | 52 | % | | | 100 | % | | Chesapeake Utilities | | | 63 | % | | | | | | | 37 | % | | | 37 | % | | | 100 | % | | Energen | | | 54 | % | | | | | | | 46 | % | | | 46 | % | | | 100 | % | | Laclede Group | | | 64 | % | | | | | | | 36 | % | | | 36 | % | | | 100 | % | | New Jersey Resources | | | 59 | % | | | | | | | 41 | % | | | 41 | % | | | 100 | % |
| Nicor | | | 55 | % | | | | | | 45 | % | | | 45 | % | | | 100 | % | | Northwest Natural Gas | | | 100 | % | | | | | | | | | | 0 | % | | | 100 | % | | Piedmont Natural Gas | | | 66 | % | | | | | | 34 | % | | | 34 | % | | | 100 | % | | Southern Union | | | 43 | % | | | 46 | % | | | 11 | % | | | 57 | % | | | 100 | % | | Southwest Gas | | | 59 | % | | | | | | | 41 | % | | | 41 | % | | | 100 | % | | Vectren | | | 58 | % | | | | | | | 42 | % | | | 42 | % | | | 100 | % | | WGL Holdings | | | 55 | % | | | | | | | 45 | % | | | 45 | % | | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | | 75th Percentile | | | 61 | % | | | | | | | | | | | 46 | % | | | 100 | % | | Average | | | 59 | % | | | | | | | | | | | 41 | % | | | 100 | % | | Median | | | 55 | % | | | | | | | | | | | 45 | % | | | 100 | % | | 25th Percentile | | | 54 | % | | | | | | | | | | | 39 | % | | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | | SJI | | | 53 | % | | | | | | | 47 | % | | | 47 | % | | | 100 | % |
Percentiles exclude zeros,the Company’s director compensation program was generally consistent with peer company policy and that no changes to SJI’s Program are independently arrayed, and therefore do not add across
proposed.The Program design strongly supports the long-term shareholder alignment objective through use of RSUs as the sole equity grant type and director stock ownership guidelines; however, the ownership guideline of five times the cash retainer of $40,000 was below the 25th percentile of the peer group practice. 30
The use of additional retainers recognizes responsibilities and the time commitment associated with serving as lead independent director or chairing a committee.SJI’s Lead Independent Director and Committee Retainers | | | Audit Committee | | | Compensation Committee | | | Nominating & Governance Committee | | | | | | | | | | | | | | Company | | Chair1 | | | Member | | | Chair1 | | | Member | | | Chair1 | | | Member | | | | | | | | | | | | | | | | | | | | | | | AGL Resources | | $ | 12,000 | | | | | | $ | 8,000 | | | | | | $ | 6,000 | | | | | | Atmos Energy | | | 5,000 | | | | | | | 5,000 | | | | | | | 5,000 | | | | | | Black Hills | | | 10,000 | | | | | | | 6,000 | | | | | | $ | 6,000 | | | | | | CH Energy Group | | | 10,000 | | | | | | | 7,500 | | | | | | | 7,500 | | | | | | Chesapeake Utilities | | | | | | | | | | | | | | | | | | | | | | | Energen | | | 12,000 | | | | 3,000 | | | | 10,000 | | | | | | | | | | | | | Laclede Group | | | 10,000 | | | | | | | | 10,000 | | | | | | | 6,000 | | | | | | New Jersey Resources | | | 10,000 | | | | | | | | 10,000 | | | | | | | 5,000 | | | | | | Nicor | | | 15,000 | | | | | | | | 15,000 | | | | | | | 15,000 | | | | |
| Northwest Natural Gas | | | 15,000 | | | | | | | | 10,000 | | | | | | | 5,000 | | | | | | Piedmont Natural Gas | | | 8,000 | | | | | | | | 5,000 | | | | | | | 5,000 | | | | | | Southern Union | | | 10,000 | | | | | | | | 10,000 | | | | | | | 10,000 | | | | | | Southwest Gas | | | 10,000 | | | | | | | | 5,000 | | | | | | | 5,000 | | | | | | Vectren | | | 7,500 | | | | | | | | 5,000 | | | | | | | 5,000 | | | | | | WGL Holdings | | | 10,000 | | | | | | | | 7,500 | | | | | | | 7,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Prevalence | | | 93 | % | | | 7 | % | | | 93 | % | | | 0 | % | | | 87 | % | | | 0 | % | | 75th Percentile | | $ | 11,500 | | | | | | | $ | 10,000 | | | | | | | $ | 7,500 | | | | | | | Median | | | 10,000 | | | | | | | | 7,750 | | | | | | | | 6,000 | | | | | | | 25th Percentile | | | 10,000 | | | | | | | | 5,250 | | | | | | | | 5,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SJI | | $ | 10,000 | | | | | | | $ | 8,000 | | | | | | | $ | 5,000 | | | | | |
Notes:
1 Amounts exclude committee memberChair retainers
are aligned with peer group median practice. Based on Cook’s findings and recommendations, in 2011,2013 the Company paid non-employee directors as follows: I. Compensation: Non – Employee Directors A. Board Service | 1. | Cash - | Annual Retainer for Board Service: | | $ | 55,000 | * | | | | Annual Retainer for Committee Meetings: | | | 15,000 | | | | | Annual Retainer (payable monthly): | | $ | 70,000 | |
2. Restricted Stock – SJI shares with a total value of $75,000 awarded annually in January. The value of the shares is based on the daily average share price for the period July 1 through December 31 of the prior year. 3. Lead Independent Director - Annual Retainer (payable monthly): $13,500 4. Independent Subsidiary Chair Retainer: $8,000 B.Committee Service 1. Annual Chairman Retainers (payable monthly): | Audit | | $ | 10,000 | | | Compensation | | $ | 10,000 | | | Governance | | $ | 6,000 | | | Corporate Responsibility | | $ | 5,000 | |
2. Meeting Fee: $1,500 for each Committee meeting in excess of four meetings per year. 3. Ad Hoc Committees: In the event a Committee is formed for a special project, the Committee members will be paid $1,500 per meeting and the Chairman will be paid a retainer in an amount approved by the Board of Directors. II. Other Benefits & Items A. $ 50,000 Group Life Insurance** B. $250,000 24 Hr. Accident Protection Insurance C. Restricted Stock Deferral Plan D. D&O Insurance - $35 Million w/$10 Million Entity Sublimit No Deductible for D&O $200,000 Deductible for Corporation E. Travel Expenses Reimbursed Upon Request III. Share Ownership Requirements Non-employee members of the Board of Directors are required, within six years of becoming a director of the Company or any of its principal subsidiaries, or within six years of a change of the share ownership guidelines, to own shares of Company Common Stock with a market value equal to a minimum of five times the current value of a Director’s annual retainer for Board Service. Shares owned outright will be combined with restricted shares awarded as part of the annual stock retainer for the purpose of meeting these requirements. | 1) * | All meeting fees, other than thoseCommencing January 1, 2014, the cash allocation was revised to be paid when a Committee meets in excess of four times per year, were eliminated, and the annual retainer was increased from $40,000 to $70,000 comprising $40,000$55,000 for Board service and $30,000$15,000 for Committee meetings. For any Committee meetings in excess of four meetings, the Committee members were paid $1,500 per meeting;service from $40,000 and 30,000, respectively. |
| 2) ** | Commencing with the restricted stock award granted in January 2012, the vesting period for the Restricted Stock units was reduced from three years to one year;
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| 3) | The life insurance and accidentLife insurance benefits were eliminated for all directorsDirectors elected after April 2011, and was grandfathered2011. The life insurance coverage remained in place for any directorsDirectors elected prior to or during or before April 2011 and;
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| 4) | The retainer for the Governance Committee chairman was increased from $5,000 to $6,000.
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In March of 2012, the Governance Committee nominated an Independent Director to serve as Chairman of the South Jersey Energy Solutions, LLC (SJES) Executive Committee. Based on the recommendation of Cook, the Board determined that an additional retainer would be paid for independent directors who serve as Chairman of the Board of SJI and its subsidiaries. Commencing May 2012, an $8,000 annual retainer was paid to the Chairman of the SJES Executive Committee. Director Compensation for Fiscal Year 20112014 | Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) (1) (2) | | | Option Awards ($) | | | Non-Equity Incentive Plan Compensation ($) | | | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) (3) | | | Total ($) | | | | | | | | | | | | | | | | | | | | | | | | | | Shirli M. Billings | | | 82,000 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 147,366 | | | Helen R. Bosley (4) | | | 24,833 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 92,199 | | | Thomas A. Bracken | | | 79,333 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 144,699 | | | Keith S. Campbell | | | 79,500 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 144,866 | | | Victor A. Fortkiewicz (5) | | | 73,000 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 138,366 | | | Sheila Hartnett-Devlin | | | 89,000 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 154,366 | | | Sunita Holzer (6) | | | 5,833 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 5,833 | | | Walter M. Higgins III | | | 93,000 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 158,366 | | | William J. Hughes (4) | | | 28,000 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 93,366 | | | Shahid Malik (7) | | | 71,667 | | | | 65,000 | * | | | - | | | | - | | | | - | | | | 366 | | | | 137,033 | | | Joseph H. Petrowski | | | 76,000 | | | | 65,000 | | | | - | | | | - | | | | - | | | | 366 | | | | 141,366 | |
*Malik’s shares were forfeited in December 2011 when he resigned from the Board.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (2) | Total ($) | | Sarah M. Barpoulis | | 76,000 | 70,000 | | | - | | - | | - | | - | | 146,000 | | Thomas A. Bracken | | 81,000 | 70,000 | | | - | | - | | - | | 390 | | 151,390 | | Keith S. Campbell | | 83,000 | 70,000 | | | - | | - | | - | | 390 | | 153,390 | | Victor A. Fortkiewicz | | 70,000 | 70,000 | | | - | | - | | - | | 390 | | 140,390 | | Sheila Hartnett-Devlin | | 89,000 | 70,000 | | | - | | - | | - | | 390 | | 159,390 | | Sunita Holzer | | 73,000 | 70,000 | | | - | | - | | - | | - | | 143,000 | | Walter M. Higgins III | | 95,500 | 70,000 | | | - | | - | | - | | 390 | | 165,890 | | Frank L. Sims | | 79,000 | 70,000 | | | - | | - | | - | | - | | 149,000 | | Joseph H. Petrowski | | 84,000 | 70,000 | | | - | | - | | - | | 390 | | 154,390 |
Footnotes (1) RepresentsPer the 2014 Director Compensation Program, the independent directors were granted 1,290 restricted stock units valuing $75,000 using the daily closing prices for the last two quarters of 2013. The above chart reflects the aggregate grant date fair value of restricted common stock awards granted in the respective fiscal year, calculated in accordance with FASB Accounting Standards Codification Topic 718, Compensation - Stock Compensation. Restricted stock grants to each director were made in January 2011 of 1,222 shares usingCompensation, which requires that the average ofgrant be measured at the daily closing prices for the last two quarters of 2010.grant date fair value. (2) In January 2012, each director listed above, with the exception of Helen Bosley, William J. Hughes and Shahid Malik, who are no longer Directors, received shares of the Company’s Common Stock with a value of $70,046. As of January 2012, each current director, except Directors Fortkiewicz and Holzer, has three outstanding restricted stock grants as follows: | Grant Date | | Stock Grant Cash Allocation | | | # of Shares | | | Value as of January 4, 2012 | | | | | | | | | | | | | | 2010 | | $ | 60,000 | | | | 1,670 | | | $ | 94,489 | | | 2011 | | $ | 60,000 | | | | 1,222 | | | $ | 69,141 | | | 2012 | | $ | 65,000 | | | | 1,238 | | | $ | 70,046 | |
(3) Represents group life insurance payments.payments and accidental death and dismemberment.
(4) Helen Bosley and William J. Hughes’ directorships ended April 2011.
(5) Director Fortkiewicz joined the Board in November 2010 and received his first stock award in January 2011.
(6) Director Holzer joined the Board in November 2011 and received her first stock award in January 2012.
(7) Director Malik resigned from the Board effective December 2, 2011.
Mr. Campbell is Chairman of Mannington Mills, Inc., which purchases natural gas from Company subsidiaries. Commencing January 2004, as a result of winning a competitive bid, another Company subsidiary owns and operates a cogeneration facility that provides electricity to Mannington Mills, Inc. Review and Approval Policies and Procedures for Related Party Transactions Pursuant to a policy adopted by the Company’s Governance Committee, the Company’s executive officers and directors, and principal stockholders, including their immediate family members and affiliates, are not permitted to enter into a related party transaction with the Company without the Governance Committee’s or other independent Board committee’s prior consent, in the casecases in which it is inappropriate for the Governance Committee to review the transaction due to a conflict of interest. Any request for the Company to enter into a transaction with an executive officer, director, principal stockholder, or any of these persons’ immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to the Governance Committee for review, consideration and approval. We require all of the Company’s directors, executive officers and employees to report to the Governance Committee any related party transaction. In approving or rejecting the proposed agreement,transaction, the Governance Committee shall consider the facts and circumstances available and deemed relevant to the Committee. The Governance Committee shall approve only those agreementstransactions that, in light of known circumstances, are in, or are not inconsistent with, the Company’s best interests, as the Governance Committee determines in the good faith exercise of its discretion. COMPENSATION DISCUSSION & ANALYSIS Compensation Committee Report We have reviewed the following Compensation Discussion and Analysis with management. Based on our review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement, Form 10-K and Annual Report for the year ended December 31, 2011.2014. Compensation Committee Keith S. Campbell, Chairman Dr. Shirli M. Billings
Sheila Hartnett-Devlin Sunita Holzer Joseph H. PetrowskiFrank L. Sims
The following is a discussion and analysis of our executive compensation programs as they apply to our Chairman/President/Chief Executive Officer (CEO), Chief Financial Officer (CFO) and the next three most highly compensated executive officers who were serving as executive officers in fiscal year 20112014 (our “Named Executives”). Our Named Executives for 20112014 were Edward J. Graham, David A. Kindlick,Stephen H. Clark, Michael J. Renna, Jeffrey E. DuBois and Kevin D. Patrick.Gina Merritt-Epps. Executive Summary Fiscal year 2014 was a year of significant investment in our businesses in support of future earnings growth. Specifically, we achieved strong financial growth in the following key performance measures: We produced record Economic Earnings* in 2014, up 7.1 percent over 2013 performance; and Economic Earnings per share exceeded prior year results at 3.13 per share. This amount represents a 3.3 percent increase in Economic Earnings per share, despite an increase in shares outstanding of 4 percent. In addition, our utility and non-utility energy project businesses drove performance in the following areas: We made $343 million in capital investment in our businesses and raised $80.7 million of equity through our dividend reinvestment plan to support that investment; and We increased our annual dividend to $2.01 per share, a 6.3 percent increase over the year end 2013 annual dividend. Highlights at our operating businesses included: Utility operations grew earnings by 6.8 percent as we continued to invest heavily in the improvement of natural gas transmission and distribution systems and increased our customer base by 4,598 net customers during 2014; Our retail and wholesale commodity businesses made substantial contributions, providing $13 million to Economic Earnings in 2014, as compared to a loss of $5.8 million in 2013. The performance improvement was realized largely through the addition of significant pipeline capacity over the last two years and our ability to optimize the value of the capacity we control when favorable market conditions occurred. Our energy production businesses contributed $24.6 million in 2014 as compared to $40.6 million in 2013. This variance was primarily due to a reduction in investment tax credits associated with renewable energy projects, and a reserve for uncollectable accounts and lower operating income recognized at one of Marina’s joint venture energy projects whose primary customer is currently working through bankruptcy proceedings. *Economic Earnings is a financial measure that is not calculated in conformance with generally accepted accounting principles (GAAP). For a full discussion of Economic Earnings and a reconciliation to GAAP income, please see our most recent Form 10-K filed on February 27, 2015. The Compensation Committee (“Committee”) of the Board of Directors is committed to providing a strong pay for performance executive compensation program that includes an appropriate mix of short-term and long-term incentives to drive shareholder value. Based upon this philosophy and our 2014 performance, the Compensation Committee took the following actions with respect to the 2014 compensation for Named Executives: Continued to grant 100 percent of equity as performance awards; 34
Awarded cash payments to our Named Executives based on SJI and individual performance in 2014, awarding our CEO a cash award of $689,456 and cash awards to our other Named Executives ranging from $161,477 to $322,210 as discussed in more detail below under the section entitled “2014 Annual Cash Awards”; General Description of Executive Compensation Program and Key Objectives SJI, asAs a provider of energy-related products and services, SJI has designed its executive compensation program to advance the Company’s strategic plan and corporate mission, which are rooted in enhancing shareholder value while attracting and retaining qualified executive management to carry out the organization’s work and goals. To achieve thethese objectives, of the Company’s strategic plan and increase shareholder value, the executive compensation program incorporates a mix of short-term and long-term performance-based incentives. SJI’s performance over the last fivethree years provides evidence that the executive compensation program was effective in furthering the Company’s business objectives. SJI has outperformed the S&P 500 index in foursix of the last fiveten years and compares favorably to the returns of the S&P Utility index over the same period. SJI has outperformed the median of the Company’s peer group used to benchmark long-term incentive compensation in terms of total shareholder return in seven of the last 10 years. By focusing executive compensation on achievement of annual corporate goals, annual and long-term earnings per share targets andten three-year compound annual total shareholder returns,cycles. SJI’s executive compensation program is an integral part of SJI’s corporate strategy for improvingdriving shareholder value.
Oversight of the Executive Compensation Program SJI’s executive compensation program is administered by the Compensation Committee (“Committee”) of the Board of Directors.Committee. The Committee is comprised of five independent directors. These directorsmembers meet the New York Stock Exchange’s independence standards. In determining the independence of members of the compensation committee, the Board considers all factors specifically relevant to determining whether the director has a relationship to the Company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including: (i) the source of the director’s compensation, including any consulting, advisory or other compensation fees; and (ii) any affiliate relationships between the director and the Company or any of its subsidiaries. In accordance with its charter, the Committee sets the principles and strategies that guide the design of our employee compensation and benefit programs for our Named Executives. The Committee annually evaluates the CEO’s performance. The Committee also reviews the recommendations from the CEO regarding the CEO’s evaluation of the CFO and the other Named Executives. Taking these performance evaluations into consideration, along with recommendations from our compensation consultant (discussed below), the Committee then establishes and approves compensation levels for our Named Executives, including annual base salaries, performance-based annual cash awards and long-term stock incentive awards. All performance goals for our Named Executives’ annual cash compensation are established at the beginning of each year for use in the performance evaluation process. The Committee meets regularly in executive sessions without members of management present to evaluate the executive compensation program and reports regularly to the Board of Directors on its actions and recommendations. In 2010, through a non-binding resolution, the Company’s shareholders approved the overall executive compensation structure. Further the shareholders approved a nonbinding advisory vote to approve executive compensation be held annually.
To assist the Committee in its evaluation of the executive compensation program for 2014, the Committee retainsretained an independent compensation consultant. From 2008 to 2011, the Committee retained Hay Group as it’s compensation consultant. In 2011, the Committee retained theconsultant, Frederic W. Cook & Co., Inc. (“Cook”) to assist in evaluating the executive compensation program. Cook conducted a review of the executive compensation structure and recommended some modifications that the Committee adopted effective 2012. For 2011, executive compensation was evaluated based upon the Hay study.. Executive Compensation Principles The Company’s key compensation objective is to advance the Company’s strategic plan and corporate mission, which are rooted in enhancing shareholder value while attracting and retaining highly qualified executive management to carry out the Company’s work and goals. The executive compensation program for our Named Executives is based on the following principles and aimed at achieving the objectives of the Company’s strategic plan while increasing shareholder value:
Executive compensation should be directly and measurably linked to business and individual performance with a substantial portion of the compensation designed to create incentives for superior performance and meaningful consequences for below-target performance; ● | Executive compensation should be directly and measurably linked to business and individual performance with a significant portion of the compensation designed to create incentives for superior performance and meaningful consequences for below-target performance.
Total compensation should be competitive with peer companies to attract, retain and motivate high performing business leaders; Executive compensation should align the interests of our Named Executives with shareholders so that compensation levels are commensurate with relative shareholder returns and financial performance through the use of performance-based restricted stock; Incentive plans should balance short-term and long-term financial and strategic objectives whereby Named Executives are rewarded for the businesses for which they are responsible and for overall Company performance; and The process for designing, determining and monitoring executive compensation should be independent of management and use the assistance of independent compensation consultants reporting directly to the Committee. |
● | An executive’s total compensation should be competitive with peer companies to attract, retain and motivate high performing business leaders.
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Shareholder Say-on-Pay Vote ● | Executive compensation should align the interests of executives with shareholders so that compensation levels are commensurate with relative shareholder returns and financial performance through the use of performance-based restricted stock.
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● | Executive compensation incentive plans should balance short-term and long-term financial and strategic objectives whereby executives are rewarded for the businesses for which they are responsible and for overall Company performance.
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● | The process for designing, determining and monitoring executive compensation should be independent of management and use the assistance of independent compensation consultants reporting directly to the Committee.
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At the Company’s Annual Meeting of Shareholders held in April 2014, we presented our shareholders with a vote to approve, on an advisory basis, the compensation paid to our Named Executives as disclosed in the “Compensation Discussion and Analysis” section of our proxy statement relating to that meeting (referred to as a “say-on-pay” proposal). 94.82 percent of the votes cast on the say-on-pay proposal voted in favor of the proposal. The Compensation Committee considered the vote and given the overwhelming level of support, made minimal changes to the executive compensation program. Compensation Practices The Company’s current executive compensation structure has been in place since 1998 and applies to all Company officers, including our Named Executives. At that time, a comprehensive study of executive compensation alternatives was undertaken, a primary objective being the creation of a system that aligns the interestinterests of Company shareholders with the financial incentives for executives on a short-term and long-term basis. Subsequently, on a three-year3-year cycle, a compensation structure and market competitiveness study has beenwas completed to ensure that our executive compensation structure remained consistent with contemporary compensation methods and tools. Moving forward,Upon the recommendation of Cook in September 2011, the Committee has determined it willthat an annual review of its executive compensation program would ensure SJI remained competitive among its peer group. As a result, the Committee reviews direct compensation (base pay, annual cash and long-term incentives) annually andannually. The Committee will continue to review indirect compensation triennially.(pension, SERP and change in control agreements) on a 3-year cycle, or more frequently, if warranted, based on market conditions and the recommendation of our executive compensation consultant. The most currentConsistent with this philosophy, Cook conducted an overall compensation study which was conducted in 2011 by Cook,that was presented to the Committee in September of 2011 for assessment2013. This report examined all components of compensation for 2012. As to 2011 compensation, the most recent study was conducted in 2008, when the Committee engaged its then consultant, Hay Group, to provide a market-based study of itsour executive compensation program in anticipation of future compensation adjustments. The study was completed and presented to the Committee in July 2008. Hay Group presented a detailed report that examined the component parts of the executive compensation program as currently applied. Further, the report provided a competitivean analysis of how the Company’sour Named Executives’ base salaries, annual cash and long-term incentive compensation compare with peer companies in the energy industry and the general business community. The Committee then evaluated and assessed those findings in the context of the Company’s performance over the years and the growth predicted going forward. Based on input from Hay Group, the Committee refined and further articulated its goals on Named Executivecompensation by deciding to targettargets compensation levels at the 50th percentile of the competitive market targets managed by the Committee within a rangelevels of 20% above or below this actual benchmark. This aligns Named Executive compensation with the stated executive compensation principles set forth above.
peer companies. The purpose of the Committee targeting the 50th percentile of the competitive market is to provide a level of compensation that is adequate for the Company to be able to attract and retain qualified executives while at the same time protecting shareholder interests. This “middle of the road” compensation philosophy allows that one half of all companies in the competitive market target higher levels of pay than SJI. It also acts to protect shareholders from the risk of overpayments that might result from a higher target pay position (e.g. 75th percentile). Although pay is targeted at the 50th percentile, actual levels of pay depend on a variety of factors such as tenure and individual and companyCompany performance. The Committee uses a working range of 20%20 percent above or below this benchmark to identify any “red flags” that represent outliers in need of special attention and refinement. The Committee refers to this targeted percentage as the targeted competitive position. In line withThe Cook report analyzed both Total Cash Compensation (TCC = base salary + annual incentive compensation) and Total Direct Compensation (TDC = TCC + the value of long-term incentives/equity). On average, Cook found that our three-year cycle discussed above,Named Executives’ TCC and TDC levels were below the targeted competitive position and recommended that the Committee engaged a new full compensation studyconsider increases in 2011. This study assessedTCC and TDC levels for consistency with the ongoing viabilitytargeted competitive position of the existing compensation structure as currently established and will be used to determine what, if any, modifications need to be made to 2012 compensation. A full report of that study will be presented in the 2012 proxy.our peer companies.
Along with reviewing pay structure,our executive compensation program, the Committee reviews and determines the appropriate peer groupsgroup companies for benchmarking purposes. Consistent with our goal of providing competitive compensation, we compare our executive compensation programs to those programs in place at the identified peer companies. TheFor 2014, the Committee, in consultation with Hay Group,Cook, selected peers for the three components of executive compensation - base salary, annual performance-based cash awards and long-term, performance-based equity awards. As a part of the 2008 compensation review, the Hay Group provided an assessment of the applicable peer groups for the Committee. The Committee adopted the now remaining 14 energy companies for its peer group. In addition to this peer group for TCC that was comprised of 11 similarly sized gas and multi-utility companies based on an analysis of the Named Executives other thanfollowing measures: revenue; net income; total assets; market capitalization; and total employees. The market capitalization of the CEO, the Committee also relies onpeer group companies ranges from approximately $1.2 billion to $4.3 billion, with a median of $2.2 billion. This peer group was revised from 2013 to eliminate two or more industry specific executive compensation studies (discussed below).companies and to include one company with comparable revenue. The peer group consists of 14 similarly sized energy utility companies is used for market comparison for base, total cash compensation and total direct compensation for the CEO. The peer group includes:following companies: AGL Resources | Atmos Energy Corporation | Black Hills Corporation | CH Energy Group, Inc. | Chesapeake Utilities Corp. | Energen Corporation | | Laclede Group, Inc. | | New Jersey Resources Corp. | Northwest Natural Gas Co. | | Piedmont Natural Gas Co. | Southern Union Co.Questar Corporation | Southwest Gas Corporation | UIL Holdings | | Vectren Corp. | WGL Holdings, Inc. | |
For purposes of benchmarking the long-term incentive program, performance and equity awards, the Committee identified an additionaldetermined that it was appropriate to use the same peer group that now, duefor both short-term and long-term compensation to mergers, is comprised of 39 energy companies against whose performance total shareholder return is gauged.help ensure alignment between pay and performance. The Committee relied on the peer group includes: AGL Resources, Inc. | Ameren Corporation | Amerigas Partners LP | Atmos Energy Corp. | Black Hills Corp. | CH Energy Group Inc. | Chesapeake Utilities Corp. | Cleco Corp. | Consolidated Edison, Inc. | Delta Natural Gas Company | Dominion Resources, Inc. | DTE Energy Company | Empire District Electric Co. | Energen Corp. | Equitable Resources, Inc. | Exelon Corporation | Ferrellgas Partners, L.P. | Gas Natural, Inc. | Great Plains Energy Inc. | Laclede Group, Inc. | MGE Energy, Inc. | National Fuel Gas Co. | New Jersey Resources Corp. | Nisource, Inc. | Northwest Natural Gas Co. | NSTAR | Pepco Holdings, Inc. | Piedmont Natural Gas Co | Pinnacle West Capital Corp. | | RGC Resources, Inc. | Southern Union Co. | Southwest Gas Corp. | Star Gas Partners, LP | Suburban Propane Partners, LP | UGI Corp. | UIL Holdings Corp. | Vectren Corp. | WGL Holdings, Inc. |
In addition to the two peer group comparisons discussed above, the Committee usesfor all formal benchmarking and generally considered energy industry specific compensation studies in evaluating compensation for our Named Executives, other than the CEO. They include the following three studies:
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| The Hay Group Energy Industry Database (based on size, position or revenues as appropriate) |
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| The Hay Group General Industry Database (based on size, position or revenues as appropriate) |
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| American Gas Association (AGA) survey data for selected positions. |
See Exhibits A and B for the list of companies in each of the studies used by South Jersey Industries, Inc. and Exhibit C for a list of the companies from which proxy data was collected beginning on page 48.survey data.
