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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PHILADELPHIA CONSOLIDATED HOLDING CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
COMMON STOCK, NO PAR VALUE
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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PHILADELPHIA CONSOLIDATED HOLDING CORP.
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
[PHILADELPHIA CONSOLIDATED HOLDING CORP. LIBERTY BELL GRAPHIC]
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
To The Holders of Common Stock:
The Annual Meeting of Shareholders of Philadelphia Consolidated Holding
Corp. will be held on May 4, 2000 at 10:00 A.M. at the Marriott West Hotel, 111
Crawford Avenue, Conshohocken, Pennsylvania for the following purposes:
(1) To elect ten Directors;
(2) To vote on an Amendment to the Company's Employee Stock Purchase
Plan to increase the number of shares subject to purchase under
the plan from 500,000 to 1,000,000 shares;
(3) To vote on the approval of the appointment of independent auditors
for the year 2000; and
(4) To consider such other business as may properly come before the
meeting.
Shareholders of record at the close of business on April 7, 2000 are entitled to
notice of, and to vote at, said meeting.
By Order of the Board of Directors
CRAIG P. KELLER
Secretary
April 10, 2000
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PHILADELPHIA CONSOLIDATED HOLDING CORP.
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
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PROXY STATEMENT
---------------------
The accompanying proxy is solicited by the Board of Directors of
Philadelphia Consolidated Holding Corp. (the "Company"), for use at the Annual
Meeting of Shareholders to be held at the Marriott West Hotel, 111 Crawford
Avenue, Conshohocken, Pennsylvania on May 4, 2000 at 10:00 A.M. This Proxy
Statement, the foregoing Notice and the enclosed Proxy are being sent to
shareholders of the Company on or about April 10, 2000.
Any Proxy may be revoked at any time before it is voted by written notice,
mailed or delivered to the Secretary of the Company, by delivering a Proxy
bearing a later date or by attending the meeting and voting in person. If your
proxy card is signed and returned without specifying a vote or an abstention on
any proposal, it will be voted in accordance with the Board of Directors'
recommendations on each proposal.
The Board of Directors knows of no other matters which are likely to be
brought before the meeting other than those specified in the notice thereof. If
any other matters properly come before the meeting however, the persons named in
the enclosed proxy, or their duly constituted substitutes acting at the meeting,
will be authorized to vote or otherwise act thereon in accordance with their
judgement on such matters. If the enclosed proxy is properly executed and
returned prior to voting at the meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. In the absence of
instructions, executed proxies will be voted "FOR" the ten nominees for the
Board of Directors; "FOR" the approval of an Amendment to the Company's Employee
Stock Purchase Plan; and "FOR" the approval of the selection by the Board of
Directors of PricewaterhouseCoopers LLP as the Company's independent auditors
for the year 2000.
Shareholders of record at the close of business on April 7, 2000 are
entitled to vote at the meeting. On March 31, 2000, the Company had outstanding
12,246,922 shares of Common Stock, no par value. Each outstanding share of
Common Stock is entitled to one vote and there is no cumulative voting. The
presence, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast on the
particular matter shall constitute a quorum for the purpose of considering such
matter.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock of the Company present in person or represented by proxy
at the meeting, with a quorum present. For purposes of the election of
directors, abstentions and broker non-votes are not considered to be votes cast
and do not affect the plurality vote required for directors.
The Company has retained American Stock Transfer & Trust Company to solicit
proxies by mail, courier, telephone, or facsimile and to request brokerage
houses to forward soliciting material to beneficial owners. For these services
the Company will pay a fee of approximately $9,000.
1. ELECTION OF DIRECTORS
The Board of Directors has nominated for election the ten persons named
below, to hold office until the next Annual Meeting and until their successors
have been duly elected and qualified. The Company believes that each nominee
named below will be able to serve. However, should any such nominee be unable to
serve as a director, the persons named in the proxies have advised that they
will vote for the election of such substitute nominee as the Board of Directors
may propose.
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NOMINEES FOR DIRECTOR
The names and ages of the nominees, their principal occupations, length of
service as Directors of the Company, and certain other biographical information
are set forth below:
JAMES J. MAGUIRE, age 66, has served as Chief Executive Officer and
Chairman of the Board of Directors of the Company since its formation in 1981
and its subsidiaries since their formation. Mr. Maguire previously served as
President of the Company. He has worked in the insurance industry for over 40
years with experience in insurance accounting, underwriting, sales and
marketing, claims management and administration.
JAMES J. MAGUIRE, JR., age 39, joined the Company in 1996 and has served on
the Board of Directors since 1997. He currently serves as President and Chief
Operating Officer. Prior to his appointment as President, Mr. Maguire, Jr.
served as Executive Vice President and Chief Operating Officer, and Vice
President of Underwriting for the Company. Mr. Maguire, Jr. was previously
employed as Assistant Vice President of Underwriting with American International
Group, Inc., an insurance and financial services company. Mr. Maguire, Jr. is
the son of Mr. James J. Maguire.
