SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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[_] Soliciting Material Pursuant to § 240.14a-12
The Phoenix Companies, Inc.
(Name of Registrant as Specified In Its Charter)
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[LOGO] PHOENIX
The Phoenix Companies, Inc.
March 24, 2003
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
to be held on Monday, April 28, 2003 at 11:00 a.m. at our offices at One
American Row, Hartford, Connecticut.
The notice of annual meeting and proxy statement accompanying this
letter provide an outline of the business to be conducted at the meeting.
At the meeting, I will also report on the progress of the Company during
the past year and answer shareholders' questions.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, I urge you to
complete, date and sign the enclosed proxy card and promptly return it in
the postage-paid envelope provided or vote by proxy using the telephone or
through the Internet as promptly as possible. Your vote is important.
Thank you.
Yours truly,
/s/ Dona D. Young
President, Chief Executive Officer
and Chairman-elect
THE PHOENIX COMPANIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
_________________
One American Row
Hartford, Connecticut 06115
March 24, 2003
To the Shareholders of
THE PHOENIX COMPANIES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of THE
PHOENIX COMPANIES, INC. will be held at our offices at One American Row,
Hartford, Connecticut 06115, on Monday, April 28, 2003 at 11:00 a.m. Eastern
time for the purpose of considering and acting upon the following matters:
1. election of four directors to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualified;
2. approval of The Phoenix Companies, Inc. 2003 Restricted Stock,
Restricted Stock Unit and Long-Term Incentive Plan;
3. ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditor for the fiscal year ending December 31,
2003; and
4. consideration of such other business as may properly come before the
meeting or any adjournments thereof.
Shareholders of record as of the close of business on March 13, 2003 are
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
By order of the Board of Directors,
/s/ John H. Beers
John H. Beers
Secretary
PROXY STATEMENT
TABLE OF CONTENTS
Page
----
VOTING PROCEDURES
• General Information........................................................1
• Voting Rights..............................................................1
• Voting of Proxies..........................................................1
• Voting by Proxy Card.......................................................2
• Voting by Telephone or Through the Internet................................2
• Voting Shares Held in Company Plans........................................2
OWNERSHIP OF COMMON STOCK......................................................2
• Directors and Executive Officers...........................................2
• Five Percent Shareholders..................................................4
PROPOSAL 1 - ELECTION OF DIRECTORS.............................................4
THE BOARD OF DIRECTORS
• Nominees for Election..................................................5
• Continuing Directors...................................................5
• General Information and Committees.....................................6
• Compensation of Directors..............................................8
• Certain Relationships and Related Transactions.........................8
AUDIT COMMITTEE CHARTER AND REPORT
• Audit Committee Charter................................................9
• Audit Committee Report.................................................9
COMPENSATION OF EXECUTIVE OFFICERS
• Summary Compensation Table............................................11
• Stock Option Grants Table.............................................13
• Stock Option Exercises and December 31, 2002 Stock Option Value Table.14
• Long-Term Incentive Plans.............................................14
• Retirement Plan.......................................................16
• Employment-Related Agreements.........................................16
COMPENSATION COMMITTEE REPORT.............................................19
PERFORMANCE GRAPH.........................................................22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE...................23
PROPOSAL 2 - APPROVAL OF THE PHOENIX COMPANIES, INC. 2003 RESTRICTED
STOCK, RESTRICTED STOCK UNIT AND LONG-TERM INCENTIVE PLAN ....................23
SUMMARY OF THE PLAN.......................................................23
NEW PLAN BENEFITS.........................................................25
EQUITY COMPENSATION PLAN INFORMATION......................................26
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR...............28
FEES INCURRED RELATING TO SERVICES PERFORMED BY PwC.......................28
OTHER MATTERS.................................................................29
SHAREHOLDER PROPOSALS.........................................................29
ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS........................29
HOUSEHOLDING OF MATERIALS.....................................................29
EXHIBIT A - AUDIT COMMITTEE CHARTER..........................................A-1
EXHIBIT B - THE PHOENIX COMPANIES, INC. 2003 RESTRICTED STOCK, RESTRICTED
STOCK UNIT AND LONG-TERM INCENTIVE PLAN..........................B-1
PROXY STATEMENT
THE PHOENIX COMPANIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 28, 2003
VOTING PROCEDURES
General Information
This proxy statement is being furnished to the shareholders of The Phoenix
Companies, Inc., a Delaware corporation (the "Company"), in connection with the
Annual Meeting of Shareholders to be held on Monday, April 28, 2003, at 11:00
a.m. Eastern time, at our offices at One American Row, Hartford, Connecticut and
at any adjournment thereof (the "Annual Meeting"). The notice of meeting, this
proxy statement and the accompanying proxy are first being sent to shareholders
on or about March 24, 2003.
Voting Rights
Only shareholders of record on March 13, 2003 (the "Record Date") are
entitled to notice of, and to vote at, the Annual Meeting. As of the Record
Date, there were 94,049,309 shares of the Company's common stock (the "Common
Stock") outstanding. Each shareholder is entitled to one vote for each share of
Common Stock registered in that person's name on the books of the Company as of
the Record Date.
A plurality of the votes validly cast is required for the election of
directors. Approval of each of the other matters that is before the meeting will
require the affirmative vote of the holders of a majority of the shares
represented at the meeting. No votes may be taken at the meeting, other than a
vote to adjourn, unless a quorum has been constituted consisting of the
representation of one-third of the outstanding shares as of the Record Date.
Proxies marked as abstaining and proxies containing broker non-votes on any
matter to be acted upon by shareholders will be treated as present at the
meeting for the purpose of determining a quorum. Broker non-votes and
abstentions as to particular matters will not, however, be counted as shares
voting on such matters. Votes will be tabulated under the supervision of persons
designated by the Board of Directors as inspectors.
Voting of Proxies
Your proxy in the form enclosed is solicited by the Board of Directors of
the Company for use at the Annual Meeting and all valid proxies will be voted.
Except as noted above or to the extent that contrary instructions are given by
shareholders in the places provided in the proxy, it is the intention of the
persons named in the proxy to vote "for" each of the nominees for the Board of
Directors and "for" each of the other proposals set forth in the notice of
meeting. A proxy may be revoked at any time prior to its use. Such revocation
may be made in person at the Annual Meeting, by a notice in writing delivered to
the Secretary of the Company or by a proxy bearing a later date.
Subject to the limitations described below, shareholders may vote by proxy
as follows: (i) by using the accompanying proxy card; (ii) by telephone; or
(iii) through the Internet. When voting using any of these methods, as to the
election of directors, you may (a) vote for all of the director nominees as a
group, (b) vote for all of the director nominees as a group, except those
nominees whose names you specify, or (c) withhold your vote from all nominees as
a group. As to each other proposal, you may vote "for" or "against" the item or
"abstain" from voting. If you properly vote by proxy but do not specify any
choices, you will thereby confer authority upon the persons named as proxies to
vote your shares in their discretion. A proxy also confers discretionary
authority on these individuals to vote your shares of Common Stock on any matter
that was not known on the date of this proxy statement but is properly presented
at the Annual Meeting, including voting on the nomination or election of any
substitute nominees selected by the Board of Directors in the event any nominees
are unable or decline to serve.
1
The expense of proxy solicitation will be borne by the Company. Depending
upon the response to the initial solicitation, proxies may be solicited in
person or by mail, telephone, electronic mail or facsimile by officers or
regular employees of the Company. Georgeson Shareholder Communications Inc. has
been retained by the Company to assist in any such solicitation at a total
estimated cost of $5,500, plus reimbursement of certain out-of-pocket expenses.
The Company will also reimburse banks, brokers and other nominees for providing
proxy materials to beneficial owners.
Voting by Proxy Card
Any shareholder holding shares as of the Record Date may vote by proxy by
using the accompanying proxy card. When you return a proxy card that is properly
signed and completed, the shares of Common Stock represented by the proxy will
be voted as you specify on the proxy card.
Voting by Telephone or Through the Internet
If you are a registered shareholder (that is, you own Common Stock in your
own name and not through a broker, nominee or in some other "street name"
capacity), you may vote by proxy via the telephone or Internet. Please see the
accompanying proxy card for instructions on how to access the telephone and
Internet voting systems. If you hold shares of Common Stock in "street name",
your broker or other nominee will advise you whether you may vote by telephone
or through the Internet.
Voting Shares Held in Company Plans
Shares of Common Stock held in The Phoenix Companies, Inc. Savings and
Investment Plan, The Phoenix Companies, Inc. Agent Savings and Investment Plan
and The Phoenix Companies, Inc. Agent Pension Plan are held of record and are
voted by the trustee of these plans. Participants in these plans may direct the
trustee how to vote shares allocated to their accounts by voting in the manner
specified by such trustee. The trustee of these plans will vote shares as to
which it has not received direction as may be specified by the trustee and the
applicable plan.
* * *
Your vote is important and the Board of Directors urges you to exercise
your right to vote. Whether or not you plan to attend the Annual Meeting, you
can assure that your shares are voted properly by returning the enclosed proxy
card or by voting by proxy using the telephone or through the Internet.
OWNERSHIP OF COMMON STOCK
Directors and Executive Officers
On June 25, 2001, Phoenix Home Life Mutual Insurance Company ("Phoenix
Life") demutualized, becoming a subsidiary of the Company. Under New York
Insurance Law, all officers and directors of the Company, as well as certain of
their family members, are prohibited until June 25, 2003, the second anniversary
of Phoenix Life's demutualization, from acquiring shares of Common Stock, other
than any they may have acquired as a result of the demutualization. All shares
whose ownership is reflected in the chart below were acquired in the
demutualization as compensation for eligible policyholders.
2
The following table shows, with respect to each director and nominee for
director of the Company, each of the six executive officers of the Company named
in the Summary Compensation Table, which appears later in this proxy statement,
and all directors and executive officers as a group, being 26 in number: (i) the
total number of shares of Common Stock beneficially owned as of the Record Date;
and (ii) the percent of the Common Stock so owned as of that date. Unless
otherwise indicated in a footnote, each person listed in the table owns the
shares shown below directly with sole voting and investment power.
Shares
Name of Beneficially Percent of
Beneficial Owner Owned Common Stock
- --------------------------------- --------------------- ---------------------
Sal H. Alfiero 53 *
J. Carter Bacot 190 *
Peter C. Browning 70(1) *
Arthur P. Byrne 29 *
Sanford Cloud, Jr. 0 *
Richard N. Cooper 71 *
Gordon J. Davis 18 *
Robert W. Fiondella 67(2) *
Michael Gilotti 0 *
Ann Maynard Gray 0 *
John E. Haire 19 *
Michael E. Haylon 51 *
Jerry J. Jasinowski 47 *
Thomas S. Johnson 44 *
John W. Johnstone, Jr. 1,599(3) *
Marilyn E. LaMarche 130 *
Philip R. McLoughlin 27 *
Simon Y. Tan 45 *
Robert F. Vizza 78(4) *
Robert G. Wilson 0 *
Dona D. Young 626(5) *
All directors and executive officers as a group 3,295(6) *
(26 persons)
- ------------------------------
* Less than one percent.
(1) Includes 29 shares of Common Stock held by Mr. Browning's adult son with
respect to which Mr. Browning disclaims beneficial ownership.
(2) Includes 18 shares of Common Stock held by Mr. Fiondella's wife.
(3) Includes 1,552 shares of Common Stock held by a trust of which Mr.
Johnstone's wife is a co-trustee and with respect to which he disclaims
beneficial ownership.
(4) Includes 18 shares of Common Stock held by Dr. Vizza's wife.
(5) Includes (a) 556 shares of Common Stock held by a trust of which Mrs. Young
is the sole trustee and (b) 18 shares of Common Stock held by a trust of
which Mrs. Young's husband is a trustee and with respect to which she
disclaims beneficial ownership.
(6) Includes 1,628 shares of Common Stock with respect to which beneficial
ownership is disclaimed.
3
Five Percent Shareholders
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of December 31, 2002 by the only person known
to us to be the beneficial owner of more than 5% of our Common Stock. We have
determined beneficial ownership in accordance with the rules of the Securities
and Exchange Commission ("SEC"). Except as otherwise indicated in the footnote
to the table, we believe, based on the information available to us, that the
person named in the table has sole voting and investment power with respect to
all shares of Common Stock that it beneficially owns.
Amount and Nature Percent of
of Beneficial Common
Name and Address of Beneficial Owner Ownership Stock
- ------------------------------------ ----------------- -----------
State Farm Mutual Automobile Insurance Company 5,896,090(1) 6.2%
One State Farm Plaza
Bloomington, IL 61710
- ---------------------------
(1) Includes 5,145,000 shares of Common Stock currently owned by State Farm
Mutual Automotive Insurance Company ("State Farm"), plus 751,090 shares
issuable upon early termination of our Equity Units owned by State Farm. On
December 31, 2002, those 5.1 million shares owned by State Farm constituted
less than 5.5% of the total outstanding shares of Common Stock. (The
calculation of the percentage in the chart is premised, pursuant to
applicable rules, on the assumption that no purchase contracts underlying
the Equity Units are terminated early other than State Farm's. If purchase
contracts underlying all Equity Units had settled on December 31, 2002, the
total shares beneficially owned by State Farm would actually have
represented less than 5.3% of the total outstanding shares of Common
Stock.)
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors consists of three classes of directors: one class to
hold office for a term expiring at the Annual Meeting of Shareholders being held
on April 28, 2003; another class to hold office for a term expiring at the
Annual Meeting of Shareholders being held in 2004; and another class to hold
office for a term expiring at the Annual Meeting of Shareholders being held in
2005. The members of each class hold office until their respective successors
are duly elected and qualified. At each Annual Meeting of Shareholders of the
Company, the successors to the class of directors whose terms expire at the
meeting are elected to hold office for terms expiring at the Annual Meeting of
Shareholders held in the third year following their election.
Messrs. Bacot, Johnstone and Vizza, all of whom will have reached age 70
prior to the 2003 Annual Meeting, are retiring as directors effective on the
date of that meeting, as required by the applicable guidelines established by
the Board of Directors. In addition, Mr. Fiondella is retiring as a director
(and as Chairman) effective March 31, 2003. No new directors are being elected
to replace any of these individuals. Instead, the size of the Board of Directors
will be reduced to 13 directors.
At the Annual Meeting on April 28, 2003, four directors are to be elected
to hold office until the 2006 Annual Meeting of Shareholders and until their
successors are duly elected and qualified. All of the nominees are presently
directors of the Company. The affirmative vote of the holders of a plurality of
the shares of Common Stock represented in person or by proxy at the Annual
Meeting is required to elect directors. It is intended that, in the absence of
contrary specifications, votes will be cast pursuant to the enclosed proxy for
the election of such nominees. Should any of the nominees become unable or
unwilling to accept nomination or election, it is intended, in the absence of
contrary specifications, that the proxies will be voted for the balance of those
named and for a substitute nominee or nominees. However, the Company now knows
of no reason to anticipate such an occurrence. All of the nominees have
consented to be named as nominees and to serve as directors if elected.
4
The following persons are nominees for election as directors of the Company
for terms to expire in 2006; the Board of Directors recommends that shareholders
vote FOR each of them:
Peter C. Browning, age 61(1), has been a director of the Company and
of Phoenix Life since 2000. He previously served as a director of Phoenix Life
from 1989 to 1999. He is currently Dean of the McColl Graduate School of
Business at Queens University of Charlotte. Previously, he served in various
capacities, including as President and Chief Executive Officer, at Sonoco
Products Company from 1993 to 2000. Mr. Browning is also a director of Lowe's
Companies, Inc., Wachovia Corporation, Acuity Brands, Inc., EnPro Industries,
Inc., and Sykes Enterprises, Incorporated and non-executive Chairman of the
Board of Nucor Corporation.
Sanford Cloud, Jr., age 58, has been a director of the Company and
of Phoenix Life since 2001. He has been President and Chief Executive Officer of
The National Conference for Community and Justice since 1994. Prior to that, he
was a partner at the law firm of Robinson & Cole from 1993 until 1994, a Vice
President at Aetna, Inc. from 1986 until 1992, and a Connecticut State Senator
from 1977 until 1980. Mr. Cloud is currently a director of Tenet Healthcare
Corp., a trustee of Northeast Utilities and Chairman of IronBridge Mezzanine
Fund, L.P.
Gordon J. Davis, Esq., age 61, has been a director of the Company
since 2000 and of Phoenix Life since 1986. He is currently a partner at the law
firm of LeBoeuf, Lamb, Greene & MacRae, L.L.P., a position he previously held
from 1994 to January 2001. From January to November 2001 he served as President
of Lincoln Center for the Performing Arts. Mr. Davis is also a director of
Consolidated Edison of New York, Inc. and of 20 registered investment companies
within the Dreyfus family of funds.
Jerry J. Jasinowski, age 64, has been a director of the Company
since 2000 and of Phoenix Life since 1995. He has been president of the National
Association of Manufacturers since 1990. Mr. Jasinowski is also a director of
Harsco Corporation and webMethods, Inc.
The following directors, whose terms expire in 2004, will continue to serve
as directors:
Arthur P. Byrne, age 57, has been a director of the Company since
2000 and of Phoenix Life since 1997. He served as President, Chief Executive
Officer and Chairman of The Wiremold Company from 1991 to 2002. Since August
2002, he has served as operating partner of JW Childs Associates, a private
equity fund based in Boston.