The Committee believes that the peer group data and industry compensation studies give the Committee an independent and accurate view of the market “value” of each position on a comparative basis. Based on this information from Cook and the performance evaluations discussed above, the Committee sets base salary, Total Cash Compensation (TCC = base + annual incentive compensation)determines the TCC and Total Direct Compensation (TDC = TCC + the value of long-term incentives/equity).TDC for each Named Executive. In general, long-term incentives are valued based on amounts reported either in the peer group data or in survey data submissions. Full value equity plansawards (restricted shares, restricted share units and outright stock awards) are valued at fair value. Performance-based plans are valued assuming 100%100 percent performance is achieved. On a job-by-job basis, this market benchmark information is compared to actual SJI levels of pay.pay and target pay opportunity. The Committee reviewed its engagement with Cook and believes there is no conflict of interest between Cook and the Committee. In reaching this conclusion, the Committee considered the factors regarding compensation advisor independence set forth in the SEC rule effective July 27, 2012 and the NYSE proposed listing standards released on September 25, 2012 that were adopted by the SEC on January 11, 2013. Compensation Components The Company’s executive compensation structure consists of three parts, two of which are directly linked to achieving predefined short-term and long-term performance goals. These three components were fully implemented with respect to compensation and performance for fiscal year 2000 and each year thereafter including fiscal year 2011. A description2014. Descriptions of the three components for our Named Executives are set forth below: Base Salary For 2014, the CEO’s base salary was at 31 percent of his targeted TDC and our other Named Executive Officers’ average base salary was 43 percent of their targeted TDC. Base salaries for our Named Executive Officers are targeted at the 50th percentile or median of the relevant peer group. Historically, Named Executive Officer salaries have not met this targeted level and trend well below it. According to the 2013 Cook report, base salaries approximated the 25th percentile of the peer group. Two Named Executive Officers were new to their roles in 2014, specifically Messrs. Clark and Renna. Each received approximately 20 percent as a step to move them closer the targeted peer position. The three other Named Executive Officers received an average salary increase of 6 percent. The Committee approved the following base salaries for our Named Executive Officers. | Name | | Base Salary for 2013 | | | Base Salary for 2014 | | | Edward J. Graham | | $ | 700,000 | | | $ | 721,000 | | | Stephen H. Clark | | | 231,755 | | | | 275,000 | | | Michael J. Renna | | | 330,000 | | | | 400,000 | | | Jeffrey E. DuBois | | | 320,000 | | | | 350,000 | | | Gina Merritt-Epps | | | 302,775 | | | | 320,000 | |
Annual Cash Awards Each Named Executive had a pre-established annual cash target award opportunity for 2014. Named Executives can achieve cash awards up to 150 percent of their annual cash target award opportunity based on the achievement of the performance metrics discussed below. The 2014 annual cash target award opportunity for each Named Executive is set forth below: | Name | | Cash Target Award Opportunity | | | Total Cash Award Achieved for 2014 Performance | | | Edward J. Graham | | $ | 540,750 | | | $ | 689,456 | | | Stephen H. Clark | | | 137,500 | | | | 161,477 | | | Michael J. Renna | | | 280,000 | | | | 322,210 | | | Jeffrey E. DuBois | | | 210,000 | | | | 249,113 | | | Gina Merritt-Epps | | | 144,000 | | | | 166,230 | |
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| Base Salary - Base Salary is targeted at the 50th percentile or median of the relevant peer group and/or competitive market. For 2011, the CEO’s base salary was 35% of the targeted TDC and all other Named Executives’ base salary was at an average of 43% of targeted TDC. For 2012, the CEO’s base salary is targeted at 35% of the targeted TDC and our other Named Executives’ base salary is targeted at an average of 44% of the targeted TDC. The Committee uses both the industry compensation studies and peer group data from Hay Group when establishing the base salaries set forth in the Summary Compensation Table on page 41.
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The performance metrics used for our Named Executives are economic earnings, financial performance of subsidiaries and individual balanced scorecard objectives and are weighted as set forth in the chart below. Shareholder approval was received in 2012 for our Annual Incentive Plan so that commencing in 2013, annual cash awards granted by the Committee under the Annual Incentive Plan could be structured to qualify for the qualified performance-based compensation exemption from Section 162(m) of the Internal Revenue Code. For 2014, the annual cash award for the CEO was structured to meet the qualified performance-based compensation exemption under Section 162(m) of the Internal Revenue Code. ●
| 2014 Annual Cash Awards - For 2011, annual cash award amounts are based on a percentage of each Named Executives’ base salary. Each Named Executive pre-established annual cash target is set forth in the Grants of Plan-Based Awards Table. The performance metrics used for our Named Executives are economic earnings per share, financial performance of subsidiaries and individual balanced scorecard objectives and are weighted as set forth in the chart below. |
2011 Annual Cash Awards
Metrics CEO CFO
| 75% SJI Economic Earnings Per Share
| - | 25% Peer group averages for return on equity by quartile | | CFO | 50% SJI Economic Earnings | 25% Financial Performance of relevant subsidiary company | 25% Specific, measurable, and predefined performance objectives | Subsidiary
LeadOther Named Executives
| 25% SJI Economic Earnings Per Share
| 50% Financial Performance of relevant subsidiary company
company(ies) | 25% Specific, measurable, and predefined performance objectives | Other Named
Executives
| 50% SJI Economic Earnings
Per Share
| - | 50% Specific, measurable, and predefined performance
objectives
|
For the SJI economic earnings per share metric, the Committee develops a schedule each year to determine the actual amount of the annual cash awardawards for this metric based on performance. The schedule includes a minimum, target and maximum performance level based on the Company’s earnings per share.economic earnings. The amount of the annual cash award attributed to this metric is capped at the maximum level so that the range for any payout to a Named Executive is plus or minus 50%50 percent of the targeted annual cash amount. The Company must achieve minimum economic earnings per share for any payout of any annual cash award to anythe Named Executive,Executives, including payouts attributed to financial performance of subsidiaries and individual balanced scorecard objectives. For 2011,2014, the minimum economic earnings per share level iswas the amount of the Company’s actual economic earnings per share result of $97,094,279 for 2010.2013. As a result, for the Company’s Named Executives to achieve any annual cash award payout for 2011,2014, the Company had to outperform the 2010 earnings.meet this minimum economic earnings level. The target levelActual SJI economic earnings per share target for 20112014 was $2.84 per share. If earnings per share of $2.84 were achieved, annual cash of 100% of target would have been earned. The maximum level earnings per share target for 2011 was $3.00 per share. At an earnings per share amount of $3.00 per share, 150% of target would have been earned. Actual earnings per share for 2011 were $2.89 per share$103,396,034 which resulted in a cash payout based on 116%120 percent of target. As a result, Messrs. Graham, Clark, Renna, DuBois, and Ms. Merritt-Epps, received the following cash awards attributable to the SJI economic earnings target: $486,675, 82,500, 84,000, 63,000, and 43,200 respectively.
For Mr. Graham, 25 percent of his annual cash award compensation is tied to return on equity (ROE) based on SJI economic earnings relative to our peer group. The specific payout is based on the following performance which is interpolated between performance levels: | Performance | Payout | | Less than the 35th percentile | 0% | | 35th percentile to 50th percentile | 50% to 100% | | 50th percentile to 80th percentile | 100% to 150% | | Greater than the 80th percentile | 150% |
Based on SJI’s percentile rank of 80.4 percent relative to our peer group, Mr. Graham achieved a cash payout equal to 150 percent or $202,781. For Messrs. Clark, Renna, DuBois and Renna,Ms. Merritt-Epps, performance is also measured using metrics related to the financial performance of the relevant subsidiary companies as follows: South Jersey Gas Company (25%) for which they are responsible. This metric carries a 50% weighting of the overall target cash award.Mr. Clark; South Jersey Gas Company (20%) and South Jersey Energy Solutions (30%) for Mr. Renna; South Jersey Gas Company (50%) for Mr. DuBois and South Jersey Gas Company (25%) and South Jersey Energy Solutions (25%) for Ms. Merritt-Epps. For 2011,2014, financial performance of the relevant subsidiary companies for which Messrs. DuBois and Renna are responsible was measured based on attainment of certain economic earnings/net income targets. For Mr. DuBois, the South Jersey Gas net income target was $51,293,100. For Mr. Renna, the net income target for South Jersey Energy Solutions, which is 30% of the 50% of his annual cash, was $34,269,500. The remaining 20% of annual cash for Mr. Renna at risk in 2011 is based on South Jersey Energy Solutions Retail. The maximum amount of annual cash attributable to the net income/subsidiary financial performance objective was capped at 150%150 percent of target. Based on performance, Financial results for South Jersey Gas Company were 121 percent of target. South Jersey Energy Solutions results were 105 percent of target. As a result Mr. Clark received a payout of $41,594; Mr. Renna received a payout of $155,960; Mr. DuBois achieved 134%received a payout of his cash attributable to the financial subsidiary performance, resulting in payment to Mr. DuBois$127,050, and Ms. Merritt-Epps received a payout of $86,179. For Mr. Renna 100% of the target for Solutions’ nonretail businesses was achieved, resulting in a payment to Mr. Renna of $42,466 with respect to the financial performance of Solutions. For Solutions’ Retail business, the business lines performed at a level equal to 140% of target resulting in Mr. Renna achieving $39,617 for a total annual cash payment of $82,063 for subsidiary financial performance.$81,360.
In addition to the companyfinancial performance components used to determine annual cash awards described above, awards to Named ExecutiveExecutives are based on individual balanced scorecard performance, which is weighted 25%25 percent for Messrs. Graham, Kindlick,Clark, Renna, DuBois, and Renna. For Mr. Patrick, the individual balanced scorecard objectives are weighted 50%.Ms. Merritt-Epps. An individual balanced scorecard (“BSC”) is a strategic performance management tool that has four quadrants that aremay be used to measure financial and non-financial goals. The four perspectives that the BSC measures against aremay include financial, customer, process and learning and growth. 20112014 Balanced Scorecard Summary Objectives
| | Objectives | Measurement Goals | Performance Level Achieved | | Stephen H. Clark, CFO | Capital Structure | Oversee development and implementation of strategy to enhance capital structure and liquidity | GoalAchieved strong performance based upon enhanced capital structure and liquidity
| | Rates and Regulatory Affairs | Achieve key regulatory initiatives | TargetAchieved above target performance on regulatory initiatives completed
| | Organizational Efficiency | Enhance performance of key functional areas | PerformanceAchieved target performance via functional area restructuring, revised reporting and the implementation of process refinements
| | Succession Planning | Development of key departmental personnel | Achieved target performance through development process | Graham, E.,Michael J. Renna, President & COO, SJI;
CEO
President, SJES | Execution ofMaintain a focus on customer growth, satisfaction and providing long term customer value
| Expand CHP portfolio; Achieve targeted ITC levels; Strengthen CHP/renewable department queue; Retain key regulatory actions | Extension of CIRTaccounts; Improve PA retail margins; Increase wholesale volumes and other mechanisms to support business objectives
margins; and Expand niche wholesale markets | Achieved strong performance including improving Open Flow/Hershey profitability; grew wholesale volumes by adding four new producer contracts; and expanded niche wholesale markets | Strategic Planning
Improve operating efficiency and productivity | Expanded planning, longer range views
Improve SJRG operating margins; Achieve renewable operating targets; Achieve CHP operating targets; Improve SJESP operating margins; Improve retail sales effectiveness; and Implement system conversions | Achieved strong performance by improving SJRG and SJESP operating margins; achieved CHP operating targets. Continued ongoing improvement in retail sales effectiveness | | Build a culture of progress and innovation. Expand and develop managerial and leadership competencies | Expand POWER program; Improve organizational effectiveness; and Improve Board reporting and communication | Organizational Development/ succession planningAchieved target performance based on improved communications and expansion of employee development and leadership programs
| Implement developmental opportunities for key employees and expand to Board level
|
Jeffrey E. DuBois, Senior VP, SJI; President, SJG | Customer Service | Successful implementation of the Customer Information System (CIS) and the Enterprise Work and Asset Management System (EWAMS) | Achieved target performance based on successful rollout of system in October, 2014 | Enhanced CustomerAIRP/SHARP | Create and Shareholder Relations | Expand communications to relevant audiences, impact ratings positively
support the organization needed for successful roll out of programs | Achieved |
Kindlick, D.,
CFO
| Development strong performance based on successful rollout of Capital Structure
| Identify and implement strategy to enhance capital structure
| Achievedprograms
| Tax planning program
Rate Case | Develop and integrate tax planning into corporate planning process
Successful completion of rate case | Achieved strong performance based on successful completion of rate case | Development of SJG regulatory plan
Succession Planning | Develop SJG regulatory plan and implement key initiatives from same
| Achieved
| Succession planning
| Identify potential successors and develop plan for their development advancement | Achieved target performance based on internal succession planning | DuBois, J.,
COO, SJG
Gina Merritt-Epps, GC and Corporate Sec. | Customer service
Effectively manage legal financial matters | Improved customer service
| Improved wait times for calls Reduced call abandonment rates | CIRT | Assess viability of continuing and implement
Efficiently manage legal expenses; manage lawsuit exposure; monitor corporate communications/relations | Achieved strong performance; Legal expense processes and the oversight of corporate matters continue to improve | EWAMSImprove corporate and customer communications | Provide effective legal responses; advise Board of Directors and senior management on legal and regulatory matters; ensure community relations department meets customer needs | Implement system as planned
| Not Achieved strong performance based on effectively managing legal needs while updating management of the Board of Directors on pertinent legal matters
| Succession planning
Improve corporate legal processes | Identify potential successorsImprove records and developadministration process; plan for their development
| Achieved
|
Renna, M.,
President,
Solutions
| Customer growth | Meet 4 of 7 subsidiary goals
and execute corporate meetings; manage SEC disclosures | Achieved 6 of 7strong performance with Board support and key filings; Improved the contract administration system and other processes | Operating Efficiency/ProductivityContinue to develop and grow legal and business knowledge | Enhance productivity on 4 goals
Attend legal seminars and conferences; advise corporate communications of key legal matters | Achieved 5 productivity goals | Expandtarget performance through growth of knowledge for legal and develop leadership competencies | Expand programs designed to develop leadership and managerial talent
| Achieved expansion of all programs
| Patrick, K.,
VP, SJI
| Timely monthly financial reviews, forecasts and tactical planning
| Ongoing business performance analysis with key metrics and variances identified
| Achieved
| Facilitate development of enterprise strategic plan and 5-year financial plan | Link strategic initiatives to financial results
| Achieved
| Identify key technology initiatives to support long term growth | Enhancement of enterprise technology infrastructure
| Achieved
| Timely implementation of key technology initiatives.
| Assist businesses with project and vendor management, approvals and key milestones
| Achieved
| Succession planning
| Identify potential successors and develop plan for their development
| Achievedgovernance matters
|
BSC objectives are predefined at or close to the beginning of the calendar year in which they are to be performed. The objectives are tied to business plans for the applicable year for each of our Named Executives. The achievement of these objectives is measured on a scale of 0 to 5 with 3 being target performance and resulting in payment at 100%100 percent of the 25%25 percent weighting attributable to the BSC component of the annual cash awards. Annual cash awards for this metric are also capped at 150%150 percent of target. The level of performance achieved for each BSC objective is dependent upon the terms of the objective itself, relative to each Named Executive’s performance. TargetBased on the performance level performance is discussed atachieved as set forth in the beginning ofabove table, Messrs. Clark, Renna, DuBois and Ms. Merritt-Epps, received the year. For 2011,following BSC ratings for 2014 individual performance: 3.35, 3.70, 3.50, and 3.63. As a result, each Named Executive achieved annual cash payments attributable to their BSC objectives as follows:
Annual Cash Award Attributable to BSC Cash 2011For 2014 | | | Target (100%) | | | Max (150%) | | | Actual | | | Stephen H. Clark | | | 34,375 | | | | 51,563 | | | | 37,383 | | | Michael J. Renna | | | 70,000 | | | | 105,000 | | | | 82,250 | | | Jeffrey E. DuBois | | | 52,500 | | | | 78,750 | | | | 59,063 | | | Gina Merritt-Epps | | | 36,000 | | | | 54,000 | | | | 41,670 | |
Long-Term Incentive | | Target (100%) | Max (150%) | Actual | | CEO | 123,750/25% | 185,625 | 123,750 | | CFO | 35,438/25% | 53,156 | 35,478 | | Renna | 35,372/25% | 53,058 | 53,058 | | DuBois | 32,156/25% | 48,234 | 20,098 | | Patrick | 53,157/50% | 79,735 | 53,157 |
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| Long-Term Incentive - The long-term incentive component of the executive compensation program for Named Executives consists of performance-based restricted stock grants, which are earned based upon the Company’s relative total shareholder return measured against our peer group, over three-year cycles. The Committee has adopted a policy to use performance-based restricted stock as its long-term incentive component. All Named Executives have pre-established performance-based, long-term incentive targets. The Committee has developed a schedule to determine the actual amount of the long-term incentive awards. The schedule, which is summarized in the chart below, includes a minimum, target and a maximum performance level. The amount of any long-term incentive award is capped at this maximum level. The range of payout is plus or minus 50% of the targeted long-term incentive amount. The minimum level requires that the Company’s common stock over a three-year period achieve a total shareholder return that matches the 35th percentile of our peer group for long-term incentive awards. The target level is set at the 50th percentile while the maximum award level is set at the 80th percentile. In six of the last seven years, the Company has significantly outperformed the peer group. For the three-year cycle ending December 31, 2011, the Company’s stock’s total shareholder return in comparison with the peer group performed at the 44th percentile.
|
| Level of Performance of SJI compared to Peers | Payout Earned at Close of 3-year period | | Less than 35th percentile | | 0 | | 35th percentile | | 50% (Minimum) | | 50th percentile | | 100% (Target) | | 80th percentile | | 150% (Maximum) |
Actual SJI LTIP Performance for Three Year Performance Cycles End Date of Performance Cycle | SJI Performance as a % of Peer Group | Payout of LTIP | | 12/31/2009 | 77.1% | 145.2% | | 12/31/2010 | 95.3% | 150% | | 12/31/2011 | 44.2% | 80.7% |
End Date of Performance Cycle | | SJI Performance as a % of Peer Group | | | Payout of LTIP | | | 12/31/2012 | | 59.2% | | | | 115.3% | | | 12/31/2013 | | 14.5% | | | | 0% | | | 12/31/2014 | | TSR = .1% | | | | 0% | | | | | EPS = 28.5% | | | | 0% | |
The target opportunity for the Named Executives’ long-term incentive was determined based on the 2013 Cook study. Per Cook, the long-term incentive opportunity was below the 25th percentile; and therefore, Cook recommended that increases could be considered for consistency with the Company’s targeted positioning. For 2014, increases to the long-term incentive opportunity were implemented consistent with the Cook study as follows, with the target shares awarded based on $55.96: | | | Target LTI 2013 | | | Target LTI 2014 | | | Edward J. Graham | | $ | 875,000 | | | $ | 1,081,500 | | | Stephen H. Clark | | $ | 46,155 | | | $ | 165,000 | | | Michael J. Renna | | $ | 214,500 | | | $ | 400,000 | | | Jeffrey E. DuBois | | $ | 204,600 | | | $ | 280,000 | | | Gina Merritt-Epps | | $ | 185,825 | | | $ | 224,000 | |
Performance Based Bonuses for 2012
The Company seeks Shareholder approval of the terms of its annual cash and long-term incentive programs. These plans are the same as 2011 and as set forth above with the following modifications.
| a. | The peer group for comparison of Named Executive Officers compensation and long-term incentive program are the same. Use of the same peer group for compensation benchmarking purposes and performance comparisons ensures alignment between pay and performance. The peer group to be used for 2012 measurement and benchmarking purposes currently consists of 12 companies that are the same as the peer group used in 2008 for benchmarking purposes with the exception of one company deleted due to its smaller size and one deleted due to differences in business model. |
| b. | Measures for determining payment of annual cash and long-term incentives include earnings per share, total shareholder return, and financial, customer and learning and growth metrics within the Committee’s discretion. |
| c. | Measurement of stock price is moved from a single day to a multi-day average to mitigate influence of single day changes in stock price on payout that is for a 3-year period of performance. |
| d. | Earnings per share and total shareholder return goals for payment of annual cash and long-term incentive are established prior to January of the year in which the goals are to be attained. Balanced scorecard goals for each Named Executive officer other than the Chief Executive officer are determined by the CEO based on review of established business unit initiatives. Once established, the BSC goals are then communicated to the Committee and ratified by it. In January of each year, the Committee reviews and approves the BSC goals for the CEO for that year. |
| e. | Prior to payment of any incentive, whether long term or annual, the Committee reviews the performance data and validates the attainment of those goals. |
| f. | Restricted stock vesting upon a change in control modified to require a qualifying termination accompanying the change in control. Moving to a “double trigger” supports retention of executives if a change in control were to occur and mitigates the need for an acquirer to make additional awards. |
| g. | In November of 2011, Cook concluded that the “SJI annual bonus plan is generally well-designed and falls within the range of peer group practices. For 2012, retention of the current plan design is recommended.” |
| h. | In November of 2011, Cook concluded that the “use of performance-based restricted stock awards (“performance share”) with vesting tied to relative shareholder return (“TSR”) is aligned with long-term shareholder interests and falls within the range of peer group practice.” Further, Cook recommended the inclusion of earnings per share as a measure for the long-term incentive program as creating a linkage between longer term operating performance with financial goals that are directly controllable by participants. |
Stock Ownership Guidelines TheSince 2001, the Company has had stock ownership guidelines in place for Named ExecutivesExecutive Officers to reinforce alignment with shareholders. The CEO is required to own shares of the Company’s common stock with a market value equal to a minimum of three times the CEO’s annual base salary. All other Named Executives are required to own shares of Company common stock with a market value equal to a minimum of one and one-half times their annual base salary. TheAll Named Executive Officers required to meet their ownership guideline by end 2014 have done so.
Beginning in 2015, stock ownership guidelines were established byare increasing for the Committee based on market data provided by Hay Group. In addition,CEO to 5 times his salary and for the Committee reviewed peer groupother Named Executive Officers to 2 times salary. Additionally, a stock holding period has been introduced that requires all of our Named Executive Officers to retain 50 percent of vested shares, net of taxes, until their new stock ownership criteriaguideline has been met. Clawback Policy Effective January 2015, the company adopted a clawback policy that applies to confirmall short-term annual incentive awards and long-term equity awards held by our Named Executive Officers in the event of a material negative financial restatement due to fraud, negligence, or intentional misconduct. Anti-Hedging and Anti-Pledging Policies Effective January 2015, the company adopted anti-hedging and anti-pledging policies that prohibit our Named Executive Officers from engaging in any hedging or monetization transactions with respect to the targets established were appropriate and in line with comparable companies in our industry.Company’s securities. Other Benefits and Perquisites Each of our Named Executives participates in other employee benefit plans generally available to all employees (e.g., major medical and health insurance, disability insurance, 401(k) Plan) on the same terms as all other employees. In addition to those benefits, our Named Executives are eligible for the following additional benefits: Executive Pension Plans The Named Executives– All salaried employees hired prior to July 1, 2003 are eligible for benefits under a tax-qualified pension plan for salaried employees. Compensationplan. All Named Executives other than Ms. Merritt-Epps meet the eligibility requirement. Base salary plus commissions are the only salary components considered under the pension plan consists of base salary and incentives.plan. Employees do not make contributions to the plan, and the employer contributions (which are based on aggregate actuarial calculations without individual allocation) are held and invested in a diversified portfolio of funds of recognized standing until they are used to provide retirement benefits. Early retirement with reduced annual benefits is permitted (but not beforebeginning at age 55).55. Named Executives, who are 50 years of age or older, are also covered by an unfunded supplemental retirement plan.plan (the SERP). Compensation under the SERP is considered as base salary plus annual incentives. The supplemental plan is designed in general to provide the Named Executive with a minimum retirement benefit from the salaried employee pension plan, and the supplemental plan, whichSERP aggregates 2%2 percent of the average of the highest three of the final fivesix years’ salarycompensation (as defined in the plan) for each year of service plus 5%.5 percent minus the benefit received under the pension plan. For Named Executives hired on or after July 1, 2003, the supplemental planSERP provides the officer with a benefit, in combination with the annuity equivalent of the employer provided benefit under the Company’s 401(k) Plan, which aggregates to 2%2 percent of the average of the highest three of the final fivesix years’ salary (as defined in the plan) for each year of service plus 5%.5 percent. Assuming continued employment and retirement at age 60, Messrs. Graham, Kindlick,Clark, Renna, DuBois and PatrickMs. Merritt-Epps will have, respectively, 36, 36,35, 21, 29, 32 and 1421 years of credited service. No credit is provided under the supplemental planSERP for more than 30 years of service.