SEAN S. SWEENEY, CPCU, RPLU, age 42, joined the Company in 1979 and has
served on the Board of Directors of the Company since 1996. He currently serves
as Executive Vice President, Director of Marketing. Prior to his appointment as
Executive Vice President, he served as Senior Vice President, Director of
Marketing for the Company since 1987. Mr. Sweeney previously was employed by the
Company as a Regional Vice President, Regional Sales Manager, and sales
representative. His current responsibilities include management of all marketing
and sales for the Company. Mr. Sweeney is the nephew of Mr. James J. Maguire.
WILLIAM J. HENRICH, JR., age 71, has served on the Board of Directors since
1996. Mr. Henrich is a senior partner with the law firm of Dilworth, Paxson,
Kalish & Kauffman.
PAUL R. HERTEL, JR., age 72, has served on the Board of Directors of the
Company since 1987. Mr. Hertel has been an insurance broker with Paul Hertel &
Company, Inc., for over 40 years and serves as Chairman of the Executive
Committee of this company.
ROGER L. LARSON, age 78, has served on the Board of Directors of the
Company since 1986. Mr. Larson served in various merchandising capacities for
Sears Roebuck & Co., including Regional Manager, prior to his retirement in
1980.
THOMAS J. MCHUGH, age 68, has served on the Board of Directors of the
Company since 1986. Mr. McHugh has been President, Chairman of the Board, and
CEO of McHugh Associates, Inc., a registered investment advisor, since 1986 and
has served as a director of The Rouse Company, a real estate development
company, since 1980.
MICHAEL J. MORRIS, age 65, has served on the Board of Directors of the
Company since 1993. Mr. Morris served as Chairman and Chief Executive Officer of
Transport International Pool Corporation, a multinational corporation that
principally provides transport services, from 1975 to his retirement in 1992.
DIRK A. STUUROP, age 51, was elected to the Board of Directors of the
Company in 1999. Mr. Stuurop currently is President of Stuurop & Company, a
privately owned strategic advisory firm. Mr. Stuurop previously served in
various investment banking positions with Merrill Lynch and Company from 1982
until his retirement in early 1999, most recently as Chairman, Global Financial
Institutions. Additionally, Mr. Stuurop is a member of the Wharton Graduate
Executive Board, a director of the Netherland America Foundation, and a director
of various private corporations.
J. EUSTACE WOLFINGTON, age 67, has served on the Board of Directors of the
Company since 1986. Since 1981, Mr. Wolfington has been the President of the
H.A.C. Group of Companies, an international automobile leasing consulting firm.
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ADDITIONAL INFORMATION REGARDING THE BOARD
MEETINGS. During 1999, the Board of Directors met four times. Each
director attended at least 75% of the meetings of the Board of Directors and any
committee on which such director served.
BOARD COMMITTEES. The Audit Committee met one time in 1999. The current
Audit Committee consists of Messrs. Hertel, Jr. (Chairman), Henrich, Jr.,
Maguire, Stuurop and Wolfington. Among other duties, the Audit Committee
recommends the selection of the Company's independent auditors and reviews the
Company's financial condition, and the scope and results of the independent
audit and any internal audit.
The Compensation Committee met four times in 1999. The current Compensation
Committee consists of Messrs. Larson (Chairman), McHugh and Morris. Among other
duties, the Compensation Committee evaluates the performance of principal
officers, recommends to the Board of Directors the selection and compensation of
principal officers, and administers the Company's various compensation plans.
The Investment Committee met five times in 1999 and is responsible for
monitoring investment policy and activities. The current Investment Committee
consists of Messrs. Morris (Chairman), Maguire, Maguire, Jr., Hertel, Jr. and
Sweeney.
The Nominating Committee met two times in 1999 and currently consists of
Messrs. McHugh (Chairman), Maguire, Maguire, Jr., Morris and Sweeney. The
Nominating Committee is responsible for recommending to the Board of Directors
candidates for nomination to the Board. The Nominating Committee will consider
recommendation of candidates for nomination to the Board of Directors from
shareholders. In order for shareholder recommendations to be considered for the
2001 Annual Meeting, such recommendations must be received by the President of
the Company at One Bala Plaza, Suite 100, Bala Cynwyd, Pennsylvania 19004 no
later than March 14, 2001. Any recommendation must be accompanied by the written
consent of the individual recommended to serve as a Director.
RELATED PARTY TRANSACTIONS. In July 1999 the Company acquired The Jerger
Company, Inc. for a total purchase price of $20.0 million in cash, 1,037,772
shares of the Company's common stock and a contingent additional cash amount of
up to $5.0 million based upon future earnings of the acquired business. Of this
purchase price, Mr. Thomas J. Jerger, a shareholder of The Jerger Company, Inc.
and a former Director of the Company, received $6.5 million in cash and 338,404
shares of common stock of the Company. Mr. Jerger may also receive up to a
maximum of $1.6 million of the contingent additional cash amount.