Ann Maynard Gray, age 57, has been a director of the Company and of
Phoenix Life since February 2002. She served as President of the Diversified
Publishing Group of Capital Cities/ABC, Inc. from 1991 to 1999. Ms. Gray is also
a director of Duke Energy Corporation and Elan Corporation PLC and a trustee for
J.P. Morgan Funds.
Robert G. Wilson, age 69, has been a director of the Company since
2000 and of Phoenix Life since 1976. He was Chairman of QuoteShip.com from 1999
to 2000 and, following the merger of Quote Ship.Com into Logistics.com, stayed
on as a consultant to Logistics.com from 2000 to 2002. He was the Chief
Executive Officer and Chairman of LendingTree.com from 1997 to 1999, and served
as a consultant to Lending Tree.com through 2002. Mr. Wilson is a former general
partner of Goldman Sachs & Co. and former President of Goldman Sachs
International Corporation.
Dona D. Young, age 49, has been President and a director of the
Company since 2000, its Chief Operating Officer from February 2001 through
December 2002, and its Chief Executive Officer since January 2003. She has been
a director of Phoenix Life since 1998, its President since 2000, its Chief
Operating Officer from February 2001 through December 2002 and its Chief
Executive Officer since January 2003. Mrs. Young was Executive Vice President,
Individual Insurance and General Counsel of Phoenix Life from 1994 to 2000 and
Senior Vice President and General Counsel from 1989 through 1994. Mrs. Young
also serves as a director of Sonoco Products Company, Wachovia Corporation and
Foot Locker, Inc. She will become Chairman of the Board of Directors of the
Company and of Phoenix Life effective April 1, 2003.
- --------------------------
(1) All ages are as of March 1, 2003.
5
The following directors, whose terms expire in 2005, will continue to serve
as directors:
Sal H. Alfiero, age 65, has been a director of the Company since
2000 and of Phoenix Life since 1988. He is currently Chairman and Chief
Executive Officer of Protective Industries, LLC, a position he has held since
May 2001. Mr. Alfiero previously served as Chairman and Chief Executive Officer
of Mark IV Industries, Inc., positions he had held since 1969. He is also a
director of Fresh Del Monte Produce, Inc., HSBC North America Inc. and HSBC USA,
Inc.
Richard N. Cooper, age 68, has been a director of the Company since
2000 and of Phoenix Life since 1982. He is currently Maurits C. Boas Professor
of International Economics for Harvard University, a position he has held since
1981. While on leave from Harvard, Mr. Cooper served as Chairman of the National
Intelligence Council from 1995 to 1997. Mr. Cooper is a director of Circuit City
Stores, Inc.
John E. Haire, age 50, has been a director of the Company since 2000
and of Phoenix Life since 1999. He is currently an Executive Vice President of
Time, Inc. From 1999 until June 2001, he served as President of The Fortune
Group. Prior to that, Mr. Haire had served as publisher of TIME Magazine since
1993.
Thomas S. Johnson, age 62, has been a director of the Company and of
Phoenix Life since 2000. He has been Chairman and Chief Executive Officer of
GreenPoint Financial Corporation since 1993. He served as President and director
of Manufacturers Hanover Trust Company and Manufacturers Hanover Corp. from 1989
to 1991. Mr. Johnson is a director of R.R. Donnelly & Sons Company, Alleghany
Corporation and Online Resources Corp.
Marilyn E. LaMarche, age 68, has been a director of the Company
since 2000 and of Phoenix Life since 1989. She has also been a trustee of the
Phoenix Funds since 2002 and a member of the Consulting Committee to the
Phoenix-Kayne Funds Board of Trustees since 2002. She has been a Limited
Managing Director in the New York investment banking firm of Lazard Frères & Co.
LLC since 1995, where she was a General Partner from 1987 to 1995 and a Senior
Vice President from 1983 to 1987.
THE BOARD OF DIRECTORS
The business and affairs of the Company are managed under the direction of
the Board of Directors. The Board has responsibility for establishing broad
corporate policies and for overseeing the overall performance of the Company.
The Board is not involved, however, in day-to-day operating details. Members of
the Board are kept informed of the Company's business by various reports and
documents sent to them, as well as by reports presented at meetings of the Board
and its committees. During 2002, the Board of Directors met 13 times. All
directors, other than Mr. Fiondella, attended at least 75 percent of the total
number of meetings of the Board of Directors and of the committees on which he
or she served. Mr. Fiondella did attend more than 75% of the regularly scheduled
meetings of the Board and such committees.
There are currently six committees of the Board of Directors that perform
essential functions of the Board. Three of these are standing committees: the
Executive Committee, the Audit Committee and the Compensation Committee. From
time to time, in its discretion, the Board may form other committees. Currently,
such other committees include the Nominating and Corporate Governance Committee,
the Shareholder and External Affairs Committee, and the Finance Committee. The
responsibilities of the committees are summarized below. Only directors who are
not current or former employees of the Company or its affiliates may be members
of the Audit Committee or the Compensation Committee. Members of such committees
must also meet certain other independence tests including, in the case of the
Audit Committee, those of the New York Stock Exchange. The Board of Directors
has determined that all of its non-employee directors meet the independence
standards of the proposed New York Stock Exchange listing rules.
6
The Executive Committee
The Executive Committee, except as otherwise provided in the Company's
amended and restated certificate of incorporation, has and may exercise the
powers and authority of the Board of Directors in the management of the
Company's property, affairs and business, including the power to declare
dividends, in the intervals between meetings of the Board of Directors.
The Executive Committee currently consists of the following eight members:
Robert W. Fiondella, Chairperson, Sal H. Alfiero, J. Carter Bacot, John W.
Johnstone, Jr., Marilyn E. LaMarche, Robert F. Vizza, Robert G. Wilson, and Dona
D. Young. It met five times during 2002.
The Audit Committee
The Audit Committee, except as otherwise provided in any resolution of the
Board of Directors, has and may exercise the authority of the Board of Directors
to: recommend to the Board of Directors the selection of the Company's
independent auditor; review the scope, plans and results relating to the
Company's internal and external audits and financial statements; review the
Company's financial condition; review the quality and integrity of the Company's
financial reporting processes and procedures; review the Company's significant
business and financial risks and exposures and evaluate the adequacy of the
Company's internal controls in connection with such risks and exposures,
including, but not limited to, accounting and audit controls over cash,
securities, receipts, disbursements and other financial transactions; and review
the Company's policies on ethical business conduct and monitor its compliance
with those policies. The Audit Committee members do not have any relationship to
the Company that may interfere with the exercise of their independence from
management and the Company. The Board of Directors has determined that each is
independent under New York Stock Exchange listing standards. Mr. Johnson, the
committee's chairman, has been determined by the Board of Directors, based on
his education and experience, to be an audit committee financial expert, as
defined under the rules implementing the Sarbanes-Oxley Act of 2002.
The Audit Committee currently consists of the following five members:
Thomas S. Johnson, Chairperson, Ann Maynard Gray, John E. Haire, Robert F.
Vizza, and Robert G. Wilson. It met six times during 2002.
The Compensation Committee
The Compensation Committee, except as otherwise provided in any resolution
of the Board of Directors, has and may exercise all the authority of the Board
of Directors with respect to compensation, benefits and personnel administration
of the Company's employees, including: nominating persons for election or
appointment as officers of the Company; evaluating the performance and
recommending to the Board of Directors the compensation, if any, of such
officers; recommending to the Board of Directors, at its discretion, any plan to
issue options for the purchase of shares of Common Stock to the Company's
directors, officers or employees and those of its subsidiaries; and
administering the Company's annual incentive plans for employees and long-term
incentive plan for senior executives. The Board of Directors has determined that
each member of this committee is independent under proposed New York Stock
Exchange listing rules.
The Compensation Committee currently consists of the following five
members: Sal H. Alfiero, Chairperson, J. Carter Bacot, Peter C. Browning,
Sanford Cloud, Jr., and John W. Johnstone, Jr. It met ten times during 2002.
The Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee, except as otherwise
provided in any resolution of the Board of Directors, has and may exercise the
power to assist the Board of Directors by: presenting qualified candidates to
the Board for election as directors; reviewing the committee structure of the
Board; and making recommendations to the Board with respect to matters of
corporate governance. The Board of Directors has determined that each member of
this committee is independent under proposed New York Stock Exchange listing
rules.
The Nominating and Corporate Governance Committee currently consists of the
following five members: Peter C. Browning, Chairperson, Sanford Cloud, Jr.,
Jerry J. Jasinowski, Thomas S. Johnson, and Marilyn E. LaMarche. It met three
times during 2002.
7
The Shareholder and External Affairs Committee
The Shareholder and External Affairs Committee, except as otherwise
provided in any resolution of the Board of Directors, has and may exercise the
authority of the Board of Directors with respect to matters relating to the
interests of the Company's shareholders or the Company's relationships to the
community at large, including: charitable contributions; government affairs and
public relations; and employee voluntary participation in community affairs and
philanthropic programs.
The Shareholder and External Affairs Committee currently consists of the
following five members: John E. Haire, Chairperson, Arthur P. Byrne, Richard N.
Cooper, Gordon J. Davis, and Ann Maynard Gray. It met two times during 2002.
The Finance Committee
The Finance Committee, except as otherwise provided in any resolution of
the Board of Directors, has and may exercise the authority of the Board of
Directors with respect to the Company's financial and investment policies
including: establishing and exercising general supervision over the investment
policies and programs of the Company; authorizing the issuance of debt and the
establishment of financing arrangements (other than through the issuance of
stock); exercising general supervision over disposition of Company subsidiaries
or material assets; regularly reviewing the Company's dividend policy; and
regularly reviewing the Company's and its major subsidiaries' policies and
positions regarding interest rate risk, liquidity management, counterparty risk,
derivative usage and foreign exchange risk.
The Finance Committee currently consists of the following five members:
Jerry J. Jasinowski, Chairperson, Arthur P. Byrne, Richard N. Cooper, Gordon J.
Davis, and Marilyn E. LaMarche. It met six times during 2002.
Compensation of Directors
Directors who are employees of the Company or any of its subsidiaries do
not receive any compensation for serving on its Board of Directors or the Board
of Directors of Phoenix Life. Outside directors (i.e., those not employed by the
Company or any of its subsidiaries) receive an annual retainer of $35,000 for
serving on those Boards of Directors. Each Chairperson of a Board Committee
receives an additional $10,000 annual retainer. Outside directors are paid
attendance fees of $4,000 for each Board meeting they attend and an additional
$1,500 for each Board Committee meeting they attend on a day when the full Board
is not in session. For purposes of these fees, each meeting of the Company's
Board of Directors and the Board of Directors of Phoenix Life is treated as one
meeting, as are meetings of their comparable committees. Directors may defer
receipt of the payment of all or a portion of their retainer and attendance
fees.
Phoenix Life provides $100,000 of whole life insurance to each director.
The cost to the Company of providing this insurance is nominal. All directors
may also participate in a matching charitable gift program to qualified
educational and other charitable institutions, subject to an annual maximum
match of $2,000 for each director.
Under New York Insurance Law, directors of the Company are prohibited until
June 25, 2006, the fifth anniversary of Phoenix Life's demutualization, from
acquiring shares of Common Stock except: (a) acquisitions on or after June 25,
2003 from a registered broker or dealer at then quoted prices; (b) as
consideration to eligible policyholders pursuant to Phoenix Life's plan of
reorganization; or (c) pursuant to a stock option plan approved by the
Superintendent of Insurance for the State of New York. While the Company has
such a stock option plan, due to limitations imposed in connection with Phoenix
Life's recent demutualization, no options could be granted under this plan in
2001. Effective on June 25, 2002, the first anniversary of the Company's
demutualization, however, the Board of Directors granted options to each outside
director to acquire 13,700 shares of Common Stock, which options are exercisable
on or after June 25, 2003 at $16.20 per share, the shares' fair market value (as
defined in the plan) on June 25, 2002. In addition, the Board of Directors may
require outside directors to receive up to one-half of their fees in shares
instead of cash and outside directors may elect to receive any portion of such
fees in shares instead of cash.
Certain Relationships and Related Transactions
Mr. Alfiero, a director, is the 60% owner of S&GI, LLC, to which the
Company paid $232,600 in 2002 to reimburse it for operating costs incurred for
business air travel of Mr. Fiondella.
8
Mr. Bacot, a director, is a director and retired Chief Executive Officer of
The Bank of New York, which was a participating lender under the Company's now
terminated June 11, 2001 Credit Agreement, is a participating lender under the
Company's December 23, 2002 Credit Agreement (the "2002 Agreement"), pursuant to
which the Company has borrowed no sums, and provides trustee services for two
Collateralized Bond Obligations managed by a Company subsidiary.
Mr. Browning, a director, and Mrs. Young, President, Chief Executive
Officer and Chairman-elect, are both directors of Wachovia Corporation, one of
whose subsidiaries provides trustee services for certain Phoenix trusts and is a
participating lender under the 2002 Agreement and another of whose subsidiaries
was an underwriter for the Company's public offering in November, 2002 of stock
purchase contracts.
Mr. Davis, a director, is a partner at the law firm of LeBoeuf, Lamb,
Greene and MacRae, L.L.P., which has in the past provided and is currently
providing legal advice and services to the Company or its subsidiaries.
Ms. LaMarche, a director, is a limited managing director of Lazard Frères
& Co. LLC, whose asset management subsidiary serves as a subadvisor for certain
Phoenix mutual funds. In 2002, those funds paid fees of $12,500 to such
subsidiary for those services.
State Farm currently owns of record more than 5 percent of the outstanding
Common Stock. In 2002, the Company's subsidiaries paid approximately $10.7
million, as compensation for the sale of their insurance and annuity products,
to entities which were either subsidiaries of State Farm or owned by State Farm
employees. The balance earned in 2002, approximately $0.7 million, was paid in
2003.
AUDIT COMMITTEE CHARTER AND REPORT
Audit Committee Charter
The Audit Committee reports to the Board of Directors and is responsible
for overseeing and monitoring the Company's financial accounting and reporting
process, the system of internal controls established by management and the audit
process of the Company. The Board adopted a written charter for the Audit
Committee in 2001. Since then, the Audit Committee has reviewed the relevant
requirements of the Sarbanes-Oxley Act, related SEC rules, both proposed and
actual, and the proposed new listing standards of the New York Stock Exchange
regarding audit committee policies. Although some of these rules and standards
have not yet been finalized at the time of the printing of this proxy statement,
the Board adopted an amendment to the Audit Committee charter in February, 2003
to conform the charter to the new requirements and to voluntarily implement
certain of these proposed rules and standards. A copy of this amended charter
has been attached to this proxy statement as Exhibit A (the "Charter"). The
Board intends to further amend the Charter, if necessary, when the applicable
rules and standards are finalized. The Charter sets out the responsibilities,
authority and specific duties of the Audit Committee. The Charter specifies,
among other things, the structure and membership requirements of the Committee,
as well as the relationship of the Audit Committee to the independent auditor,
the internal auditor and management of the Company.
Audit Committee Report
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the preparation, presentation and integrity of the Company's financial
statements and for the Company's reporting process, including its systems of
internal controls. The Company's independent auditor is responsible for auditing
the Company's annual financial statements and performing quarterly reviews. In
fulfilling its responsibilities, the Audit Committee relies, without independent
verification, on the information provided by the Company's management and its
independent auditor.
In fulfilling its oversight responsibilities, the committee has met with
management and with PricewaterhouseCoopers LLP ("PwC"), the Company's
independent auditor, and has reviewed and discussed the Company's audited
financial statements for the year ended December 31, 2002 (the "audited
statements"). The committee also discussed with PwC the matters required to be
discussed by Statement on Auditing Standards 61, as amended ("SAS 61")
(Communications with Audit Committee) including: (i) PwC's responsibilities
under generally accepted auditing standards; (ii) the Company's significant
accounting policies; (iii) management judgments and accounting estimates; (iv)
any significant audit
9
adjustments; (v) any disagreements with management; and (vi) any difficulties
encountered in performing the audit. Additionally, the committee met with both
PwC and the Company's internal auditors, with and without management present, to
discuss the results of their examinations, their evaluations of the Company's
internal controls and the overall quality, not just the acceptability, of the
Company's financial reporting.
The committee has received from PwC a letter providing the disclosures
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) with respect to any relationships between PwC
and the Company that in their professional judgment may reasonably be thought to
bear on independence. PwC has discussed its independence with the committee and
has confirmed in such letter that, in its professional judgment, it is
independent of the Company within the meaning of the federal securities laws.
The committee has considered whether provision of the non-audit services
rendered by PwC during the Company's most recent fiscal year is compatible with
maintaining the independence of such auditors and deemed that it was.
In reliance on these reviews and discussions, the committee recommended to
the Board of Directors that the Company's audited statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002 and be
filed with the Securities and Exchange Commission. The committee has also
approved, subject to shareholder ratification, the selection of PwC as the
Company's independent auditor for the fiscal year 2003.
THE AUDIT COMMITTEE
Thomas S. Johnson, Chairperson
Ann Maynard Gray
John E. Haire
Robert F. Vizza
Robert G. Wilson
10
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table describes the components of the total compensation paid
to or earned by (even if receipt is deferred) those persons who were, as of
December 31, 2002, the Company's Chief Executive Officer, its four other most
highly compensated executive officers, and a former highly compensated executive
officer (together, the "Named Executive Officers") for services rendered to the
Company and its subsidiaries during the last three completed fiscal years.