Mr. Renna and Ms. Merritt-Epps are currently not eligible for the SERP because they have not met the age requirement. Disability Plan – Temporary disability shall be paid at a rate of 100%100 percent of the officer’s base salary, and extends at full pay for up to 120 days for Named Executives with less than five years of service, and up to 365 days for Named Executives with service of five or more years. Long-term disability (LTD), begins upon the expiration of the temporary disability benefit as described above. LTD is paid at a rate of 60%60 percent of the officer’s base salary, reduced by Social Security Disability payments, if any, up to $10,000 per month. Group Life Insurance – At a dollar equivalent of approximately two times each Named Executives’ base salary, group life insurance is rounded to the next highest $5,000 increment. The insurance premium is paid by the Company; the Named Executive is responsible for resultant federal, state or local income taxes. 24-Hour Accident Protection Coverage is provided while in the employ ofemployed by the Company in an amount of $250,000. The insurance premium is paid by the Company; the Named Executive is responsible for resultant federal, state or local income taxes. Supplemental Survivor’s Benefit– Upon the death of any Named Executive while employed by the Company, his/her surviving beneficiary shall receive a lump sum payment of $1,000 to be paid as soon as practical following the Named Executives’ death. The surviving beneficiary shall alsowill receive a lump sum death benefit based upon years of service with the Company in the amounts of six months base salary (10-15for 10-15 service years);years; nine months base salary (15-25for 15-25 service years);years; and 12 months base salary (25+for 25+ service years).years. Such payment shall beis offset by proceeds from the Named Executives’ qualified pension plan and SERP in the year of death. Supplemental Saving Plan Contributions – The Internal Revenue Code limits the contributions that may be made by, or on behalf of, an individual under defined contribution plans such as the Company’s 401(k) Plan. The Company has adopted a policy of reimbursing its Named Executives with the amount of Company contributions that may not be made because of this limitation. This includes the tax liability incurred by the additional income. Amounts paid pursuant to this policy are included in the Summary Compensation Table. Company Automobile – The Company’s Named Executives are provided a companyan automobile to be used for business and at the Named ExecutivesExecutives’ discretion, for commuting and other non-business purposes. Each Named Executive is responsible for any federal and/or state income taxes that result from non-business usage. Time Off– The Company’s Named Executives may take such time off for vacation or personal needs as may be accommodated while ensuring the duties and responsibilities of his/her position are accommodated to the satisfaction of SJI’s CEO. It is anticipated that such time off would not normally exceed 20 days per calendar year, exclusive of scheduled corporate holidays. Time off does not accrue and cannot be carried over from one year to the next. Annual Physical Examination– The Company provides Named Executives with an annual physical examination at its expense. Deferred Compensation Program – Our Named Executives participate in a Restricted Stock Deferral Plan that permits them to defer all or a portion of the Company stock that they would otherwise receive under the Company’s Stock-Based Compensation Plan. 2015 Compensation Overview The Compensation Committee engaged ClearBridge Compensation Group (ClearBridge) to perform the Executive Compensation study for 2015. Market median is used as the target reference point. Based on the ClearBridge study, the Committee made the following compensation decisions: Modified our peer group to eliminate Energen (given the recent sale of its natural gas business) and added Avista Corp. (given its size and industry relevance); Awarded salary increases to each of our Named Executives based on each individual’s role, responsibility, and performance as well as the competitiveness of each individual’s salary vs. our peer group; Continued to grant 100 percent of equity as performance awards; Modified the performance measures used in our equity awards from a mix of TSR and EPS performance relative to our peers to a mix of TSR performance relative to our peers, EPS performance relative to internal goals and ROE performance relative to internal goals; Adopted stock ownership guidelines for Mr. Renna, in his role as CEO, of 5 times his salary and increased stock ownership guidelines for all other Named Executives from 1.5 times salary to 2 times salary; Adopted stock holding periods requiring all of our Named Executives to retain 50% of vested shares, net of taxes, until their new stock ownership guideline has been met; Adopted a clawback policy authorizing the Board, in the event of a material negative financial restatement due to fraud, gross negligence, or intentional misconduct by one or more officers, including our Named Executives, to require reimbursement or forfeiture of all or a portion of his/her incentive compensation, including equity compensation; and Adopted anti-hedging and anti-pledging policies prohibiting designated executive officers, including our Named Executives, from engaging in any hedging or monetization transactions with respect to the Company’s securities. Employment Agreements; Change ofin Control Agreements The Company has employmentAt the recommendation of Cook, the Committee approved new change in control agreements with each of itsfor all Named Executives. The agreements areExecutives effective January 1, 2013 that provide for severance benefits upon a one-year period ending December 31, 2012. Generally, these agreements protect the officer in the event of termination following a change in control and fromcontrol. A summary of these agreements is set forth below:
The agreements provide for a 3-year term compared to a 1-year term; The agreements provide that severance is payable upon an involuntary termination without cause by the Company or resignation for other than just cause. This protection permitsgood reason by the officer to focus on fulfillment of his position. IfNamed Executive following a change of control (as defined in each agreement) occurs,control; Severance equals two times (three times for the agreement is automatically extendedCEO) base salary and average annual cash award for one year fromthe three fiscal years immediately preceding the date the change of control occurs. If there is a change of control during the term of the agreement or during the extended term of the agreement, and the Named Executive’s employment is terminated other than for cause or if a Named Executive resigns after there has been a significant adverse change in their employment arrangementtermination, along with the Company due to a changereimbursement of control, he is entitled to a severance payment equal to 300% of his average base compensation duringCOBRA coverage costs for the preceding five calendar years. Ifapplicable two or three year period, less the Named Executive’s employment agreement is terminated for other than cause without a change of control, he is entitled to a severance payment equal to 150% of his current base salary. For a summary of the payments that would be made upon the termination or resignation of our Named Executives see “Employment Agreements; Change of Control Agreements and Other Potential Post-Employment Payments”.employee contribution rate. With regardAccelerated vesting of time based equity awards. Performance based awards vest to payments to Named Officersthe extent provided in the event of termination or change in control,award agreement evidencing the Committee established these amountsperformance based upon market data provided by Hay Group. Relevant competitors’ provisions for termination and change in control payments were reviewed and the amount to be paid was determined by the Committee. Individual officers did not negotiate the amount of these potential payments. The amount was established based on position and each individual who occupies the position is eligible to receive the amount established by the Committee.awards. The agreements include a modified cutback if any payments under the agreements (including any other agreements) would otherwise constitute a parachute payment under Section 280G of the Internal Revenue Code (Code) so that the payments will be limited to the greater of (i) the dollar amount which can be paid to the Named Executive without triggering an excise tax under Section 4999 of the Code or (ii) the greatest after-tax dollar amount after taking into account any excise tax incurred under Section 4999 of the Code with respect to such parachute payments. For 2011 compensation theThe South Jersey Industries, Inc. 1997 Stock-Based Compensation Plan, as amended and restated effective January 26, 2005 and approved by the shareholders,1, 2012, and the Restricted Stock Agreements governing the performance-based restricted stock grants to our Named Executives were amended in 2012 to provide for double trigger vesting of outstanding unvested awards upon a qualifying termination following a change in control. A qualifying termination includes an involuntary termination without cause by the Company or a resignation for good reason by the Named Executive, each following a change in control. Prior to this change, unvested awards vested and became non-forfeitable upon a change in control.
In connection with the approval of the new change in control agreements, the Committee adopted the South Jersey Industries, Inc. Officer Severance Plan effective January 1, 2013 (the “Officer Severance Plan”). All Named Executives were designated by the Committee to participate in the Officer Severance Plan. The Officer Severance Plan provides for the following benefits upon an involuntary termination without cause by the Company or resignation for good reason by the Named Executive, absent a change in control: A lump sum cash payment equal to one times annual base salary; A monthly reimbursement of the COBRA premium cost for the Named Executives provideand their dependents (where applicable) for 12 months, less the optionrequired employee contribution rate, provided that the Named Executives are eligible for and timely elect COBRA continuation coverage; and Accelerated vesting of time-based equity awards. Performance-based awards vest to the Company that all unvested shares will vest upon a change of control and become non-forfeitable, payableextent provided in cash or a manner deemed appropriate by the Board of Directors.award agreement evidencing the performance-based awards. Tax Implications Section 162(m) of the Internal Revenue Code of 1986 limits the deduction allowable for compensation paid to certain of our Named Executives up to $1 million. Qualified performance-based compensation is excluded from this limitation if certain requirements are met. Our policy is generally to preserve the federal income tax deductibility of compensation paid, to the extent feasible. Awards made under the 1997 Stock-Based Compensation Plan to employees, including Named Executives, are intended to qualify as performance-based compensation and are therefore excluded from the $1 million limitation. Notwithstanding our policyShareholder approval was received in 2012 for an Annual Incentive Plan so that commencing in 2013, annual cash awards granted by the Committee under the Annual Incentive Plan could be structured to preservequalify for the federal income taxqualified performance-based compensation exemption from Section 162(m). The Committee monitors, and will continue to monitor, the effect of Section 162(m) on the deductibility of such compensation payments, under certain circumstancesand intends to optimize the deductibility of such compensation to the extent deductibility is consistent with the objectives of SJI’s executive compensation program. The Committee in its discretion,weighs the benefits of full deductibility with the other objectives of the executive compensation program and, accordingly, may authorize payment, such as salary, bonuses or otherwise, that may cause a Named Executive’s incomefrom time to exceedtime pay compensation subject to the deductible limits.deductibility limitations of Section 162(m). Risk Assessment Taking carefully considered risk is an integral part of any business strategy; and, therefore, our executive compensation policies are not intended to eliminate all risk. However, our incentive compensation pay policies are designed to mitigate risk-taking that is short sighted or excessive. Through a combination of incentive compensation that has a short-short and long-term focus, the Company balances the competing interests of incentive compensation. Annual and multi-year vesting is balanced and is not overly weighted toward short-term results. Further, our metrics are quantitative and more than one metric is used to measure achievement against objectives for short-term goals. Payout schedules related to the metrics are measured after the completion of the appropriate time horizon to ensure a full assessment of the metric. Further, in formulating and reviewing our executive compensation policies, the Committee considers whether the policy’s design encourages excessive risk-taking and attaches specific measurable objectives to the extent possible. Further, for 20112014, the Human Resources Department compiled an inventory of the compensation programs administered by South Jersey Industries, including South Jersey Energy Solutions, South Jersey Gas Company and South Jersey Energy Service Plus and SJI Services, LLC.Solutions. This inventory included compensation and incentive programs for all levels of management as well as for our represented workforce. A description of each of these programs was provided to the Committee. The principal features of each program were summarized for the Committee, which included eligibility criteria, benefit formula, performance metrics, vesting schedule, manner of payment along with any other unique characteristics of the program. Along with the inventory of compensation programs, the Human Resource DepartmentResources department presented its assessment of the compensation programs and the conclusions reached by the internal Risk Management Department.department. The Risk Management department conducted its own review of the programs. These evaluations focused on potential risks inherent in the compensation programs. Having reviewed the extensive documentation presented to it by the Company, the Committee determined that the compensation programs are not reasonably likely to have a material adverse effect upon the companyCompany and do nonot encourage unnecessary or excessive risk. In addition to Committee review of compensation policies, the Company has a practice whereby its internal compensation committee, that is comprised of the Company’s six senior officers who report directly to the CEO, reviews all compensation programs for all Company-wide employees for the current year and the coming year. This process entails an inventory of all compensation plans and a review across functional areas within the Company and ensures that no one individual is able to solely determine the compensation for hishis/her employees without review of the full internal compensation committee. Further, the internal compensation committee has a series of internal policies that guide its decision-making process. For example, as structural and individual changes are made to compensation throughout the year, the internal compensation committee must review a written proposal from the sponsoring executive. Our Human Resource DepartmentResources department acts as a consultant to the internal compensation committee and identifies how any proposed changes impact the organization, the employee, and what, if any, compensation policies and procedures are implicated. Through this review, any anomalies are highlighted and reviewed. In addition to this review all categories of incentive pay (both short-term and long-term) are capped at a percentage of base salary. For example, long-term incentive compensation is capped at 150% of base salary. Based on the foregoing, the Committee of the Board of Directors has determined that the overall amount of incentive pay at risk at the capped percentage is not material and as a consequence, no disclosure is required. EXECUTIVE COMPENSATION TABLES Summary Compensation Table Name and Principal Position (a) | | Year (b) | | Salary ($) (c) | | | Bonus ($) (d) | | | Stock Awards ($) (1) | | | Option Awards ($) (f) | | | Non-Equity Incentive Plan Compensation ($) (g) (4) | | | Change in Pension Value and Nonqualified Compensation Earnings ($) (h) | | | All Other Compensation ($) (2) (i) | | | Totals ($) (j) | | | Edward J. Graham Chairman, President and Chief Executive Officer | | 2011 | | | 659,327 | | | | - | | | | 620,857 | | | | - | | | | 554,400 | | | | 2,304,000 | | | | 36,959 | | | | 4,175,543 | | | | 2010 | | | 624,231 | | | | - | | | | 638,757 | | | | - | | | | 624,023 | | | | 1,616,000 | | | | 32,888 | | | | 3,535,899 | | | | 2009 | | | 574,999 | | | | - | | | | 425,846 | | | | - | | | | 300,438 | | | | 694,000 | | | | 34,508 | | | | 2,029,791 | | | David A. Kindlick Vice President and Chief Financial Officer | | 2011 | | | 283,341 | | | | - | | | | 164,027 | | | | - | | | | 158,760 | | | | 672,000 | | | | 16,369 | | | | 1,294,497 | | | | 2010 | | | 269,822 | | | | - | | | | 165,562 | | | | - | | | | 184,275 | | | | 650,000 | | | | 16,160 | | | | 1,285,819 | | | | 2009 | | | 258,440 | | | | - | | | | 127,612 | | | | - | | | | 107,851 | | | | 360,000 | | | | 16,844 | | | | 870,747 | | | Michael J. Renna (3) President and Chief Operating Officer of South Jersey Energy Solutions | | 2011 | | | 278,458 | | | | - | | | | 163,721 | | | | - | | | | 176,153 | | | | 72,000 | | | | 12,041 | | | | 702,373 | | | | 2010 | | | 244,637 | | | | - | | | | 150,227 | | | | - | | | | 167,937 | | | | 44,000 | | | | 11,631 | | | | 618,432 | | | | 2009 | | | 221,420 | | | | - | | | | 109,314 | | | | - | | | | 115,936 | | | | 23,000 | | | | 11,261 | | | | 480,931 | | | Jeffrey E. DuBois Vice President and Senior Vice President Operations & Chief Operating Officer of South Jersey Gas Company | | 2011 | | | 257,014 | | | | - | | | | 148,847 | | | | - | | | | 143,578 | | | | 653,000 | | | | 11,903 | | | | 1,214,342 | | | | 2010 | | | 244,712 | | | | - | | | | 150,227 | | | | - | | | | 165,375 | | | | 338,000 | | | | 11,730 | | | | 910,044 | | | | 2009 | | | 222,535 | | | | - | | | | 106,402 | | | | - | | | | 112,063 | | | | 799,000 | | | | 12,340 | | | | 1,252,340 | | | Kevin D. Patrick Vice President, Research & Corporate Development | | 2011 | | | 236,034 | | | | - | | | | 113,902 | | | | - | | | | 114,818 | | | | 132,000 | | | | 17,140 | | | | 613,894 | | | | 2010 | | | 224,769 | | | | - | | | | 114,992 | | | | - | | | | 125,423 | | | | 274,000 | | | | 15,122 | | | | 754,306 | | | | 2009 | | | 210,000 | | | | - | | | | 103,687 | | | | - | | | | 88,154 | | | | - | | | | 12,302 | | | | 414,143 | |
Name and Principal Position | | Year | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($) (1) | | | Non-Equity Incentive Plan Compensation ($) (2) | | | Change in Pension Value and Nonqualified Compensation Earnings ($) (3) | | | All Other Compensation ($) (4) | | | Totals ($) | | Edward J. Graham Chairman, President and Chief Executive Officer | | | 2014 2013 2012 | | | | 720,435 699,308 669,808 | | | | - - - | | | | 937,891 830,655 628,301 | | | | 689,456 393,750 510,469 | | | | 2,482,000 0 2,181,000 | | | | 34,176 45,517 34,701 | | | | 4,863,958 1,969,230 4,024,279 | | Stephen H. Clark Chief Financial Officer | | | 2014 2013 | | | | 275,000 234,327 | | | | - - | | | | 143,115 43,814 | | | | 161,477 62,100 | | | | 663,000 68,000 | | | | 18,078 15,772 | | | | 1,260,670 424,013 | | Michael J. Renna President and Chief Operating Officer of South Jersey Energy Solutions | | | 2014 2013 2012 | | | | 398,116 329,308 299,673 | | | | - - - | | | | 346,892 203,638 180,844 | | | | 322,210 137,250 166,800 | | | | 144,000 0 86,000 | | | | 17,118 15,586 15,197 | | | | 1,228,336 685,782 748,514 | | Jeffrey E. DuBois Senior Vice President and President of South Jersey Gas Company | | | 2014 2013 2012 | | | | 349,192 319,758 299,418 | | | | - - - | | | | 242,844 194,226 161,807 | | | | 249,113 138,217 165,550 | | | | 1,076,000 136,000 735,000 | | | | 37,616 15,888 14,394 | | | | 1,954,765 804,089 1,376,169 | | Gina Merritt-Epps General Counsel and Corporate Secretary | | | 2014 2013 2012 | | | | 319,536 302,140 266,726 | | | | - - | | | | 194,266 176,404 128,494 | | | | 166,230 90,251 102,094 | | | | - - - | | | | 21,500 20,801 22,632 | | | | 701,532 589,596 519,946 | |
Footnotes to Summary Compensation Table (1) Represents the compensation expense incurred by the Company in the respective fiscal yearfull grant date fair value of awards in connection with the grants of restricted common stock, calculated in accordance with FASB ASC Topic 718. See Footnote 12 of the Company’s financial statements for additional information, including valuation assumptions used in calculating the fair value of the award. This amount includes the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718 of performance-based restricted stock grants. Table The maximum value of Contentsthe performance-based restricted stock granted to each Named Executive is $1,406,836, $214,672, $520,339, $364,266 and $291,398 for Messrs. Graham, Clark, Renna, DuBois and Ms. Merritt-Epps, respectively. For the 20112014 grant, the CEO and NEONamed Executives deferred their stock grants upon vesting as follows: | Named Executive | | Award | | Vest Date | Deferral Date | Edward J. Graham E. | 12,188 | 12/31/13 | 19,326 | | 3/1/2016* | Kindlick, D. | 3,220 | 12/31/1317 | Not Deferred | Renna, M.Stephen H. Clark | 3,214 | 12/31/13 | 2,949 | | 3/1/17 | Not Deferred | DuBois,Michael J. Renna | 2,922 | 12/31/13 | 7,148 | | 3/1/2016**17 | Not Deferred | Patrick, K.Jeffrey E. DuBois | 2,236 | 12/31/13 | 5,004 | | 3/1/17 | 3/1/19 | | Gina Merritt-Epps | | | 4,003 | | 3/1/17 | Not Deferred |
*Payable in two(2) This amount represents the aggregate annual installments beginning in 2016.
**Payable in one installment in 2016.incentive awards paid out to each Named Executive with respect to 2012, 2013 and 2014 performance under the Company’s Annual Incentive Plan.
(2)(3) Amounts in this column represent the aggregate change in the actuarial present value of each Named Executive’s accumulated benefit in the SERP. Mr. Renna and Ms. Merritt-Epps are not currently eligible for the SERP. The SERP covers officers of South Jersey Industries who have attained age 50.
(4) Includes employer contributions to the Company’s 401(k) Plan, reimbursement for 401(k) contributions not permitted under Internal Revenue Code, the value of a Company-provided automobile and the income value of group life insurance.insurance and other perquisites in excess of $10,000. The 20112014 values for these items are listed below: | | | Edward J. Graham | | | Stephen H. Clark | | | Michael J. Renna | | | Jeffrey E. DuBois | | | Gina Merritt-Epps | | | 401(k) Plan | | $ | 5,434 | | | $ | 7,534 | | | $ | 6,615 | | | $ | 7,800 | | | $ | 7,031 | | | 401(k) Reimbursement | | | 13,329 | | | | - | | | | 2,229 | | | | 1,943 | | | | 1,886 | | | Group Life Insurance | | | 7,158 | | | | 2,516 | | | | 1,311 | | | | 3,320 | | | | 1,059 | | | Perquisites (a) | | | 8,255 | | | | 8,028 | | | | 6,963 | | | | 6,297 | | | | 11,524 | | | Tax Gross-Up (b) | | | | | | | | | | | | | | | 18,256 | | | | | | | Total Value | | $ | 34,176 | | | $ | 18,078 | | | $ | 17,118 | | | $ | 37,616 | | | $ | 21,500 | |
| | Graham | | | Kindlick | | | Renna | | | DuBois | | | Patrick | | | 401(k) Plan | | $ | 5,217 | | | $ | 7,107 | | | $ | 6,228 | | | $ | 7,350 | | | $ | 4,495 | | | 401(k) Reimbursement | | | 19,960 | | | | 1,306 | | | | - | | | | - | | | | - | | | Group Life Insurance | | | 3,482 | | | | 2,658 | | | | 578 | | | | 1,273 | | | | 1,162 | | | Automobile | | | 8,300 | | | | 5,298 | | | | 5,235 | | | | 3,280 | | | | 11,483 | | | Total Value | | | 36,959 | | | | 16,369 | | | | 12,041 | | | | 11,903 | | | | 17,140 | |
(a) The amounts of the perquisites reflect the value of the Company-provided automobile for each Named Executive. (3)(b) The amount reported for Mr. Renna is not currently eligibleDuBois reflects the value of the reimbursement of certain payroll taxes in the amount of $10,323 as a result of an inadvertent omission by the Company for Medicare taxes and a one-time gross-up on the SERP. The SERP covers officerspayroll taxes in the amount of South Jersey Industries who have attained age 50. Mr. Renna does not attain age 50 until 2017.$7,933.