Pursuant to the acquisition agreement, the Company entered into an
employment agreement with Mr. Jerger for a period of five years and a base
salary of $210,000 ("Base Salary") commencing July 16, 1999. Mr. Jerger
subsequently resigned his position with the Company effective November 22, 1999
and the Company entered into a severance agreement with Mr. Jerger agreeing to
pay Mr. Jerger the Base Salary through the original employment period of five
years.
The Company utilized investment advisory services from McHugh Associates
Inc. of which a board member, Thomas J. McHugh serves as President. The fee for
these services amounted to $0.2 million for 1999.
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MANAGEMENT -- DIRECTORS AND EXECUTIVE OFFICERS
Directors hold office until the next annual meeting of the shareholders, or
until their successors are duly elected and qualified. Officers are elected by
and serve at the discretion of the Board of Directors. The Directors and
Executive Officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
James J. Maguire............ 66 Chairman of the Board of Directors and Chief
Executive Officer
James J. Maguire, Jr........ 39 Director, President and Chief Operating Officer
Sean S. Sweeney............. 42 Director, Executive Vice President
William J. Henrich, Jr...... 71 Director
Paul R. Hertel, Jr.......... 72 Director
Roger L. Larson............. 78 Director
Thomas J. McHugh............ 68 Director
Michael J. Morris........... 65 Director
Dirk A. Stuurop............. 51 Director
J. Eustace Wolfington....... 67 Director
Craig P. Keller............. 49 Senior Vice President, Secretary, Treasurer, and
Chief Financial Officer
See "Nominees for Director" for the biographies of Messrs. Maguire,
Maguire, Jr., Sweeney, Henrich, Hertel, Larson, McHugh, Morris, Stuurop, and
Wolfington.
CRAIG P. KELLER, age 49, joined the Company as Vice President and Chief
Financial Officer in December 1992 and was appointed Senior Vice President in
1999, Treasurer in 1997 and Secretary in 1993. Mr. Keller was previously
employed by Reliance Insurance Group, Inc., a subsidiary of Reliance Group
Holdings, where he served in various financial capacities from 1985 through
1992, including Assistant Vice President from June 1991 to December 1992. Mr.
Keller, formerly with Coopers & Lybrand, is a Certified Public Accountant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 2000 by: (i) each person known to
the Company to own beneficially more than 5% of the outstanding Common Stock;
(ii) each of the Company's nominees for directors and persons referred to in the
Summary Compensation Table; and (iii) all of the directors and executive
officers as a group. As used in this table, "beneficially owned" means the sole
or shared power to vote or dispose of, or to direct the voting or disposition
of, the shares, or the right to acquire such power within 60 days after March
31, 2000 with respect to any shares.
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME(1) OWNED(2) OWNED
------- ------------ ------------
James J. Maguire............................................ 5,677,464(3) 38.2%
William J. Henrich, Jr. .................................... 6,000 *
Paul R. Hertel, Jr. ........................................ 18,000(4) *
Roger L. Larson............................................. 8,775(5) *
Thomas J. McHugh............................................ 8,000 *
Michael J. Morris........................................... 21,000 *
Dirk A. Stuurop............................................. 6,366 *
J. Eustace Wolfington....................................... 412,350 3.4%
Sean S. Sweeney............................................. 80,618 *
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SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME(1) OWNED(2) OWNED
------- ------------ ------------
Craig P. Keller............................................. 6,932 *
James J. Maguire, Jr. ...................................... 868,137(6) 7.1%
Thomas G. Maguire........................................... 861,528(7) 7.0%
The Kaufmann Fund, Inc. .................................... 1,286,300(8) 10.5%
FMR Corp.................................................... 1,245,900(8) 10.2%
Wanger Asset Management, L.P., Wanger Asset Management LTD,
and Acorn Investment Trust................................ 840,000(9) 6.9%
All Directors and Executive Officers as a Group (11
persons).................................................. 7,113,642 47.9%
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* Less than 1%
(1) The named shareholders' business address is One Bala Plaza, Suite 100, Bala
Cynwyd, PA 19004, except that, the business address of: The Kaufmann Fund,
Inc. is 140 E. 45th Street, 43rd Floor, New York, NY 10017; FMR Corp. is 82
Devonshire Street, Boston, MA 02109; and Wanger Asset Management L.P.,
Wanger Asset Management, LTD and Acorn Investment Trust is 227 West Monroe
Street, Suite 3000, Chicago, IL 60606.
(2) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, unless otherwise noted in the footnotes to this
table and except for shares referred to in the following sentence. With
respect to Mr. James J. Maguire, the shares beneficially owned include
2,613,492 shares subject to currently outstanding options exercisable on or
before 60 days from March 31, 2000.