Annual Compensation Long-Term Compensation
--------------------- -------------------------
Payouts Shares
Under Underlying
1997-99 Options All Other
Salary Bonus (1) LTIP (2) Awarded (3) Compensation (4)
Name and Principal Position Year $ $ $ # $
- --------------------------- ---- ------ --------- --------- ----------- ----------------
Robert W. Fiondella 2002 900,000 0 2,246,400 262,500 49,463
Chairman of the Board and Chief 2001 900,000 0 2,246,400 1,086,665
Executive Officer (5) 2000 900,000 1,170,000 2,246,400 47,582
Dona D. Young 2002 700,000 0 1,832,220 262,500 34,222
President and 2001 700,000 0 1,537,380 50,263
Chief Operating Officer (6) 2000 650,000 715,000 1,439,100 35,553
Michael J. Gilotti 2002 387,692 1,210,860 N/A 70,000 21,111
Executive Vice President, 2001 380,000 1,002,200 N/A 23,329
Wholesaling Distribution and 2000 296,154 1,030,000 N/A 21,764
Marketing (7)
Michael E. Haylon 2002 387,500 226,497 187,200 60,000 1,100,656
Executive Vice President and 2001 375,000 475,000 187,200 2,664,652
Chief Investment Officer 2000 335,000 715,000 187,200 9,706
Philip R. McLoughlin 2002 665,385 (8) 0 552,825 140,000 8,361,175
Former Chairman and Chief 2001 600,000 550,000 552,825 4,556,053
Executive Officer, Phoenix 2000 600,000 901,300 552,825 104,749
Investment Partners, Ltd.
("PXP") (9)
Simon Y. Tan 2002 425,000 138,448 409,500 140,000 42,319
Executive Vice President 2001 425,000 372,938 409,500 21,711
2000 342,500 360,000 409,500 6,923
- -------------------------
(1) Grants in 2002 under the Long-Term Incentive Plan, which will be paid out
in 2005, are discussed below under the section of this proxy statement
entitled Long-Term Incentive Plans, beginning on page 14, and in the table
contained in such section.
(2) These payments are awards earned upon completion of the Company's
1997-1999 Long-Term Incentive Plan, which was designed to pay out in three
annual installments beginning in 2000 and ending in 2002.
(3) See the Stock Option Grants Table on page 13 of this proxy statement for a
discussion of these options.
11
(4) "All Other Compensation" paid in 2002 consisted of:
Mr. Mrs. Mr. Mr. Mr. Mr.
Item Fiondella Young Gilotti Haylon McLoughlin Tan
--------- ----- ------- ------ ---------- ---
Company contributions to the Savings
and Investment Plan................... $26,500 $19,625 $11,125 $ 10,656 $ 11,500 $11,719
Payment of 2001 PXP retention bonus....... 0 0 0 1,090,000 1,785,000 0
Employment-related agreement.............. 0 0 0 0 6,482,525(a) 0
Value of vacation time sold............... 0 0 7,308 0 42,692 0
Auto, health reimbursement, spousal
travel, financial and tax planning,
reimbursement for taxes, and value of
insurance premium paid for term life
insurance in excess of $50,000............ 22,963 14,597 2,678 0 39,458 30,600
------ ------ ----- - ------ ------
Total All Other Compensation $49,463 $34,222 $21,111 $1,100,656 $8,361,175 $42,319
======= ======= ======= ========== ========== =======
(a) Pursuant to his employment-related agreement of February 1, 2001, Mr.
McLoughlin elected to receive a portion of the payment due to him on
retirement in a lump sum, with the balance in the form of a 100% joint and
survivor annuity paying $16,175 per month.
(5) Mr. Fiondella served as Chief Executive Officer through December 31,
2002. Mr. Fiondella is retiring as a director (and as Chairman)
effective March 31, 2003. Mr. Fiondella will become entitled to
certain retirement benefits, including retirement payments and
restricted stock units, upon his retirement. These benefits and
payments are described under the section of this Proxy Statement
entitled Employment-Related Agreements: Retirement Agreements,
beginning on page 18.
(6) Mrs. Young was appointed as Chief Operating Officer in February
2001, which position she held through December 31, 2002. On January
1, 2003, she became Chief Executive Officer and on April 1, 2003,
she will become Chairman.
(7) Mr. Gilotti did not participate in the 1997-1999 Long-Term Incentive
Plan.
(8) Includes salary of $415,385 through August 31, 2002 and consulting
fees of $250,000 earned through December 31, 2002 following Mr.
McLoughlin's retirement on September 1, 2002.
(9) Mr. McLoughlin served as Chairman and Chief Executive Officer of PXP
until his retirement on September 1, 2002. Upon his retirement, Mr.
McLoughlin became entitled to certain retirement benefits under the
Company's non-qualified defined benefit. These defined benefits are
described under the section of this Proxy Statement entitled
Retirement Plan, on page 16. Mr. McLoughlin also entered into a
consulting agreement with PXP, described under the section of this
proxy statement entitled Employment-Related Agreements: Retirement
Agreements, beginning on page 18, pursuant to which Mr. McLoughlin
has served as a consultant to PXP since September 1, 2002.
12
Stock Option Grants Table
The following table sets forth information concerning stock options granted
by the Company in 2002 to the Named Executive Officers.
Percent of
Number of Total Stock
Securities Options Grant
Underlying Granted to Exercise Date
Stock Options Employees Price Per Expiration Present
Name Granted (1) in 2002 Share (2) Date (3) Value (4)
- ----------------------------------------------------------------------------------------------------------------
Robert W. Fiondella........... 262,500 6.2% $16.20 06/25/2012 $2,147,250
Dona D. Young................. 262,500 6.2% $16.20 06/25/2012 $2,147,250
Michael J. Gilotti............ 70,000 1.6% $16.20 06/25/2012 $ 572,600
Michael E. Haylon............. 60,000 1.4% $16.20 06/25/2012 $ 490,800
Philip R. McLoughlin.......... 140,000 3.3% $16.20 06/25/2012 $1,145,200
Simon Y. Tan.................. 140,000 3.3% $16.20 06/25/2012 $1,145,200
(1) All grants vest 33-1/3% on June 25 of 2003, 2004 and 2005. Pursuant to his
employment-related agreement of February 1, 2001, however, Mr. McLoughlin
is entitled to exercise his options at any time prior to September 1, 2007
and, if not then vested, to receive an amount in cash equal to the excess,
if any, of the fair market value of the exercised options over their
exercise price.
(2) The exercise price of the options granted is equal to the fair market
value of a share of Common Stock on the date of grant.
(3) Pursuant to the terms of the Company's Stock Incentive Plan, upon an
option holder's retirement, he will have until the Expiration Date or five
years, whichever period is shorter, to exercise his options. In Mr.
Fiondella's and Mr. McLoughlin's cases, this means they will have until
March 31, 2008 and September 1, 2007, respectively, to exercise their
options.
(4) The hypothetical grant date present values of stock options granted in
2002 are presented pursuant to SEC rules and are calculated under the
modified Black-Scholes Model for pricing options. The material assumptions
used for these calculations were: (i) a fair market value exercise price;
(ii) a volatility factor of 34.9%; (iii) a risk-free rate of return of
5.5%; (iv) a dividend yield of 0.9%; (v) a three-year vesting schedule,
and (vi) a ten-year option term. No discount to the calculated value was
taken to reflect: (a) the fact that options are not freely tradable; or
(b) the exercise or lapse of the options after vesting but prior to the
end of the option period. These grant date present values are not intended
to forecast possible appreciation, if any, of our Common Stock. The
ultimate value of the options will depend on the future market price of
the Common Stock, which cannot be forecast with reasonable accuracy. The
actual value, if any, an optionee will realize upon exercise of an option
will depend on the excess of the market value of Common Stock, on the date
the option is exercised, over the exercise price.
13
Stock Option Exercises and December 31, 2002 Stock Option Value Table
The following table sets forth information concerning stock options held by
the Named Executive Officers. As of December 31, 2002, there were no
in-the-money options.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at December 31, 2002 December 31, 2002(1)
---------------------------------- ----------------------------
Shares Values
Acquired Realized
on on
Name Exercise Exercise Exercisable Unexercisable(2) Exercisable Unexercisable
- ------------------------ ---------- ---------- ------------- ------------------ ------------- ---------------
Robert W. Fiondella 0 0 0 262,500 0 0
Dona D. Young 0 0 0 262,500 0 0
Michael J. Gilotti 0 0 0 70,000 0 0
Michael E. Haylon 0 0 0 60,000 0 0
Philip R. McLoughlin 0 0 140,000 (3) 0 0 0
Simon Y. Tan 0 0 0 140,000 0 0
- ------------------------
(1) Based on the December 31, 2002 closing stock price of $7.60.
(2) Represents stock options that are not vested.
(3) Under the term of his employment-related agreement of February 1, 2001,
Mr. McLoughlin may exercise his options for cash, but not for shares,
prior to vesting, as described in Note 1 to the preceding table.
Long-Term Incentive Plans
Under the Company's Long-Term Incentive Plan, the Compensation Committee of
the Board of Directors approves awards to designated officers of the Company and
establishes three-year performance goals that support the long-term corporate
strategy. At the end of the three-year performance cycle, awards are determined
and paid based on actual results achieved. Only two Named Executive Officers
participated in the Long-Term Incentive Plan in 2002. Messrs. Haylon and
McLoughlin participated, instead, in PXP's 2002 Phantom Option Plan (discussed
below under the section of this proxy statement entitled PXP's Phantom Option
Plans).
Long-Term Incentive Plan Awards in Fiscal Year 2002
Performance or Estimated Future Payouts(1)
Other Period -----------------------------------------------
Until Maturation Threshold Target Maximum
Name or Payout Payment Payment Payment
--------------------------------- ---------------------- ------------- ------------- -------------
Robert W. Fiondella (2) N/A N/A N/A N/A
Dona D. Young 2002 - 2004 (3) $900,000 $1,800,000 $5,400,000
Michael J. Gilotti 2002 - 2004 (3) $126,000 $ 252,000 $ 756,000
Michael E. Haylon (4) N/A N/A N/A N/A
Philip R. McLoughlin (5) N/A N/A N/A N/A
Simon Y. Tan (6) N/A N/A N/A N/A
(1) Actual payout for the 2002-2004 cycle, which will occur in 2005, will be
based on a formula that takes into account the Company's success in
improving its return on equity.
(2) Pursuant to his Retirement and Transition Agreement (discussed below in
the section of this proxy statement entitled Employment-Related
Agreements: Retirement Agreements, beginning on page 18), Mr. Fiondella
did not participate in the Company's Long-Term Incentive Plan in 2002.
(3) This is the performance period under the Company's Long-Term Incentive
Plan for 2002.
14
(4) Mr. Haylon did not participate in the Long-Term Incentive Plan in 2002.
(5) Mr. McLoughlin did not participate in the Long-Term Incentive Plan in
2002.
(6) Pursuant to his Retirement and Transition Agreement (discussed below in
the section of this proxy statement entitled Employment-Related
Agreements: Retirement Agreements, beginning on page 18), Mr. Tan did not
participate in the Company's Long-Term Incentive Plan in 2002.
PXP's Phantom Option Plans
In 2002, Messrs. Haylon's and McLoughlin's long-term compensation plan
awards were under PXP's Phantom Option Plans instead of under the Company's
Long-Term Incentive Plan. These PXP plans permit PXP to recognize and reward
contributions that participants make toward the long-term growth of PXP.
Performance or
Other Period Until
Number Maturation Estimated Future Payouts Under
Name of Units or Payout Non-Stock Price-Based Awards
- -------------------------- -------------------- ------------------------- -------------------------------------
Michael E. Haylon 40,000 (1) (2) (3)
25,000 (4) (5) (6)
Philip R. McLoughlin 150,000 (1) (7) (3)
50,000 (4) (7) (6)
(1) These were awarded in 2002 under PXP's 2002 Phantom Option Plan.
(2) Mr. Haylon's rights under PXP's 2002 Phantom Option Plan vest 33-1/3% on
January 1 of each of 2003, 2004 and 2005. He may exercise his vested
rights in March of any year prior to March 31, 2007.
(3) Each unit has a beginning reference value of $7.73, which was determined
based on PXP's revenues and operating income. The value of the units is
recalculated each quarter based on a formula tied to the change in PXP's
current trailing 12-month revenues and operating income (before
amortization of intangibles) as compared to such results in 2001. Upon
exercise, the unit holder is entitled to the excess of the recalculated
value as of the date of exercise over $7.73. Based on these calculations
as of December 31, 2002, each unit had a year-end value of $9.21 so, if a
unit is exercised in 2003, the unit holder would be entitled to $1.48. The
value of the units is not subject to any limitations.
(4) These were originally awarded in 2001 under PXP's 2001 Phantom Option Plan
but were repriced in December 2001.
(5) Mr. Haylon's rights under PXP's 2001 Phantom Option Plan are fully vested.
He may exercise these rights in March of any year prior to March 31, 2006.
(6) Each unit has a beginning reference value of $10.30, which was determined
based on PXP's revenues and operating income. The value of the units is
recalculated each quarter based on a formula tied to the change in PXP's
current trailing 12-month revenues and operating income (before
amortization of intangibles) as compared to such results in 2001. Upon
exercise, the unit holder is entitled to the excess of the recalculated
value as of the date of exercise over $10.30. Based on these calculations
as of December 31, 2002, each unit had a year-end value of $9.21, which is
below the reference value, so exercise of an option would have resulted in
no payment to the unit holder. The value of the units is not subject to
any limitations.
(7) Mr. McLoughlin's rights under PXP's 2001 Phantom Option Plan were vested
when granted and under PXP's 2002 Phantom Option Plan, vested upon his
retirement on September 1, 2002. He may exercise these rights at any time
prior to September 1, 2005.
15
Retirement Plan
The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age, which is age 62 for participants
with ten years of service or otherwise age 65, based on the final pay formula
contained in the Company's pension plan, a qualified defined-benefit plan. The
benefits also include any pension amounts provided instead under the Company's
non-qualified pension plan due to benefit limitations imposed by the Internal
Revenue Code or to the Company's exclusion of certain types of compensation from
the qualified plan.
Pension Plan Table
Years of Plan Participation
Final
Average ------------------------------------------------------------------------------------------
Pay 10 15 20 25 30 35
- ----------------- ----------- ----------- ------------ ------------ ------------ ------------
$ 500,000 $100,000 $150,000 $200,000 $ 250,000 $ 275,000 $ 300,000
750,000 150,000 225,000 300,000 375,000 412,500 450,000
1,000,000 200,000 300,000 400,000 500,000 550,000 600,000
1,250,000 250,000 375,000 500,000 625,000 687,500 750,000
1,500,000 300,000 450,000 600,000 750,000 825,000 900,000
1,750,000 350,000 525,000 700,000 875,000 962,500 1,050,000
2,000,000 400,000 600,000 800,000 1,000,000 1,100,000 1,200,000
The benefits shown in the above table are payable in the form of a straight
life annuity and would be actuarially adjusted for optional benefit forms
available under the pension plan. The annual retirement benefit under the
qualified plan and the non-qualified plan is generally equal to the sum of: (i)
an executive's "final average earnings" multiplied by years of credited service
up to 25 years times two percent; and (ii) an executive's "final average
earnings" multiplied by years of credited service in excess of 25 years but up
to 35 years times one percent. Benefits payable under the pension plan are
reduced by Social Security benefits. "Final average earnings" taken into account
under the pension plan is the average annual salary (as reflected in the
"salary" column of the Summary Compensation Table) paid to a participant during
the consecutive 36-month period prior to an employee's retirement. "Final
average earnings" also takes into account the average of the highest three of
the executive's last five years' bonuses (excluding long-term incentive
compensation).
At December 31, 2002 (assuming retirement as of such date), the estimated
"final average earnings" under the qualified plan and the non-qualified plan are
$1,797,466.69 for Robert W. Fiondella, $1,165,000.00 for Dona D. Young,
$1,021,816.64 for Michael E. Haylon and $693,812.66 for Simon Y. Tan. The
estimated years of credited service under the qualified plan and the
non-qualified plan as of such date are 33.75 years for Mr. Fiondella, 22.42
years for Mrs. Young, 12.58 years for Mr. Haylon and 20.75 years for Mr. Tan.
Mr. Gilotti, who had 3.58 years of service on December 31, 2002, will not vest
under either plan until he has five years of service. Had he been vested on
December 31, 2002, his estimated "final average earnings", taking into account
his three years of bonuses, would have been $1,021,816.64. Upon his retirement
on September 1, 2002, Philip R. McLoughlin had "final earnings" under the
qualified plan and the non-qualified plan of $1,405,967 and 31.17 actual years
of service under such plans. In accordance with the pension plan's optional
benefit forms available to him, Mr. McLoughlin elected to receive his retirement
benefits through a lump sum payment of $1,029,342 and a 100% joint and survivor
annuity with monthly payments of approximately $30,000. In addition, he elected
to defer approximately $994,000 through a tax-deferred accumulation plan. If Mr.
Tan continues until at least January 1, 2004 to be employed by the Company or
any of its subsidiaries, he will have five additional years added to his age and
credited years of service on his date of retirement for purposes of determining
his benefits under the retirement plans maintained by the Company. Executive
Vice Presidents had been excluded from the Company's Early Retirement Program
offered in 2001 to other employees, under which five additional years had
similarly been added to age and credited years of service for purposes of
determining benefits.