(4) Non-equity incentive compensation in 2010 Proxy was stated at target. 2010 amounts in the above Summary Compensation Table reflected amounts paid in 2011. 2011 amounts are stated at actual.35
Grants of Plan-Based Awards The following table sets forth certain information concerning the grant of awards made to our Named Executives during the year ended December 31, 2011.2014. Grants of Plan-Based Awards - 20112014 | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Possible Payouts of Shares Under Equity Incentive Plan Awards (2) | | | All Other Stock Awards: Number of Shares of Stock or | | | Exercise or Base Price of Option | | | Grant Date Fair Value of Stock and Option | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Possible Payouts of Shares Under Equity Incentive Plan Awards (2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | Exercise or Base Price of Option Awards ($ / Sh) | | | Grant Date Fair Value of Stock and Option Awards ($) (3) | | | Name | | Grant Date | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | Units (#) | | | awards ($ / Sh) | | | Awards ($) (3) | | Grant Date | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | | Edward J. Graham | | 1/07/11 | | | 0 | | | | 495,000 | | | | 742,500 | | | | 0 | | | | 12,188 | | | | 18,282 | | | | - | | | | - | | | | 620,857 | | 1/03/14 | | 0 | | | 540,800 | | | 811,200 | | | 0 | | | 19,326 | | | 28,989 | | | | - | | | - | | | 937,891 | | | David A. Kindlick | | 1/07/11 | | | 0 | | | | 141,750 | | | | 212,625 | | | | 0 | | | | 3,220 | | | | 4,830 | | | | - | | | | - | | | | 164,027 | | | | Stephen H. Clark | | 1/03/14 | | 0 | | | 137,500 | | | 206,250 | | | 0 | | | 2,949 | | | 4,424 | | | | - | | | - | | | 143,115 | | | Michael J. Renna | | 1/07/11 | | | 0 | | | | 141,488 | | | | 212,232 | | | | 0 | | | | 3,214 | | | | 4,821 | | | | - | | | | - | | | | 163,721 | | 1/03/14 | | 0 | | | 280,000 | | | 420,000 | | | 0 | | | 7,148 | | | 10,722 | | | | - | | | - | | | 346,892 | | | Jeffrey E. DuBois | | 1/07/11 | | | 0 | | | | 128,625 | | | | 192,938 | | | | 0 | | | | 2,922 | | | | 4,383 | | | | - | | | | - | | | | 148,847 | | 1/03/14 | | 0 | | | 210,000 | | | 315,000 | | | | 0 | | | 5,004 | | | 7,506 | | | | - | | | - | | | 242,844 | | | Kevin D. Patrick | | 1/07/11 | | | 0 | | | | 106,313 | | | | 159,470 | | | | 0 | | | | 2,236 | | | | 3,354 | | | | - | | | | - | | | | 113,902 | | | | Gina Merritt-Epps | | 1/03/14 | | 0 | | | 144,000 | | | 216,000 | | | | 0 | | | 4,003 | | | 6,005 | | | | - | | | - | | | 194,266 | |
Footnotes to Grants of Plan-Based Awards Table (1) Amounts represent potential cash bonus amountsawards payable pursuant to the respectiveour Named Executives if all ofperformance goals and targets were achieved for 20112014 performance. Actual cash awards paid to our Named Executives for 2014 performance to be paidare set forth in 2012 for each Named Executive.the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. (2) Represents the possible payoutspayout of shares of the performance-based restricted stock grantgrants to each Named Executive at the end of the three-year vesting and performance-measurement3-year performance period. (3) Represents the full grant date fair value of the grant of restricted common stock calculated in accordance with SFASBFASB ASC Topic 718. See Footnote 1 of the financial statements for additional information, including valuation assumptions used in calculating the fair value of the awards. Equity Awards The following table sets forth certain information concerning our outstanding restricted stock awards for our Named Executives at December 31, 2011.2014. Outstanding Equity Awards at Fiscal Year-End - 20112014 Stock Awards | Name | | Year | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (1) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | | | Edward J. Graham | | 2011 | | | - | | | | - | | | | 12,188 | | | | 692,400 | | | | | 2010 | | | - | | | | - | | | | 24,555 | | | | 1,394,970 | | | David A. Kindlick | | 2011 | | | - | | | | - | | | | 3,220 | | | | 182,928 | | | | | 2010 | | | - | | | | - | | | | 6,364 | | | | 361,539 | | | Michael J. Renna | | 2011 | | | - | | | | - | | | | 3,214 | | | | 182,587 | | | | | 2010 | | | - | | | | - | | | | 5,775 | | | | 328,078 | | | Jeffrey E. DuBois | | 2011 | | | - | | | | - | | | | 2,922 | | | | 165,999 | | | | | 2010 | | | - | | | | - | | | | 5,775 | | | | 328,078 | | | Kevin D. Patrick | | 2011 | | | - | | | | - | | | | 2,236 | | | | 127,027 | | | | | 2010 | | | - | | | | - | | | | 4,420 | | | | 251,100 | |
| Name | | Year | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (1) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | | | Edward J. Graham | | | 2014 2013 | | | | - - | | | | - - | | | | 19,326 17,385 | | | | 1,138,881 1,024,498 | | | Stephen H. Clark | | | 2014 2013 | | | | - - | | | | - - | | | | 2,949 917 | | | | 173,785 54,039 | | | Michael J. Renna | | | 2014 2013 | | | | - - | | | | - - | | | | 7,148 4,262 | | | | 421,232 251,160 | | | Jeffrey E. DuBois | | | 2014 2013 | | | | - - | | | | - - | | | | 5,004 4,065 | | | | 294,886 239,550 | | | Gina Merritt-Epps | | | 2014 2013 | | | | - - | | | | - - | | | | 4,003 3,692 | | | | 235,897 217,570 | |
Footnotes to Outstanding Equity Awards At Fiscal Year-End Table (1) Represents grants of performance-based restricted stock issued in January 2010 at maximumtarget performance and January 2011 at target.(100 percent). Actual shares awarded could range from 0 percent to 150 percent of target performance. (2) Market value of Company common stock at December 31, 20112014 was $56.81$58.93 and was used to calculate market value. Stock Vesting - 20112014 The following table sets forth certain information concerning the vesting of restricted stock for the Company’s Named Executives during the year ended December 31, 2011.2014. No options are outstanding and none were exercised by the Named Executives during the year ended December 31, 2011. Stock Vested - 20112014 Stock Awards | Name | | Number of Shares Acquired on Vesting (#) (1) | | | Value Realized on Vesting ($) | | | Edward J. Graham | | | 0 | | | | 0 | | | Stephen H. Clark | | | 0 | | | | 0 | | | Michael J. Renna | | | 0 | | | | 0 | | | Jeffrey E. DuBois | | | 0 | | | | 0 | | | Gina Merritt-Epps | | | 0 | | | | 0 | |
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | | Edward J. Graham | 9,554 | 542,763 | | David A. Kindlick | 2,863 | 162,647 | | Michael J. Renna | 2,453 | 139,355 | | Jeffrey E. DuBois | 2,387 | 135,605 | | Kevin D. Patrick | 2,326 | 132,140 |
Footnote to Stock Vested Table (1) The dollar value is calculated by multiplying the number of shares ofPerformance based restricted stock that have vested by the market value of the Company’s common stock on the vesting date of December 31, 2011, which was $56.81.awards for 2014 were forfeited when performance targets were not achieved. Pension Benefits Table | Name | Plan Name (1) (2) | | Number of Years Credited Service Under Plan at FAS Measurement Date | | | Present Value of Accumulated Benefit (3) | | | Payments During Last Fiscal Year | | | Edward J. Graham | Retirement Plan for Employees of SJI | | | 32 | | | | $ 1,287,000 | | | | 0 | | | | SJI Supplemental Executive Retirement Plan | | | 33 | | | | 10,817,000 | | | | 0 | | | Stephen H. Clark | Retirement Plan for Employees of SJI | | | 17 | | | | 620,000 | | | | 0 | | | | SJI Supplemental Executive Retirement Plan | | | 18 | | | | 1,186,000 | | | | 0 | | | Michael J. Renna (4) | Retirement Plan for Employees of SJI | | | 16 | | | | 443,000 | | | | 0 | | | | SJI Supplemental Executive Retirement Plan | | | N/A | | | | N/A | | | | N/A | | | Jeffrey E. DuBois | Retirement Plan for Employees of SJI | | | 27 | | | | 1,024,000 | | | | 0 | | | | SJI Supplemental Executive Retirement Plan | | | 28 | | | | 3,000,000 | | | | 0 | | | Gina Merritt-Epps (5) | Retirement Plan for Employees of SJI | | N/A | | | N/A | | | N/A | | | | SJI Supplemental Executive Retirement Plan | | N/A | | | N/A | | | N/A | |
| Name | Plan Name (1) (2) | Number of Years Credited Service Under Plan at FAS Measurement Date | Present Value of Accumulated Benefit (3) | Payments During Last Fiscal Year | | Edward J. Graham | Retirement Plan for Employees of SJI SJI Supplemental Executive Retirement Plan | 29 | 804,000 | 0 | | David A. Kindlick | Retirement Plan for Employees of SJI SJI Supplemental Executive Retirement Plan | 31 �� | 1,006,000 | 0 | Michael J. Renna (4) | Retirement Plan for Employees of SJI | 13 | 228,000 | 0 | Jeffrey E. DuBois | Retirement Plan for Employees of SJI SJI Supplemental Executive Retirement Plan | 24 25 | 616,000 1,461,000 | 0 | Kevin D. Patrick | SJI Supplemental Executive Retirement Plan | 5 | 406,000 | 0 |
Footnotes to Pension Benefits Table (1) The South Jersey Industries, Inc. Supplemental Executive Retirement Plan (the “SERP”) provides benefits to officers of South Jersey Industries who have attained age 50. A participant is eligible for a normal retirement benefit under the SERP after having attained age 60. We base the normal retirement benefit on 2%2 percent of the participant’s “final average compensation” multiplied by years of credited service (up to 30 years), plus an additional 5%5 percent of final average compensation. “Final average compensation” is the average of the participant’s base pay plus annual incentivecash award for the highest 3three years in the final 6six years of employment. A participant is eligible for an early retirement benefit under the SERP after having attained age 55. A participant’s early retirement benefit equals his or her normal retirement benefit reduced by 2%2 percent per year. The SERP benefit for officers hired on or after July 1, 2003 reflects a reduction for the annuity equivalent of the employer provided benefit under the Company’s 401(k) Plan. The SERP’s normal form of payment is a life annuity with six years guaranteed. (2) The Retirement Plan for Employees of South Jersey Industries, Inc. (the “plan”“Retirement Plan”) provides benefits to non-bargaining employees who wewere hired before July 1, 2003. The plan defines Normal Retirement Age as age 65. A Participant is eligible for a normal retirementnon-reduced benefit under the planRetirement Plan after having attained age 65.60 with 5 years of service. We base the normal retirement benefit on the sum of (a) the participant’s accrued benefit as of September 30, 1989 increased 5%5 percent per year thereafter, and (b) 1.00%1.00 percent of the participant’s “final average compensation” plus 0.35%0.35 percent of the participant’s final average compensation in excess of covered compensation, multiplied by years of credited service after September 30, 1989 (up to 35 years less credited service as of September 30, 1989). “Final average compensation” is the average of the participant’s base pay plus annual incentivecommissions for the highest 3three years of the final 6six years of employment immediately preceding retirement. retirement, as defined by the plan. A participant is eligible for an early retirement benefit under the planRetirement Plan after having attained age 55 and completed five years of service. A participant’s early retirement benefit equals his or her normal retirement benefit reduced by 2%2 percent per year prior to age 60. The plan’sRetirement Plan’s normal form of payment is a life annuity with six years guaranteed. (3) We base present values for participants on a 5.03%4.25 percent discount rate and RP-2000 mortality projected to 2012RP-2014 bases table with MP-2014 generational projection scale (postretirement only), and no preretirement decrements. (4) Mr. Renna isand Ms. Merritt Epps are not currently eligible for the SERP. The SERP covers officers of South Jersey Industries who have attained age 50. Both Mr. Renna doesand Ms. Merritt-Epps are not attain age 50eligible until 2017. Nonqualified Deferred Compensation Table The following table sets forth certain information regarding the Company’s Restricted Stock Deferral Plan, which represents the Company’s only non-tax-qualified deferred compensation program. The Restricted Stock Deferral Plan permits the deferral of fully vested shares of restricted stock earned by the Company’s Named Executives pursuant to previously issued performance-based, restricted stock grants. The Company does not make contributions to the plan, and all earnings referenced in the table represent dividends paid on outstanding shares of common stock. | Name | | Plan Name | | Executive Contributions in Last FY (1) | | | Registrant Contributions in Last FY | | | Aggregate Earnings in Last FY (2) | | | Aggregate Withdrawals Distributions | | | Aggregate Balance at Last FYE (1) (3) | | | Edward J. Graham | | Restricted Stock Deferral Plan | | | - | | | | - | | | | 77,483 | | | | - | | | | 2,992,108 | | | David A. Kindlick | | Restricted Stock Deferral Plan | | | 334,440 | | | | - | | | | 21,403 | | | | 125,889 | | | | 826,520 | | | Michael J. Renna | | Restricted Stock Deferral Plan | | | 286,606 | | | | - | | | | 15,128 | | | | 301,547 | | | | 584,187 | | | Jeffrey E. DuBois | | Restricted Stock Deferral Plan | | | 278,880 | | | | - | | | | 14,695 | | | | 275,326 | | | | 567,462 | | | Kevin D. Patrick | | Restricted Stock Deferral Plan | | | 271,779 | | | | - | | | | 7,239 | | | | - | | | | 279,562 | |
| Name | Plan Name | | Executive Contributions in Last FY (1) | | | Registrant Contributions in Last FY | | | Aggregate Earnings in Last FY (2) | | | Aggregate Withdrawals Distributions | | | Aggregate Balance at Last FYE (1) (3) | | | Edward J. Graham | Restricted Stock Deferral Plan | | | - | | | | - | | | | 72,736 | | | | 600,966 | | | | 2,160,674 | | | Stephen H. Clark | Restricted Stock Deferral Plan | | | - | | | | - | | | | - | | | | - | | | | - | | | Michael J. Renna | Restricted Stock Deferral Plan | | | - | | | | - | | | | - | | | | 154,267 | | | | - | | | Jeffrey E. DuBois | Restricted Stock Deferral Plan | | | - | | | | - | | | | 10,295 | | | | 150,158 | | | | 305,816 | | | Gina Merritt-Epps | Restricted Stock Deferral Plan | | | - | | | | - | | | | 7,393 | | | | 37,620 | | | | 219,601 | |
Footnotes to Nonqualified Deferred Compensation Table (1) The amounts represent the market value of vested shares of previously restricted stock deferred by the Named Executives calculated by multiplying the number of shares of deferred stock by the market value of the Company’s common stock as of December 31, 2011,2014, which was $56.81.$58.93. (2) The amounts represent dividends paid on the deferred common stock. These amounts are not reported in the Summary Compensation Table as they represent dividends earned on the deferred common stock, which dividends are payable on all outstanding shares of the Company’s common stock. (3) The amounts represent the market value of vested shares of previously restricted stock deferred by the Named Executive. The Company has, in previous years, disclosed the issuance of the restricted shares as compensation in the Summary Compensation Table for such year. Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 20112014 relating to equity compensation plans of the Company pursuant to which grants of restricted stock, options or other rights to acquire shares may be made from time to time. Equity Compensation Plan Information | Plan Category | | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | | | (b) Weighted average exercise price of outstanding options, warrants and rights ($) (2) | | | (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) | | | 111,705 | | | | - | | | | 103,079 | | Equity compensation plans not approved by security holders | | | - | | | | - | | | | - | | | Total | | | 111,705 | | | | - | | | | 103,079 | |
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
($) (3)
| (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)
| 126,272(2)
| -
| 1,193,537
| Equity compensation plans
not approved by security
holders
| -
| -
| -
| Total | 126,272(2)
| - | 1,193,537 |
Footnotes to Equity Compensation Plan Information (1) These plans include those used to make awards of performance-based, restricted stock to the Company’s Officers and restricted stock to the Directors. (2) This total includes 33,322 shares that had vested as of December 31, 2011 but had not yet been issued. (3) Only restricted stock has been issued. The restricted stock is issuable for no additional consideration, and therefore, the shares are not included in the calculation of weighted average exercise price in column (b).
Employment Agreements; Change of Control Agreements and Other Potential Post-Employment Payments All Named Executives are party to a Change in Control Agreement (“CIC Agreement”) that provides for severance benefits upon a termination following a change in control. A summary of the CIC Agreement terms are set below: Severance is payable upon an involuntary termination without cause by the Company or resignation for good reason by the Named Executive following a change in control; Severance equals two times (three times for the CEO) base salary and average annual cash award for the three fiscal years immediately preceding the date of termination, along with the reimbursement of COBRA coverage costs for the applicable two or three year period, less the employee contribution rate; and Accelerated vesting of all time based equity awards while performance based awards vest to the extent provided in the award agreement evidencing the performance based award. In addition to the CIC Agreements, all Named Executives participate in the South Jersey Industries, entered into certain agreements and maintains certain plansInc. Officer Severance Plan effective January 1, 2013 (the “Officer Severance Plan” that will requireprovides for the following benefits upon an involuntary termination without cause by the Company or resignation for good reason by the Named Executive, absent a change in control: A lump sum cash payment equal to provide compensation toone times annual base salary; A monthly reimbursement of the COBRA premium cost for the Named Executives and their dependents (where applicable) for 12 months, less the required employee contribution rate, provided that the Named Executives are eligible for and timely elect COBRA continuation coverage; and Accelerated vesting of all time-based equity awards while performance-based awards vest to the extent provided in the award agreement evidencing the performance-based awards. Below is an estimate of the Company inamounts payable to each Named Executive under the event ofCIC Agreements and the Officer Severance Plan, assuming a termination of employment or a change in the Company’s control with a qualifying termination. We listed the amount of compensation payable to each named executive in each situation in the table below.on December 31, 2014. Executive Benefits and Payments Upon Termination | | Retirement | | | Termination by the Companies for Cause | | | Termination by the Officer for Good Reason following a CIC | | | Termination by the Companies for Other than Cause following a CIC | | | Termination by the Companies for Other than Cause without a CIC | | | Edward J. Graham | | | | | | | | | | | | | | | | | | | | | | Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 3,933,051 | | | $ | 3,933,051 | | | $ | 990,000 | | | Equity Compensation | | $ | 0 | | | $ | 0 | | | $ | 1,622,380 | | | $ | 1,622,380 | | | $ | 0 | | | Incremental Nonqualified Pension | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2,376,000 | | | David A. Kindlick | | | | | | | | | | | | | | | | | | | | | | Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 1,849,080 | | | $ | 1,849,080 | | | $ | 425,250 | | | Equity Compensation | | $ | 306,187 | | | $ | 0 | | | $ | 423,973 | | | $ | 423,973 | | | $ | 0 | | | Incremental Nonqualified Pension | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 1,182,000 | | | Michael J. Renna | | | | | | | | | | | | | | | | | | | | | | | $ | 0 | | | $ | 0 | | | $ | 1,132,706 | | | $ | 1,132,706 | | | $ | 424,463 | | | Equity Compensation | | $ | 0 | | | $ | 0 | | | $ | 401,306 | | | $ | 401,306 | | | $ | 0 | | | Incremental Nonqualified Pension | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | Jeffrey E. DuBois | | | | | | | | | | | | | | | | | | | | | | Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 1,020,978 | | | $ | 1,020,978 | | | $ | 385,875 | | | Equity Compensation | | $ | 0 | | | $ | 0 | | | $ | 384,717 | | | $ | 384,717 | | | $ | 0 | | | Incremental Nonqualified Pension | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 865,000 | | | Kevin D. Patrick | | | | | | | | | | | | | | | | | | | | | | Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 763,732 | | | $ | 763,732 | | | $ | 354,375 | | | Equity Compensation | | $ | 0 | | | $ | 0 | | | $ | 294,446 | | | $ | 294,446 | | | $ | 0 | | | Incremental Nonqualified Pension | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 285,000 | |
Executive Benefits and Payments Upon Termination | | Retirement | | | Termination by the Company for Cause | | | Termination by the Officer for Good Reason or by the Company without Cause following a CIC | | | Termination by the Officer for Good Reason or by the Company without Cause without a CIC | | Edward J. Graham Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 3,946,451 | | | $ | 748,705 | | | Equity Compensation | | $ | 1,100,753 | | | $ | 0 | | | $ | 2,163,379 | | | $ | 0 | | Stephen H. Clark Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 738,348 | | | $ | 303,270 | | | Equity Compensation | | $ | 133,870 | | | $ | 0 | | | $ | 227,824 | | | $ | 0 | | Michael J. Renna Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 1,197,033 | | | $ | 426,368 | | | Equity Compensation | | $ | 0 | | | $ | 0 | | | $ | 672,392 | | | $ | 0 | | Jeffrey E. DuBois Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 1,074,928 | | | $ | 377,462 | | | Equity Compensation | | $ | 276,441 | | | $ | 0 | | | $ | 534,436 | | | $ | 0 | | Gina Merritt-Epps Cash Compensation | | $ | 0 | | | $ | 0 | | | $ | 908,795 | | | $ | 343,919 | | | Equity Compensation | | $ | 0 | | | $ | 0 | | | $ | 453,467 | | | $ | 0 | |
Below is a description of the assumptions that we used in determining the payments in the tables above upon termination as of December 31, 2011:2014: Retirement Named Executive retiresExecutives retire from the Company upon attaining both 55 years of age and 10 years of continuous service with the Company. Change in Control (CIC) A change in control shall generally mean any of the following: (1) consummation of any paya merger or proposal forconsolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger liquidation, dissolution or acquisitionconsolidation, will not own 50 percent or more of SJIthe shares of the surviving corporation; (2) sale or all orother disposition of substantially all of its assets; (2)the assets of the Company; (3) election to the Board of Directors of SJI a new majority different from the current slate, unless each such new director stands for election as a management nominee and is elected by shareholders immediately prior to the election of any such new majority; or (3)(4) the acquisition by any person(s) of 20%30 percent or more of the stock of SJI having general voting rights in the election of directors. Cash Compensation Termination following a Change inof Control (Good Reason or Without Cause) – The Company shall paySeverance equals two times (three times for the Named Executives as severance pay an amount equal to 300% of aCEO) base amount determined to be thesalary and average annual compensation paid tocash award for the Named Executives during the five calendarthree fiscal years immediately preceding the date of termination, along with the reimbursement of COBRA coverage costs for the applicable two or three year period, less the employee contribution rate as reported on their Forms W-2.set forth above. The employmentCIC Agreements include a modified cutback if any payments under the agreements require(including any other agreements) would otherwise constitute a parachute payment under Section 280G of the Code so that such severance pay shallthe payments will be reducedlimited to the largestgreater of (i) the dollar amount as will result in no payment being subjectwhich can be paid to the Named Executive without triggering an excise tax imposed byunder Section 4999 of the Internal Revenue Code.Code or (ii) the greatest after-tax dollar amount after taking into account any excise tax incurred under Section 4999 of the Code with respect to such parachute payments. The only other parachute paymentpayments that would trigger an excise taxbe considered parachute payments upon a change in control is due to the acceleration of unvested restricted stock awards. It is assumed that the one-year, non-compete agreement, which the Named Executives areMessrs. Graham and Renna may be subject to would mitigatea cutback under Section 280G of the parachute payments such that noCode pursuant to the above provision. Ms. Merritt-Epps may be subject to an excise tax under Section 4999 of the Code but would receive the greatest after-tax amount after paying any applicable excise tax and thus no cutback would apply. The 280G analysis does not reflect any allocation of payments that may be imposed.made with respect to applicable non-compete provisions, reasonable compensation or any ameliorative tax planning strategies. Termination for Other than Cause or for Good Reason without a Change in Control– The Company shall pay the each Named Executive as severance pay an amount equal to 150%100% of the Named Executives’ base salary, to be paid out in 18 equal monthly installments.along with COBRA reimbursement for the same 12 month period. Equity Compensation Retirement – Named Executives are entitled to shares underpro-rated vesting upon retirement, based on the Restricted Stock Agreement that are reduced by an amount equal to 1/36th of the number of shares to which the Named Executive would otherwise be entitled for each month from the date of Named Executives’ retirement through the end of the three-yearapplicable 3-year performance period. The amount for Mr. Kindlick,Messrs. Graham, Clark and DuBois who is the only Named Executiveare eligible for retirement, represents the reducedpro-rated value of outstanding target shares from the 20102013 and 20112014 restricted stock awards. Change in Control – The Company shall provide that theUpon a qualifying termination following a change in control, all unvested restricted stock awards that are outstanding shall become non-forfeitable. Amountsvest and pay at target level performance. A qualifying termination includes an involuntary termination without cause by the Company or a resignation for good reason by the Named Executive, each following a change in control. The amounts disclosed represent the value of outstanding 2013 and 2014 awards based on target shares from the 2010 and 2011 restricted stock awards.level performance. Stock Price – Assumed to be $56.81$58.93 based on the closing price as of December 31, 2011.2014. Incremental Nonqualified Pension40
The present values of accumulated pension benefits under the Retirement Plan for Employees of SJI and the SJI Supplemental Executive Retirement Plan for the Named Executive are disclosed in the Pension Benefits Table section of this proxy disclosure. The payment amounts disclosed in this section represent the amount of the increase under such payments upon any triggering events.
Termination by the Companies Other than for Cause without a Change in Control – For purposes of the Supplemental Executive Retirement Plan (“SERP”), 18 months shall be included as service credit and the severance amount shall be considered in the final average earnings calculation. Mr. Graham, Mr. Kindlick, Mr. DuBois, and Mr. Patrick are currently eligible to receive a SERP benefit.
Final Average Earnings (“FAE”) – FAE means the average base salary plus annual cash earned for that calendar year for the highest 3 years of the final 6 years of employment. The FAEs were based on the base salary for 2011, 2010, and 2009 plus the severance pay.
Present Values – 75.03% discount rate and RP-2000 mortality projected to 2012 (postretirement only), and no pre-retirement decrements. Assumes normal form of payment is a life annuity with six years guaranteed.