(3) Of these shares 1,760,500 are owned jointly by Mr. Maguire and his wife
Frances Maguire, as to which Mr. Maguire shares the voting and investment
power with his wife; and 200,000 are owned of record by his wife. Mr.
Maguire disclaims beneficial ownership of the 200,000 shares owned of record
by his wife.
(4) Record owner is P&E Limited Partnership, a family limited partnership of
which Mr. Hertel and his wife are general partners. Mr. Hertel has shared
voting and investment power with his wife with respect to these shares.
(5) Record owner is the Roger L. Larson Trust which is controlled by Roger L.
Larson and his wife as co-trustees. Mr. Larson has shared voting and
investment power with his wife with respect to these shares.
(6) Of the shares shown, 110,816 shares are owned by a trust for the benefit of
Mr. James J. Maguire, Jr. and 750,712 shares are in trusts for the other
children of Mr. James J. Maguire, of which Mr. James J. Maguire, Jr. is
deemed to be beneficial owner of such shares because he has shared voting
and investment power of such shares as co-trustee of these trusts.
(7) These shares are owned by trusts for the children of Mr. James J. Maguire
and Mr. Thomas G. Maguire is deemed to be beneficial owner of such shares
because he has shared voting and investment power of such shares as
co-trustee of these trusts.
(8) According to the Schedules 13G filed with the Company by The Kaufmann Fund,
Inc., and FMR Corp., respectively, these shares were acquired in the
ordinary course of business, were not acquired for the purpose of and do not
have the effect of changing or influencing the control of the issuer of such
securities and were not acquired in connection with, or as a participant in,
any transaction having such purposes or effect.
(9) According to the Schedule 13G filed with the Company, Wanger Asset
Management L.P. and Wanger Asset Management LTD have shared voting and
dispositive power for 840,000 shares and Acorn Investment Trust has shared
voting and dispositive power for 675,000 shares. Additionally, according to
this Schedule 13G, these shares were acquired and are held in the ordinary
course of business and were not acquired and are not held for the purpose of
or with the effect of changing or influencing the control of the issuer and
were not acquired and are not held in connection with or as a participant in
any transaction having that purpose or effect.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
and changes in ownership with the Securities and Exchange Commissioner ("SEC").
Officers, directors, and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, for
the period January 1, 1999 through December 31, 1999, or its knowledge that no
Forms 5 were required for certain reporting persons, the Company believes that
all filing requirements applicable to its officers and directors were complied
with, except for one late filing of a Form 4, reporting two transactions for Mr.
Wolfington.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during each of the last three years
to the Company's Chief Executive Officer, and each of the Company's other
executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
--------------------
ANNUAL NO. OF
COMPENSATION SHARES UNDERLYING
-------------------- -------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) SARS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ---------- ------- ---------------
James J. Maguire, Chief 1999 845,048 -- -- -- 165,000(2)(4)
Executive Officer, and 1998 812,557 500,000 -- -- 192,006(2)(4)
Chairman of the Board 1997 775,000 500,000(1) -- -- 208,179(2)(4)
James J. Maguire, Jr., Director, 1999 238,462 -- 100,000 -- 6,135(2)(3)
President and Chief 1998 170,250 50,000 -- -- 12,919(2)(3)
Operating Officer 1997 150,000 30,708 -- -- 9,297(2)(3)
Sean S. Sweeney, Director and 1999 218,077 30,000 -- -- 9,986(2)(3)
Executive Vice President 1998 174,685 131,177 -- -- 8,831(2)
1997 170,000 113,021 -- 100,000(5) 9,776(2)
Craig P. Keller, Senior Vice 1999 193,678 -- -- -- 10,349(2)(3)
President, Secretary, Treasurer, 1998 168,712 20,000 25,000 -- 11,483(2)(3)
and Chief Financial Officer 1997 150,000 20,000 -- -- 14,240(2)(3)
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(1) Paid in part in year shown; advanced on account, in part, in prior year.
(2) Includes both matching and profit sharing contributions by the Company under
its defined contribution plan, as well as premiums paid on term life
insurance policies.
(3) Includes the discount from the fair market value of the Company's common
stock purchased pursuant to the Company's Employee Stock Purchase Plan which
amounted to $4,411 for Messrs. Maguire, Jr., Sweeney and Keller in 1999.
(4) Pursuant to an agreement between the Company and a trust created by Mr.