Employment-Related Agreements
Employment Agreements. The Company entered into an Executive Employment
Agreement with Mrs. Dona Young, dated January 1, 2003, pursuant to which Mrs.
Young serves as the Chief Executive Officer of the Company and pursuant to which
the Company will seek to cause Mrs. Young to be re-nominated so that she may
continue to serve as a member of the Board of Directors throughout her
employment term. The agreement entitles Mrs. Young to participate in benefit
plans of the Company and other perquisites maintained for its senior executives,
sets her base salary at $900,000, retroactive to October 1, 2002, and provides
for a short-term bonus (at a target of 100% of base salary), a long-term
16
incentive bonus (at a target of 200% of base salary) and the grant of 394,737
restricted stock units. Each restricted stock unit represents a contractual
right to receive one share of Common Stock, subject to vesting restrictions,
following the later of June 25, 2006 or termination of employment. The
restricted stock units vest on the earlier of January 1, 2006, a change in
control of the Company, or a termination of her employment by the Company
without cause (as defined in the agreement), by Mrs. Young for good reason (as
defined in the agreement) or due to her death or disability. The agreement
further provides that while Mrs. Young holds the restricted stock units, she
will not have any right to vote or to direct the vote of the related shares of
stock or to dispose of the restricted stock units. The Company will credit each
restricted stock unit with "dividend equivalents" (i.e., cash dividends on the
shares of stock underlying the restricted stock units) and interest thereon to
be distributed following the later of June 25, 2006 or termination of Mrs.
Young's employment.
If Mrs. Young's employment is terminated by the Company without cause (as
defined in the agreement) or if she terminates her employment for good reason
(as defined in the agreement), she will be entitled to: (i) two times the sum of
her base salary and her short-term incentive award, based on the greater of her
target and the average of her short-term bonuses over the last two completed
fiscal years prior to her termination; (ii) a pro-rata portion of the short-term
award for the year in which her termination occurs; (iii) a pro-rata portion of
her previously awarded long-term awards for each then open cycle; (iv) pro-rata
vesting of any outstanding equity grants (other than the restricted stock units
described above); (v) continued health coverage for two years; (vi) an amount
equal to the lump sum value of two years of additional service and age credit
for pension purposes under any qualified and nonqualified defined benefit type
pension plan or arrangement of the Company; (vii) an amount equal to two years
of maximum Company matching contribution under any type of qualified or
nonqualified deferred compensation plan sponsored by the Company; and (viii)
outplacement services and, for six months after termination, office space and
secretarial support. If the Company and Mrs. Young do not enter into a new
employment agreement on or before January 1, 2006, the executive will be deemed
to be terminated by the Company without cause. In addition, Mrs. Young will have
good reason to terminate her employment if the Company fails to renew the
Employment Continuation Agreement described below.
Change in Control Agreements. In January, 2003, the Company entered
into agreements with Messrs. Gilotti and Haylon and a number of both Phoenix
Life's and PXP's other key executives that will, in certain circumstances,
provide separation benefits upon the termination of their employment by the
Company for reasons other than death, disability, cause (as defined in the
agreements) or retirement, or by the executive for good reason (as defined in
the agreements). These agreements provide this protection only if the
termination occurs following (or is effectively connected with) the occurrence
of a change of control, as defined in the agreements. Mrs. Young and the Company
entered into a similar Employment Continuation Agreement, dated January 1, 2003,
that becomes operational upon a change in control of the Company. The initial
term of each agreement ends January 1, 2006, subject to automatic renewals of up
to two successive and consecutive additional one-year periods.
The principal operative provisions of these agreements are intended to
preserve for the covered executives the same duties, responsibilities and
compensation opportunities as were in effect prior to a change of control for a
period of two years following a change in control. When operative, these
agreements establish certain minimum levels with respect to the covered
executive's base salary and incentive compensation opportunities and also
generally assure the covered executive that he or she will not incur a
significant change in the other terms and conditions of his or her employment.
These agreements provide for change in control severance benefits
including: (i) vesting of qualified and non-qualified pension plan benefits and
a lump sum payment in an amount equal to one to three years (depending on the
executive's pay grade) of additional service and age credit under such plans;
(ii) in lieu of any severance benefits payable under any other plan, policy or
program, a cash amount equal to one to three times (depending on the executive's
pay grade) base salary plus the greater of the average of annual incentive
compensation earned in the last three fiscal years prior to the change in
control and the short-term incentive target for the year in which employment
terminates; (iii) one to three years (depending on the executive's pay grade) of
continued medical, dental and long-term disability coverage; (iv) vesting of
equity compensation; (v) an amount equal to a pro rata portion of the short-term
award for the year in which termination occurs and a pro-rata portion of
long-term awards for each then open cycle at target; (vi) an amount equal to one
to three years (depending on the executive's pay grade) of additional
contributions the Company would have contributed to the Company's Savings and
Investment Plan and/or the Excess Investment Plan; (vii) outplacement services;
and (viii) in Mrs. Young's case only, office space and secretarial support for
six months after termination. Mrs. Young, Messrs. Haylon and Gilotti and two
other executives will also be entitled to a "gross-up" payment from the Company
to cover any excise tax liability they may incur as a result of payments or
benefits contingent on a change of control and any income tax liability they may
incur as a result of the "gross-up" payment.
17
Severance Letter Agreements. The Company has agreements dated in 2001
with Mr. Haylon and in 2000 with Mr. Gilotti that would provide separation
benefits upon the termination of their employment by the Company for reasons
other than for cause (as defined in the agreements) or by the executive for good
reason (as defined in the agreements). These agreements do not require a change
in control to be operational. If triggered, each agreement would result in the
following benefits: (i) an amount equal to two times the sum of the executive's
base salary, the highest of the last three years' awards of short-term incentive
compensation and the highest of the last three payments under the Company's
Long-Term Incentive Plan (or any successor plan); (ii) an amount equal to full
payment of the award for all current long-term cash cycles under the Company's
Long-Term Incentive Plan; (iii) an amount equal to the value of two years of
additional service and age credit for pension purposes under any qualified and
non-qualified defined benefit type pension plan or arrangement of the Company;
(iv) an amount equal to the present value of two years of Company matching
contributions under the Company's Savings and Incentive Plan and/or Excess
Investment Plan; (v) continued medical, dental and long-term disability coverage
for two years; (vi) outplacement services, including office space; and (vii)
full vesting of benefits under all stock option or other stock or equity
compensation plans. These executives would also be entitled to a "gross-up"
payment from the Company to cover any excise tax liability they may incur as a
result of these benefits and any income tax liability they may incur as a result
of such "gross-up" payment. These letter agreements expire January 1, 2004.
Retirement Agreements. The Company and Phoenix Life entered into a
Retirement and Transition Agreement with Mr. Robert Fiondella, dated September
27, 2002, pursuant to which Mr. Fiondella continued to serve as the Chief
Executive Officer and Chairman of the Board of the Company and Phoenix Life
through December 31, 2002. As of January 1, 2003, Mr. Fiondella retained the
positions of Chairman of the Board of the Company and Phoenix Life. He will
continue to receive his annual base salary, secretarial support and other
business services and he is entitled to continue his participation in the
Company's and its affiliates' employee benefit, retirement, and welfare plans
through his retirement on March 31, 2003. Upon his retirement, Mr. Fiondella
will be entitled to a payment of $8,000,000, approximately 573,000 restricted
stock units (each representing the right to receive one share of Common Stock
after June 25, 2006), and deferred compensation of $4,000,000 from Phoenix Life.
Also upon his retirement, Mr. Fiondella's previously granted options will become
exercisable in accordance with their terms and he will be entitled to his
previously accrued benefits under the Company's and its affiliates' retirement,
welfare and deferred compensation arrangements. Mr. Fiondella agreed to
restrictive covenants including, but not limited to, a covenant not to compete
with the Company and its affiliates and a covenant not to solicit the Company's
or its affiliates' clients or employees. The employment agreement and the change
in control agreement previously entered into between Mr. Fiondella and the
Company terminated upon execution of and were superseded by the Retirement and
Transition Agreement. Pursuant to an amendment dated February 10, 2003, to the
Retirement and Transition Agreement, Mr. Fiondella agreed to remain with the
Company from April 1 through June 30, 2003 in a consulting capacity to provide
advice on management transition matters. During this period, he will be paid a
monthly consulting fee equal to his current monthly salary and will continue to
be provided with an office, secretarial support and access to a Company-provided
car and driver.
PXP entered into an agreement dated August 5, 2002, with Mr. Philip
McLoughlin pursuant to which he agreed to continue as a consultant after his
retirement on September 1, 2002. In such capacity, he continued, among other
responsibilities, to assist in the day-to-day management of PXP and in the
identification and selection of his successor as the principal executive officer
of PXP. For this, he received consulting fees equal to his former salary, plus
reimbursement for certain travel expenses and for other expenses reimbursable
for employees under PXP's existing policies. In addition, he was provided with
an office and secretarial support. On September 4, 2002, the Company and Mr.
McLoughlin entered into a Statement of Clarification and Intent, which clarified
certain of his then existing employment-related agreements to, among other
provisions, quantify the sums owed thereunder. Mr. McLoughlin elected to have
such sums paid through a lump sum payment in 2002 of $6,482,525, with the
balance through a 100% joint and survivor annuity paying $16,175 per month. On
December 18, 2002, PXP and Mr. McLoughlin entered into a new consulting
agreement, under which he agreed to continue, through March 31, 2003, to perform
the responsibilities he had had under the prior agreement. Thereafter, Mr.
McLoughlin will cease to assist in the day-to-day management of PXP but will
continue to advise management of PXP and the Company with respect to PXP and its
affiliated entities. His fees after March 31 will be $20,833 per month. Mr.
McLoughlin agreed to a covenant not to solicit employees of PXP or its
affiliates. This consulting agreement, which replaced the August 5 agreement,
may be terminated without penalty by either party at any time for any reason on
thirty days' notice, but if not so terminated, will remain in effect until
December 31, 2004.
The Company entered into a Retirement and Transition Agreement with Mr.
Simon Y. Tan, dated February 19, 2003, pursuant to which Mr. Tan will continue
through January 1, 2004 to serve as an Executive Vice President of both the
Company and Phoenix Life, focusing primarily on the pursuit and development of
new life insurance and annuity
18
products. For such services, he will continue to receive a salary at the rate in
effect on the date of the agreement and is eligible to receive any award under
the Company's long- and short-term incentive plans for the cycle ending in 2002,
but not thereafter. He will also continue to participate in each of the
Company's other employee benefit, retirement and welfare plans during his
employment. In consideration for those benefits, Mr. Tan agreed to restrictive
covenants including, but not limited to, a covenant not to compete with the
Company and its affiliates and a covenant not to solicit clients or employees of
the Company or its affiliates. The Retirement and Transition Agreement
supersedes all prior employment-related agreements between Mr. Tan and the
Company or Phoenix Life, other than his Supplemental Retirement Plan Agreement,
which enhances his retirement benefit on a non-qualified basis by adding five
years to his age and credited years of service for purposes of determining
benefits. Upon his retirement, Mr. Tan's previously granted options will become
exercisable in accordance with their terms and he will be entitled to his
previously accrued benefits under the Company's and its affiliates' retirement,
welfare and deferred compensation agreements. He will also be entitled to a
payment under his Supplemental Retirement Plan Agreement.
COMPENSATION COMMITTEE REPORT
The Compensation Committee consists of each of the directors signing this
report, none of whom is a current or former employee of the Company or any of
its affiliates. This report discusses the executive compensation program in
effect with respect to the compensation paid to the Company's executive
officers, including the Named Executive Officers, with respect to calendar year
2002. The compensation determinations described below were ratified by the Board
of Directors.
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission nor shall such information be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates it by reference into such filing.
Executive Compensation
The Company's executive compensation program is designed to: attract,
motivate and retain executive officers who can make a significant contribution
to the Company's annual and long-term success; align the interest of the
executive officers with those of shareholders; and place a significant
proportion of the executive officers' total compensation at risk by aligning it
with the Company's financial and Common Stock performance.
Executive compensation is composed of three components: base salary; annual
incentive awards (bonuses); and annual long-term incentive awards. The target
awards for each component of compensation are based on comparative data for the
insurance and investment industries and peer groups of companies which compete
in the various businesses served by the Company and by other comparative data
obtained from nationally recognized compensation consulting firms.
Base Salary
Base salary is targeted in a range around the median of the appropriate
peer group. The base salary target for an executive position is determined
through an annual formal assessment conducted by the Company's human resource
personnel with the help of one or more independent consultants. The assessment
considers the position's degree of complexity and level of responsibility, its
importance to the Company in relation to other executive positions, and the
competitiveness of an executive's total compensation. In 2002, except in the
case of promotions, no base salary increases were granted to executive officers.
Base salary increases for 2003 were determined in 2002 based on a comprehensive
review of market data and an assessment of each executive's performance. Base
salary increases were not awarded to those executives whose base salaries were
deemed to be above market. Instead, bonuses were awarded if warranted by
individual performance. These base salary increases and bonuses were reviewed
and approved by the Compensation Committee.
Annual Incentives
Under the Company's annual incentive plan, the Company's executives are
eligible for annual cash incentive awards based upon the achievement of
performance objectives. Each year the Company determines and the committee
approves
19
these objectives. For 2002, these objectives emphasized return on equity,
revenue and sales growth and expense control. Mr. Fiondella's and Mrs. Young's
performance objectives emphasized Company return on equity, revenue growth and
expense control. Mr. McLoughlin's performance objectives emphasized PXP
operating earnings, Mr. Haylon's emphasized growth of Alternative Financial
Products and PXP's operating earnings, Mr. Gilotti's emphasized annuity sales
and Mr. Tan's emphasized Company return on equity, revenue growth, expense
control and sales growth.
All regular full-time and part-time employees are eligible to participate
in an annual incentive plan. The Compensation Committee reserves the right to
make adjustments to such plan as it deems appropriate in its sole discretion.
Individual awards for executive officers must be reviewed and approved by the
committee before being paid. Awards are paid in the first quarter of the year
following the plan year.
Long-Term Incentive Compensation
Long-term incentives for the Company's executive officers and other key
employees are provided pursuant to the Company's Long-Term Incentive Plan (the
"LTIP") and The Phoenix Companies, Inc. Stock Incentive Plan (the "Stock
Incentive Plan"). If the stockholders approve of the new Restricted Stock Unit
and Long-Term Incentive Plan described in Proposal 2, the Company intends to
grant future long term incentive awards under that plan instead of the LTIP.
Long-Term Incentive Plan
Beginning in 2000, the LTIP has operated during successive three-year
periods, or performance cycles. As part of the annual compensation review
process, targeted award opportunities for each executive level are reviewed and
any changes are approved by the Compensation Committee. At the beginning of each
performance cycle, corporate performance objectives are established which may
include specific earnings and growth objectives for the performance period.
Results for performance objectives for the period are measured and the results,
which are expressed as a percentage, may range from 0 percent to 300 percent.
Actual payouts are determined by multiplying the average of the executive's
annualized salary on each February 1 of the performance cycle by both (a) the
executive's target award opportunity, and (b) the corporate performance
percentage results. In 2002, the committee approved the performance goal for the
2002-2004 performance cycle. The performance goal established was based upon
improvement in the Company's return on equity. In 2003, the committee approved
the results of the 2000-2002 performance cycle. The first half of that plan,
representing a period prior to demutualization, measured statutory earnings and
the net change in agency ratings. The second half, representing a period
post-demutualization, measured growth in ROE. Based on actual results, the Board
approved an overall award of 125% of target.
Stock Incentive Plan
In 2001, to further align the interests of the executives and other key
employees and groups with those of shareholders, the Compensation Committee
adopted the Stock Incentive Plan. The Stock Incentive Plan provides that the
committee may, from time to time, grant incentive stock options and
non-statutory stock options for the purchase of Common Stock to officers
(including officers who are also directors), employees and insurance agents of
the Company and its subsidiaries.
The maximum number of shares issuable under the Stock Incentive Plan with
respect to officers, employees and insurance agents of the Company or its
subsidiaries is the aggregate of five percent of the shares outstanding on June
26, 2001 reduced by the shares issuable pursuant to options granted under The
Phoenix Companies, Inc. Directors Stock Plan and, with respect to officers and
employees of PXP (other than those officers, employees or insurance agents of
the Company), one percent of such shares outstanding.
On June 25, 2002, 75% of the 6,300,000 options issuable under this plan
became available. The committee granted 4,456,906 stock options to a large
number of officers of the Company. These options have an exercise price of
$16.20 and a three-year vesting period (33-1/3% per year) with a ten-year term.
CEO Compensation
When determining the compensation of the Chief Executive Officer, the
Compensation Committee considers the Company's financial performance, as well as
relevant peer group data, for the insurance and investment industries.
20
Mr. Fiondella did not receive an increase to his base salary in 2002. Based upon
achievement against the performance criteria established for the 2002 annual
incentive plan, Mr. Fiondella did not receive an award for 2002. As a result of
his Retirement and Transition Agreement, Mr. Fiondella did not receive an award
under the Company's 2000-2002 long-term incentive plan cycle and is not
participating in any existing or future long-term incentive plan cycles.
In December 2002, the committee approved the compensation of Dona Young,
who was appointed Chief Executive Officer effective January 1, 2003. The
committee established an annual base salary of $900,000, an annual incentive
target of 100% of base salary and a long-term incentive target of 200% of base
salary. The committee also awarded Mrs. Young with a grant of 394,737 restricted
stock units.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
Company's Chief Executive Officer or any of the four other most highly
compensated executive officers, unless the compensation is "performance-based".