EXHIBIT A
Participant List
AGL Resources | Alliant Energy | Atmos Energy Corporation | Avista Corporation | Cascade Natural Gas Corporation | CenterPoint Energy, Inc. | Central Hudson Gas & Electric | Chesapeake Utilities Corporation | Citizens Gas & Coke Utility | Colorado Springs Utilities | Constellation Energy | Consumers Energy Company | Dominion Resources, Inc. | DTE Energy | Duke Energy Corporation | Energen Corporation | Energy South, Inc. | Entergy Corporation | EON US LLC | Equitable Utilities | Exelon Corporation | Gainesville Regional Utilities | Integrys Energy Group | Intermountain Gas Company | Iroquois Pipeline Operating Company | Knoxville Utilities Board | Laclede Gas | Memphis Light Gas & Water | Metropolitan Utilities District | Middle Tenn. Natural Gas Company | Montana Dakota Utilities | Mountaineer Gas Company | National Fuel Gas Distribution Corporation | National Gas & Oil Cooperative | National Grid | New Jersey Resources Corporation | NICOR, Inc. | NiSource, Inc. | Northwest Natural Gas Company | North Western Energy LLC | NSTAR | Oneok, Inc. | Pepco Holdings | Philadelphia Gas Works | Piedmont Natural Gas Company, Inc. | Puget Sound Energy | Questar Corporation | SEMCO Energy | Sempra Energy | Source Gas | South Jersey Gas Company | Southern California Gas Company | Southern Union Company | Southwest Gas Corporation | UGI Utilities, Inc. | Vectren Corporation | Vermont Gas Systems, Inc. | Washington Gas Light Company | Westfield Gas & Electric Light | Xcel Energy, Inc. |
EXHIBIT B
Energy Database
Company Name | Sector | T.D. Williamson, Inc. | Energy | Hess Corporation | Energy | Sierra Southwest Co-Op Services, Inc. | Energy | Piedmont Natural Gas Company, Inc. | Energy | Southern Company | Energy | Southern Company -Alabama Power | Energy | Southern Company - Georgia Power | Energy | Southern Company - Southern Nuclear Operating Company | Energy | Southern Company - Mississippi Power | Energy | Southwest Gas Corporation | Energy | New York Power Authority | Energy | City of Philadelphia - Philadelphia Gas Works | Energy | Powersouth | Energy | Atmos Energy Corporation | Energy | Memphis Light, Gas & Water Division | Energy | California Independent System Operator Corporation | Energy |
United Illuminating Corporation | Energy | Unitil Corporation | Energy | CHS, Inc. | Energy | Mirant Corporation | Energy | ElectriCities of North Carolina | Energy | CenterPoint Energy | Energy | Dominion Resources, Inc. | Energy | Dominion Resources, Inc. - Dominion Energy | Energy | Dominion Resources, Inc. - Dominion Generation Corporation | Energy | Dominion Resources, Inc. - VA Power | Energy | Iroquois Pipeline Operating Company | Energy | Public Works Commission of Fayetteville, North Carolina | Energy | PJM Interconnection, LLC | Energy | PG&E Corporation - Pacific Gas and Electric Company | Energy | Electric Reliability Council of Texas, Inc. | Energy |
FirstEnergy | Energy | Allegheny Energy, Inc. AGL Resources, Inc | Energy | GDF SUEZ Energy - United Water | Energy | GDF SUEZ Energy North America | Energy | GDF SUEZ Energy-SUEZ Energy Generation North America | Energy | GDF SUEZ Energy-SUEZ Energy LNG North America | Energy | GDF SUEZ Energy-SUEZ Energy Marketing North America | Energy | GDF SUEZ Energy-SUEZ Energy Retail North America | Energy | American Transmission Co. LLC | Energy | PNM Resources Inc. | Energy | Edison International - Edison Mission Energy | Energy | Energy Future Holdings | Energy | Energy Future Holdings - Luminant | Energy | Energy Future Holdings - Luminant Energy | Energy |
Energy Future Holdings - Oncor Electric Delivery Company | Energy | Energy Future Holdings - TXU Energy | Energy | Old Dominion Electric Cooperative | Energy | Central Vermont Public Service Corporation | Energy | Petrobras Americas Inc | Energy | Wood Mackenzie | Energy | DPL Inc. | Energy | Orlando Utilities Commission | Energy | City of Austin - Austin Energy | Energy | E.ON U.S., LLC | Energy | Duquesne Light | Energy | Vopak North America | Energy | NuStar Energy L.P. | Energy | Cheniere Energy, lnc. | Energy | CGGVentas | Energy | L/B Water Service | Energy | Helmerich & Payne, Inc. | Energy |
Florida Municipal Power Agency | Energy | South Jersey Industries | Energy | South Jersey Industries - Energy Solutions | Energy | South Jersey Industries - South Jersey Gas Company | Energy | AES Corporation | Energy | Southern Minnesota Municipal Power Agency | Energy |
Public Works Commission of Fayetteville, North Carolina | Energy | PJM Interconnection, LLC | Energy | PG&E Corporation - Pacific Gas and Electric Company | Energy | Electric Reliability Council of Texas, Inc. | Energy | FirstEnergy | Energy | Allegheny Energy, Inc. AGL Resources, Inc | Energy | GDF SUEZ Energy - United Water | Energy | GDF SUEZ Energy North America | Energy |
GDF SUEZ Energy-SUEZ Energy Generation North America | Energy | GDF SUEZ Energy-SUEZ Energy LNG North America | Energy | GDF SUEZ Energy-SUEZ Energy Marketing North America | Energy | GDF SUEZ Energy-SUEZ Energy Retail North America | Energy | American Transmission Co. LLC | Energy | PNM Resources Inc. | Energy | Edison International - Edison Mission Energy | Energy | Energy Future Holdings | Energy | Energy Future Holdings - Luminant | Energy | Energy Future Holdings - Luminant Energy | Energy | Energy Future Holdings - Oncor Electric Delivery Company | Energy | Energy Future Holdings - TXU Energy | Energy | Old Dominion Electric Cooperative | Energy | Central Vermont Public Service Corporation | Energy | Petrobras Americas Inc | Energy |
Wood Mackenzie | Energy | DPL Inc. | Energy | Orlando Utilities Commission | Energy | City of Austin - Austin Energy | Energy | E.ON U.S., LLC | Energy | Duquesne Light | Energy | Vopak North America | Energy | NuStar Energy L.P. | Energy | Cheniere Energy, lnc. | Energy | CGGVentas | Energy | L/B Water Service | Energy | Helmerich & Payne, Inc. | Energy | Florida Municipal Power Agency | Energy | South Jersey Industries | Energy | South Jersey Industries - Energy Solutions | Energy | South Jersey Industries - South Jersey Gas Company | Energy |
AES Corporation | Energy | Southern Minnesota Municipal Power Agency | Energy |
General Industry Database
Company Name | Sector | Johnson County Government | General Market | Community Options, Inc. | General Market | New York City Department of Education | General Market | Tipp Enterprises - Novamex | General Market | Laureate Education, Inc | General Market | American Institute of Graphic Arts (AlGA) | General Market | Massachusetts Society of Certified Public Accountants | General Market | Kforce, Inc | General Market | Telefonica International Wholesale Services | General Market | City of Austin, TX | General Market |
Sleep Innovations | Industrial | International Fellowship Of Christians & Jews | General Market | Chicago Province of the Society of Jesus | General Market | Pharmacy Onesource, Inc. | General Market | Shippensburg University Foundation | General Market | Rochester Institute of Technology | General Market | Alzheimer’s Disease and Related Disorders Association | General Market | Rensselaer Polytechnic Institute | General Market | Ritchie Bros. Auctioneers | General Market | Healthcare Information Management Systems Society | General Market | Bureau Veritas | General Market | FMC Corporation | Chemical | FMC Corporation - Agricultural Products Group | Chemical |
FMC Corporation - Industrial Chemicals Group | Chemical | FMC Corporation - Specialty Chemicals Group | Chemical | PPG Industries Inc. - Chemicals | Chemical | PPG Industries Inc. - Coatings & Resins | Chemical | PPG Industries Inc. - Corporate | Chemical | PPG Industries Inc. - Glass | Chemical | Honeywell - Specialty Materials | Chemical | Eastman Chemical | Chemical | Umicore | Chemical | Ashland, Inc. - Aqualon Functional Ingredients | Chemical | Ashland, Inc. - Ashland Distribution | Chemical | Ashland, Inc. - Consumer Markets | Chemical | Ashland, Inc. - Corporate | Chemical | Ashland, Inc. - Hercules Water Technologies | Chemical | Ashland, Inc. - Performance Materials | Chemical |
Tronox Incorporated | Chemical | Sunoco, Inc. - Chemical Division | Chemical | INVISTA | Chemical | Dow Chemical Company, The | Chemical | Dow Chemical Company, The - Dow AgroSciences | Chemical | Dow Corning Corporation | Chemical | E. I. du Pont de Nemours and Company | Chemical | Occidental Petroleum Corporation - Occidental Chemical Corp. | Chemical | Calgon Carbon | Chemical | Olin Corporation - Chlor Alkali | Chemical | Arkema | Chemical | Solvay America - Solvay Solexis | Chemical | Solvay America Inc. | Chemical | Solvay America Inc. - Solvay Advanced Polymers, Inc. | Chemical | Solvay America Inc. - Solvay Chemicals | Chemical | Solvay America Inc. - Solvay lnformation Technologies | Chemical |
| | Chemtura Corporation | Chemical | Bayer Material Science | Chemical | Mosaic Company, The | Chemical | Air Products and Chemicals | Chemical | Rhodia | Chemical | BASF | Chemical | BASF - Ciba Specialty Chemicals | Chemical | Arch Chemicals, Inc. | Chemical | H.B. Fuller Company | Chemical | Williams Companies, Inc. | Chemical | Cognis | Chemical | Roquette America | Chemical | MeadWestvaco Corporation - Specialty Chemicals | Chemical | Praxair, Inc. | Chemical | NewMarket Corporation | Chemical | Georgia Gulf Corporation | Chemical | lneos Group Limited | Chemical |
| | Air Liquide America | Chemical | Cabot Corporation | Chemical | MacDermid | Chemical | EMD Chemicals Inc | Chemical | Evonik Degussa Corporation | Chemical | Linde Group, North America Inc. | Chemical | Millennium Inorganic Chemicals | Chemical | NOVA Chemicals, Inc. Lubrizol Corporation, The | Chemical | LyondellBasell North America - Lyondell | Chemical | Clariant Corporation | Chemical | International Flavors & Fragrances | Chemical | Agrium, Inc. - US | Chemical | Potash Corporation of Saskatchewan, Inc. | Chemical | Huntsman- Textile Effects | Chemical | Cytec Industries Inc. | Chemical | Lonza Inc. | Chemical |
| | Akzo Nobel | Chemical | Akzo Nobel - Car Refinishes | Chemical | Akzo Nobel - Functional Chemicals | Chemical | Akzo Nobel - Industrial Finishes | Chemical | Akzo Nobel - International Paint LLC | Chemical | Akzo Nobel - National Starch | Chemical | Akzo Nobel - Powder Coatings | Chemical | Akzo Nobel - Pulp & Paper Chemicals | Chemical | Akzo Nobel- Surfactants | Chemical | TOTAL S.A- Total Petrochemicals USA | Chemical | Sasol North America, Inc. | Chemical | lnfineum USA L.P. | Chemical | Chevron Phillips Chemical Company LLC | Chemical | Champion Technologies | Chemical | Champion Technologies - Corsicana Technologies | Chemical | Shepherd Color Company | Chemical |
| | Buckman Laboratories | Chemical | lnnophos, Inc. | Chemical | LANXESS | Chemical | Westlake Chemical Corporation | Chemical | Siegwerk USA Inc | Chemical | Momentive Specialty Chemicals, Inc. | Chemical | Michelman Inc. | Chemical | Baker Petrolite | Chemical | Sika Corporation | Chemical | Bluestar Silicones | Chemical | Zep Inc. | Chemical | Canexus | Chemical | SABIC Innovative Plastics US LLC | Chemical | GEO Specialty Chemicals | Chemical | Nitto Denko America – Permacel Automotive | Chemical | Americas Styrenics | Chemical | ICL Industrial Products | Chemical |
| | DSM Nutritional Products, Inc. | Chemical | DSM Resins U.S. Inc. - DSM Chemicals North America, Inc. | Chemical | Firmenich, Incorporated | Chemical | OCI Chemical | Chemical | Borealis Compounds Inc. | Chemical | Ferro Corporation | Chemical | Southern Company | Industrial | FirstEnergy Corp. | Industrial | Weston Solutions | Industrial | Jacobs Engineering Group Inc. | Industrial | Zachry Construction Corporation | Industrial | Granite Construction Incorporated | Industrial | Day & Zimmermann | Industrial | Gilbane, Inc. | Industrial | Bovis Lend Lease | Industrial | McCarthy Building Companies Inc. | Industrial | PCL Construction Enterprises Inc. | Industrial |
| | Tishman Realty & Construction Co. Inc. | Industrial | Turner Construction Company | Industrial | Wertz Company | Industrial | NACCO Materials Handling Group | Industrial | Bridgestone Americas, Inc. | Industrial | Saint-Gobain Corporation | Industrial | Voith - Voith Hydro Inc. | Industrial | Voith - Voith Paper Fabric & Roll Systems Inc | Industrial | Continental Automotive Systems, Inc. | Industrial | Michelin North America | Industrial | Flowserve Corporation | Industrial | Valmont Industries, Inc. - Coatings | Industrial | Valmont Industries, Inc. - Corporate | Industrial | Valmont Industries, Inc. - International | Industrial | Valmont Industries, Inc. - Irrigation | Industrial | Valmont Industries, Inc. - Structures Division | Industrial |
Valmont Industries, Inc. - Tubing | Industrial | Valmont Industries, Inc. - Utilities | Industrial | Marmon Group, Inc., The - Union Tank Car | Industrial | Hexagon Metrology, Inc. | Industrial | Cooper Industries, Ltd.- B-Line | Industrial | Cooper Industries, Ltd. - Bussmann | Industrial | Cooper Industries, Ltd. - Cooper Tools | Industrial | Cooper Industries, Ltd. - Corporate | Industrial | Cooper Industries, Ltd. - Crouse-Hinds ECM | Industrial | Cooper Industries, Ltd. - Lighting | Industrial | Cooper Industries, Ltd. - Power Systems | Industrial | Cooper Industries, Ltd. - Wiring Devices | Industrial | Lehigh Hanson | Industrial | Lehigh Hanson - Building Products | Industrial | Lehigh Hanson - Canada Region | Industrial | Lehigh Hanson - Lehigh White | Industrial |
Lehigh Hanson- North Region | Industrial | Lehigh Hanson - South Region | Industrial | Lehigh Hanson- West Region | Industrial | Ingersoll Rand Company Limited | Industrial | Ingersoll Rand Company Limited- Climate Control | Industrial | Ingersoll Rand Company Limited - Enterprise Services | Industrial | Ingersoll Rand Company Limited - Industrial Technologies | Industrial | Ingersoll Rand Company Limited - Security Technologies | Industrial | Ingersoll Rand Company Limited - Trane Residential | Industrial | Caterpillar Inc. | Industrial | Joy Global, Inc. | Industrial | Joy Global, Inc. - Joy Mining Machinery | Industrial | SPX Corporation | Industrial | Modine Manufacturing Company | Industrial | Belden | Industrial |
Wienerberger- General Shale Brick. Inc. | Industrial | Illinois Tool Works Inc. | Industrial | Owens-Illinois, Inc. | Industrial | Pilkington | Industrial | Eaton Corporation | Industrial | Noranda Aluminum | Industrial | Noranda Aluminum – Gramercy | Industrial | Noranda Aluminum - Noranda Primary | Industrial | Noranda Aluminum – Norandal | Industrial | ArcelorMittal Tubular Products | Industrial | ArcelorMittal Tubular Products | Industrial | ArcelorMittal Tubular Products Mechanical | Industrial | Sonoco Products Company | Industrial | CNH Global N.V. | Industrial | Andersons, Inc., The | Industrial | Cargill, Inc. | Industrial | American Crystal Sugar Company | Industrial |
Hallmark Cards, Inc. | Industrial | MeadWestvaco Corp - Community Development & Land Management | Industrial | MeadWestvaco Corporation – Calmar | Industrial | MeadWestvaco Corporation - Consumer & Office Products | Industrial | MeadWestvaco Corporation - Consumer Solutions | Industrial | MeadWestvaco Corporation - Corporate | Industrial | MeadWestvaco Corporation - Global Business Services | Industrial | MeadWestvaco Corporation - Packaging Resource Group | Industrial | MeadWestvaco Corporation - Specialty Papers | Industrial | Deere & Company | Industrial | Associated Materials, Inc. | Industrial | Mitsubishi lnternational Corporation | Industrial | Hilti - US | Industrial | Newark InOne | Industrial | ABB, Inc. | Industrial |
FANUC CNC America Corporation | Industrial | Hillwood Development Corporation | Industrial | Matthews International Corporation | Industrial | Huhtamaki | Industrial | CHS, Inc. (307511) | Industrial | Tate & Lyle Americas | Industrial | Tate & Lyle Americas- Custom Ingredients | Industrial | Tate & Lyle Americas –Ingredients | Industrial | Americas Tate & Lyle Americas - Tate & Lyle | Industrial | Sucralose Amsted Industries, Inc. - Amsted Rail | Industrial | Amsted Industries, Inc. - Baltimore Aircoil | Industrial | Amsted Industries, Inc. - Burgess Norton | Industrial | Amsted Industries, Inc. - Consolidated Metco Inc. | Industrial | Amsted Industries, Inc. – Corporate | Industrial | Amsted Industries, Inc. - Diamond Chain | Industrial |
Amsted lndustries, Inc. - Griffin Pipe | Industrial | Amsted Industries, Inc. - Means Industries, Inc. | Industrial | Pioneer Hi-Bred International, Inc. | Industrial | Ensign-Bickford Industries | Industrial | Brambles | Industrial | Johnson Controls | Industrial | FM Global | Industrial | PCS – Potash | Industrial | Plastic Omnium | Industrial | Benteler North America | Industrial | BMW Manufacturing | Industrial | ZF Group North American Operations | Industrial | GrafTech International, LTD | Industrial | Southern Star Concrete | Industrial | Griffith Laboratories USA | Industrial | Eagle Ottawa, LLC | Industrial | Groupe SEB | Industrial |
Denso Manufacturing | Industrial | Armacell LLC | Industrial | Day & Zimmermann | Industrial | Ford Motor | Industrial | MonierLifetile LLC | Industrial | Handy & Harman | Industrial | Dawn Food Products, Inc. | Industrial | Lenzing Fibers Inc – Hahl | Industrial | Lenzing Fibers Inc. | Industrial | Lopez Foods | Industrial | Ply Gem Siding Group | Industrial | Bunge North America, Inc. | Industrial | BELIMO Americas | Industrial | Ball Corporation | Industrial | Agfa Corporation | Industrial | Agfa Corporation - Agfa Materials | Industrial | S&B Industrial Minerals S.A. - N.A | Industrial | S&B Industrial Minerals S.A. - Stollberg Inc | Industrial |
Bal-Seal Engineering Inc | Industrial | Sitel Semiconductor | Industrial | Amcor Limited | Industrial | Amcor Limited- Amcor PET Packaging | Industrial | Glatfelter | Industrial | WireCo World Group Inc. | Industrial | Vallourec | Industrial | Danfoss | Industrial | Howden Buffalo Inc. | Industrial | ASML | Industrial | TomTom, Inc. | Industrial | ltalcementi | Industrial | Flexco | Industrial | Archer Daniels Midland | Chemical | Konica Minolta Graphics Imaging, Inc | Industrial | Barnes Group Inc. | Industrial | PERl USA | Industrial |
| | Anonymous Industrial Company | Industrial | Thomas Steel Strip Corp | Industrial | Jaguar Land Rover NA | Industrial | Southco, Inc. | Industrial | Forbo Flooring | Industrial | Siemens Corporation | Industrial | Mersen Group | Industrial | United States Steel Corporation | Industrial | Gerdau AmeriSteel Corporation | Industrial | ArcelorMittal | Industrial | AK Steel Corporation | Industrial | Severstal - Severstal North America | Industrial | CSN | Industrial |
EXHIBIT C
Proxy Position 1
and Chief
Executive Officer
| Top Financial
Position
| Proxy Position 3 | Proxy Position 4 | Proxy Position 5 | | | | | | Atmos Energy Corp. | Atmos Energy Corp. | Atmos Energy Corp. | Atmos Energy Corp. | Atmos Energy Corp. | Nicor, Inc. | New Jersey Resources Corp. | New Jersey Resources Corp. | Nicor, Inc. | Nicor, Inc. |
| | | | | New Jersey Resources Corp. | WGL Holdings Inc. | WGL Holdings Inc. | New Jersey Resources Corp. | New Jersey Resources Corp. | WGL Holdings, Inc. | Southern Union Co. | Southern Union Co. | WGL Holdings Inc. | WGL Holdings, Inc. | Southern Union Co. | AGL Resources Inc. | AGL Resources Inc. | Southern Union Co. | Southern Union Co. | AGL Resources Inc. | Vectren Corp. | Vectren Corp. | AGL Resources Inc. | AGL Resources Inc. | Vectren Corp. | Southwest Gas Corp. | Southwest Gas Corp. | Vectren Corp. | Vectren Corp. | Southwest Gas Corp. | Laclede Group Inc. | Laclede Group Inc. | Southwest Gas Corp. | Southwest Gas Corp. | Laclede Group Inc. | Piedmont Natural Gas Co. Inc. | Piedmont Natural Gas Co. Inc. | Laclede Group Inc. | Laclede Group Inc. | Piedmont Natural Gas Co.lnc. | Energen Corp. | Energen Corp. | Piedmont Natural Gas Co.lnc. | Piedmont Natural Gas Co.lnc. | Energen Corp. | CH Energy Group Inc. | CH Energy Group Inc. | Energen Corp. | Energen Corp. | CH Energy Group Inc. | Northwest Natural Gas Co. | Northwest Natural Gas Co. | CH Energy Group Inc. | CH Energy Group Inc. | Northwest Natural Gas Co. | Black Hills Corp/SD | Black Hills Corp/SD | Northwest Natural Gas Co. | Northwest Natural Gas Co. | Black Hills Corp/SD | Chesapeake Utilities Corp. | Chesapeake Utilities Corp. | Black Hills Corp/SD | Black Hills Corp/SD | Chesapeake Utilities Corp. | | | Chesapeake Utilities Corp. | Chesapeake Utilities Corp. |
The graph below compares the cumulative total return on the Company’s Common Stock for the 5- year5-year period ended December 31, 20112014 with the cumulative total return on the S&P 500 and the S&P Utility Indexes. The graph assumes that $100 was invested on December 31, 20062009 in the Company’s Common Stock, the S&P 500 Index and the S&P Utility Index and that all dividends were reinvested. Standard & Poor’s Utilities Index is a commonly used indicator of utility common stock performance based on companies considered electric, gas or water utilities that operate as independent producers and/or distributors of power. For the 5-year period ending December 31, 2011,2014, investors received a 14.5%12.5 percent annualized total return compared with the (0.2%)15.5 percent and 3.7%13.3 percent returns from the S&P 500 Index and S&P Utility Index, respectively. The annual growth rate for 20112014 for the Company was 10.6%.8.9 percent. This compares with 2.1%13.7 percent for the S&P 500 and 19.9%29.0 percent for the S&P Utility Index. Indexed Total Return Over 5 Years Assuming Dividends Reinvested   | S&P 500 | 100 | 115.1 | 117.5 | 136.3 | 180.4 | 205.1 | | S&P UTIL | 100 | 105.5 | 126.5 | 128.1 | 145.0 | 187.0 | | SJI | 100 | 142.4 | 157.5 | 144.1 | 165.3 | 180.0 |
ANNUAL REPORT AND FINANCIAL INFORMATION | |
A copy of the Company’s Annual Report to Shareholders for the year ended December 31, 20112014 accompanies this proxy statement. The Annual Report is not proxy-soliciting material or a communication by which any solicitation is made. Upon written request of any person who on the record date for the Annual Meeting was a record owner of the Common Stock, or who represents in good faith that he or she was on that date a beneficial owner of such stock and is entitled to vote at the Annual Meeting, the Company will send to that person, without charge, a copy of its Annual Report on Form 10-K for 2011,2014, as filed with the Securities and Exchange Commission. Requests for this report should be directed to Gina Merritt-Epps, CorporateGeneral Counsel and Corporate Secretary, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
| | By Order of the Board of Directors, | | | | Gina Merritt-Epps | | | | CorporateGeneral Counsel & Corporate Secretary | | | March 30, 2015 | | |
March 20, 2012
SOUTH JERSEY INDUSTRIES, INC. 1997 STOCK-BASED2015 OMNIBUS EQUITY COMPENSATION PLAN (As Amended and Restated Effective January 1, 2012)
1. Purpose of Plan The purpose of the Plan is to enable the Company to recognize the contributions made to the Company by employees (including employees who are members of the Board of Directors)Board) and non-employee directorsNon-Employee Directors of the Company by providing such persons with additional incentive to devote themselves to the future success of the Company and to improve the ability of the Company to attract, retain and motivate persons upon whom the Company’s sustained growth and financial success depend, by: (i)(a) providing incentive compensation opportunities competitive with those of other major companies; (ii)(b) providing performance-related incentives that motivate superior performance; and (iii)(c) providing such persons with the opportunity to acquire or increase their ownership interest in the Company and to thereby acquire a greater stake in the Company and a closer identity with it. 2. Definitions (a) “Award” means an award of Options, SARs, or Restricted Stock.Whenever used in this Plan, the following terms will have the respective meanings set forth below:
(a) “Award” means a Stock Award, Stock Unit, Option, SAR, Other Stock-Based Award or Cash Incentive Award granted under the Plan. (b) “Board” “Award Agreement” means the boardwritten instrument that sets forth the terms and conditions of directorsan Award, including all amendments thereto. (c) “Board” means the Board of Directors of the Parent Company. (c) “Code”(d) “Cash Incentive Award” means a cash bonus award, as described in Section 12.
(e) “Cause” has the meaning set forth in any written agreement between the Grantee and the Company, or if there is no such agreement or the agreement does not define “Cause” then “Cause” means conduct by a Grantee involving one or more of the following: (i) the willful and continued failure by the Grantee to substantially perform his or her duties other than any such failure resulting from the Grantee’s incapacity due to physical or mental illness or injury, provided that the Board of Directors of the Company or the Chief Executive Officer has provided written notice of termination for Cause to the Grantee, and the Grantee has not corrected the act or failure to act that constitutes the grounds for Cause as set forth in the Company’s notice of termination within 30 days of the Grantee’s receipt of the notice; (ii) the Grantee’s conviction of, plea of no contest to, or plea of nolo contendere to, a crime under state or federal law; (iii) willful misconduct by the Grantee which is materially injurious to the Company, monetarily or otherwise; or (iv) the Grantee’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the Grantee’s duties and responsibilities. (f) “Change in Control” means any of the following: (i) the consummation of (A) a merger or consolidation of the Company with another corporation where the shareholders of the Parent Company immediately prior to the merger or consolidation will not beneficially own immediately after the merger or consolidation, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), or (B) a sale or other disposition of all or substantially all of the assets of the Parent Company; (ii) directors are elected such that a majority of the members of the Board shall have been members of the Board for less than two years, unless each such new director who was not a director at the beginning of such two year period stands for election as a management nominee (which shall in no event include directors nominated by hostile shareholders) and is elected by shareholders immediately prior to the election of any such new majority; or (iii) any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Parent Company representing more than 30% of the voting power of the then outstanding securities of the Parent Company; provided that a Change in Control shall not be deemed to occur for purposes of this subsection (iii) as a result of (A) a transaction in which the Parent Company becomes a subsidiary of another corporation and in which the shareholders of the Parent Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such shareholders to more than 30% of all votes to which all shareholders of the parent corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote) or (B) an increase in any person’s beneficial ownership of securities of the Parent Company in connection with one or more Parent Company stock repurchase transactions. Notwithstanding the foregoing, for any Awards subject to the requirements of section 409A of the Code that will become payable on a Change in Control, the transaction constituting a “Change in Control” must also constitute a “change in control event” for purposes of section 409A(a)(2)(A)(v) of the Code. (g) “Code” means the Internal Revenue Code of 1986, as amended.amended, and the regulations promulgated thereunder. (d) “Committee” (h) “Committee” means the Compensation Committee of the Board or another committee describedappointed by the Board to administer the Plan, provided, however, that grant decisions made hereunder shall be made by the Board. All Board action shall be by the (i) “outside directors” as defined under section 162(m) of the Code, (ii) “non-employee directors” as defined in Paragraph 5.Rule 16b-3 under the Exchange Act, and (iii) “independent directors” under the rules and regulations of the New York Stock Exchange or such other securities exchange on which the Common Stock is then listed. A majority of the independent directors of the Company, in their sole discretion, may exercise any or all authority of the Committee under the Plan in lieu of the Committee, and in such instances references herein to the Committee shall be deemed to refer to such directors.
(e) “Company” (i) “Company” means South Jersey Industries, Inc. and each of its Subsidiary Companies.subsidiaries and any successor corporation, as determined by the Board.
(f) “Date(j) “Common Stock” means the common stock of Grant”the Parent Company.
(k) “Disability” or “Disabled” means a Grantee becoming disabled within the meaning of section 22(e)(3) of the Code. (l) “Dividend” shall mean a dividend paid on shares of Company Stock. (m) “Dividend Equivalent” means an amount calculated with respect to a Stock Unit, which is determined by multiplying the number of shares of Common Stock subject to the Stock Unit by the per-share cash Dividend, or the per-share fair market value (as determined by the Board) of any Dividend in consideration other than cash, paid by the Company on its Common Stock. If interest is credited on accumulated dividend equivalents, the term “Dividend Equivalent” shall include the accrued interest. (n) “Effective Date” of the Plan means the date on which an Option, SAR or Restricted Stock Awardof the Company’s 2015 Annual Meeting of Shareholders, provided that the Plan is granted.approved by the shareholders of the Company as of that date. (g) “Dividend Equivalent” means(o) “Eligible Participant” has the right to receive the equivalent value (in Shares) of dividends that are paid on Restricted Stock and reinvestedmeaning set forth in Shares.Section 6(a).
(h) “Eligible Participant” (p) “Employee” means an employee of the CompanyEmployer (including an officer or director who is also an employee), but excluding any person who is classified by the Employer as a “contractor” or “consultant,” no matter how characterized by the Internal Revenue Service, other governmental agency or a directorcourt. Any change of characterization of an individual by the Parent CompanyInternal Revenue Service or any court or government agency shall have no effect upon the classification of an individual as determined in accordance with Paragraph 7.an Employee for purposes of this Plan, unless the Board determines otherwise.
(i) “Fair Market Value” (q) “Employer” means on any given date the mean between the highestCompany and lowest prices of actual sales of Shares on the principal national securities exchange on which the Shares are listed on such date or, if there are no such sales on such date, the mean between the closing bid and asked prices of the Shares on such exchange on such date.its subsidiaries.
(j) “Holder”(r) “Exchange Act” means a person to whom (i) an SAR has been granted under the Plan, which SAR has not been exercised and has not expired or terminated, or (ii) a Restricted Stock Award has been granted, which Award has not become vested or been forfeited.Securities Exchange Act of 1934, as amended.
Table(s) “Exercise Price” means the per share price at which shares of Contents(k) “IncentiveCommon Stock Option” meansmay be purchased under an Option, granted under the Plan,as designated by the Committee at the time of such grant as an Incentive Stock Option and containing the terms specified herein for Incentive Stock Options.Board.
(l) “Non-Qualified Option”(t) “Fair Market Value” of Common Stock means, an Option granted underunless the Plan, designated by the Committee at the time of such grant as a Non-Qualified Option and containing the terms specified herein for Non-Qualified Options.