James J. Maguire and his wife, Frances M. Maguire, the Trust has purchased a
split-dollar life insurance policy on the joint lives of Mr. Maguire and his
wife. Under the agreement, the Company pays the premium on the policy and
the trust is the beneficiary of the insurance policy. However, the Company
has been granted a security interest in the death benefit of the policy
equal to the sum of all premium payments made by the Company. The
arrangement is designed so that if the assumptions made as to mortality
experience, policy dividends and other factors are realized, the Company,
upon the death of the survivor of Mr. Maguire and his wife or the surrender
of the policy, will recover all of its insurance premium payments which do
not include certain amounts paid to Mr. Maguire, as described below. The
premium paid by the Company in 1999 and 1998 pursuant to this arrangement
was $338,174. The amount in this column does not include
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such premium payment. However, the amount in this column includes the sum of
each future years' present value of the imputed interest on such premium
payment (adjusted for the cost of term insurance based upon the joint lives
of Mr. Maguire and his wife). The interest amount calculated for 1999 and
1998 is $148,065 and $172,294, respectively. Pursuant to the split dollar
arrangement described above, Mr. Maguire receives each year an amount equal
to the portion of the annual premium due and payable on the life insurance
policy which is not paid by the Company pursuant to the above described
formula, but paid by Mr. Maguire. The amount reported in this column
included said amount totaling $7,181 and $7,026 in 1999 and 1998,
respectively.
(5) Restated to reflect a two for one stock split of the Company's common stock
distributed in November 1997.
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options during 1999 to the Company's Chief Executive Officer and each of the
Company's executive officers. There were no stock appreciation rights ("SARs")
granted in 1999 for the named persons.
OPTION GRANTS IN 1999
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
NO. OF SHARES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM($)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED(1) IN 1999 ($/SHARE) DATE 5% 10%
---- ------------- ------------ ------------ ---------- --------- ---------
James J. Maguire............... -- -- -- -- -- --
James J. Maguire, Jr........... 100,000 38.8% $13.875 10/19/09 383,300 847,100
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(1) Options are exercisable after the fifth anniversary from date of grant.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information relating to the number and value
of options and SARs held at December 31, 1999 by the Company's Chief Executive
Officer and by each of the Company's other executive officers. There were no
option/SAR exercises in 1999 for the named persons.
OPTION/SAR VALUES AT DECEMBER 31, 1999(1)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
James J. Maguire(2)....................... 2,613,492 -- 31,084,900 --
James J. Maguire, Jr.(3).................. -- 302,900 -- 1,117,300
Sean S. Sweeney(4)........................ -- 200,000 -- 637,500
Craig P. Keller(5)........................ -- 37,500 -- 40,600
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(1) All share and per share amounts granted prior to November 1997 were restated
to reflect a two for one split of the Company's common stock distributed in
November 1997.
(2) Exercise price of $2.606.
(3) Exercise price of $8.500 for 2,900 options; $9.313 for 200,000 options;
$13.875 for 100,000 options.
(4) Exercise price of $8.125 for 100,000 options; Base price of $14.50 for
100,000 SARs.
(5) Exercise price of $20.500 for 25,000 options; Base price of $11.250 for
12,500 SARs.
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DIRECTORS COMPENSATION
Non-employee directors receive annual compensation of $18,000, plus $1,000
for each Board meeting attended and $500 for each Committee meeting attended.
Non-employee directors may designate a portion of their fees to be used for the
purchase of shares of the Company's common stock under the terms of the
Directors Stock Purchase Plan.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for administering the compensation program for the Company's
executives including the executive officers named in the Summary Compensation
Table. The Committee is composed exclusively of independent, non-employee
directors who are not eligible to participate in any of the Company's executive
compensation programs. All decisions by the Committee relating to the
compensation of the Company's executive officers are reviewed by the Board of
Directors.
COMPENSATION PHILOSOPHY. The Company's executive compensation program is
based upon a pay-for-performance philosophy. The Company is committed to a
strong link between its business and strategic goals and its compensation
program. The financial goals for certain elements of the compensation program
are reviewed and approved by the Board in conjunction with its approval of the
Company's strategic and operating plans.
BASE SALARY. An executive's base salary is determined by an assessment of
his or her sustained performance, experience, scope and job demands, as well as
current salary levels at peer companies. While some of these companies are in
the Nasdaq Insurance Stocks Index and some are not, these were generally
selected for the peer group because they were considered comparable to the
Company either in terms of market capitalization, or because they compete with,
or are in lines of business related to, the Company's business.
ANNUAL INCENTIVES. The Company utilizes cash bonuses as a principal method
of tying compensation to performance. The CEO's cash bonus is calculated based
on an earnings per share formula, with other executive's cash bonuses based on a
predetermined amount of a calculated bonus pool which was also based upon an
earnings per share formula, and with respect to marketing executives, was also
based upon production and profitability goals. For 1999 no cash bonuses were
earned based upon the earnings per share formula. The Company believes that the
cash bonus creates a direct link between the Company's profitability and the
compensation of executives. Incentive compensation is also provided by the
Company's Amended and Restated Employees' Stock Option Plan (the "Stock Option
Plan") and the awarding of Stock Appreciation Rights.
RATIONALE FOR CHIEF EXECUTIVE OFFICER COMPENSATION. In setting Mr.