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. A transition rule applies for newly
public companies that exempts them from the $1,000,000 limit compensation paid
under plans in effect prior to the public offering and disclosed in the
prospectus adequately to comply with securities laws. The Compensation Committee
believes that the compensation plans for the senior executives are covered by
this exemption.
In the future, the committee intends to structure any compensation for
executive officers so that it qualifies for deductibility under Section 162(m)
to the extent feasible. However, to maintain a competitive position within the
Company's peer group of companies, the committee retains the authority to
authorize payments including salary and bonus that may not be deductible.
THE COMPENSATION COMMITTEE
Sal H. Alfiero, Chairperson
J. Carter Bacot
Peter C. Browning
Sanford Cloud, Jr.
John W. Johnstone, Jr.
21
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock with the cumulative total returns of the Standard & Poor's 500 Stock Index
and of the common stock of a peer group selected by the Company ("Peer Group
Index") for the period June 25, 2001 through December 31, 2002. Within the Peer
Group Index, however, the relevant investment dates for Principal Financial
Group, Inc. and Prudential Financial, Inc., are November 22, 2001 and December
12, 2001, respectively, the dates of their respective Initial Public Offerings.
The cumulative total return, which assumes any dividends paid are reinvested, is
equal to: (i) the difference between the price per share at the beginning and
end of a period; divided by (ii) the share price at the beginning of such
period.
Cumulative Total Return
[GRAPHIC OMITTED]
25-Jun-01 30-Sep-01 31-Dec-01 31-Mar-02 30-Jun-02 30-Sep-02 31-Dec-02
--------------------------------------------------------------------------------------------------
PNX 100.00 80.95 103.64 107.56 103.73 76.99 42.96
S&P 500 100.00 85.74 94.90 95.16 82.42 68.18 73.93
Peer Index 100.00 87.72 102.32 98.53 91.14 72.39 88.37
Except as noted above, all indices assume $100 was invested on June 25,
2001 in the Common Stock, the Standard & Poor's 500 Stock Index and the common
stock of the Peer Group Index members, with dividends being reinvested. Peer
Group Index members are AmerUs Group Co., Franklin Resources, Inc., Janus
Capital Group, Inc. (formerly Stilwell Financial Inc.), Jefferson-Pilot
Corporation, John Hancock Financial Services, Inc., Lincoln National
Corporation, MetLife, Inc., Nationwide Financial Services, Inc., Neuberger
Berman Inc., Principal Financial Group, Inc., Prudential Financial, Inc., T.
Rowe Price Group, Inc., The MONY Group Inc., and Waddell & Reed Financial, Inc.
The Peer Group Index is capitalization-weighted.
The foregoing table shall not be deemed to be "soliciting material" or to
be "filed" with the SEC nor shall such table be incorporated by reference into
any filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference into such filing.
22
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, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file with the SEC and
the New York Stock Exchange reports of ownership and changes in ownership of
Common Stock of the Company. Officers, directors and greater than 10 percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during its most recent fiscal year, all Section 16(a)
filing requirements applicable to its officers and directors (the Company has no
greater than 10 percent beneficial owners) were complied with.
PROPOSAL 2
APPROVAL OF THE PHOENIX COMPANIES, INC. 2003
RESTRICTED STOCK, RESTRICTED STOCK UNIT AND LONG-TERM INCENTIVE PLAN
To further its policy of encouraging the creation of long-term shareholder
value, the Board of Directors has adopted The Phoenix Companies, Inc. 2003
Restricted Stock, Restricted Stock Unit and Long-Term Incentive Plan (the
"Plan"), subject to shareholder approval. The shareholders are being asked to
approve the Plan and the reservation of shares for issuance under the Plan.
The full text of the Plan is set forth in Exhibit B. A summary of the Plan
is set forth below and is qualified in its entirety by reference to the full
text of the Plan.
Approval by shareholders of the performance goals in the Plan is one of
several requirements under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), if compensation payable pursuant to the long-term
performance units granted under the Plan is to qualify for the performance-based
exemption to the limitation on our ability to deduct compensation in excess of
$1,000,000 paid to certain executives officers in any taxable year (these
affected executive officers are referred to as "Covered Employees"). If
shareholders do not approve the Plan, we will not implement it. Shareholders
should be aware that the Plan is not the exclusive means of providing incentive
compensation to Covered Employees, and that the Company reserves the right to
pay bonuses to these Covered Employees under another plan or without regard to
any plan in appropriate circumstances, whether or not deductible.
SUMMARY OF THE PLAN
General. The purpose of the Plan is to foster and promote the long-term
financial success of the Company. The Plan is intended to motivate superior
performance by means of performance-related incentives. The Plan will encourage
and provide for the acquisition of a long-term ownership interest in the Company
by the Company's and its subsidiaries' officers, employees, non-employee
directors and insurance agents. The Plan will enable the Company to attract and
retain the services of an outstanding management team upon whose judgment,
interest, and special effort the successful conduct of its operations is largely
dependent.
Administration. The Plan will be administered by the Compensation
Committee. The committee selects the participants to whom restricted stock,
restricted stock units and long-term performance units may be granted, the time
or times at which such awards are granted, the number of shares subject to each
grant and the terms and conditions (not inconsistent with the Plan) of each
grant, including the performance goals applicable to the long-term performance
awards.
Eligibility. Any officer or other employee, non-employee director or
insurance agent of the Company or any subsidiary of the Company selected by the
committee may participate in the Plan. There are approximately 2,180 officers
and other employees, 15 non-employee directors and 350 insurance agents eligible
for participation in the Plan.
23
Shares Reserved. The number of shares of Common Stock that may be issued
under the Plan may not exceed 6,000,000 shares, which may include authorized but
unissued shares or treasury shares. If there is a stock split, stock dividend,
recapitalization, or other relevant change affecting the Company's shares,
appropriate adjustments will be made in the number of shares that may be issued
in the future and in the number of shares under all outstanding restricted stock
units granted before the event. If shares subject to an award are cancelled,
terminated or otherwise settled without the issuance of shares, those shares
will again be available for inclusion in future award grants.
Grant of Restricted Stock and Restricted Stock Unit Awards. The committee may
grant restricted stock and restricted stock units under the Plan. Each share of
restricted stock will be subject to forfeiture if a specified period of service,
generally three years, is not completed. Each restricted stock unit will
represent a contractual right to receive one share of Common Stock after the
satisfaction of vesting criteria, such as continued employment with the Company
for a specified period of time, generally three years. (The specified period
during which restricted stock is subject to forfeiture and restricted stock
units are subject to vesting is referred to as the "restricted period.") In
accordance with New York Insurance Law, the Plan expressly prohibits the grant
of restricted stock until after June 25, 2006. Restricted stock units may be
granted before June 25, 2006, but distribution of any shares issuable pursuant
to such restricted stock units will be delayed until after June 25, 2006,
together with any dividend equivalents earned in respect of such units. Instead
of delaying the distribution of any such units and dividend equivalents, the
committee may elect to pay cash equal to the fair market value of the shares
underlying such units.
Transferability Restrictions. Generally, restricted stock units and shares of
restricted stock may not be transferred (that is, they may not be sold,
assigned, transferred, pledged, hypothecated or otherwise encumbered) by the
participant during the restricted period. The committee may permit (on such
terms and conditions as it establishes) restricted stock units or shares of
restricted stock to be transferred during the restricted period by the
participant to a member of the participant's immediate family or to a trust or
similar vehicle for the benefit of such immediate family members, provided that
any restricted stock units or shares of restricted stock so transferred will
remain subject to the forfeiture provisions described above.
Shareholder Rights. Participants will have all the rights of a shareholder
with respect to restricted stock, including but not limited to, the right to
vote and the right to receive dividends. In respect of restricted stock units, a
participant will not have any right to vote on any matter submitted to the
Company's shareholders or to dispose of the shares of Common Stock underlying
such restricted stock units, nor will a participant have any beneficial
ownership in respect of any shares of Common Stock underlying restricted stock
units, until such time as the shares of Common Stock underlying such units have
been issued. At the discretion of the committee, a participant may be entitled
to cash dividends (referred to as "dividend equivalents") paid by the Company on
a share of Common Stock for each restricted stock unit awarded to a participant.
Termination of Employment. Generally, if a participant terminates employment
by reason of death, disability or retirement, the restricted period will lapse
as to a pro-rated portion of the shares of restricted stock and restricted stock
units transferred or issued to such participant based on the number of days the
participant actually worked since the date the awards were granted (or in the
case of awards which become vested in installments, since the date, if any, on
which the last installment of such awards became vested). Any awards as to which
the restricted period has not lapsed at the date of a participant's termination
of employment by reason of death, disability or retirement will automatically be
cancelled upon such participant's termination of employment. Generally, if a
participant's employment is terminated for any reason other than death,
disability or retirement at any time prior to the date when the restricted
period lapses, all restricted stock held by the participant will revert back to
the Company and all restricted stock units and any dividend equivalents credited
to such participant will be forfeited upon the participant's termination of
employment.
Change of Control. In the event of a change of control of the Company, as
defined in the Plan, the restricted period with respect to each award of
restricted stock and restricted stock units will lapse on the date of such
change of control.
Long-Term Performance Units. The committee in its sole discretion will select
those participants to receive long-term performance units under the Plan.
Long-Term Performance Units will relate to pre-established "performance goals"
over a "performance cycle." A "performance cycle" will generally be three years
and may consist of calendar year segments. The "Performance Goals" will be
objectives for the Company, any subsidiary, unit or business segment of the
Company, or individual established by the committee and will be based on one or
more of the following measures: sales, revenues, earnings per share, net income,
operating income, cash flow, stock price, return on equity, cash operating
income, risk-based capital ratio, debt to capital ratio, operating margin,
assets under management, claims-paying ability
24
and debt rating. The performance goals may reflect absolute entity performance
or a relative comparison of entity performance to the performance of a peer
group or other external measure.
Prior to the beginning of the first year of a performance cycle (or such
later time consistent with Section 162(m) of the Code), the committee will
allocate a target number of long-term performance units ("Target Units") to
participants. Prior to the beginning of the first year of a performance cycle or
the beginning of each segment of the performance cycle (or such later time
consistent with Section 162(m)), the committee will determine the performance
goals applicable to the units that may be earned by the participant for such
performance cycle and/or segment thereof. The committee will specify the formula
for determining the percentages of the performance goals that must be achieved
for the participant to earn the Target Units or less than or more than the
target number of long-term performance units allocated to the participant if
actual performance is equal to, less than or greater than the target performance
goals. The committee may, in its sole discretion, provide that long-term
performance units will be earned by a participant in respect of the achievement
of performance goals for the performance cycle. The committee may, in its sole
discretion, provide that no units will be earned by a participant in respect of
a performance cycle unless a threshold level of the performance goals is
satisfied. Following the end of each performance cycle, the committee will
determine the number of units actually earned by a participant for such cycle
calculated in accordance with the pre-established performance goals applicable
to such cycle. Participants will not receive any payment with respect to units
until the committee certifies the results of the performance goals. Subject to
certain adjustments to shares of Common Stock for stock splits, reorganizations,
consolidations and other corporate events that effect the Common Stock
generally, the maximum number of units that may be earned by a participant and
the maximum number of shares that may be issued pursuant to such earned units in
a performance cycle may not exceed 600,000.
Subject to New York Insurance Law, in the committee's sole discretion, the
participant will be entitled to receive one share of Common Stock or restricted
stock unit in exchange for each earned long-term performance unit. The
restricted stock units will be subject to the terms and conditions applicable to
the terms described above with two exceptions: (i) unless the committee
otherwise determines at or after the date Target Units are allocated to the
participant, the "restricted period" with respect to restricted stock units
granted prior to June 25, 2006 will lapse on June 26, 2006; and (ii) the
committee may not elect to pay cash or part cash and part Common Stock in lieu
of delivering only Common Stock for the restricted stock units.
In general, if a participant ceases employment by reason of death,
disability or retirement during a performance cycle, the participant will earn a
pro-rated number of units determined by prorating the percentage of the target
earned according to the number of months the participant was actively at work
during the cycle. In general , if a participant ceases employment for any reason
other than death, disability or retirement, such participant will forfeit all of
his units. In the event of a change of control, the participant will earn a
prorated number of units in respect of each outstanding performance cycle
determined by prorating the percentage of the target earned according to the
number of completed months prior to the change of control.
Amendment, Modification, and Termination. The Board of Directors may
terminate the Plan at any time and, from time to time, may amend or modify the
Plan, subject in certain cases prior to June 26, 2006 to the prior written
consent of the New York State Superintendent of Insurance. No amendment,
modification, or termination of the Plan will in any manner adversely affect any
award theretofore granted under the Plan, without the consent of the
participant.
Term. The Plan will be effective upon approval by the shareholders of the
Company. The Plan will continue in effect, unless sooner terminated by the Board
of Directors, until no more shares of Common Stock are available for issuance
under the Plan.
NEW PLAN BENEFITS
No restricted stock, restricted stock units or long-term performance units
have been granted under the Plan. The amounts that will actually be payable
under future awards cannot be definitely determined until participants are
selected for awards and, in respect of long-term performance units: (i) the
performance goals and the targets for such awards are established; and (ii) the
attainment of the performance goals is determined.
25
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of the end of the Company's
2002 fiscal year with respect to compensation plans under which equity
securities of the Company are authorized for issuance. The table does not
include securities that may be issuable under The Phoenix Companies, Inc. 2003
Restricted Stock, Restricted Stock Unit and Long-Term Incentive Plan.
----------------------- -------------------------- -----------------------------
(A) (B) (C)
- ------------------------------------ ----------------------- -------------------------- -----------------------------
Number of securities
Number of securities to Weighted-average exercise remaining available for
be issued upon exercise price of outstanding future issuance under
Plan Category of outstanding options, options, warrants equity compensation plans,
warrants and rights and rights excluding securities
reflected in column (A)
- ------------------------------------ ------------------------- -------------------------- ---------------------------
Equity compensation plans approved
by the Company's shareholders N/A N/A N/A
- ------------------------------------ ------------------------- -------------------------- ---------------------------
Equity compensation plans not
approved by the Company's
shareholders
• Stock Incentive Plan (1) 4,197,758 $16.20 1,896,742(2)
• Directors Stock Plan (3) 205,500 $16.20 819,500(2)
• Retirement and Transition N/A N/A 573,477
Agreement (4)
- ------------------------------------ ------------------------- -------------------------- ---------------------------
Total 4,403,258 $16.20 2,470,219(5)
- ------------------------------------ ------------------------- -------------------------- ---------------------------
(1) A copy of the Stock Incentive Plan is filed as an exhibit to the Form S-1
filed by the Company on February 9, 2001. The following summary of the
material features of the plan is qualified in its entirety by reference to
the full text of the plan, which is hereby incorporated by reference.
Under the Company's Stock Incentive Plan, the Compensation Committee (or
if the committee delegates such authority to the CEO, the CEO) may grant
stock options to officers, employees and insurance agents of the Company
and its subsidiaries. The maximum number of shares issuable under the plan
with respect to officers, employees and insurance agents of the Company
(including those who are also employees, officers or directors of PXP and
those individuals who were officers or employees of the Company on June
25, 2001) is the aggregate of 5% of the shares outstanding on June 26,
2001 reduced by the shares issuable pursuant to options granted under the
Company's Directors Stock Plan and, with respect to officers and employees
of PXP (other than those officers, employees or insurance agents described
above) 1% of such shares outstanding. The maximum number of shares which
may be subject to award under the plan: prior to June 25, 2003, shall not
exceed 75% of the shares available under the plan; prior to June 25, 2004,
shall not equal 85% of the shares available under the plan; and prior to
June 25, 2005, shall not exceed 100% of the shares available under the
plan. During any five-year period, no participant may be granted options
in respect of more than 5% of the shares available for issuance under the
plan. The Board may terminate or amend (subject, in some cases, to the
approval of its shareholders and, prior to June 25, 2006, to the approval
of the New York Superintendent of Insurance) the plan, but such
termination or amendment may not adversely affect any outstanding stock
option without the consent of the participant. The plan will continue in
effect until it is terminated by the Board or until no more shares are
available for issuance.
The exercise price per share subject to an option will be not less than
the fair market value of such share on the option's grant date. Each
option will generally become exercisable in equal installments on each of
the first three anniversaries of the grant date, except that no option
will become exercisable prior to June 25, 2003 nor may any option be
exercised after the tenth anniversary of the grant date. Options may not
be transferred by the grantee, except in the event of death or if the
committee permits the transfer of non-qualified stock options by gift or
domestic relations order to the grantee's immediate family members. Upon a
grantee's death, any outstanding options previously granted to such
grantee will be exercisable by the grantee's designated beneficiary until
the earlier of the expiration of the option or five years following the
grantee's death. If the grantee terminates employment by reason of
disability or retirement, any outstanding option will continue to vest as
if the grantee's service had not terminated and the grantee may exercise
any vested option until the earlier of five years following
26
termination of employment or the expiration of the option. If the
grantee's employment is terminated for cause, the grantee will forfeit any
outstanding options. If the grantee's employment terminates in connection
with a divestiture of a business unit or subsidiary or similar
transaction, the committee may provide that all or some outstanding
options will continue to become exercisable and may be exercised at any
time prior to the earlier of the expiration of the term of the options and
the third anniversary of the grantee's termination of service. If the
grantee terminates employment for any other reason, any vested options
held by the grantee at the date of termination will remain exercisable for
a period of 30 days and any then unvested options will be forfeited.