(m) “Option” means any stock option granted under the Plan and described either in Paragraph 3(a) or 3(b).
(n) “Optionee” means a person to whom an Option has been granted under the Plan, which Option has not been exercised and has not expired or terminated.
(o) “Parent Company” means South Jersey Industries, Inc.
(p) “Performance Goal” means the annual consolidated earnings per share from the Company’s continuing operations, or any other goal that is established at the discretion of the Committee including, among other things: (i) the price of Shares; (ii) the market share of the Company (or any business unit thereof); (iii) sales by the Company (or any business unit thereof); (iv) return on equity of the Company; (v) costs of the Company (or any business unit thereof); or (vi) the Company’s total shareholder return and earnings per share growth as measured against comparable returns/earnings of peer companies. The Committee shall have sole discretion to determine specific targets within each category of Performance Goals.
(q) “Qualifying Termination” meansBoard determines otherwise with respect to a Holderparticular Award, the closing price of Common Stock on the New York Stock Exchange on the relevant date (or if there were no trades on that date) the last reported sale price of Common Stock during regular trading hours on the latest preceding date upon which a Restrictedsale was reported. If the Common Stock Award eitheris not listed on the (i) terminationNew York Stock Exchange, the Fair Market Value shall be as determined by the HolderBoard on the basis of hisavailable prices for such Common Stock or her employment within such manner as may be authorized by applicable regulations under the Code.
(u) “Good Reason” has the meaning set forth in any written agreement between the Grantee and the Company, for Goodor if there is no such agreement or the agreement does not define “Good Reason, following a Change of Control, or (ii) termination of the Holder’s employment by the Company for other than Cause following a Change of Control. For this purpose” then “Good Reason” shall meanmeans any of the following: (1)(i) a material diminution in the assignment to the Holder by the Company, without the Holder’s express written approval, ofGrantee’s authority, duties inconsistent with the Holder’s position, duties,or responsibilities, titles, offices or status with the Company immediately prior to a Change of Control of the Company, or any removal of the HolderGrantee from or any failure to re-elect the HolderGrantee to any such positions; (2)positions, other than a failure to re-elect the Grantee to the Board of Directors of the Company by the Company’s stockholders; (ii) a material reduction in the Holder’sGrantee’s base salary, asother than in effect onconnection with an across-the-board, proportional reduction in annual base salary affecting all similarly-situated executives of the Date of Grant or as the same is increased from time to time during the Restriction Period of any Restricted Stock Award; (3) the failure to continue in effect any benefit plan or arrangement in which the Holder is participating immediately prior to a Change of Control, orCompany; (iii) the taking of any action by the Company which would adversely affect the Holder’s participation in and/or materially reduce the Holder’s benefitsGrantee’s target opportunity under any such benefit plan or arrangement or which would deprive the Holder of any material fringe benefit enjoyed by the Holder immediately prior to a Change of Control; (4)annual bonus program; (iv) a relocation of the Parent Company’s corporate headquarters to a location more than 50 miles outside of Folsom, New Jersey, or the Holder’sGrantee’s relocation by the Company to any place more than 50 miles from the location at which the HolderGrantee performed the Holder’sGrantee’s duties except for required travel by the HolderGrantee on the Company’s business to an extent substantially consistent with the Holder’s business travel obligations immediately prior to a Change of Control; (5)business; or (v) a material breach of the Holder’s then current Employment Agreement withby the Company (if any) by the Company;of any employment or (6) any purported termination of the Holder’s employment which is not effected pursuant to a Notice of Termination, as specified under the Holder’s then current Employment Agreement withchange in control agreement between the Company (if any). and the Grantee. Notwithstanding the foregoing, for any of the foregoing acts (or failurefailures to act) to constitute “Good Reason,” the HolderGrantee must object in writing to the Company within 90 days following initial notification of the termination or occurrence or proposed occurrence of the act (or failurefailures to act), and which act (or failurefailures to act) is not then rescinded or otherwise remedied by the Board within 30 days after delivery of such notice and the HolderGrantee actually resigns from employment within 30 days after the expiration of the foregoing 30-day cure period. If the Holder’sGrantee’s resignation occurs after such time, the resignation shall not be treated as a Qualifying Termination. For this purpose “Cause” shall mean any of the following reasons: (1) the willful and continued failure by the Holder to substantially perform his or her duties hereundervoluntary resignation other than any such failure resulting from the Holder’s incapacity due to physical or mental illness or injury; (2) the conviction of the Holder of a crime under state or federal law and the Board or one of its committees is unable to conclude in good faith (and in its sole discretion) that the Holder had no reasonable cause to believe that the activities of which he or she was convicted were unlawful and that such conviction will not materially impair his or her ability to discharge his or her duties; (3) the willful engaging by the Holder in misconduct which is materially injurious to the Company, monetarily or otherwise; or (4) the continued inability of the Holder to perform his or her duties by reason of alcoholism or drug abuse even after appropriate rehabilitation services have been made available to him or her. For this purpose “Change of Control” shall mean any of the events described in the first sentence of Paragraph 13 of the Plan.for Good Reason. (r) “Restriction Period”“Grantee” means the period during which Restricted Stock awarded under the Plan is subject to forfeiture.
(s) “Restricted Stock” means Shares awarded by the Company under Paragraph 11 of the Plan and described in Paragraph 3(d).
(t) “SAR” means a stock appreciation right granted under the Plan and described in Paragraph 3(c).
(u) “Share” or “Shares” means a share or shares of Common Stock of the Parent Company.
(v) “Subsidiary Companies” means all corporations that, at the time in question, are subsidiary corporations of the Parent Company within the meaning of section 425(f) of the Code.
(w) “Ten Percent Shareholder” means a person who on the Date of Grant owns, either directly or within the meaning of the attribution rules contained in section 425(d) of the Code, stock possessing more than ten percent of the total combined voting power of all classes of stock of his or her employer corporation or of its parent or subsidiary corporations, as defined respectively in sections 425(e) and (f) of the Code.
(x) “Value” of a SAR means the excess of the Fair Market Value of a Share on the date of exercise of such SAR over the Fair Market Value of a Share on the Date of Grant of such SAR.
3. Rights to be Granted
Rights that may be granted under the Plan are:
(a) Incentive Stock Options, which give the Optionee the right for a specified time period to purchase a specified number of Shares for a price not less than their Fair Market Value on the Date of Grant;
(b) Non-Qualified Options, which give the Optionee the right for a specified time period to purchase a specified number of Shares for a price determined by the Committee on the Date of Grant;
(c) SARs, which give the Holder the right for a specified time period, without payment to the Company, to receive the Value of such SARs, to be paid in cash or Shares or a combination of cash and Shares, the number and amount of which shall be determined pursuant to Paragraph 8(e) below.
(d) Restricted Stock Awards, which give the Holder a specific number of Shares which are either (i) awarded upon the Company’s achievement of Performance Goals established by the Committee, or (ii) awarded, subject to forfeiture if the Company fails to achieve Performance Goals established by the Committee.
4. Stock Subject to Plan
Not more than 1,000,000 Shares in the aggregate may be delivered pursuant to the Plan upon exercise of Options or SARs or pursuant to Restricted Stock Awards. The Shares so delivered may, at the option of the Company, be either treasury Shares or Shares originally issued for such purpose. If an Option or an SAR covering Shares terminates or expires without having been exercised in whole or in part, other Options or SARs may be granted covering the Shares as to which the Option or SAR was not exercised. If a Restricted Stock Award is forfeited, other Restricted Stock Awards may be granted covering the Shares which were forfeited.
5. Administration of Plan
The Plan shall be administered by the Compensation/Pension Committee of the Board or such other committee, consisting of two or more directors who, unless the Board determines otherwise, are “outside directors” (within the meaning of Section 162(m) of the Code) and “non-employee directors” (within the meaning of Rule 16b-3(b)(3)(i) under the Securities Exchange Act of 1934) as may be determined by the Board.
6. Grant of Rights
The Committee may grant Options, SARs, Restricted Stock Awards or all of the foregoing to Eligible Participants.
7. Eligibility
(a) An Option may be granted to those Eligible Participants who are designated by the Committee as eligible to receive an Option.
(b) An Incentive Stock Option shall not be granted to a Ten Percent Shareholder except on such terms concerning the option price and period of exercise as are provided in Paragraphs 8(a) and 8(f) with respect to such a person. A Non-Qualified Option shall not be granted to a Ten Percent Shareholder.
(c) A Restricted Stock Award may be granted to those Eligible Participants who are designated by the Committee as eligible to receive a Restricted Stock Award.
(d) No Eligible Participant may be granted in any calendar year Awards covering more than 300,000 Shares.
8. Option and SAR Agreements and Terms
All Options and SARs shall be granted within ten years from January 26, 2005 and be evidenced by Option agreements or SARs agreements which shall be executed on behalf of the Parent Company and by the respective Optionees or Holders. The terms of each such agreement shall be determined from time to time by the Committee, consistent, however, with the following:
(a) Option Price. The option price per Share shall be determined by the Committee but, in the case of Incentive Stock Option, shall not be less than 100% of the Fair Market Value of such Share on the Date of Grant. With respect to any Incentive Stock Option granted to a Ten Percent Shareholder, the option price per Share shall not be less than 110% of the Fair Market Value of such Share on the Date of Grant.
(b) Restrictions on Transferability. No Option or SAR shall be transferable otherwise than by will or the laws of descent and distribution and, during the lifetime of the Optionee or Holder, shall be exercisable only by him or her. Upon the death of an Optionee or Holder, the person to whom the rights shall have passed by will or by the laws of descent and distribution may exercise any Options or SARs only in accordance with the provisions of Paragraph 8(f).
(c) Payment Upon Exercise of Options. Full payment for Shares purchased upon the exercise of an Option shall be made in cash or, at the election of the Optionee and as the Committee may, in its sole discretion, approve, either (i) by surrendering Shares with an aggregate Fair Market Value equal to the aggregate option price, (ii) by delivering such combination of Shares and cash as the Committee may, in its sole discretion, approve or (iii) at the election of the Optionee, and if the Committee, in its sole discretion approves, by surrendering the Option in exchange for issuance of a number of shares equal to the difference between the exercise price of the Option and the Fair Market Value of the Shares subject to the Option.
(d) Issuance of Certificates Upon Exercise of Options; Payment of Cash. Only whole Shares shall be issuable upon exercise of Options. Any right to a fractional Share shall be satisfied in cash. Upon payment of the option price, a certificate for the number of whole Shares and a check for the Fair Market Value on the date of exercise of any fractional Share to which the Optionee is entitled shall be delivered to such Optionee by the Parent Company; provided, however, that in the case of the exercise of a Non-Qualified Option, the Optionee has remitted to his employer an amount, determined by such employer, necessary to satisfy applicable federal, state or local tax-withholding requirements, or made other arrangements with his or her employer for the satisfaction of such tax-withholding requirements. The Parent Company shall not be obligated to deliver any certificates for Shares until such Shares have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange upon which outstanding Shares of such class at the time are listed nor until there has been compliance with such laws or regulations as the Parent Company may deem applicable. The Parent Company shall use its best efforts to effect such listing and compliance.
(e) Issuance of Certificates Upon Exercise of SARs; Payment of Cash. Upon exercise of an SAR, its Value shall be payable in cash, or in Shares or such combination of cash and Shares aswho is selected by the Holder and approved byBoard to receive an Award under the Committee in its sole discretion. Any SharesPlan.
(w) “Incentive Stock Option” means an Option that may be due upon exerciseis intended to meet the requirements of an SAR shall be delivered to the Holder by the Parent Company and any payment of cash shall be made by the employerincentive stock option under section 422 of the Holder. The employer of the Holder shall deduct from the amount of any cash so payable an amount necessary to satisfy applicable federal, state,Code. (x) “Key Advisor” means a consultant or local tax-withholding requirements. If no cash is payable (or if the amount of cash payable is insufficient to satisfy applicable tax-withholding requirements), no Shares shall be delivered by the Parent Company to the Holder until the Holder remits to his or her employer an amount, determined by such employer, necessary to satisfy applicable federal, state, or local tax-withholding requirements or makes other arrangementsadvisor who performs services for the satisfaction of such tax-withholding requirements. The Parent Company, shall not be obligated to deliver any certificates for Shares until such Shares have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange upon which outstanding Shares of such class at the time are listed nor until there has been compliance with such laws or regulations as the Parent Company may deem applicable. The Parent Company shall use its best efforts to effect such listing and compliance. (f) Periods of Exercise of Options and SARs. An Option or SAR shall be exercisable in whole or in part at such time as may be determined by the Committee and stated in the Option or SAR agreement; provided however, that unless otherwise determined by the Committee, no Option or SAR shall be exercisable before one year or after five years from the Date of Grant in the case of an Option or SAR granted to a Ten Percent Shareholder, or before one year or after ten years from the Date of Grant in all other cases, except as provided below:
(i) In the event that an Optionee or Holder ceases to be employed by the Company for any reason other than retirement, disability (as determined by the Committee) or death, any Option or SAR held by such Optionee or Holder shall not be exercisable after the date the Optionee or Holder ceases to be employed by the Company unless otherwise determined by the Committee and set forth in the Option or SAR agreement or a written amendment thereto; provided, however, that in no event shall an Option or SAR be exercisable after five years from the Date of Grant in the case of a Ten Percent Shareholder or after ten years from the Date of Grant in all other cases;
(ii) If an Optionee or Holder ceases to be employed by the Company, and if such cessation of employment is due to the disability (as determined by the Committee) or the retirement of the Optionee or Holder, he or she shall have the rightrenders bona fide services to exercise his or her Options or SARs until the last day of the sixth month following cessation of employment, or such longer period as the Committee may determine and set out in writing, even if the date of exercise is within any time period prescribed by the Plan prior to which such Option or SAR shall not be exercisable; provided, however, that in no event shall an Option or SAR be exercisable after five years from the Date of Grant in the case of a Ten Percent Shareholder or after ten years from the Date of Grant in all other cases;
(iii) In the event that an Optionee or Holder ceases to be employed by the Company, by reasonthe services are not in connection with the offer and sale of his or her death, any Incentive Stock Option, Non-Qualified Option or SAR held by such Optionee or Holder shall be exercisable, the person to whom the rights of the Optionee shall be passed by will or by the laws of descent and distribution, until the last day of the twelfth month following the date of the Optionee’s or Holder’s death, or such longer period as the Committee may determine and set outsecurities in writing, even if the date of exercise is within any time period prescribed by the Plan prior to which such Option or SAR shall not be exercisable; provided, however, that in no event shall an Option or SAR be exercisable after five years from the Date of Grant in the case of a Ten Percent Shareholder or after ten years from the Date of Grant in all other cases.
(g) Date of Exercise. The date of exercise of an Option or SAR shall be the date on which written notice of exercise, addressed to the Parent Company at its main office to the attention of its Secretary, is hand delivered, telecopied or mailed, first class postage prepaid; provided, however, that the Parent Company shall not be obligated to deliver any certificates for Shares pursuant to the exercise of an Option or SAR until the Optionee shall have made payment in full of the option price for such Shares. Each such exercise shall be irrevocable when given. Each notice of exercise must (i) specify the Incentive Stock Option, Non-Qualified Option, SAR, or combination thereof, being exercised; (ii) must, in the case of the exercise of an Option, include a statement of preference (which shall not be binding on the Committee) as to the manner in which payment to the Parent Company shall be made (Shares or cash or a combination of Shares and cash); and (iii) must, in the case of the exercise of an SAR, include a statement of preference (which shall not be binding on the Committee) as to the manner in which payment to the Holder shall be made other than only in cash (Shares or cash or a combination of Shares and cash).
(h) Termination of Employment. For purposes of the Plan, a transfer of an employee between two employers, each of which is a Company, shall not be deemed a termination of employment.
(i) Multiple Grants of Incentive Stock Options, Non-Qualified Options and SARs. The grant, exercise, termination or expiration of any Incentive Stock Option, Non-Qualified Option or SAR shall have no effect upon any other Incentive Stock Option, Non-Qualified Option or SAR held by the same Optionee or Holder; provided, however, that the Committee may, in its sole discretion, provide in the Option agreement or SARs agreement that the exercise of a certain number of SARs is conditioned upon the exercise of a certain number of Options or provide that an SAR shall otherwise be attached to Options granted under the Plan. All SARs which are attached to Options shall be subject to the following terms:
(A) such SAR shall expire no later than the Option to which it is attached;
(B) such SAR shall be for an amount no more than the excess of the Fair Market Value of the Shares subject to the attached Option on the date such SAR is exercised over the option price of such Option;
(C) such SAR shall be subject to the same restrictions on transferability as the Option to which it is attached;
(D) such SAR shall be exercisable only when the Option to which it attached is eligible to be exercised;
(E) such SAR shall be exercisable only when the Fair Market Value of the Shares subject to the attached Option exceeds the option price of such Option; and
(F) such SAR shall expire upon the exercise of the Option to which it is attached. Upon exercise of an SAR which is attached to an Option, the Option to which the SAR is attached shall expire.
9. Limitation on Grant of Incentive Stock Options
The aggregate Fair Market Value (determined as of the time options are granted) of the Shares for which any employee may be granted Incentive Stock Options that first become exercisable in any one calendar year under the Plan and any other plan of his or her employer corporation and its parent and subsidiary corporations, as defined respectively in Sections 425(e) and (f) of the Code, shall not exceed $100,000.
10. Rights As Shareholders With Respect to Options and SARs
Neither an Optionee nor a Holder shall have any right as a shareholder with respect to any Shares subject to his or her Options or SARs until the date of the issuance of a stock certificate to him or her for such Shares.
11. Restricted Stock Awards
The grant of a Restricted Stock Award shall be subject to the following terms and conditions:
(a) Grant of Restricted Stock Award. Any Restricted Stock granted under the Plan shall be evidenced by an agreement executed by the Companycapital-raising transaction and the Holder, which agreement shall conform to the requirements of the Plan, and shall specify (i) the number of Shares subject to the Award, (ii) the Restriction Period applicable to each Award, (iii) the events that will give rise toindividual does not directly or indirectly promote or maintain a forfeiture of the Award, (iv) the Performance Goals that must be achieved in ordermarket for the restriction to be removed from the Award, (v) the extent to which the Holder’s right to receive the Shares under the Award will be forfeited if the Performance Goals are not met, and (vi) whether the Restricted Stock is subject to a vesting schedule. The agreement may contain such other provisions not inconsistent with the terms of the Plan as the Committee shall deem advisable.
(b) Delivery of Restricted Stock. Upon determination of the number of shares of Restricted Stock that are to be granted to the Holder, the Committee shall direct that a certificate or certificates representing the number of Shares be issued to the Holder with the Holder designated as the registered owner. The certificate(s) representing such shares shall be legended as to restrictions on the sale, transfer, assignment, or pledge of the Restricted Stock during the Restriction Period and deposited by the Holder, together with a stock power endorsed in blank, with the Company.
(c) Dividend Equivalents. Notwithstanding any provision of the Plan to the contrary, a Holder who has been granted a Restricted Stock Award pursuant to this Paragraph 11 may, at the discretion of the Committee, be credited as of dividend payment dates during the Restriction Period with Dividend Equivalents with respect to the Shares underlying the Restricted Stock Award. Such Dividend Equivalents shall be credited to an account established on behalf of the Holder by the Company. The Dividend Equivalents credited under this Paragraph (c) shall be notionally reinvested in Shares and shall be converted into additional Shares under such formula, at such time, and subject to such limitations as may be determined by the Committee.
(d) Receipt of Common Stock. At the end of the Restriction Period, the Committee shall determine, in light of the terms and conditions set forth in the Restricted Stock agreement, the number of shares of Restricted Stock with respect to which the restrictions imposed hereunder shall lapse. The Restricted Stock with respect to which the restrictions shall lapse shall be converted to unrestricted Shares by the removal of the restrictive legends from the Restricted Stock. Thereafter, Shares equal to the number of shares of the Restricted Stock with respect to which the restrictions hereunder shall lapse shall be delivered to the Holder. The Committee may, in its sole discretion, modify or accelerate the vesting and delivery of shares of Restricted Stock.
(e) Termination By Reason of Death, Disability or Retirement. Unless otherwise determined by the Committee, if a Holder ceases to be employed by the Company and such cessation of employment is due to the Holder’s death, disability (as determined by the Committee) or retirement, the vested portion of the Restricted Stock, if any, shall become nonforfeitable. The non-vested portion of the Restricted Stock shall be forfeited as of the date of such termination of employment.
(f) Other Termination. Unless otherwise determined by the Committee at the time of grant, if a Holder ceases to be employed by the Company and such cessation of employment is due to any reason other than for death, disability (as determined by the Committee), retirement, or Qualifying Termination, any Restricted Stock with respect to which the Restriction Period has not expired shall be forfeited.
12. Changes in Capitalization
In the event of a stock dividend, stock split, recapitalization, combination, subdivision, issuance of rights, or other similar corporate change, the Board shall make appropriate adjustments in the aggregate number of Shares that may be covered by Options, SARs or Restricted Stock Awards under the Plan, the number of Shares subject to, and the option price of, each then-outstanding Option, the number of then-outstanding SARs and the Fair Market Value of Shares upon which the Value of such SARs is based, and the number of Shares subject to each then-outstanding Restricted Stock Award.
13. Mergers, Dispositions and Certain Other Transactions
Effective January 1, 2012, notwithstanding any provision of this Plan to the contrary, if, during the Restriction Period of any Restricted Stock Award, the Parent Company or any of the Subsidiary Companies shall be merged into or consolidated with or otherwise combined with or acquired by another person or entity, or there is a divisive reorganization or a liquidation or partial liquidation of the Parent Company, then all Restricted Stock Awards shall become nonforfeitable and immediately payable in cash upon the Qualifying Termination of the Holder, to the extent then still outstanding. Except as otherwise provided in the foregoing sentence of this Paragraph 13, if, during the term of any Option or SAR, or during the Restriction Period of any Restricted Stock Award, the Parent Company or any of the Subsidiary Companies shall be merged into or consolidated with or otherwise combined with or acquired by another person or entity, or there is a divisive reorganization or a liquidation or partial liquidation of the Parent Company, the Parent Company may choose to take no action with regard to the Options, SARs or Restricted Stock Awards outstanding or, notwithstanding any other provision of the Plan, to take any of the following courses of action:
(a) Not less than 15 days or more than 60 days prior to any such transaction, all Optionees and Holders shall be notified that their Options and SARs shall expire on the 15th day after the date of such notice, in which event all Optionees and Holders shall have the right to exercise all of their Options and SARs prior to such new expiration date; or
(b) The Parent Company shall provide in any agreement with respect to any such merger, consolidation, combination or acquisition that the surviving, new or acquiring corporation shall grant options and stock appreciation rights to the Optionees and Holders to acquire shares, or stock appreciation rights in shares in such corporation with respect to which the excess of the fair market value of the shares of such corporation immediately after the consummation of such merger, consolidation, combination or acquisition over the option price, or the value of such stock appreciation rights, shall not be greater than the excess of the Fair Market Value of the Shares over the option price of Options (or, in the case of an SAR, the Value of such SAR) , immediately prior to the consummation of such merger, consolidation, combination or acquisition; or
(c) The Parent Company shall provide that all Restricted Stock Awards that are outstanding on the date of the merger, consolidation, combination or acquisition shall become nonforfeitable or immediately payable in cash; or
(d) The Parent Company shall take such other action as the Board shall determine to be reasonable under the circumstances in order to permit Optionees and Holders to realize the value of rights granted to them under the Plan.
14. Plan Not to Affect Employment
Neither the Plan nor any Award shall confer upon any employee of the Company any right to continue in the employment of the Company.
15. Interpretation
The Committee shall have the power to interpret the Plan and to make and amend rules for putting it into effect and administering it. It is intended that the Incentive Stock Options granted under the Plan shall constitute incentive stock options within the meaning of section 422A of the Code, that the Non-Qualified Options and Restricted Stock Awards shall constitute property subject to federal income tax pursuant to the provisions of section 83 of the Code and that the Plan shall qualify for the exemption available under Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission. The provisions of the Plan shall be interpreted and applied insofar as possible to carry out such intent.
16. Amendments
(a) The Plan may be amended by the Board, but any amendment that increases the aggregate number of Shares that may be issued pursuant to the Plan upon exercise of Options or SARs or upon the grant of a Restricted Stock Award (otherwise than pursuant to Paragraph 12), that changes the class of Eligible Participants, or that otherwise requires the approval of the shareholders of the Parent Company in order to maintain the exemption available under Rule 16b-3 (or any similar rule) of the Securities Exchange Act of 1934, shall require the approval of the holders of such portion of the shares of the capital stock of the Parent Company present and entitled to vote on such amendment as is required by applicable state law and the terms of the Parent Company’s Articles of Incorporation, as then in effect, to make the amendment effective. No outstanding Option, SAR or Restricted Stock Award shall be affected by any such amendment without the written consentsecurities.
(y) “Non-Employee Director” means a member of the Optionee, Holder, or other person then entitled to exercise such Option or SAR or receive Shares pursuant to such Restricted Stock Award.Board who is not an Employee. (b) Subject(z) “Non-Qualified Option” means an Option that is not intended to the provisionsbe taxed as an incentive stock option under section 422 of the Plan, the Committee may amend any Option agreement, SARs agreement or Restricted Stock agreement, subject to the consent of the affected Optionee or Holder if such amendment is not favorable to the Optionee or Holder or if such amendment has the effect of changingCode.
(aa) “Option” means an Incentive Stock Option to a Non Qualifiedor Non-Qualified Option, except that the consent of the Optionee or Holder shall not be required for any amendment made pursuant to Paragraph 13 hereof.as described in Section 9. 17. Compliance with Section 162(m) of the Code
This Plan is intended to comply with Section 162(m) of the Code with respect to qualified performance-based Awards that may be awarded(bb) “Other Stock-Based Award” means any Award based on, measured by the Committee to Eligible Participants. For this purpose, an Award shall constitute qualified performance-based compensation to the extent that it is granted by the Committee on account of the attainment of one or more pre-established, objective performance goals established by the Committee, the material terms of which are disclosed to the shareholders of the Parent Company and satisfaction of such performance goals are certified by the Committee.
18. Securities Laws
The Committee shall have the power to make each Award under the Plan subject to such conditions as it deems necessary or appropriate to comply with the then-existing requirements of the Securities Act of 1933 or the Securities Exchange Act of 1934, including Rule 16b-3 (or any similar rule), of the Securities and Exchange Commission.
19. Effective Date and Term of Plan
The Plan shall expire no laterpayable in Common Stock (other than January 26, 2015, unless sooner terminated by the Board. Any Incentive Stock Option granted before the approval of the Plan by the Parent Company’s shareholders shall be expressly conditioned upon, and shall not be exercisable until, such shareholder approval.