Maguire's 1999 base salary and bonus, the Compensation Committee considered,
among other factors, compensation levels for chief executive officers of other
peer specialty property and casualty insurance companies, Mr. Maguire's
experience and knowledge of the industry and the favorable developments achieved
by the Company in 1998 under Mr. Maguire's leadership, including $19.7 million
of net operating income, the upgrading of the rating from A.M. Best Company for
the Company's insurance subsidiaries to A+ (Superior), the successful completion
of the Company's Feline PridesSM offering by which the Company raised $103.5
million of proceeds, the introduction of certain new insurance programs, the
continued expansion of the Company's marketing organization, and the continued
development of the Preferred Agent program.
POLICY ON DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal
Revenue Code ("Section 162(m)") limits to $1.0 million the annual tax deduction
for compensation paid to the Chief Executive Officer and any of the four highest
paid other executive officers unless certain requirements for performance-
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based compensation are met. The Compensation Committee considered these
requirements and designed the Cash Bonus Plan of the Chief Executive Officer and
the Stock Option Plan, accordingly. The Committee currently intends to continue
to comply with the requirements of Section 162(m) but reserves the right to
alter the Cash Bonus Plan and the Stock Option Plan if it believes that doing so
would be in the best interests of the Company and its shareholders.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ROGER L. LARSON, CHAIRMAN
THOMAS J. MCHUGH
MICHAEL J. MORRIS
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STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of the NASDAQ Stock
Market (U.S.) ("NASDAQ -- US") Index and the NASDAQ Insurance Stocks Index (SIC
Codes 631 and 633) ("NASDAQ -- INS"). The comparison begins on December 31,
1994.
PHILADELPHIA CONSOLIDATED THE NASDAQ STOCK
HOLDING CORP. MARKET (US) NASDAQ INSURANCE STOCKS
------------------------- ---------------- -----------------------
1994 100.00 100.00 100.00
1995 135.42 141.33 151.76
1996 193.75 173.89 142.16
1997 295.83 213.07 162.86
1998 377.08 300.25 182.44
1999 241.67 542.43 221.94
2. AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
On April 5, 2000, the Company's Board of Directors amended the Philadelphia
Insurance Companies Employee Stock Purchase Plan (the "Plan"), subject to the
approval of the stockholders of the Company. The purpose of amending the Plan is
to increase the aggregate maximum number of shares of Common Stock ("Shares")
subject to purchase under the Plan to 1,000,000 shares. Previously, up to
500,000 Shares were available for purchases under the Plan. As of March 31,
2000, employees had exercised rights to purchase an aggregate of 445,234 shares
under the Plan.
The purpose of the Plan is to assist the Company and its subsidiaries in
retaining the employment of employees by offering them a greater stake in the
Company's success and a closer identity with it, and to aid in obtaining the
services of individuals whose employment would be helpful to the Company and
would contribute to its success. This is to be accomplished by providing
employees a continuing opportunity to purchase Shares through periodic
offerings.
The key provisions of the Plan, as proposed to be amended, are as follows:
TYPE OF PLAN. The Plan is an employee stock purchase plan pursuant to
which Shares are to be offered for sale. The Plan permits purchases of
Shares by employees at a discount during one month "offering periods"
established from time to time by an administrative committee (the
"Committee"). The amendment to the Plan is subject to approval by the
Company's shareholders within 12 months of its adoption. If the amendment
to the Plan is not approved, the Plan will remain in effect without regard
to the amendment. The Plan will terminate only upon the decision of the
Board of Directors of the Company to terminate the Plan. This Plan is not
subject to the Employee Retirement Income Security Act of 1974, as amended.
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ADMINISTRATION. The Plan is administered by the Committee. The
committee will be the compensation committee of the Board of Directors of
the Company, unless the Board of Directors determines to appoint a
different committee to administer the Plan or determines to administer the
Plan itself. The Committee has discretionary authority to interpret the
Plan, to issue rules for administering the Plan, to change, alter, amend or
rescind such rules, and to make all other determinations necessary or
appropriate for the administration of the Plan. The Committee's
determinations, interpretations and constructions are final and conclusive.
If the Committee is a committee appointed by the Board of Directors, its
members will serve at the discretion of the Board of Directors.
ELIGIBILITY. All employees of the Company and those of its
subsidiaries which are designated at the discretion of the Committee as
participating in the Plan are eligible to participate in the Plan except
(1) employees who are customarily employed for 20 hours per week or less,
or who are customarily employed five months per calendar year or less, and
(2) employees who own stock possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company or any
subsidiary. Approximately 550 employees are currently eligible to
participate in the Plan.
SHARES AVAILABLE UNDER THE PLAN. The maximum number of Shares that
may be purchased under the Plan, as the Plan is proposed to be amended, is
1,000,000, increased from the 500,000 Share limitation previously in the
Plan. The Shares available for purchase under the Plan may, at the option
of the Company, be Shares purchased specifically for purposes of the Plan,
shares otherwise held in treasury or Shares originally issued by the
Company for such purpose.