Generally, upon a change of control (as defined in the plan), each
outstanding option will become fully exercisable. Alternatively, the
committee may: (i) require that each option be canceled in exchange for a
payment in an amount equal to the excess, if any, of the price paid in
connection with the change of control over the exercise price of the
option; or (ii) if the committee determines in good faith that the option
will be honored or assumed by, or an alternative award will be issued by,
the acquirer in the change of control, require that each option remain
outstanding without acceleration of vesting or exchanged for such
alternative award.
(2) The combined total available under the Stock Incentive Plan and the
Directors Stock Plan is 1,869,742 shares. The Compensation Committee may
allocate this total between the two plans, subject to the limitations
under the Directors Stock Plan discussed in Note 3.
(3) A copy of the Directors Stock Plan is filed as an exhibit to the Form S-1
filed by the Company on February 9, 2001. The following summary of the
material features of the plan is qualified in its entirety by reference to
the full text of the plan, which is hereby incorporated by reference.
Under the Company's Directors Stock Plan, the Board of Directors may grant
options to outside directors, provided that prior to June 25, 2006: (i)
such options will be in substitution for a portion of the cash fees that
would otherwise have been payable to such directors; and (ii) the
aggregate number of shares issuable pursuant to options will not exceed
0.5% of the total shares outstanding on June 26, 2001, or 525,000 shares.
The exercise price per share will not be less than the fair market value
of a share on the day such option is granted and the option will be
exercisable from the later of June 25, 2003 or the day the option is
granted until the earlier of the tenth anniversary of such grant date or
the third anniversary of the day the outside director ceases to provide
services for the Company. In addition, the Board of Directors may require
the outside directors to receive up to one-half of their directors fees in
shares instead of cash and the outside directors may elect to receive any
portion of such fees in shares instead of cash. The aggregate number of
shares that may be issued in lieu of cash fees may not exceed 500,000
shares.
(4) A copy of the Retirement and Transition Agreement with Mr. Fiondella is
filed as an exhibit to the Form 8-K filed by the Company on October 9,
2002. The following summary of the material features of the restricted
stock units is qualified in its entirety by reference to the full text of
the agreement, which is hereby incorporated by reference.
The Company's Retirement and Transition Agreement with Mr. Fiondella
provides for the issuance to him of $8,000,000 worth of restricted stock
units upon his retirement in March 2003. This equated to 573,477
restricted stock units, based on the closing price on September 27, 2002,
the date of measurement. Each unit represents the right to receive one
share of Common Stock after June 25, 2006. The agreement expressly
prohibits the actual issuance of stock to Mr. Fiondella prior to the fifth
anniversary of the effective date of the demutualization (i.e., prior to
June 25, 2006). The agreement further provides that while Mr. Fiondella
holds the restricted stock units, he will not have any right to vote or to
direct the vote of the related shares of stock. Moreover, he is expressly
prohibited from disposing of the underlying shares of stock, or of any
economic interest related to the shares of stock, other than upon his
death (in which case, the Company will distribute the shares of stock to
his estate after June 25, 2006). The Company will credit each restricted
stock unit with "dividend equivalents" (i.e., cash dividends on the shares
of stock underlying the restricted stock units) and interest thereon, both
to be distributed promptly following June 25, 2006.
(5) Includes the number of shares available in the aggregate under the Stock
Incentive Plan and Directors Stock Plan (1,896,742) plus the number of
restricted stock units to be issued to Mr. Fiondella upon his retirement
(573,477).
To be approved, this proposal requires the affirmative vote of the holders
of a majority of the shares of Common Stock present in person or represented by
proxy at the 2003 Annual Meeting and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
27
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITOR
On November 4, 2002, the Audit Committee, subject to ratification by the
shareholders, appointed PricewaterhouseCoopers LLP ("PwC") as its independent
auditor to audit and report on the consolidated financial statements of the
Company for the fiscal year ending December 31, 2003. The Company has been
advised that representatives of PwC will be present at the Annual Meeting. They
will be afforded the opportunity to make a statement, should they desire to do
so, and to respond to appropriate questions.
Fees Incurred Relating to Services Performed by PwC
Commencing in 2002, the Company has not had PwC provide any services
prohibited under the new SEC rules, including financial information systems
design and implementation consulting services. Other types of consulting
services may be provided by PwC from time to time. To the extent other
consulting services are provided by PwC, they are closely monitored and
controlled to ensure that their nature and extent do not interfere with PwC's
independence. In addition to being monitored by management, services provided by
PwC are approved in advance by the Audit Committee, and the level of non-audit
service fees overall is monitored by the Audit Committee. The independence of
PwC also is considered annually by the Company's full Board of Directors.
As reflected in the table below, the Company incurred fees of $3,733,000
and $5,390,000 in 2002 and 2001, respectively, for services performed by PwC. Of
these sums, $3,243,000 in 2002 and $4,106,000 in 2001 were for audit and
audit-related services.
2002 2001
--------------- ---------------
Audit Fees (1) $2,666,000 $2,061,000
Audit-Related Fees (2) 577,000 2,045,000
Tax Fees (3) 226,000 161,000
All Other Fees (4) 264,000 1,123,000
--------------- ---------------
Total Fees: $3,733,000 $5,390,000
=============== ===============
- -------------------------------------
(1) Amounts represent fees for the annual audits of the Company for the years
ended December 31, 2002 and 2001, reviews of the Company's financial
statements for interim periods in 2002 and 2001, and audits of statutory
and other regulatory filings in 2001 and 2002. In addition, these amounts
include fees for comfort letter procedures, consents, and other assistance
related to documents filed with the SEC.
(2) Amounts represent fees for employee benefit plans audits, accounting
consultations, performance of agreed upon procedures for regulatory
purposes, due diligence support (2002 only) and, for 2001 only, services
provided in connection with Phoenix Life's demutualization and the
Company's initial public offering.
(3) Amounts represent fees for consultations on tax matters and tax compliance
services.
(4) Amounts represents fees for non-financial information system consulting
services in 2001 and 2002. In 2001 only, amounts include fees for financial
information system design services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF
PwC AS THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31,
2003.
28
OTHER MATTERS
The Company is not aware of any matters, other than those referred to
herein, which will be presented at the meeting. If any other appropriate
business should properly be presented at the meeting, the proxies named in the
accompanying form of proxy will vote the proxies in accordance with their best
judgment in the interests of the Company.
SHAREHOLDER PROPOSALS
In order for nominations of persons for election to the Board of Directors
and shareholder proposals for the 2004 annual meeting of shareholders to be
eligible for inclusion in the Company's proxy statement, they must be received
by the Company at its principal executive offices in Hartford, Connecticut no
later than November 25, 2003. Your proposals should be addressed to: Secretary,
The Phoenix Companies, Inc., One American Row, Hartford Connecticut 06115.
Proposals for inclusion in the proxy statement must comply with all of the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as well as
with the requirements of the Company's bylaws. A copy of the bylaws may be
obtained from the Company's Secretary.
A shareholder who wishes to present a matter for action at the Company's
2004 Annual Meeting, but chooses not to do so under SEC Rule 14a-8, must deliver
to the Company's Secretary on or before January 29, 2004, but no earlier than
December 30, 2003, a notice containing the information required by the Company's
bylaws. A copy of the bylaws may be obtained from the Company's Secretary.
ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS
The Company is offering its shareholders the opportunity to consent to
receive future proxy materials and annual reports electronically. Electronic
delivery could save the Company a significant portion of the costs associated
with printing and mailing its annual meeting materials, and the Company hopes
that shareholders find this service convenient and useful. By providing the
appropriate information when you vote by proxy via the Internet, you can consent
to receive future proxy materials and/or annual reports electronically. If you
consent and the Company elects to deliver future proxy materials and/or annual
reports to you electronically, then the Company will send you a notice by
electronic mail explaining how to access these materials, but will not send you
paper copies of these materials unless you request them. The Company may also
choose to send one or more items to you in paper form despite your consent to
receive them electronically. Your consent will be effective until you revoke it
by terminating your registration at the Web site www.econsent.com/pnx. If you
consent to electronic delivery, you will be responsible for your usual Internet
charges (e.g. on-line fees) in connection with the electronic delivery of the
proxy materials and annual report.
HOUSEHOLDING OF MATERIALS
Pursuant to a notice sent by the Company to its eligible shareholders, the
Company sent only one copy of this proxy statement and the annual report to
those households in which multiple shareholders shared the same address unless
the Company received instructions from a shareholder in such a household
requesting separate copies of these materials. If you are a shareholder who
shares the same address as other shareholders of the Company and would like to
receive a separate copy of this proxy statement, the annual report or future
proxy statements, information statements and annual reports, please contact
Phoenix Shareholder Services by calling (800) 490-4258, writing to Phoenix
Shareholder Services, P.O. Box 2578, Jersey City, N.J. 07303-2578, or e-mailing
to Phoenix@equiserve.com. If you share the same address as multiple shareholders
and would like the Company to send only one copy of future proxy statements,
information statements and annual reports, please contact Phoenix Shareholder
Services at the above phone number, post office address or e-mail address.
29
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EXHIBIT A
THE PHOENIX COMPANIES, INC.
AUDIT COMMITTEE CHARTER
The Bylaws of The Phoenix Companies, Inc. (the "Company") provide for an Audit
Committee (the "Committee") of the Board of Directors (the "Board"). This
charter sets forth for the purpose, composition and responsibilities of, and the
processes to be followed by, the Committee. At least annually, the Committee
shall review the adequacy of this charter and seek its re-approval by the Board.
A. PURPOSES
The primary purpose of the Committee is to assist the Board in fulfilling
its oversight responsibilities, by reviewing the quality and integrity
of:
• the Company's financial statements and financial reporting process;
• the Company's systems of internal accounting and financial controls;
• the appointment of the Independent Auditors, including a review of
the Independent Auditors' qualifications and independence;
• the annual independent audit of the consolidated financial statements
of the Company and its subsidiaries;
• the Company's internal auditing and accounting processes; and
• the Company's legal and regulatory compliance and ethics programs as
established by management and the Board.
In conducting such review, the Committee shall be empowered to
investigate any matter brought to its attention, with full access to all
books, records, facilities and personnel of the Company, and to retain
outside legal, accounting or other experts for this purpose. The
Committee shall seek to maintain free and open communication among the
Committee, the Board, the Company's independent auditors (the
"Independent Auditors"), the Company's internal audit personnel and
management.
B. COMPOSITION
The Committee shall consist of at least three members of the Board. All
members of the Committee shall be independent of the Company, its
subsidiaries and their management and none shall be a current or former
officer or employee of the Company or any of its subsidiaries. The
Committee's composition shall satisfy the requirements for Audit
Committee membership set forth in the Sarbanes-Oxley Act of 2002 and
Audit Committee rules of the New York Stock Exchange. Accordingly, the
Board shall determine that each member of the Committee is a director:
• who has no relationship that, in the opinion of the Board, may
interfere with the exercise of his or her independent judgment as a
member of the Committee or with his or her independence from
management and the Company; and
• who is financially literate (as such qualification may be interpreted
by the Board) or who shall become financially literate within a
reasonable period of time after appointment to the Committee.
In addition, at least one member of the Committee shall have accounting
or related financial management expertise (as such qualification may be
interpreted by the Board) and at least one member shall qualify as a
"financial expert" as such term is defined by the United States
Securities and Exchange Commission.
A-1
C. RESPONSIBILITIES AND PROCESSES
The Committee's role is one of oversight, in reliance, without further
independent verification, on the information provided by the Company's
management and its Independent Auditors. The Committee recognizes that
management is responsible for preparing the Company's financial
statements and that the Independent Auditors are responsible for auditing
those financial statements. Consequently, in carrying out its
responsibilities and duties, the Committee shall not be providing any
expert or special assurances as to the Company's financial statements or
any professional certification as to the work of the Independent
Auditors.
The following shall be the recurring processes of the Committee in
carrying out its purposes. The Committee may supplement or diverge from
these processes or perform any other activities consistent with this
Charter, the Company's Bylaws and applicable law, in any such case as the
Committee or the Board may deem necessary or appropriate. The Committee
shall meet four times per year, or more frequently as circumstances
require. The Committee shall report to the Board regularly on its
deliberations and actions, and may ask members of management or others to
attend any meeting of the Committee and to provide such information as
the Committee may deem pertinent.
The Committee shall have responsibility with respect to:
1. The Company's financial statements and financial reporting process
• Review and discuss with management and the Independent Auditors
the Company's annual audited financial statements, including:
the Company's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations"; and
significant issues regarding accounting, auditing and financial
reporting principles and practices, and the adequacy and
effectiveness of the Company's internal accounting and financial
controls;
• Review and discuss with management and the Independent Auditors
any analysis or report prepared by management, internal audit
staff or the Independent Auditors relating to significant
financial reporting issues, including the quality and
appropriateness of the Company's accounting principles as
applied and significant judgments affecting the Company's
financial reporting;
• In consultation with the Independent Auditors and internal audit
staff, review the integrity and quality of the Company's
financial reporting processes, both internal and external;
• Review and discuss quarterly interim financial statements with
management and the Independent Auditors prior to the filing of
the quarterly financial statements to be included in the
Company's quarterly reports filed with the Securities and
Exchange Commission including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations";
• Discuss earnings press releases, as well as financial
information and earnings guidance provided to analysts and
rating agencies;
• Submit any report required of the Audit Committee by the rules
of the Securities and Exchange Commission to be included in the
Company's annual proxy statement; and
• Review information included in the Company's annual proxy and
other required filings with the Securities and Exchange
Commission as it relates to accounting, auditing and financial
reporting matters or the Company's relationship with the
Independent Auditor.
2. The Company's systems of internal accounting and financial control
• Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to
monitor and control such exposures;
• Review major changes to the Company's financial reporting,
auditing and accounting principles and practices as suggested by
the Independent Auditors, internal audit staff or management;
and
A-2
• Meet at least four times annually with the chief financial
officer, the senior internal auditing executive and the
Independent Auditors in separate executive sessions to discuss
any matters regarding the quality and adequacy of the Company's
internal accounting and financial controls that the Committee,
management or the Independent Auditors believe should be
discussed confidentially.
3. The appointment of the Independent Auditors, including a review of
the Independent Auditors' qualifications and independence
• Annually evaluate, select and appoint the Independent Auditors,
subject to the approval of the shareholders;
• Pre-approve all audit and permitted non-audit services to be
performed by the Independent Auditors;
• Inform the Independent Auditors that they are ultimately
accountable to the Board and the Committee, as representatives
of the Company's shareholders;
• Require and review formal annual written statements from the
Independent Auditors regarding such firm's independence,
including written disclosure describing all relationships
between the Independent Auditors and the Company and its
affiliates consistent with Independence Standards Board Standard
No. 1, as it may be modified or supplemented; actively engage
the Independent Auditors in a dialogue with respect to any such
disclosed relationships and their impact on the objectivity and
independence of the Independent Auditors; and, if so determined
by the Committee, recommend that the Board take appropriate
action in response to the Independent Auditors' formal annual
written statement to satisfy itself of the independence of the
Independent Auditors; and
• At least annually, obtain and review a report by the Independent
Auditors describing: the firm's internal quality-control
procedures; any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or
by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps
taken to deal with any such issues.
4. The annual independent audit of the consolidated financial statements
of the Company and its subsidiaries
• Meet with the Independent Auditors prior to the annual audit to
review the scope, planning and timing thereof;
• Approve the audit fees to be paid to the Independent Auditors;
• Review and discuss with the Independent Auditors any reports
required to be provided to the Committee under generally
accepted auditing standards;
• Periodically review and discuss with the Independent Auditors,
out of the presence of management: the Company's internal
controls; the Independent Auditors' recommendations, if any, for
improvements in the Company's internal controls and the
implementation of such recommendations; the completeness and
accuracy of the Company's financial statements; and certain
other matters required to be discussed by Statement of Auditing
Standards No. 61 and any applicable Statement of Audit Standards
pertaining to communications with the Audit Committee;
• Review and discuss with the Independent Auditors the Company's
compliance with Financial Accounting Standard Board
pronouncements and Securities and Exchange Commission
requirements;
• Review with the Independent Auditors any management letter
provided by the Independent Auditors and any problems or
difficulties and the Company's response thereto; and
• Set clear hiring policies for employees or former employees of
the Independent Auditors.
A-3
5. The Company's internal auditing and accounting processes
• Review and approve the Internal Audit Charter for the Company's
internal audit department;
• Review with the Company's senior internal audit executive the
scope and results of the Company's internal audit activity and
periodic summaries of significant audit findings, and receive
the Company's senior internal audit executive status updates
relative to the annual audit plan;
• Discuss annually with the Company's senior internal audit
executive the annual audit plan, internal audit costs, adequacy
of staffing and coordination of the Independent Auditors; and
• Review the appointment and performance of the Company's senior
internal audit executive.
6. The Company's legal compliance and ethics programs as established by
management and the Board
• Receive reports from management, the Company's senior compliance
officer, the Company's senior internal audit executive and the
Independent Auditors concerning compliance by the Company's
subsidiaries with applicable laws and regulations and the
Company's Code of Conduct;
• Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting,
internal accounting controls or auditing matters;
• Establish procedures for the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters; and
• Review with the Company's general counsel such legal and
regulatory matters as may have a material impact on the
Company's financial statements or the Company's compliance
policies.