20. General
Each Option, SAR or Restricted Stock Award shall be evidenced by a written instrument containing such terms and conditions not inconsistent with the Plan as the Committee may determine. The issuance of Shares on the exercise of an Option, or SAR, or pursuant to a Restricted Stock Award, shall be subject to all of the applicable requirements of the New Jersey Business Corporation Act and other applicable laws, including federal or state securities laws, and all Shares issued under the Plan shall be subject to the terms and restrictions contained in the Articles of Incorporation of the Parent Company, as amended from time to time. Among other things, the Optionee or Holder may be required to deliver an investment representation to the Company in connection with any exercise of an Option or SAR, or in connection with the receipt of Shares pursuant to a RestrictedUnit, Stock Award or to agree to refrain from selling or otherwise disposing of the Shares required for a specified period of time or on specified terms.
21. Indemnification
Service on the Committee shall constitute serviceSAR), as a member of the Board. Each member of the Committee shall be entitled, without further act on his or her part, to indemnity from the Parent Company and limitation of liability to the fullest extent provided by applicable law and by the Parent Company’s Articles of Incorporation and/or By lawsdescribed in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan or the granting of Awards hereunder in which he or she may be involved by reason of his or her being or having been a member of the Committee, whether or not he or she continues to be such member of the Committee at the time of the action, suit or proceeding.
SOUTH JERSEY INDUSTRIES
2012 ANNUAL INCENTIVE COMPENSATION PLAN
Effective January 1, 2012
1. Purpose of the Plan
The purpose of the Plan is to provide a link between compensation and performance, to motivate participants to achieve corporate performance objectives and to enable South Jersey Industries (hereinafter the “Company” or “SJI”) to attract and retain high quality Eligible Employees.
2. Definitions
As used herein, the following definitions shall apply:
(a) “Affiliated Entity” means any partnership or limited liability company in which a majority of the partnership or other similar interest thereof is owned or controlled, directly or indirectly, by the Company or one or more of its subsidiaries or Affiliated Entities or a combination thereof. For purposes hereof, the Company, a subsidiary or an Affiliated Entity shall be deemed to have a majority ownership interest in a partnership or limited liability company if the Company, such subsidiary or Affiliated Entity shall be allocated a majority of partnership or limited liability company gains or losses or shall be or control a managing director or a general partner of such partnership or limited liability company.
(b) “Board” means the Board of Directors of the Company.
(c) “Annual Cash Incentive” means a cash payment made pursuant to the Plan.
(d) “Code” means the Internal Revenue Code of 1986, as amended.
(e) “Committee” means the Compensation Committee of the Board.
(f) “Company” “Parent Company” means South Jersey Industries, a New Jersey corporation.Inc.
(g) “Covered Employee” (dd) “Performance Goals” means an Employee who is a “covered employee” under Section 162(m)annual consolidated earnings per share; the price of shares of Common Stock; the Code.
(h) “Director” means a non-Employee member of the Board.
(i) “Eligible Employee” means any Employee who is selected for participation in the Plan by the Committee.
(j) “Employee” means any person who is in the employmarket share of the Company a subsidiary or an Affiliated Entity, subject to the control and direction of the Company, the subsidiary or the Affiliated Entity as to both the work to be performed and the manner and method of performance. Neither service as a Director nor fees received from, the Company, the subsidiary or the Affiliated Entity for service as a Director shall be sufficient to constitute Employee status.
(k) “Performance-Based Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.
(l) “Performance Goal” means(or any measurable criterion tied to the success of the Company and based on one or more of the business criteria described in Section 6.
(m) “Performance Period” means a fixed period established by the Committee that may range in duration from a minimum period of twelve (12) months to a maximum period of thirty-six (36) months and over which the attainment of the applicable Performance Goals set by the Committee is to be measured.
(n) “Plan” means the South Jersey Industries 2012 Annual Incentive Compensation Plan.
3. Administration of the Plan
(a) The Committee. The Plan shall be administered by the Committee (or a subcommittee of the Committee) which shall be comprised of two or more Directors eligible to serve on a committee awarding Annual Cash Incentive payments qualifying as Performance-Based Compensation.
(b) Powers of the Committee. Subject the provisions of the Plan (including any other powers given to the Committee hereunder), the Committee shall have the authority, in its discretion, to:
(i) establish the duration of each Performance Period;
(ii) select the Eligible Employees who are to participate in the Plan for that Performance Period;
(iii) determine the specific Performance Goal or Goals for each Performance Period and the relative weighting of those goals, establish one or more designated levels of attainment for each such goals and set the Annual Cash Incentive potential for each participant at each corresponding level of attainment;
(iv) certify the level at which the applicable Performance Goal or Goals are attained for the Performance Period and determine the actual Annual Cash Incentive for each participant in an amount not to exceed his or her maximum Annual Cash Incentive potential for the certified level of attainment;
(v) exercise discretionary authority, when appropriate, to reduce the actual Annual Cash Incentive payable to any participant below his or her Annual Cash Incentive potential for the attained level of the Performance Goal(s) for the Performance Period;
(vi) construe and interpret the terms of the Plan and Annual Cash Incentives awarded under the Plan;
(vii) establish additional terms, conditions, rules or procedures for the administration of the Plan; provided, however, that no Annual Cash Incentive shall be awarded under any such additional terms, conditions, rules or procedures which are inconsistent with the provisions of the Plan; and
(viii) take such other action, non inconsistent with the terms of the Plan, as the Committee deems appropriate.
All decisions and determinations by the Committee shall be final, conclusive and binding on the Company, its subsidiaries, Affiliated Entities, the participants, and any other persons having or claiming an interest hereunder.
(c) Indemnification. In addition to such other rights of indemnification as they may have as members of the Board, members of the Committee who administer the Plan shall be defended and indemnifiedunit thereof); sales by the Company to the extent permitted by law, on an after-tax basis against (i) all reasonable expenses (including attorneys’ fees) actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Annual Cash Incentive awarded hereunder and (ii) all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within 30 days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to handle and defend the same.
4. Coverage
All Eligible Employees shall be covered by the Plan, except to the extent the Committee may elect to exclude one or more Eligible Employees from participation in a designated Performance Period.
5. Terms and Conditions of Annual Cash Incentive Awards.
(a) Pre-Established Performance Goals. Payment of Annual Cash Incentivees shall be based solely on account of the attainment of one or more pre-established, objective Performance Goals over the designated Performance Period. The Committee shall establish one or more objective Performance Goals with respect to each Eligible Employee in writing not later than 90 days after the commencement of the Performance Period to which the Performance Goals relate or the date on which twenty-five percent (25%) of such Performance Period has been completed (or such other date as may be required or permitted under Section 162(m) of the Code), provided that the outcome of the Performance Goals must be substantially uncertain at the time of their establishment. Performance Goals shall be based solely on one or more of the business criteria described in Section 6 and shall be weighted, equally or in such other proportion as the Committee shall determine at the time such Performance Goals are established, for the purposes of determining the actual Annual Cash Incentive amounts that may become payable upon the attainment of those goals. For each Performance Goal, the Committee may designate one or more levels of attainment and set the Annual Cash Incentive potential for each Eligible Employee at each of those performance levels. Alternatively, the Committee may establish a linear formula for determining the Annual Cash Incentive potential at various points of Performance Goal attainment. Under no circumstance, however, shall the aggregate Annual Cash Incentive potential for any participant for any Performance Period exceed the applicable maximum dollar amount set forth in Section 5(d).
(b) Committee Certification. As soon as administratively practicable following the completion of the Performance Period, the Committee shall certify the actual levels of performance attained for the period determined, on the basis of those certified levels, the actual Annual Cash Incentive amount to be paid to each Eligible Employee for the Performance Period. The certification shall be final, conclusive and binding on the participant, and on all other persons, to the maximum extent permitted by law.
(c) Committee Discretion. The Committee, in determining the amount of the Annual Cash Incentive actually to be paid to an Eligible Employee, shall not award a Annual Cash Incentive in excess of the dollar amount determined on the basis of the Annual Cash Incentive potential established for the particular level at which each of the applicable Performance Goals for the Performance Period is attained. If the actual level of performance attained is between two of the designated performance levels, the Annual Cash Incentive amounts will be interpolated on a straight-line basis between those two levels. In addition, the Committee shall have the discretion to reduce or eliminate the Annual Cash Incentive that would otherwise be payable with respect to one or more Performance Goals on the basis of the certified level of attained performance of those goals. In exercising its discretion to reduce the Annual Cash Incentive payable to any participant, the Committee may utilize such objective or subjective criteria as the Committee deems appropriate in its sole and absolute discretion. The Committee shall not waive any Performance Goal applicable to a participant’s Annual Cash Incentive potential for a particular Performance Period, provided that, the Committee may, in its sole discretion, waive the Performance Goal for a particular Performance Period in the event of the participant’s death or disability or under such circumstances as the Committee deems appropriate in the event a Change in Control should occur prior to the completion of that Performance Period. For purposes of the Plan, a Change in Control shall have the same definition as set forth in the Company’s Stock Plan (or any successor to that plan).
(d) Individual Limitations on Awards. Notwithstanding any other provision of the Plan, the maximum amount of any Annual Cash Incentive paid to a Covered Employee or other Eligible Employee under the Plan shall be limited to One Million Dollars ($1,000,000) per each twelve (12) month period (or portionbusiness unit thereof) included within the applicable Performance Period.
(e) Payment Date. Payment of Annual Cash Incentive amounts shall be made as soon as administratively practicable thereafter, but in any event, no later than March 15 of the year following the year in which the Performance Period ends. No participant shall accrue any right to receive a Annual Cash Incentive award under the Plan unless that participant remains in Employee status until the payment date for that Annual Cash Incentive following the completion of the Performance Period. Accordingly, no Annual Cash Incentive payment shall be made to any participant who ceases Employee status prior to the payment date for the Annual Cash Incentive; provided, however, that the Committee shall have complete discretion to award a full or pro-rated Annual Cash Incentive, based on the level at which the applicable Performance Goals are attained for the Performance Period, to a participant who ceases Employee status prior to such payment date by reason of death or disability or in connection with an involuntary reduction in force.
(f) Withholding Tax. To the extent required by applicable federal, state, local or foreign law, each employer shall withhold all applicable taxes from all Annual Cash Incentive amounts.
6. Business Criteria
(a) Permitted Criteria. Performance Goals established by the Committee may be based on any one of, or combination of, the following: earnings; earnings per share (actual or targeted growth); earnings before interest and taxes; pretax earnings before interest, depreciation, amortization; revenues; sales; debt level; cost reduction targets; cash flow (including but not limited to free cash flow, net cash flow, net cash flow before financing activities, cash flow from operations, increase in cash flow return); capital expenditures; weighted average cost of capital; debt/proved reserves; net income or gross income (including but not limited to income after capital costs and income before or after taxes); operating income; expense; working capital; operating or profit margin; pre-tax margin; contribution margin; return factors (including, but not limited to return on equity, capital employed, or investment; risk adjusted return on capital; return on investors’ capital; return on average equity; return on assets; and return on net assets); costs of the Company (or any business unit thereof); the Company’s total shareholder return; revenues; debt level; cash flow; capital expenditures; net income or gross income; operating income; expenses; net borrowing; goals related to mergers, acquisitions, dispositions or similar business transactions; assets; regulatory compliance; employee retention/attrition rates; individual business objectives; risk management activities; corporate value measures which may be objectively determined (including ethics, compliance, environmental, diversity commitment and safety); or implementation or completion of critical projects or processes; cost reduction targets; interest-sensitivity gap levels; weighted average cost of capital; working capital; operating or profit margin; pre-tax margin; contribution margin; book value; operating expenses (including, but not limited to lease operating expenses, severance taxes and other production taxes, gathering and transportation and general and administrative costs); unit costs; net borrowing, debt leverage levels, credit quality, or debt ratings; accomplishment of mergers, acquisitions, dispositions, or similar business transactions (including, but not limited to acquisition goals based on value of assets acquired or similar objectives);EBIT; EBITDA; debt to debt plus stockholder equity; total shareholder return;EBIT or EBITDA; interest coverage; comparative shareholder return; market price per share; book value per share; net asset value per share; growth measures; debt to total capitalization ratio; asset quality levels; investments; economic value added; stock price appreciation; market capitalization; accounts receivables day sales outstanding; accounts receivables to sales; achievement of balance sheet or income statement objectives; market share; assets; asset sale targets; non-performing assets; satisfactory internal or external audits; improvement of financial ratings; charge-offs; regulatory compliance; employee retention/attrition rates; individual business objectives; risk management activities, corporate value measures which may be objectively determined (including ethics, compliance, environmental, diversity commitment, and safety); amount of the oil and gas reserves; costs of finding oil and gas reserves; reserve replacement ratio, reserve additions, or other reserve level measures; drilling results; natural gas and/or oil production, production and reserve growth; refinery runs; refined product measures; implementation or completion of critical projects or processes; production volume; sales volume; production efficiency; inventory to sales; and inventory turns.turns; and any other goal that is established at the discretion of the Board other than with respect to Awards intended to meet the requirements of section 162(m) of the Code under Section 13. Such Performance Goals may be measured not onlyparticular to a Grantee or the division, department, branch, line of business, subsidiary or other unit in terms ofwhich the Company’s performance but also in terms of its performance relative to the performance of other entitiesGrantee works, or may be measuredbased on attaining a specified absolute level of the Performance Goal, or a percentage increase or decrease in the Performance Goal compared to a pre-established target, previous years’ results, or a designated market index or comparison group, all as determined by the Board. The Board shall have sole discretion to determine specific targets within each category of Performance Goals.
(ee) “Plan” means this South Jersey Industries, Inc. 2015 Omnibus Equity Compensation Plan, as may be amended from time to time. (ff) “SAR” means a stock appreciation right as described in Section 10. (gg) “Stock Award” means an award of Common Stock as described in Section 7. (hh) “Stock Unit” means an award of a phantom unit representing a share of Common Stock, as described in Section 8. 3. Administration (a) Committee. The Plan shall be administered by the Committee. (b) Committee Authority. The Committee shall have the sole authority to make recommendations regarding (i) who from among the Eligible Participants will receive Awards under the Plan, (ii) the type, size and terms and conditions of the Awards to be made under the Plan, (iii) the time when the Awards will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, subject to Section 4(b), (iv) any restrictions on resale applicable to the shares to be issued or transferred pursuant to the Award, (v) whether any Award shall be subject to any non-competition, non-solicitation, confidentiality, clawback or other covenants or conditions, (vi) amendment of the terms and conditions of any previously issued Award, subject to the provisions of Section 20 below, and (vii) any other matters arising under the Plan. All Committee recommendations will be submitted to the full Board for action by (i) “outside directors” as defined under section 162(m) of the Code, (ii) “non-employee directors” as defined in Rule 16b-3 under the Exchange Act, and (iii) “independent directors” under the rules and regulations of the New York Stock Exchange or such other securities exchange on which the Common Stock is then listed. (c) Committee Determinations. The Board has delegated administration of the Plan to the Committee. The Board shall have full power and express discretionary authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, procedures, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, based on recommendations from the Committee. The Board’s interpretations of the Plan and all determinations made by the Board pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of the Board shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated Grantees. No person acting under this Section 3 shall be held liable for any action or determination made with respect to the Plan or any Award under the Plan, except for the willful misconduct or gross negligence of such person. (d) Delegation of Administration. The Committee may delegate certain administrative matters under the Plan to such other officer or officers of the Company as determined in the Committee’s discretion, and such administrator(s) may have the authority to execute and distribute Award Agreements in accordance with the Board’s determinations, to maintain records relating to the granting, vesting, exercise, forfeiture or expiration of Awards, to process or oversee the issuance of shares or cash upon the exercise, vesting and/or settlement of an Award, and to take such other administrative actions as the Board may specify. Any delegation by the Committee pursuant to this Section 3(d) shall be subject to such conditions and limitations as may be determined by the Committee and shall be subject to and limited by applicable law or regulation, including without limitation the general corporation law of the State of New Jersey and the rules and regulations of the New York Stock Exchange or such other securities exchange on which the Common Stock is then listed. 4. Awards and Vesting Restrictions (a) Awards under the Plan may consist of Stock Awards as described in Section 7, Stock Units as described in Section 8, Options as described in Section 9, SARs as described in Section 10, Other Stock-Based Awards as described in Section 11 and Cash Incentive Awards as described in Section 12. All Awards shall be subject to such terms and conditions as the Board deems appropriate and as are specified in writing to the Grantee in the Award Agreement. (b) Awards shall be subject to vesting over a period of not less than one year, subject to the following provisions as may be determined by the Board: (i) vesting of Awards may be accelerated in connection with a Participant’s death or disability, or in the event of a change in control; and (ii) an Award Agreement for a Non-Employee Director may include vesting over a period of less than one year and/or accelerated vesting in connection with the Non-Employee Director’s retirement. (c) All Awards shall be made conditional upon the Grantee’s acknowledgement, in writing or by acceptance of the Award, that all decisions and determinations of the Board shall be final and binding on the basisGrantee, his or her beneficiaries and any other person having or claiming an interest under such Award. Awards under a particular Section of the performancePlan need not be uniform as among the Grantees. 5. Shares Subject to the Plan (a) Shares Authorized. Subject to adjustment as described in subsection (d) below, the total aggregate number of shares of Common Stock that may be issued under the Plan shall be 1,200,000 shares. The maximum aggregate number of shares of Common Stock with respect to which all Awards of Incentive Stock Options may be made under the Plan shall be 1,200,000 shares, subject to adjustment as described in subsection (d). (b) Source of Shares; Share Counting. Shares issued under the Plan may be authorized but unissued shares of Common Stock or reacquired shares of Common Stock, including shares purchased by the Company on the open market for purposes of the Plan. If and to the extent Options or SARs granted under the Plan terminate, expire or are canceled, forfeited, exchanged or surrendered without having been exercised, and if and to the extent that any Stock Awards, Stock Units or Other Stock-Based Awards are forfeited or terminated, or otherwise are not paid in full, the shares reserved for such Awards shall again be available for purposes of the Plan. To the extent that any Awards are designated in an Award Agreement to be paid in cash, and not in shares of Common Stock, such Awards shall not count against the share limits in subsection (a). Shares of Common Stock surrendered in payment of the exercise price of an Option, and shares withheld or surrendered for payment of taxes, shall not be available for re-issuance under the Plan. If SARs are exercised and settled in Common Stock, the full number of shares subject to the SARs shall be considered issued under the Plan, without regard to the number of shares issued upon settlement of the SARs. The preceding provisions of this Section 5(b) shall apply only for purposes of determining the aggregate number of shares of Common Stock that may be issued under the Plan, but shall not apply for purposes of determining the maximum number of shares of Common Stock with respect to which Awards may be granted to any Grantee under the Plan. For the avoidance of doubt, if shares of Common Stock are repurchased by the Company on the open market with the proceeds of the exercise price of Options, such shares may not again be made available for issuance under the Plan. (c) Individual Limits. The maximum aggregate number of shares of Common Stock with respect to which Awards may be made under the Plan to any individual during any calendar year shall be 200,000 shares, subject to adjustment as described in subsection (d) below. The maximum aggregate number of shares of Common Stock with respect to which Awards may be made under the Plan to any Non-Employee Director during any calendar year is 10,000 shares, subject to adjustment as described in subsection (d) below. The individual limits of this subsection (c) shall apply without regard to whether the Awards are to be paid in Common Stock or cash. All cash payments (other than with respect to Dividend Equivalents) shall equal the Fair Market Value of the shares of Common Stock to which the cash payments relate. A Grantee may not accrue Dividend Equivalents during any calendar year in excess of $1,000,000. (d) Adjustments. If there is any change in the number or kind of shares of Common Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Common Stock is substantially reduced as a result of a spinoff or the Company’s payment of an extraordinary dividend or distribution, the maximum number of shares of Common Stock available for issuance under the Plan, the maximum number of shares of Common Stock for which any individual may receive Awards in any year, the kind and number of shares covered by outstanding Awards, the kind and number of shares issued or transferred and to be issued or transferred under the Plan, and the price per share or the applicable market value of such Awards shall be equitably adjusted by the Board, in such manner as the Board deems appropriate, to reflect any increase or decrease in the number of, or change in the kind or value of, the issued shares of Common Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the Plan and such outstanding Awards; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. In addition, in the event of a Change in Control of the Company, the provisions of Section 17 of the Plan shall apply. Any adjustments to outstanding Awards shall be consistent with section 409A or 424 of the Code, to the extent applicable. Any adjustments determined by the Board shall be final, binding and conclusive. 6. Eligibility for Participation (a) Eligible Participants. All Employees, Non-Employee Directors and Key Advisors shall be eligible to participate in the Plan (referred to individually as an “Eligible Participant” and collectively as “Eligible Participants”). (b) Selection of Grantees. The Committee shall recommend the Eligible Participants to receive Awards and the number of shares of Common Stock subject to each Award. (c) Continued Service. For purposes of this Plan, unless provided otherwise in the Award Agreement, a Grantee’s employment or service will not be deemed to have terminated merely because of a change in the capacity in which the Grantee renders service to the Company as an employee, non-employee member of the Board, or Key Advisor or a change in the Company entity for which the Grantee renders such service, provided that there is no interruption or termination of the Grantee’s continuous employment or service to the Company. For the avoidance of doubt, the provisions of the Plan that refer to “retirement” and “disability” shall not apply to a Grantee who is a Key Advisor. 7. Stock Awards (a) General Requirements. The Board may issue shares of Common Stock to an Eligible Participant under a Stock Award, upon such terms and conditions as the Board deems appropriate under this Section. Shares of Common Stock issued pursuant to Stock Awards may be issued for cash consideration or for no cash consideration, and subject to restrictions as determined by the Board. The Board may establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Board deems appropriate, including restrictions based upon the achievement of specific Performance Goals. The Board shall determine the number of shares of Common Stock to be issued pursuant to a Stock Award. (b) Requirement of Employment or Service. The Board shall determine under what circumstances a Grantee may retain Stock Awards after termination of the Grantee’s employment or service, and the circumstances under which Stock Awards may be forfeited. The circumstances shall be set forth in writing in the Award Agreement. (c) Restrictions on Transfer. While Stock Awards are subject to restrictions, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except upon death as described in Section 16(a). To the extent that the Company determines to issue certificates, each certificate for a share of a Stock Award shall contain a legend giving appropriate notice of the restrictions in the Award. The Grantee shall be entitled to have the legend removed when all restrictions on such shares have lapsed. The Company may retain possession of any certificates for Stock Awards until all restrictions on such shares have lapsed. (d) Right to Vote and to Receive Dividends. The Board shall determine to what extent, and under what conditions, the Grantee shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares during the restriction period. The Board may determine that dividends on Stock Awards shall be withheld while the Stock Awards are subject to restrictions and that the dividends shall be payable only upon the lapse of the restrictions on the Stock Awards, or on such other terms as the Board determines. Dividends that are not paid currently shall be credited to bookkeeping accounts on the Company’s business unitsrecords for purposes of the Plan. Accumulated dividends may accrue interest, as determined by the Board, and shall be paid in cash, shares of Common Stock, or divisionsin such other form as dividends are paid on Common Stock, as determined by the Board. 8. Stock Units (a) General Requirements. The Board may grant Stock Units to an Eligible Participant, upon such terms and conditions as the Board deems appropriate under this Section 8, subject to Section 4(b). Each Stock Unit shall represent the right of the Grantee to receive a share of Common Stock or an amount based on the value of a share of Common Stock upon the Company’s achievement of Performance Goals established by the Board. All Stock Units shall be credited to bookkeeping accounts on the Company’s records for purposes of the Plan. (b) Terms of Stock Units. The Board may grant Stock Units that are payable on terms and conditions determined by the Board, which may include payment based on achievement of specified Performance Goals. Stock Units may be paid at the end of a specified vesting or performance period, subject to Section 4(b), or payment may be deferred to a date authorized by the Board. The Board shall determine the number of Stock Units to be granted and the requirements applicable to such Stock Units. (c) Payment With Respect to Stock Units. Payment with respect to Stock Units shall be made in cash, in Common Stock, or in a combination of the two, as determined by the Board. The Award Agreement shall specify the maximum number of shares that can be issued under the Stock Units. (d) Requirement of Employment or Service. The Board shall determine in the Award Agreement under what circumstances a Grantee may retain Stock Units after termination of the Grantee’s employment or service, and the circumstances under which Stock Units may be forfeited. (e) Dividend Equivalents. The Board may grant Dividend Equivalents in connection with Stock Units, under such terms and conditions as the Board deems appropriate. Dividend Equivalents may be paid to Grantees currently or may be deferred. All Dividend Equivalents that are not paid currently shall be credited to bookkeeping accounts on the Company’s records for purposes of the Plan. Dividend Equivalents may be accrued as a cash obligation, or may be converted to additional Stock Units for the Grantee, and deferred Dividend Equivalents may accrue interest, all as determined by the Board. The Board may provide that Dividend Equivalents shall be payable based on the achievement of specific performance goals. Dividend Equivalents may be payable in cash or shares of Common Stock or in a combination of the two, as determined by the Board. 9. Options (a) General Requirements. The Board may grant Options to an Eligible Participant upon such terms and conditions as the Board deems appropriate under this Section 9, subject to Section 4(b). The Board shall determine the number of shares of Common Stock that will be subject to each Award of Options to an Eligible Participant. (b) Type of Option, Price and Term. (i) The Board may grant Incentive Stock Options or Non-Qualified Options or any combination of the two, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to Employees of the Parent Company or its subsidiaries, as defined in section 424 of the Code. Non-Qualified Options may be granted to Eligible Participants. (ii) The Exercise Price of Common Stock subject to an Option shall be determined by the Board and may be equal to or greater than the Fair Market Value of a share of Common Stock on the date the Option is granted. However, an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, entity. as defined in section 424 of the Code, unless the Exercise Price per share is more than 110% of the Fair Market Value of the Common Stock on the date of grant. (iii) The Board shall determine the term of each Option, which shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, as defined in section 424 of the Code, may not have a term that exceeds five years from the date of grant. (c) Exercisability of Options. Options shall become exercisable in accordance with such terms and conditions as may be determined by the Board and specified in the Award Agreement. The Board may grant Options that are subject to achievement of performance goals or other conditions. The Board may accelerate the exercisability of any or all outstanding Options at any time for any reason, subject to Section 4(b). (d) Termination of Employment or Service. Except as specified in the Award Agreement, an Option may only be exercised while the Grantee is employed as an Employee or providing service as a Non-Employee Director or Key Advisor. (e) Exercise of Options. A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company. The Grantee shall pay the Exercise Price for the Option (i) in cash, (ii) if permitted by the Board, by delivering shares of Common Stock owned by the Grantee and having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation to ownership of shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, (iv) with approval of the Board, by surrender of all or any part of the vested shares of Common Stock for which the Option is exercisable to the Company for an appreciation distribution payable in shares of Common Stock with a Fair Market Value at the time of the Option surrender equal to the dollar amount by which the then Fair Market Value of the shares of Common Stock subject to the surrendered portion exceeds the aggregate Exercise Price payable for those shares, (v) by such other method as the Board may approve, to the extent permitted by applicable law, or (vi) by any combination of the foregoing. Shares of Common Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. Payment for the shares pursuant to the Option, and any required withholding taxes, must be received by the time specified by the Board depending on the type of payment being made, but in all cases prior to the issuance of the Common Stock. No person shall have any rights as a stockholder with respect to any share of Common Stock covered by an Option unless and until such person shall have become the holder of record of such share, and, except as otherwise permitted in Section 5(d) hereof, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property or distributions or other rights) in respect of such share for which the record date is prior to the date on which such person shall have become the holder of record thereof. (f) Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, as defined in section 424 of the Code, exceeds $100,000, then the Option, as to the excess, shall be treated as a Non-Qualified Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary, as defined in section 424 of the Code. 10. Stock Appreciation Rights (a) General Requirements. The Board may grant SARs to an Eligible Participant separately or in tandem with an Option. The Board shall establish the number of shares, the terms and the base amount of the SAR at the time the SAR is granted. The base amount of each SAR shall be not less than the Fair Market Value of a share of Common Stock as of the date of grant of the SAR. (b) Tandem SARs. The Board may grant tandem SARs either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the date of the grant of the Incentive Stock Option. In the case of tandem SARs, the number of SARs granted to a Grantee that shall be exercisable during a specified period shall not exceed the number of shares of Common Stock that the Grantee may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs relating to the Common Stock covered by such Option shall terminate. Upon the exercise of SARs, the related Option shall terminate to the extent of an equal number of shares of Common Stock. (c) Exercisability; Term. A SAR shall become exercisable in accordance with such terms and conditions as may be specified. The Board may grant SARs that are subject to achievement of performance goals or other conditions. The Board may accelerate the exercisability of any or all outstanding SARs at any time for any reason, subject to Section 4(b). The Board shall determine under what circumstances and during what periods a Grantee may exercise a SAR after termination of employment or service. A tandem SAR shall be exercisable only while the Option to which it is related is exercisable. The Board shall determine the term of each SAR, which shall not exceed ten years from the date of grant. The circumstances shall be set forth in writing in the Award Agreement. (d) Exercise of SARs. When a Grantee exercises SARs, the Grantee shall receive in settlement of such SARs an amount equal to the value of the stock appreciation for the number of SARs exercised. The stock appreciation for a SAR is the amount by which the Fair Market Value of the underlying Common Stock on the date of exercise of the SAR exceeds the base amount of the SAR as specified in the Award Agreement. (e) Form of Payment. The Board shall determine whether the stock appreciation for a SAR shall be paid in the form of shares of Common Stock, cash or a combination of the two. For purposes of calculating the number of shares of Common Stock to be received, shares of Common Stock shall be valued at their Fair Market Value on the date of exercise of the SAR. 11. Other Stock-Based Awards The Board may grant to Eligible Employees other awards not specified in Sections 7, 8, 9 or 10 above that are based on, or measured by, Common Stock, on such terms and conditions as the Board deems appropriate, subject to Section 4(b). Other Stock-Based Awards may be granted subject to achievement of performance goals or other conditions and may be payable in Common Stock or cash, or in a combination of the two, as determined in the Award Agreement. 12. Cash Incentive Awards The Board is authorized to grant Cash Incentive Awards to Eligible Participants. The Board shall, in its sole discretion, determine which such Eligible Participants will receive Cash Incentive Awards and the terms and conditions applicable to Cash Incentive Awards, including the criteria for the vesting of Cash Incentive Awards, which shall be based on such measures as the Board deems appropriate and need not relate to the value of shares of Common Stock. A “Cash Incentive Award” is an Award to be settled solely in cash. 13. Qualified Performance-Based Compensation (a) Designation as Qualified Performance-Based Compensation. The Board may determine that Stock Units, Stock Awards, Dividend Equivalents or Other Stock-Based Awards granted to an Employee shall be considered “qualified performance-based compensation” under section 162(m) of the Code, in which case the provisions of this Section 13 shall apply. (b) Performance may alsoGoals. When Awards are made under this Section 13, the Board shall establish in writing (i) the objective Performance Goals that must be met, (ii) the period during which performance will be measured, on an absolute basis, relative to internal business plans, or based on growth. As(iii) the maximum amounts that may be applicable,paid if the Performance Goal are met, and (iv) any other conditions that the Board deems appropriate and consistent with the requirements of section 162(m) of the Code for “qualified performance-based compensation.” The Performance Goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the Performance Goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the Performance Goals have been met. The Board shall not have discretion to increase the amount of compensation that is payable, but may also be measured in aggregate or on a per share basis.reduce the amount of compensation that is payable, pursuant to Awards identified by the Board as “qualified performance-based compensation.” (c) Criteria Used for Objective Performance Goals. The Board shall use objectively determinable Performance Goals. Performance Goals need not be uniform as among participants.Grantees. Table(d) Timing of ContentsEstablishment of Goals. (b) Authorized Adjustments.(e) Certification of Results. The Committee shall certify the performance results for the performance period specified in the Award Agreement after the performance period ends. The Board shall determine the amount, if any, to be paid pursuant to each Award based on the achievement of the Performance Goals and the satisfaction of all other terms of the Award Agreement.