METHOD OF PURCHASING SHARES. Employees who are eligible to
participate in the Plan may elect to purchase Shares during the one month
"offering periods" established from time to time by the Committee. An
employee may elect to participate by delivering to the Committee a
subscription agreement specifying the number of Shares to be purchased for
that offering period. The purchase of the Shares will generally occur on
the last day of the offering period, and the price for the Shares purchased
is the lesser of 85% of the fair market value of the Shares on (i) the
first business day of the offering period or (ii) the date the Shares are
purchased. In addition to the aggregate limitation on the number of Shares
available for purchase under the Plan, no employee may accrue a right to
purchase Shares during any one calendar year having a fair market value in
excess of $25,000 (determined as of the first day of the offering period).
Under the Plan, fair market value is generally determined by reference to
reported prices of the Shares when they are publicly traded, and is
determined by the Committee if the Shares are not publicly traded. The
discount from the fair market value of the Company's common stock purchased
during 1999 pursuant to the Plan for executive officers as a group was
$13,233 and for all employees other than executive officers was $265,129.
PAYMENT FOR SHARES. Each employee purchasing Shares under the Plan
will be required to execute his or her note evidencing the employee's
unconditional obligation to pay the purchase price to the Company or to any
subsequent holder of the note. Under the terms of the note, one-half of the
purchase price for the Shares will be paid by means of equal, regular
payroll deductions over a period of 36 months. In the event the employee's
compensation drops below the amount required to make such payments through
withholding (as a result of a leave of absence or any other reason) the
employee will be personally obligated to make the payments required during
that 36-month period. The remaining balance will be payable in full at the
end of the 36-month period unless the Company permits the employee to
continue to pay the remaining balance over a second 36-month period by
continuing, regular payroll deductions. The payment of the purchase price
under the note is without interest. If an employee ceases to be employed by
the Company or any subsidiary, the outstanding principal balance payable
under his or her note, if any, is payable in full within 30 days of
terminating employment. The Shares purchased will be held in an account and
pledged as collateral to secure repayment of the employee's note. There is
no provision for changing the manner in which payments for the Shares are
to be made, except that an employee may pay the outstanding balance due
with respect to his or her Shares at any time. In general, payments are
made after the purchase through payroll deductions over a 3 year period,
with a balloon payment due at the end of such 3 year period, or, at the
Company's election, over a 6 year period pursuant to the terms of the
payment obligation entered into by the employee with respect to the
purchase.
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RESALE RESTRICTIONS. Any Shares purchased under the Plan will be
restricted for a period of two years (measured from the first day of the
relevant offering period). If an employee attempts to sell, transfer, make
subject to any lien or otherwise dispose of any Shares prior to the end of
the two year restricted period, the Shares will be forfeited back to the
Company on payment by the Company to the employee of the then fair market
value or the original purchase price paid for the Shares, whichever is
less. To the extent the Shares are collateral security for any unpaid
purchase price, the Shares may also be taken back by the Company in
satisfaction of the unpaid purchase price if there is an attempted sale
during the restricted period.
FEDERAL INCOME TAX EFFECTS OF PLAN PARTICIPATION. The following
discussion summarizes, as of the date hereof, general principles of federal
income tax law applicable to the Plan and the shares of Common Stock
acquired under the Plan. The Plan is intended to qualify as a "stock
purchase plan" under the applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"). This permits employees to receive
favorable tax treatment for purchases of Shares under the Plan. In
particular, employees will not recognize income on the purchase of Shares
even though the purchase (at 85% of fair market value) represents a bargain
sale. This represents a deferral of income tax liability when compared with
the normal treatment of a bargain purchase. The general rule applicable to
such bargain purchases requires that the employee recognize the excess of
the fair market value on the date of purchase over the purchase price as
taxable compensation income in the year of the purchase.
Generally, with respect to purchases of Shares under the Plan, the
employee will not recognize income until he or she sells or otherwise
disposes of the Shares purchased under the Plan. If, as is required under
applicable provisions of the Plan, the employee holds the Shares he or she
has purchased until the expiration of the two year restricted period
(discussed above), and the employee realizes a gain on the sale of the
Shares, the employee will recognize a portion of such gain as compensation
income and the rest of the gain, if any, as long term capital gain. The
portion of the gain which is treated as compensation income under these
circumstances is equal to the excess of the fair market value of the stock
as of the first day of the offering period over the purchase price
(determined as of the first day of the offering period, i.e., the initial
15% discount determined on the first day of the offering period is treated
as compensation income). Any additional gain will be a long term capital
gain. Under these circumstances, the employer does not receive a tax
deduction for any amounts of compensation income recognized by the
employee.