D. PERFORMANCE EVALUATION
The Committee will annually review its own performance.
A-4
EXHIBIT B
THE PHOENIX COMPANIES, INC.
2003 RESTRICTED STOCK, RESTRICTED STOCK UNIT
AND
LONG-TERM INCENTIVE PLAN
ARTICLE I. PURPOSES
Section 1.1 General Purpose. The purpose of THE PHOENIX
COMPANIES, INC. 2003 RESTRICTED STOCK, RESTRICTED STOCK UNIT AND LONG-TERM
INCENTIVE PLAN is to foster and promote the long-term financial success of the
Company by: (a) motivating superior performance by means of performance-related
incentives; (b) enabling the Company to attract and retain the services of an
outstanding management team upon whose judgment, interest, and special effort
the successful conduct of its operations is largely dependent; and (c)
encouraging and providing for the acquisition of a long-term ownership interest
in the Company by the Company's and its Subsidiaries' Employees, non-employee
directors and Agents.
Section 1.2 Special Rules Prior to June 25, 2006. This Plan is
designed to effectuate its purposes while at the same time assuring that no
Participant acquires beneficial ownership of any Common Stock within the meaning
of Section 7312(w) of the New York Insurance Law, as in effect on the date of
the Demutualization, prior to the fifth anniversary of the Demutualization.
Accordingly, notwithstanding anything in this Plan to the contrary, in no event
shall any Restricted Stock be granted, or shares of Common Stock attributable to
Long-Term Performance Units or Restricted Units be issued, prior to June 25,
2006, the fifth anniversary of the Demutualization. Any shares of Common Stock
that would have been issuable under this Plan pursuant to Restricted Units prior
to June 25, 2006 but for the operation of this Section 1.2, shall instead be
delivered by the Company to the Participant, or the Participant's beneficiary or
estate as provided in Section 9.1, as soon as reasonably practicable after June
25, 2006, together with any Dividend Equivalents credited with respect to such
Restricted Units and any interest thereon. Instead of delaying any such
distribution in respect of Restricted Units, the Committee may, in its sole
discretion, elect to pay cash (in the manner provided in Section 6.8) in lieu of
delivering Common Stock as provided under this Section 1.2.
ARTICLE II. DEFINITIONS
Section 2.1 Definitions. Whenever used herein, the following terms
shall have the respective meanings set forth below:
(a) "Adjustment Event" means any stock dividend,
stock split or share combination of, or extraordinary cash
dividend on, the Common Stock or recapitalization,
reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering
to purchase Common Stock at a price substantially below Fair
Market Value, or other similar event affecting the Common
Stock of the Company.
(b) "Agent" means an "insurance agent" as defined in
Section 2101 of the New York Insurance Law and who also is
treated by the Company as a "statutory employee" as defined
under applicable provisions of the Code.
(c) "Approved Retirement" means termination of a
Participant's employment (i) on or after normal retirement age
(age 65 or age 62 with 10 years of service) or (ii) with the
Committee's approval, on or after any early retirement date
established under any retirement plan or other special
retirement programs or arrangements maintained by the Company
or a Subsidiary and in which the Participant participates;
provided that in each case, the Committee may require,
as a condition to a Participant's retirement being an
"Approved Retirement" for purpose of the Plan, that the
Participant enter into a general release of claims,
non-solicitation and/or non-competition agreement in form and
substance satisfactory to the Company.
(d) "Award" means the award of a Restricted Unit,
Restricted Stock, or Long-Term Performance Unit under the
Plan.
(e) "Board" means the Board of Directors of the
Company.
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(f) "Change of Control" means the first occurrence of
any of the following events:
(i) any person acquires "beneficial
ownership" (within the meaning of Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of
the combined Voting Power of the Company's
securities;
(ii) within any 24-month period, the persons
who were directors of the Company at the beginning of
such period (the "Incumbent Directors") shall cease
to constitute at least a majority of the Board or the
board of directors of any successor to the Company;
provided that any director elected or nominated for
election to the Board by a majority of the Incumbent
Directors then still in office shall be deemed to be
an Incumbent Director for purposes of this subclause
2(f)(ii);
(iii) the effective date of any merger,
consolidation, share exchange, division, sale or
other disposition of all or substantially all of the
assets of the Company which is consummated (a
"Corporate Event"), if immediately following the
consummation of such Corporate Event the stockholders
of the Company immediately prior to such Corporate
Event do not hold, directly or indirectly, a majority
of the Voting Power, in substantially the same
proportion as prior to such Corporate Event, of (x)
in the case of a merger or consolidation, the
surviving or resulting corporation or (y) in the case
of a division or a sale or other disposition of
assets, each surviving, resulting or acquiring
corporation which, immediately following the relevant
Corporate Event, holds more than 25% of the
consolidated assets of the Company immediately prior
to such Corporate Event;
(iv) the approval by stockholders of the
Company of a plan of liquidation with respect to the
Company; or
(v) any other event occurs which the Board
declares to be a Change of Control.
(g) "Code" means the Internal Revenue Code of 1986,
as amended.
(h) "Committee" means the Compensation Committee of
the Board or such other Committee of the Board as the Board
shall designate from time to time.
(i) "Common Stock" means the common stock of the
Company, par value $0.01 per share.
(j) "Company" means The Phoenix Companies, Inc., a
Delaware corporation, and any successor thereto.
(k) "Demutualization" means the demutualization that
occurred on June 25, 2001 of Phoenix Home Life Mutual
Insurance Company pursuant to a plan of reorganization
approved by the New York State Superintendent of Insurance
under Section 7312 of the New York Insurance Law.
(l) "Disability" has the meaning given in the
Company's long-term disability insurance policy or program as
in effect from time to time; provided that a Participant shall
not be treated as having incurred a Disability unless he
qualifies for disability benefits under such policy or
program.
(m) "Dividend Equivalents" means an amount equal to
the cash dividends paid by the Company on one share of Common
Stock for each Restricted Unit awarded to a Participant in
accordance with the Plan.
(n) "Effective Date" means the date this Plan is
approved by the stockholders of the Company in accordance with
the requirements, if any, of applicable law.
(o) "Employee" means any officer or other employee of
the Company or any Subsidiary (as determined by the Committee
in its sole discretion).
(p) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
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(q) "Fair Market Value" means, on any date, the
closing price of the Common Stock as reported in the principal
consolidated transaction reporting system for the New York
Stock Exchange (or on such other recognized quotation system
on which the trading prices of the Common Stock are quoted at
the relevant time) on such date. In the event that there are
no Common Stock transactions reported on such tape (or such
other system) on such date, Fair Market Value shall mean the
closing price on the immediately preceding date on which
Common Stock transactions were so reported.
(r) "Long-Term Performance Unit" means the unit of
measurement for an Award under the Plan subject to achievement
of Performance Goals during a Performance Cycle, which, at any
given time, shall be equal in value to the current Fair Market
Value of one share of Common Stock.
(s) "Participant" means any Employee, Agent or
non-employee director designated by the Committee to
participate in the Plan.
(t) "Performance Cycle" means the period(s) selected
by the Committee during which the performance of the Company
or any Subsidiary or unit thereof or any individual is
measured for the purpose of determining the extent to which an
Award of Long-Term Performance Units subject to achievement of
Performance Goals has been earned. Unless otherwise determined
by the Committee, a Performance Cycle shall be three years and
may consist of one or more calendar year segments.
(u) "Performance Goals" means the objectives for the
Company, any Subsidiary or unit or business segment thereof or
individual established by the Committee for a Performance
Cycle with respect to any performance-based Awards
contingently awarded under the Plan. The Performance Goals for
Awards that are intended to constitute "performance-based"
compensation within the meaning of Section 162(m) of the Code
shall be based on one or more of the following measures:
sales, revenues, earnings per share, net income, operating
income, cash flow, stock price, return on equity, cash
operating income, risk-based capital ratio, debt to capital
ratio, operating margin, assets under management, claims
paying ability or debt rating. Performance Goals may reflect
absolute entity performance or a relative comparison of entity
performance to the performance of a peer group or other
external measure.
(v) "Plan" means The Phoenix Companies, Inc. 2003
Restricted Stock, Restricted Stock Unit and Long-Term
Incentive Plan, as set forth herein and as the same may be
amended from time to time.
(w) "Restricted Period" means the period during which
Awards are subject to forfeiture or restrictions on transfer
(if applicable) pursuant to the Plan.
(x) "Restricted Stock" means Common Stock awarded to
a Participant which is subject to forfeiture and restrictions
on transferability in accordance with Article VI of the Plan.
(y) "Restricted Unit" means a Participant's right to
receive one share of Common Stock at the end of a specified
period of time, which right is subject to forfeiture and
restrictions on transferability in accordance with the Plan.
(z) "Subsidiary" means any corporation or partnership
in which the Company owns, directly or indirectly, equity
interests entitling the Company to exercise 50% or more of the
total combined Voting Power of all classes of stock of such
corporation or to receive 50% or more of the capital interest
or profits interest of such partnership.
(aa) "Voting Power" means such number of Voting
Securities as shall enable the holders thereof to cast all the
votes which could be cast in an annual election of directors
of a company.
(bb) "Voting Securities" means all securities
entitling the holders thereof to vote in an annual election of
directors of a company.
Section 2.2 Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
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ARTICLE III. ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be those Employees, non-employee
directors and Agents selected by the Committee to participate in the Plan.
ARTICLE IV. ADMINISTRATION
Section 4.1 Power to Grant and Establish Terms of Awards. The Committee
shall have the authority, subject to the terms of the Plan (including, without
limitation, Section 1.2), to determine the Participants to whom Awards shall be
granted and the terms and conditions of any and all Awards, including, but not
limited to, the number of shares of Common Stock to be covered by such Awards,
the time or times at which Awards shall be granted, the terms and provisions of
the instruments by which Awards shall be evidenced, the period of time during
which restrictions on Awards shall remain in effect, and the Performance Goals
applicable to such Awards. The terms and conditions of each Award shall be
determined by the Committee at the time of grant, and such terms and conditions
shall not be subsequently changed in a manner which would be adverse to the
Participant without the consent of the Participant to whom such Award has been
granted. The Committee may establish different terms and conditions for
different Participants and for the same Participant for each Award such
Participant may receive, whether or not granted at different times. The grant of
any Award to any Participant shall neither entitle such Participant to, nor
disqualify him from, the grant of any other Award.
Section 4.2 Administration. The Committee shall be responsible for the
administration of the Plan. Any Award granted by the Committee may be subject to
such conditions, not inconsistent with the terms of the Plan, as the Committee
shall determine. The Committee, by majority action thereof, is authorized to
prescribe, amend and rescind rules and regulations relating to the Plan, to
provide for conditions deemed necessary or advisable to protect the interests of
the Company, to interpret the Plan and to make all other determinations
necessary or advisable for the administration and interpretation of the Plan to
carry out its provisions and purposes. Determinations, interpretations or other
actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding and conclusive for all purposes and upon all persons.
The Committee may consult with legal counsel, who may be counsel to the Company,
and shall not incur any liability for any action taken in good faith in reliance
upon the advice of counsel.
Section 4.3 Delegation by the Committee. Notwithstanding anything
else contained in the Plan to the contrary, the Committee may delegate, subject
to such terms and conditions or guidelines as it shall determine, to any officer
of the Company or to a committee of officers of the Company any portion of its
authority and powers under the Plan in respect of Participants who are not
subject to the reporting requirements of Section 16(a) of the Exchange Act.
ARTICLE V. STOCK SUBJECT TO PLAN
Section 5.1 Number. Subject to the provisions of Section 5.3, the number
of shares of Common Stock available for issuance pursuant to Awards under the
Plan shall be 6,000,000. The shares to be delivered under the Plan may consist,
in whole or in part, of Common Stock held in treasury or authorized but unissued
Common Stock, not reserved for any other purpose.
Section 5.2 Canceled, Terminated, or Forfeited Awards. Any shares of
Common Stock subject to an Award which for any reason expires, or is canceled,
terminated or otherwise settled without the issuance of any Common Stock shall
again be available under the Plan.
Section 5.3 Adjustment Due to Change in Capitalization. In the event
of any Adjustment Event, the aggregate number of shares of Common Stock
available for Awards to be granted under this Plan or subject to outstanding
Restricted Units or Long-Term Performance Units and any performance vesting
criteria applicable to outstanding Restricted Stock, Restricted Units or
Long-Term Performance Units shall be proportionately adjusted to reflect, as
deemed equitable and appropriate by the Committee, such Adjustment Event. To the
extent deemed equitable and appropriate by the Committee, subject to any
required action by stockholders, in any merger, consolidation, reorganization,
liquidation, dissolution, or other similar transaction, any Restricted Unit
granted under the Plan shall pertain to the securities and other property to
which a holder of the number of shares of Common Stock covered by the Restricted
Unit would have been entitled to receive in connection with such event. Any
shares of stock (whether Common Stock, shares of stock into which shares of
Common Stock are converted or for which shares of Common Stock are exchanged or
shares of stock distributed with respect to Common Stock) or cash or other
property received with respect to any Award granted under the Plan as a result
of any Adjustment Event or any distribution of property
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or other similar transaction shall, except as otherwise provided by the
Committee at or after the date an Award is made by the Committee, be subject to
the same terms and conditions, including restrictions on transfer, as are
applicable to such Award.
ARTICLE VI. RESTRICTED STOCK AND RESTRICTED UNITS
Section 6.1 Grant of Awards. The Committee may make awards in the form
of Restricted Stock or Restricted Units. Any Award made hereunder shall be
subject to the terms and conditions of the Plan and to any other terms and
conditions not inconsistent with the Plan as shall be prescribed by the
Committee in its sole discretion (including in the case of an Award of
Restricted Stock, requiring the Participant to pay the Company an amount equal
to the par value per share for each share of Restricted Stock awarded). As
determined by the Committee, with respect to an award of Restricted Stock, the
Company shall either (a) transfer or issue to each Participant to whom an award
of Restricted Stock has been made the number of shares of Restricted Stock
specified by the Committee or (b) hold such shares of Restricted Stock for the
benefit of the Participant for the Restricted Period. In the case of Restricted
Units, no shares of Common Stock shall be issued at the time an Award of
Restricted Units is made, and the Company shall not be required to set aside a
fund for the payment of such Award.
Section 6.2 Restrictions on Transferability. Restricted Units and shares
of Restricted Stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered by the Participant during the Restricted
Period, except as hereinafter provided. Notwithstanding the foregoing, the
Committee may permit (on such terms and conditions as it shall establish)
Restricted Units and shares of Restricted Stock to be transferred during the
Restricted Period by the Participant to a member of the Participant's immediate
family or to a trust or similar vehicle for the benefit of such immediate family
members, provided that any Restricted Units or shares of Restricted Stock so
transferred shall remain subject to the provisions of this Article VI.
Section 6.3 Rights as a Shareholder. Except for the restrictions set
forth herein (including, without limitation, Section 1.2) and unless otherwise
determined by the Committee, the Participant shall have all the rights of a
shareholder with respect to such shares of Restricted Stock, including but not
limited to, the right to vote and the right to receive dividends. In respect of
Restricted Units, a Participant shall not have any right to vote on any matter
submitted to the Company's stockholders or to dispose of the shares of Common
Stock underlying such Restricted Units, nor shall a Participant have any
beneficial ownership in respect of any shares of Common Stock underlying
Restricted Units, until such time as the shares of Common Stock underlying such
Restricted Units have been issued. At the discretion of the Committee, a
Participant's Restricted Unit account may be credited with Dividend Equivalents
during the Restricted Period.
Section 6.4 Restricted Period. Unless the Committee shall otherwise
determine at or after the date an Award is made to the Participant by the
Committee, the Restricted Period shall commence upon the date of grant and shall
lapse with respect to the Award in three approximately equal installments on
each of the first three anniversaries of the date of grant, unless sooner
terminated as otherwise provided herein.
Section 6.5 Legend. Each certificate issued to a Participant in respect
of shares of Restricted Stock shall be registered in the name of the Participant
and shall bear the following (or similar) legend: "The shares of stock
represented by this certificate are subject to the terms and conditions
contained in The Phoenix Companies, Inc. 2003 Restricted Stock, Restricted Stock
Unit and Long-Term Incentive Plan and may not be sold, pledged, transferred,
assigned, hypothecated or otherwise encumbered in any manner (except as provided
in Section 6.2 of the Plan) until _________."
Section 6.6 Death, Disability or Approved Retirement. Unless the Committee
shall otherwise determine at the date of grant, if a Participant ceases to be
employed by the Company or any Subsidiary by reason of death, Disability or
Approved Retirement, the Restricted Period will lapse as to a pro rated portion
of the shares of Restricted Stock and Restricted Units transferred or issued to
such Participant under the Plan based on the number of days the Participant
actually worked since the date the Awards were granted (or in the case of Awards
which becomes vested in installments, since the date, if any, on which the last
installment of such Awards became vested). Any Awards as to which the Restricted
Period has not lapsed at the date of a Participant's termination of employment
by reason of death, Disability or Approved Retirement shall automatically be
cancelled upon such Participant's termination of employment.