(f) Death, Disability or Other Circumstances. To the extent consistent with section 162(m) of the Code, the Board may provide in the Award Agreement that Awards under this Section 13 shall be payable, in whole or in part, in the event of the Grantee’s death or Disability, upon a Change in Control or under other circumstances consistent with the Treasury regulations and rulings under section 162(m) of the Code. (g) Impact of Extraordinary Items or Changes In Accounting. To the extent applicable, subject to the following sentence and unless the CommitteeBoard determines otherwise, the determination of the achievement of Performance Goals shall be determined based on the relevant financial measure, computed in accordance with U.S. generally accepted accounting principles (“GAAP”), and in a manner consistent with the methods used in the Company’s audited financial statements. To the extent permitted by Sectionsection 162(m) of the Code, in setting the Performance Goals within the period prescribed in Section 5(a)13(d), the CommitteeBoard may provide for appropriate adjustment as it deems appropriate, including for one or more of the following items: asset write-downs; litigation or claim judgments or settlements; changes in accounting principles; changes in tax law or other laws affecting reported results; changes in commodity prices; severance, contract termination and other costs related to exiting, modifying or reducing any business activities; costs of, and gains and losses from, the acquisition, disposition or abandonment of businesses or assets; gains and losses from the early extinguishment of debt; gains and losses in connection with the termination or withdrawal from a pension plan; stock compensation costs and other non-cash expenses; unrealized gains and losses relating to fair valuations of derivatives; any extraordinary non-recurring items as described in applicable Accounting Principles Board opinions or Financial Account Standards Board statements Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operation appearing in the Company’s annual report to stockholders for the applicable year; business or other structural changes in the total shareholder return peer group; and any other specified non-operating items as determined by the CommitteeBoard in setting performance goals. (h) Status of Performance Goals.Awards under Code Section 162(m). It is the intent of the Company that Awards under this Section 13 constitute “performance-based compensation” within the meaning of section 162(m) of the Code and regulations thereunder. Accordingly, the terms of this Section 13 shall be interpreted in a manner consistent with section 162(m) of the Code and regulations thereunder. If any provision of the Plan as in effect on the date of adoption of any agreements relating to Awards under this Section 13 does not comply or is inconsistent with the requirements of section 162(m) of the Code or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements. 7. Effective Date and Term of Plan
The Plan is effective on January 1, 2012. Assuming that stockholder approval is obtained, the Plan shall continue in effect until Board terminates it or until stockholder approval again is required for the Plan to meet the requirements of Code Section 162(m) but is not obtained.
8. Amendment, Suspension or Termination of the Plan14. Deferrals
The Board may at any time amend, suspendpermit or terminate the Plan. However, any amendment or modificationrequire a Grantee to defer receipt of the Plan shallpayment of cash or the delivery of shares that would otherwise be subject to stockholder approvaldue to the extent required under Code Section 162(m) or otherGrantee in connection with any Award. The Committee shall establish rules and procedures for any such deferrals, consistent with applicable law or regulation.requirements of section 409A of the Code. 9. General Provisions15. Withholding of Taxes
(a) Transferability. No participant in the Plan shall have the right to transfer, alienate, pledge or encumber his or her interest in the Plan, and such interest shall not (to the maximum permitted by law) be subject to the claims of the participant’s creditors or to attachment, execution or other process of law. However, if a participant dies before payment is made of the actual Annual Cash Incentive to which he or she has become entitled under the Plan, then that Annual Cash Incentive shall be paid to the executor or other legal representative of his or her estate. (b) No Rights to Employment. Neither the action of the Company in establishing or maintaining the Plan, nor any action taken under the Plan by the Committee, nor any provision of the Plan itself shall be construed so as to grant any person the right to remain in Employee status for any period of specific duration, and each participant shall at all times remain an Employee at-will and may accordingly be discharged at any time, with or without cause and with or without advance notice of such discharge.
(c) Acknowledgement of Authority.Required Withholding. All Annual Cash Incentivees shall be awarded conditional upon the participant’s acknowledgement, by participation in the Plan, that all decisions and determinations of the Committee shall be final and binding on the participant, his or her beneficiaries and any other person having or claiming an interest in such Annual Cash Incentive.
(d) Company Policies. All Annual Cash IncentiveesAwards under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Company may require that the Grantee or other person receiving or exercising Awards pay to the Company the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Awards, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Awards.
(b) Election to Withhold Shares. If the Board so permits, shares of Common Stock may be withheld to satisfy the Company’s tax withholding obligation with respect to Awards paid in Common Stock, at the time such Awards become taxable, up to an amount that does not exceed the minimum applicable policieswithholding tax rate for federal (including FICA), state and local tax liabilities. 16. Transferability of Awards (a) Restrictions on Transfer. Except as described in subsection (b) below, only the Grantee may exercise rights under an Award during the Grantee’s lifetime, and a Grantee may not transfer those rights except by will or by the laws of descent and distribution. When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee may exercise such rights. Any such successor must furnish proof satisfactory to the Company of his or her right to receive the Award under the Grantee’s will or under the applicable laws of descent and distribution. (b) Transfer of Non-Qualified Options to or for Family Members. Notwithstanding the foregoing, the Board may provide, in an Award Agreement, that a Grantee may transfer Non-Qualified Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Board may determine; provided that the Grantee receives no consideration for the transfer of a Non-Qualified Option and the transferred Non-Qualified Option shall continue to be subject to the same terms and conditions as were applicable to the Non-Qualified Option immediately before the transfer. 17. Consequences of a Change in Control (a) Assumption of Outstanding Awards. Upon a Change in Control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding Awards that are not exercised or paid at the time of the Change in Control shall be assumed by, or replaced with Awards that have comparable terms by, the surviving corporation (or a parent or subsidiary of the surviving corporation). After a Change in Control, references to the “Company” as they relate to employment matters shall include the successor employer. (b) Vesting Upon Certain Terminations of Employment. Unless the Award Agreement provides otherwise, if a Grantee’s employment is terminated by the Company without Cause, or the Grantee terminates employment for Good Reason, in either case within 12 months following the Change in Control, the Grantee’s outstanding Awards shall become fully vested as of the date of such termination; provided that if the vesting of any such Awards is based, in whole or in part, on performance, the applicable Award Agreement shall specify how the portion of the Award that becomes vested pursuant to this Section 17(b) shall be calculated. (c) Other Alternatives. In the event of a Change in Control, if all outstanding Awards are not assumed by, or replaced with Awards that have comparable terms by, the surviving corporation (or a parent or subsidiary of the surviving corporation), the Board may take any of the following actions with respect to any or all outstanding Awards, without the consent of any Grantee: (i) the Board may determine that outstanding Options and SARs shall automatically accelerate and become fully exercisable and the restrictions and conditions on outstanding Stock Awards shall immediately lapse; (ii) the Board may determine that Grantees shall receive a payment in settlement of outstanding Stock Units or Other Stock-Based Awards, in such amount and form as may be determined by the Board; (iii) the Board may require that Grantees surrender their outstanding Options and SARs in exchange for a payment by the Company, in cash or Common Stock as determined by the Board, in an amount equal to the amount, if any, by which the then Fair Market Value of the shares of Common Stock subject to the Grantee’s unexercised Options and SARs exceeds the Option exercise price or SAR base amount; and (iv) after giving Grantees an opportunity to exercise all of their outstanding Options and SARs, the Board may terminate any or all unexercised Options and SARs at such time as the Board deems appropriate. Such surrender, termination or payment shall take place as of the date of the Change in Control or such other date as the Board may specify. Without limiting the foregoing, if the per share Fair Market Value of the Common Stock does not exceed the per share Option exercise price or SAR base amount, as applicable, the Company shall not be required to make any payment to the Grantee upon surrender of the Option or SAR. 18. Agreements with Grantees Each Award made under the Plan shall be evidenced by an Award Agreement containing such terms and conditions as the Board shall approve. In the event of a conflict between the provisions of the Plan and the provisions of any Award Agreement, the provisions of the Plan shall control. 19. Requirements for Issuance of Shares No Common Stock shall be issued in connection with any Award hereunder unless and until all legal requirements applicable to the issuance of such Common Stock have been complied with to the satisfaction of the Board. The Board shall have the right to condition any Award made to any Grantee hereunder on such Grantee’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Common Stock as the Board shall deem necessary or advisable, and if the Company determines to issue certificates representing such shares, such certificates may be legended to reflect any such restrictions. Any certificates representing shares of Common Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon. No Grantee shall have any right as a shareholder with respect to Common Stock covered by an Award until shares have been issued to the Grantee. 20. Amendment and Termination of the Plan (a) Amendment. The Board may amend or terminate the Plan or an Award at any time, provided, however, that the Board shall not amend the Plan without approval of the shareholders of the Company adoptedif such approval is required in order to comply with the Code or applicable laws, or to comply with applicable stock exchange requirements. No amendment or termination of this Plan or an Award shall, without the consent of the Grantee, materially impair any rights or obligations under any Award previously made to the Grantee under the Plan, unless such right has been reserved in the Plan or the Award Agreement, or except as provided in Section 21(b) below. Notwithstanding anything in the Plan to the contrary, the Board may amend the Plan in such manner as it deems appropriate in the event of a change in applicable law or regulations. (b) No Repricing Without Shareholder Approval. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution (whether in the form of cash, shares of Common Stock, other securities, or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities, or similar transactions), the Company may not, without obtaining stockholder approval: (i) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (ii) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (iii) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities. This Section 20(b) is intended to govern the repricing or exchange of “underwater” Options and SARs and shall not be construed to prohibit the adjustments provided for in Section 5(d) of this Plan. (c) Shareholder Approval for “Qualified Performance-Based Compensation.” If Awards are made under Section 13 above, the Plan must be reapproved by the Company’s shareholders no later than the first shareholders meeting that occurs in the fifth year following the year in which the shareholders previously approved the provisions of Section 13, if additional Awards are to be made under Section 13 and if required by section 162(m) of the Code or the regulations thereunder. (d) Termination of Plan. The Plan shall terminate on the day immediately preceding the tenth anniversary of its Effective Date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the shareholders. The termination of the Plan shall not impair Awards outstanding or the power and authority of the Board with respect to an outstanding Award. 21. Miscellaneous (a) Effective Date. The Plan shall be effective as of the Effective Date, if approved by the Company’s shareholders on such date. (b) Awards in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to (i) limit the right of the Board to make Awards under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Awards to employees thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other stock-based awards outside of this Plan. Without limiting the foregoing, the Board may make an Award to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for a grant made by such corporation. The terms and conditions of the Awards may vary from time to timethe terms and conditions required by the Plan and from those of the substituted stock incentives, as determined by the Board. (c) Compliance with Law. (e) Unfunded Obligation. Employees eligible to participate in(i) The Plan, the Plan shall haveexercise of Options and the status of general unsecured creditors of the Company. Any amounts payable to eligible Employees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including (without limitation) Title I of the Employee Retirement Income Security Act of 1974, as amended. The Company shall not be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. Employees shall have no claim against the Company for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.
(f) Reliance on Reports. Each member of the Committee shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company to issue or transfer shares of Common Stock under Awards shall be subject to all applicable laws and its subsidiaries or Affiliated Entities and upon any other information furnished in connection with the Planto approvals by any persongovernmental or regulatory agency as may be required. With respect to persons other than himself or herself. In no event shall any person who is or shall have been a membersubject to section 16 of the Committee or ofExchange Act, it is the Board be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.
(g) Successors. The terms and conditions of the Plan, together with the obligations and liabilitiesintent of the Company that accrue hereunder, shall be binding upon any successor tothe Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company whether by waythat Incentive Stock Options comply with the applicable provisions of merger, consolidation, reorganization or other change in ownership or controlsection 422 of the Company.Code, and Awards of “qualified performance-based compensation” comply with the applicable provisions of section 162(m) of the Code. To the extent that any legal requirement of section 16 of the Exchange Act or section 422 or 162(m) as set forth in the Plan ceases to be required under section 16 of the Exchange Act or section 422 or 162(m) of the Code, that Plan provision shall cease to apply. The Board may revoke any Award if it is contrary to law or modify an Award to bring it into compliance with any valid and mandatory government regulation. The Board may also adopt rules regarding the withholding of taxes on payments to Grantees. The Board may, in its sole discretion, agree to limit its authority under this Section.
(h) Section 409A.(ii) The Plan is intended to comply with the short-term deferral rule set forth in the regulations under Section 409Arequirements of the Code in order to avoid application of Sectionsection 409A of the Code, to the Plan. Ifextent applicable. Each Award shall be construed and toadministered such that the extent that any payment under this Plan is deemed to be deferred compensation subject toAward either (A) qualifies for an exemption from the requirements of Sectionsection 409A of the Code this Plan shall be administered so that such payments are made in accordance withor (B) satisfies the requirements of Sectionsection 409A of the Code. If an awardAward is subject to Sectionsection 409A of the Code, (i)(I) distributions shall only be made in a manner and upon an event permitted under Sectionsection 409A of the Code, (ii)(II) payments to be made upon a termination of employment shall only be made upon a “separation from service” under Sectionsection 409A of the Code, (III) unless the Award specifies otherwise, each installment payment shall be treated as a separate payment for purposes of section 409A of the Code, and (iii)(IV) in no event shall a participant,Grantee, directly or indirectly, designate the calendar year in which a distribution is made except in accordance with Sectionsection 409A of the Code.
(iii) Any award granted under the PlanAward that is subject to Sectionsection 409A of the Code and that is to be distributed to a key employeeKey Employee (as defined below) upon separation from service shall be administered so that any distribution with respect to such awardAward shall be postponed for six months following the date of the participant’sGrantee’s separation from service, if required by Sectionsection 409A of the Code. If a distribution is delayed pursuant to Sectionsection 409A of the Code, the distribution shall be paid within 30 days after the end of the six-month period. If the participantGrantee dies during such a six-month period, any postponed amounts shall be paid within 90 days of the participant’sGrantee’s death. The determination of key employees,Key Employees, including the number and identity of persons considered key employeesKey Employees and the identification date, shall be made by the CommitteeBoard or its delegate each year in accordance with Sectionsection 416(i) of the Code and the “specified employee” requirements of Sectionsection 409A of the Code. (i) Governing Law. The validity, construction, interpretation(iv) Notwithstanding anything in the Plan or any Award Agreement to the contrary, each Grantee shall be solely responsible for the tax consequences of Awards under the Plan, and effectin no event shall the Company have any responsibility or liability if an Award does not meet any applicable requirements of section 409A of the Code. Although the Company intends to administer the Plan to prevent taxation under section 409A of the Code, the Company does not represent or warrant that the Plan or any Award complies with any provision of federal, state, local or other tax law.
(d) Enforceability. The Plan shall be binding upon and enforceable against the Company and its successors and assigns. (e) Funding of the Plan; Limitation on Rights. This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Awards under this Plan. Nothing contained in the Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company and any Grantee or any other person. No Grantee or any other person shall under any circumstances acquire any property interest in any specific assets of the Company. To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. (f) Rights of Grantees. Nothing in this Plan shall entitle any Employee, Non-Employee Director, Key Advisor or other person to any claim or right to receive an Award under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employment or service of the Employer. (g) Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. Any fractional shares of Common Stock that would result under an Award shall be rounded to the nearest whole share using conventional rounding (greater than or equal to .50 round up, less than .50 round down). (h) Employees Subject to Taxation Outside the United States. With respect to Grantees who are subject to taxation in countries other than the United States, the Board may make Awards on such terms and conditions as the Board deems appropriate to comply with the laws of the applicable countries, and the Board may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws. (i) Company Policies. All Awards under the Plan will be subject to any compensation, share trading, clawback, recoupment and other policies that may be applicable to the employees of the Company, as in effect from time to time and as approved by the Board, whether or not approved before or after the effective date of the Plan. (j) Severability. In the event any provision of the Plan or of any Award Agreement shall be held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan or Award Agreement, and the Plan or Award Agreement shall be construed or enforced as though the illegal or invalid provision had not been included. (k) Headings. The section headings of the Plan are for reference only. In the event of a conflict between a section heading and the content of a Section of the Plan, the content of the Section shall control. (l) Governing Law. Except to the extent preempted by any applicable federal law, the Plan and Award Agreements shall be governed and construed by and determined in accordance with the laws of the State of New Jersey, without giving effect to the conflict of lawlaws provisions thereof. IN WITNESS WHEREOF, _______________, by its duly authorized officer acting in accordance with a resolution duly adopted by the Board of Directors of SJI, has executed this Plan on ______________, 2011, effective as of January 1, 2012.53
Please note the meeting location! Directions to The Mansion on Main StreetStockton Seaview Hotel and Golf Club for the Annual Meeting of Shareholders Stockton Seaview Hotel and Golf Club, Bayview Room 401 South New York Road, Galloway, New Jersey The Mansion on Main Street9:15 a.m. - doors will open to the public for continental breakfast
3000 Main Street, Voorhees, NJ 0804310:00 a.m. - meeting begins
Versailles Room on11:00 a.m. - meeting adjourns
Admission to the 3rd levelMeeting: Attendance at the Annual Meeting will be limited to shareholders as of the record date, their authorized representatives and guests of SJI. If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket. Parking Instructions: Free valet parking is available at the hotel’s main entrance on New York Rd. (Route 9). The meeting will be held in a separate building so please note you will have a long walk if you valet park. Signs will guide you to the meeting room. Self parking adjacent to the meeting room is located on Bartlett Ave, which is off of New York Rd (Route 9). Shuttle service from self parking to the Bayview Room is available. From Philadelphia:North: Ben Franklin Bridge to route 70 East. Follow to Route 73 South. Follow to Evesham Road. Turn rightGarden State Parkway, Exit 48, South on Evesham Road. Continue for 1 1/2 miles. Turn left into Main Street Complex.New York Road (Route 9) (7 miles). Resort on Right.
From North Jersey:West: Atlantic City Expressway, Exit 12, Left on Wrangleboro Road (Route 575) for 3.8 miles, Right on Jimmie Leeds Road. Proceed east 5.9 miles. Right on New Jersey Turnpike South to Exit 4. Follow Route 73 South. Follow to Evesham Road. Turn rightYork Road (Route 9). Resort on Evesham Road. Continue for 1 1/2 miles. Turn left into Main Street Complex .Right. From South Jersey /Atlantic City:(Absecon): Mill Rd toward Delaware Ave. (.4 mi) Turn slight left onto E Wyoming Ave. (Route 9). Atlantic City ExpresswayContinue to follow Route 73 North. Continue9 (2 mi). Resort is on Route 73 North to Evesham Road. Turn left on Evesham Road. Continue for 1 1/2 miles. Turn left into Main Street Complex. the Left.
| SOUTH JERSEY INDUSTRIES, INC. | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on April 29, 2015. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | | | C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC. | | | | P.O. BOX 1342 BRENTWOOD, NY 11717 | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | | | | | | | VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on April 29, 2015. Have your proxy card in hand when you call and then follow the instructions. | | | | | | | | VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | |
   TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M87167-P62649-Z65158 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. SOUTH JERSEY INDUSTRIES, INC. The Board of Directors recommends you vote FOR the following: 1. To elect ten Directors (term expiring 2016). For Against Abstain 1a. Sarah M. Barpoulis 1b. Thomas A. Bracken For Against Abstain 1c. Keith S. Campbell 2. To hold an advisory vote to approve executive compensation. 1d. Sheila Hartnett-Devlin 3. To adopt the 2015 Omnibus Equity Compensation Plan. 1e. Victor A. Fortkiewicz 4. To ratify the appointment of Deloitte & Touche LLP as independent registered public accounting firm for 2015. 1f. Walter M. Higgins III 5. To transact other business that may properly come before the meeting. 5. To transact other business that may properly come before the meeting. 1g. Sunita Holzer 1h. Joseph H. Petrowski 1i. Michael J. Renna 1j. Frank L. Sims Please indicate if you plan to attend this meeting Yes No Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date Admission Ticket 2015 Annual Meeting Thursday, April 30, 2015 at 10:00 AM Stockton Seaview Hotel & Golf Club Bayview Room 401 South New York Road, Galloway, NJ 08205  Directions: From the North: Garden State Parkway, Exit 48, South on New York Road/Route 9 (7 miles). Resort on Right. From the West: Atlantic City Expressway, Exit 12, Left on Wrangleboro Road/Route 575 (3.8 miles), Right on Jimmie Leeds Road. Proceed east 5.9 miles. Right on New York Road/Route 9. Resort on Right. From the South (Absecon): Mill Rd toward Delaware Ave (4 miles). Turn slight left onto E Wyoming Ave/Route 9. Continue to follow Route 9 (2 miles). Resort is on Left. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. | SOUTH JERSEY INDUSTRIES, INC. Annual Meeting of Shareholders April 30, 2015 10:00 AM This proxy is solicited by the Board of Directors The shareholder(s) hereby appoint(s) Edward J. Graham and Gina Merritt-Epps, Esq., or either of them, as proxies, each with the power to appoint (his/her) substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common stock of SOUTH JERSEY INDUSTRIES, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 10:00 AM, Eastern Time on Thursday, April 30, 2015, at the Stockton Seaview Hotel & Golf Club, Bayview Room, 401 South New York Road, Galloway, NJ 08205, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side | |
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