Section 6.7 Termination of Employment. Unless the Committee shall
otherwise determine at or after the date of grant, if a Participant ceases to be
employed by the Company or any Subsidiary for any reason other than those
specified in Section 6.6 at any time prior to the date when the Restricted
Period lapses, all Restricted Stock held by the Participant
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shall revert back to the Company and all Restricted Units and any Dividend
Equivalents credited to such Participant shall be forfeited upon the
Participant's termination of employment.
Section 6.8 Issuance of New Certificates; Settlement of Restricted
Units. Upon the lapse of the Restricted Period with respect to any shares of
Restricted Stock, such shares shall no longer be subject to the restrictions
imposed under Section 6.2 and the Company shall issue or have issued new share
certificates without the legend described in Section 6.5 in exchange for those
previously issued. Except as provided in Section 1.2, upon the lapse of the
Restricted Period with respect to any Restricted Units, the Company shall
deliver to the Participant, or the Participant's beneficiary or estate, as
provided in Section 9.1, one share of Common Stock for each Restricted Unit as
to which restrictions have lapsed and any Dividend Equivalents credited with
respect to such Restricted Units and any interest thereon. The Committee may, in
its sole discretion, elect to pay cash or part cash and part Common Stock in
lieu of delivering only Common Stock for Restricted Units. If a cash payment is
made in lieu of delivering Common Stock, the amount of such cash payment for
each share of Common Stock to which a Participant is entitled shall be equal to
the Fair Market Value of the Common Stock on the date on which the Restricted
Period lapsed with respect to the related Restricted Unit.
Section 6.9 Accelerated Vesting and Payment. In the event of a
Change of Control, the Restricted Period with respect to each Award shall lapse
on the date of such Change of Control.
ARTICLE VII. LONG-TERM PERFORMANCE UNITS
Section 7.1 Eligibility. The Committee in its sole discretion shall
select those Participants to receive Long-Term Performance Units under the Plan.
Long-Term Performance Units shall relate to pre-established Performance Goals
over a Performance Cycle, as determined by the Committee. A Participant may be
selected to receive Long-Term Performance Units in respect of more than one
Performance Cycle.
Section 7.2 Grant of Long-Term Performance Units. Prior to the
beginning of the first year of a Performance Cycle (or such later date selected
by the Committee consistent with the requirements of Section 162(m) of the
Code), the Committee shall allocate a target number of Long-Term Performance
Units ("Target Units") to any Participant designated by the Committee to be
eligible to earn such Award in respect of such Performance Cycle. An allocation
of Target Units shall be evidenced by such documentation deemed appropriate by
the Committee. Such documentation may contain terms and conditions relating to
the Award, including, without limitation, the number of Target Units and the
threshold and maximum number of Long-Term Performance Units that may be earned
pursuant to the Award or any portion thereof, the Performance Goals applicable
in respect of such Award, and such other terms and conditions, not inconsistent
with this Plan, as the Committee may in its sole discretion determine. Long-Term
Performance Units may not be sold, assigned, transferred, pledged, hypothecated
or otherwise encumbered by the Participant during the Performance Cycle.
Section 7.3 Performance Goals. Prior to the beginning of the
Performance Cycle or the beginning of each segment in such Performance Cycle (or
such later date selected by the Committee consistent with the requirements of
Section 162(m) of the Code), the Committee shall determine the Performance Goals
applicable to the Long-Term Performance Units that may be earned by the
Participant for such Performance Cycle or segment thereof. The Committee shall
specify the formula for determining the percentages of the Performance Goals
that must be achieved for the Participant to earn the Target Units or less than
or more than the target number of Long-Term Performance Units allocated to the
Participant if actual performance is equal to, less than or greater than the
target Performance Goals. The Committee may, in its sole discretion, provide
that Long-Term Performance Units shall be earned by a Participant in respect of
achievement of Performance Goals in each segment of the Performance Cycle and/or
on a cumulative basis for the Performance Cycle. The Committee may, in its sole
discretion, provide that no Long-Term Performance Units shall be earned by a
Participant in respect of a Performance Cycle unless a threshold level of the
Performance Goals is satisfied. The Committee may, at any time and from time to
time, adjust the Performance Goals applicable to Long-Term Performance Units;
provided that no such adjustment shall be made in the case of Long-Term
Performance Units that may be earned by a Participant who is a Covered Employee
(within the meaning of Section 162(m) of Code) at any time during the
Performance Cycle, unless such adjustment can be made without causing the Award
to cease to qualify as other performance-based compensation under Section 162(m)
of the Code. Following the end of each Performance Cycle, the Committee shall
determine the number of Long-Term Performance Units actually earned by a
Participant for such Performance Cycle calculated in accordance with the
Performance Goals applicable to such Performance Cycle. Participants shall not
receive any payment with respect to Long-Term Performance Units until the
Committee certifies the results of the Performance Goals. Notwithstanding
anything else in this Plan to the contrary, subject to Section 5.3, the maximum
number of Long-Term Performance Units that may be earned by a Participant (and
the maximum number of shares that may be issued pursuant to such earned
Long-Term Performance Units) in a Performance Cycle shall not exceed 600,000.
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Section 7.4 Distribution of Awards. Subject to Section 1.2, in the
Committee's sole discretion, the Participant shall be entitled to receive one
share of Common Stock or Restricted Unit in exchange for each earned Long-Term
Performance Unit. Any shares of Common Stock or Restricted Units granted in
exchange for earned Long-Term Performance Units shall be granted as soon as
reasonably practicable after the end of the Performance Cycle for which the
Long-Term Performance Units were earned. Restricted Units shall be subject to
the terms and conditions applicable to Restricted Units granted under Article
VI; provided that unless the Committee shall otherwise determine at or after the
date Target Units are allocated to the Participant by the Committee, the
Restricted Period with respect to Restricted Units granted prior to June 25,
2006 shall lapse on June 26, 2006; further provided that the Committee may not
elect to pay cash or part cash and part Common Stock in lieu of delivering only
Common Stock for Restricted Units.
(a) Death, Disability or Approved Retirement. Unless the
Committee shall otherwise determine at the date of grant, if a
Participant ceases to be employed by the Company or any Subsidiary by
reason of death, Disability or Approved Retirement during a Performance
Cycle, the Participant shall be entitled to a pro-rated number of
Long-Term Performance Units determined by prorating the percentage of
the target earned according to the number of months the Participant was
actively at work during the Performance Cycle. Any Long-Term
Performance Units earned by such Participant shall be paid at the same
time as those for active Participants of the Plan. Any Long-Term
Performance Units that are not earned in accordance with this Section
7.4(a) at the date of a Participant's termination of employment by
reason of death, Disability or Approved Retirement shall automatically
be cancelled upon such Participant's termination of employment.
(b) Termination of Employment. Unless the Committee shall
otherwise determine at or after the date of grant, if a Participant
ceases to be employed by the Company or any Subsidiary for any reason
other than those specified in Section 7.4(a) at any time during a
Performance Cycle, such Participant shall not receive any payment in
respect of any Long-Term Performance Units outstanding as of the
Participant's termination of employment.
(c) Accelerated Vesting and Payment. In the event of a Change
of Control, the Participant shall earn a prorated number of Long-Term
Performance Units in respect of each outstanding Performance Cycle
determined by prorating the percentage of the target earned according
to the number of completed months prior to the Change of Control. Any
Long-Term Performance Units that are not earned in accordance with this
Section 7.4(c) at the date of the Change of Control shall automatically
be cancelled upon such Change of Control.
ARTICLE VIII. AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board at any time may terminate the Plan, and from time to time may
amend or modify the Plan; provided that to the extent necessary to comply with
the Plan of Reorganization adopted in connection with the Demutualization, no
amendment shall be made which would be or become effective prior to the fifth
anniversary of the Demutualization without the prior written consent of the New
York State Superintendent of Insurance. No amendment, modification, or
termination of the Plan shall in any manner adversely affect any Award
theretofore granted under the Plan, without the consent of the Participant.
ARTICLE IX. MISCELLANEOUS PROVISIONS
Section 9.1 Beneficiary Designation. Each Participant under the Plan
may from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation, Restricted Units outstanding at the
Participant's death shall be paid to the Participant's surviving spouse, if any,
or otherwise to or by his estate.
Section 9.2 No Guarantee of Employment or Participation. Nothing in the
Plan shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment or services at any time,
nor confer upon any Participant any right to continue in the employ or services
of the Company or any Subsidiary or affiliate. No Employee, Agent, or
non-employee director shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Awards.
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Section 9.3 Tax Withholding. The Company shall have the power to
withhold, or require a Participant to remit to the Company promptly upon
notification of the amount due, an amount sufficient to satisfy federal, state
and local withholding tax requirements with respect to any Award (or settlement
thereof), and the Company may defer payment of cash or issuance or delivery of
Common Stock until such requirements are satisfied. The Committee may, in its
discretion, permit a Participant to elect, subject to such conditions as the
Committee shall impose (a) to have Common Stock otherwise issuable or
deliverable under the Plan withheld by the Company or (b) to deliver to the
Company previously acquired shares of Common Stock, in each case, having a Fair
Market Value sufficient (either alone or with the application of any cash
withheld) to satisfy not more than the Participant's statutory minimum federal,
state and local tax obligation associated with the transaction.
Section 9.4 Indemnification. Each person who is or shall have been a
member of the Committee or of the Board shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be made a party or
in which he may be involved by reason of any action taken or failure to act
under the Plan (in the absence of bad faith) and against and from any and all
amounts paid by him in settlement thereof, with the Company's approval, or paid
by him in satisfaction of any judgment in any such action, suit, or proceeding
against him; provided that he shall give the Company an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle and defend
it on his own behalf. The foregoing right of indemnification shall not be
exclusive and shall be independent of any other rights of indemnification to
which such person may be entitled under the Company's Certificate of
Incorporation or By-Laws, by contract, as a matter of law, or otherwise.
Section 9.5 No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to pay
compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan.
Section 9.6 Requirements of Law. The granting of Awards and the
issuance of shares of Common Stock shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
Section 9.7 Governing Law. The Plan, and all Awards made and actions
taken thereunder, shall be construed in accordance with and governed by the laws
of the State of New York, without giving effect to the conflicts of law
provisions thereof.
Section 9.8 No Impact On Benefits. Awards granted under the Plan are
not compensation for purposes of calculating an Employee's rights under any
employee benefit plan.
Section 9.9 Securities Law Compliance. Instruments evidencing Awards
may contain such other provisions, not inconsistent with the Plan, as the
Committee deems advisable, including a requirement that the Participant
represent to the Company in writing, when an Award is granted or when he
receives shares with respect to such Award (or at such other time as the
Committee deems appropriate) that he is accepting such Award, or receiving or
acquiring such shares (unless they are then covered by a Securities Act of 1933
registration statement), for his own account for investment only and with no
present intention to transfer, sell or otherwise dispose of such shares except
such disposition by a legal representative as shall be required by will or the
laws of any jurisdiction in winding up the estate of the Participant. Such
shares shall be transferable only if the proposed transfer shall be permissible
pursuant to the Plan and if, in the opinion of counsel satisfactory to the
Company, such transfer at such time will be in compliance with applicable
securities laws.
Section 9.10 Term of Plan. The Plan shall be effective upon approval by
the Board and by the stockholders of the Company. The Plan shall continue in
effect, unless sooner terminated pursuant to Article VIII, until no more shares
of Common Stock are available for issuance under the Plan.
Section 9.11 No Constraint on Corporate Action. Nothing in this Plan
shall be construed (a) to limit, impair or otherwise affect the Company's right
or power to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, or to merge or consolidate, or dissolve,
liquidate, sell, or transfer all or any part of its business or assets, or (b)
except as provided in Section 4.1 or Article VIII, to limit the right or power
of the Company or any of its Subsidiaries to take any action which such entity
deems to be necessary or appropriate.
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If you would like to talk to a customer service representative, please call
Phoenix Shareholder Services toll-free for shareholders in the United States,
Puerto Rico, Canada and the Virgin Islands at 1-800-490-4258, Monday through
Friday, 9:00 a.m. through 5:00 p.m., Eastern time.
Written Correspondence:
Mail to:
Phoenix Shareholder Services
P.O. Box 2578
Jersey City, NJ 07303-2578
E-mail: phoenix@equiserve.com
Web site: PhoenixWealthManagement.com
The Phoenix Companies, Inc.
One American Row, P.O. Box 5056
Hartford, Connecticut 06102-5056 U.S.A.
CC6B
PROXY
THE PHOENIX COMPANIES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON APRIL 28, 2003
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R The undersigned hereby appoints John H. Beers, Carole A. Masters and
Tracy L. Rich, or any of them, each with full powers of substitution, as
O proxies of the undersigned, to attend the Annual Meeting of Shareholders
of The Phoenix Companies, Inc. to be held on April 28, 2003, at 11:00
X a.m. Eastern time, and at any adjournment or postponement thereof, and
to vote, on the items set forth on the reverse side, the number of
Y shares the undersigned would be entitled to vote if personally present.
If shares of The Phoenix Companies, Inc. Common Stock are issued to
or held for the account of the undersigned under any employee plan and
voting rights attach to such shares (any of such plans, a "Voting
Plan"), then the undersigned hereby directs the respective fiduciary of
each applicable Voting Plan to vote all shares of The Phoenix Companies,
Inc. Common Stock in the undersigned's name and/or account under such
Voting Plan in accordance with the instructions given herein, at the
Annual Meeting and at any adjournment or postponement thereof, on all
matters properly coming before the Annual Meeting, including but not
limited to the matters set forth on the reverse side.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" EACH OF THE
NOMINEES FOR DIRECTOR AND "FOR" PROPOSALS 2 AND 3. THIS PROXY WILL ALSO
BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS (OR, IN
THE CASE OF A VOTING PLAN, WILL BE VOTED IN THE DISCRETION OF THE PLAN
TRUSTEE OR ADMINISTRATOR) AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY
USING THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE BY TELEPHONE OR THROUGH
THE INTERNET.
------------
(Continued and to be signed on the reverse side) SEE REVERSE
SIDE
------------
[down arrow] FOLD AND DETACH HERE [down arrow]
- --------------------------------------------------------------------------------
- ------------------------------- ADMISSION TICKET -------------------------------
The Phoenix Companies, Inc.
2003 Annual Meeting of Shareholders
Monday, April 28, 2003
11:00 a.m. at
One American Row
Hartford, Connecticut
Please retain this portion of the Proxy Card if you wish to
attend the Annual Meeting of Shareholders in person.
You must present this portion of the Proxy Card at the door for admission.
Seating will be on a first-come, first-served basis
and you may be asked to present valid picture identification
before being admitted. Cameras, recording equipment and other
electronic devices will not be permitted at the meeting.
- ------------------------------- ADMISSION TICKET -------------------------------
----- Please mark your
X votes as in this
- ----- example.
- -------------------------------------------------------------------------------------------------------------------
The Phoenix Companies, Inc.
FOR WITHHELD Director Nominees: FOR AGAINST ABSTAIN
------ -------- ------------------ ---- ------- -------
1. Election of 2.Approval of 2003
Directors 01. Peter C. Browning Restricted Stock,
------ -------- 02. Sanford Cloud, Jr. Restricted Stock
For all nominees, except vote withheld 03. Gordon J. Davis, Esq. Unit and Long-Term
from the following nominee(s): 04. Jerry J. Jasinowski Incentive Plan. ---- ------- -------
3.Ratification of ---- ------- -------
the appointment of
PricewaterhouseCoopers
- ---------------------------------------------- LLP as independent
auditor. ---- ------- -------
- -------------------------------------------------------------------------------------------------------------------
If you plan to attend the Annual -----
Meeting, please check this box.
-----
SIGNATURE(S) ________________________________________________________ DATE ___________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such.
- -------------------------------------------------------------------------------------------------------------------
[up arrow] THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. [up arrow]
[logo] PHOENIX THE PHOENIX COMPANIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - April 28, 2003
The Annual Meeting of shareholders of The Phoenix Companies, Inc.
c/o EquiServe Trust Company N.A. will be held at One American Row, Hartford, Connecticut on Monday,
PO Box 8635 April 28, 2003, at 11:00 a.m. Eastern time. Only shareholders of
Edison, NJ 08818-9226 record at the close of business on March 13, 2003 will be
entitled to vote at the meeting.
By Order of the Board of Directors
/s/ John H. Beers
John H. Beers
Secretary
----------------------------------------------------------------------------------------------------------
It is important that your shares be represented at the Annual Meeting. Whether or not you plan to attend
the Annual Meeting, please complete and return your proxy in the enclosed postage-paid envelope as soon as
possible or vote by proxy using the telephone or through the Internet as promptly as possible.
VOTE BY INTERNET - http://www.eproxyvote.com/pnx
Use the Internet to transmit your voting instructions and for electronic delivery of information up until
midnight Eastern time on April 27, 2003. Have your proxy card in hand when you access the Web site. You
will be prompted to enter your Control Number which is located below to obtain your records and to create
an electronic voting instruction form.
VOTE BY PHONE - 1-877-779-8683
Use any touch-tone telephone to transmit your voting instructions up until midnight Eastern time on
April 27, 2003. Have your proxy card in hand when you call. You will be prompted to enter your Control
Number which is located below and then follow the simple instructions provided. The toll-free telephone
number listed above is available only within the U.S., Canada, Puerto Rico and the Virgin Islands.
From all other locations, shareholders may call collect at 001-201-536-8073.
VOTE BY MAIL
Please mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided.
Phoenix Companies (PNX) Inactive
Filed: 21 Mar 03, 12:00am