A disposition of stock acquired under a stock purchase plan occurring
prior to the end of the two year restricted period described above, (a
"premature disposition") is subject to different tax rules. If there is a
premature disposition of Shares, the employee will recognize a portion of
his or her gain, if any, as ordinary compensation income. The ordinary
income portion of the gain on a premature disposition is equal to the
excess of the fair market value as of the date of acquisition of the stock
over its purchase price (i.e., the compensation element is determined on
the last rather than on the first day of the offering period). It is
unlikely that these rules will have a material impact under the Plan as the
Plan repurchase provisions will generally eliminate any taxable (or
economic) gain on such a disposition. If ordinary compensation income is
recognized by an employee as a result of a premature disposition of Shares,
the Company will be entitled to a deduction for compensation expense.
The purchase of Shares under the Plan may also result in continuing
income recognition by participating employees attributable to the interest
free payment obligation. Specifically, any loan from an employer to an
employee that is treated as a below market loan under applicable Code
provisions should result in deemed compensation income that must be
recognized by the employee in the amount of the interest that is foregone
(using certain statutory presumptions concerning the appropriate interest
rate) and a corresponding deduction for compensation expense that should be
recognized by the employer. Any such amounts of additional compensation
income may result in an increased federal and/or other tax liability to the
participating employee. The employee may also be treated as making a deemed
payment of interest in the same amount to the employer (which may or may
not be deductible by the employee), and a corresponding interest income
item that would have to be recognized by the employer.
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FORFEITURES AND PENALTIES. Any Shares purchased under the Plan are
restricted, and may not be sold, transferred, made subject to any lien or
otherwise disposed of for a period of two years (measured from the first
day of the applicable offering period). An attempt to sell, transfer, make
subject to any lien or otherwise dispose of such Shares during such
restricted period results in forfeiture to the Company on payment by the
Company of the lesser of the fair market value of the Shares or the
purchase price paid for the Shares. In addition, if an employee terminates
employment with the Company for any reason other than retirement,
disability or death, any Shares purchased under the Plan which have not
been held beyond the two year restricted period described above may be
repurchased by the Company for the lesser of the fair market value of the
Shares or the purchase price paid for the Shares. The Shares are also
collateral security for the employee's payment obligation with respect to
the purchase and may be taken by the Company in satisfaction of that
obligation.
AMENDMENT OF THE PLAN. The Company's Board of Directors may at any
time, or from time to time, amend the Plan at its discretion, but may not
increase the maximum number of shares that may be issued pursuant to the
Plan, materially increase the benefits accruing to participants under the
Plan, or modify the requirements as to eligibility for participation in the
Plan without obtaining the approval of the Company's shareholders within
twelve months before or after such amendment.
The affirmative vote of the holders of a majority of the Company's Common
Stock present at the meeting in person or by proxy is required to adopt the
amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
3. APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to the shareholders' approval, the Board of Directors has appointed
the firm of PricewaterhouseCoopers LLP, which served as the Company's
independent auditors for the year 1999, to serve as the Company's independent
auditors for the year 2000. If the shareholders do not approve this appointment
by the affirmative vote of a majority of shares present in person or represented
by proxy at the meeting, other independent auditors will be considered by the
Board.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the meeting and will have the opportunity to make a statement if the
representative desires to do so. The representative is also expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSALS OF SHAREHOLDERS
It is currently contemplated that the Company's 2001 Annual Meeting of
Shareholders will be held on May 3, 2001. In order to be set forth in the
Company's Proxy Statement for such meeting, shareholder proposals must be
received by the President of the Company at One Bala Plaza, Suite 100, Bala
Cynwyd, Pennsylvania 19004, no later than December 11, 2000.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
PHILADELPHIA CONSOLIDATED HOLDING CORP.
The undersigned shareholder hereby appoints James J. Maguire and Craig P.
Keller, or either one of them, the proxies of the undersigned, with full
power of substitution, to vote all the shares of common stock of
Philadelphia Consolidated Holding Corp. standing in the name of the
undersigned at the close of business on April 7, 2000 at the Annual
Meeting of Shareholders of the Company to be held on Thursday, May 4, 2000
at 10:00 a.m. EDT and at any and all adjournments thereof, with all the
powers the undersigned would possess if the undersigned were present.
The undersigned shareholder instructs the proxies to vote as specified on
this proxy on the matters described in the Company's Proxy Statement dated
April 10, 2000. Proxies will be voted as instructed.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE COMPANY'S NOMINEES AS DIRECTORS (INCLUDING THE ELECTION OF ANY PERSON
TO THE BOARD OF DIRECTORS WHERE A NOMINEE NAMED IN THE PROXY STATEMENT IS
UNABLE OR WILL NOT SERVE); FOR THE APPROVAL OF AN AMENDMENT TO THE
EMPLOYEE STOCK PURCHASE PLAN; AND FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
BY EXECUTION OF THIS PROXY, THE UNDERSIGNED SHAREHOLDER CONFERS UPON THE
ABOVE-APPOINTED PROXIES THE DISCRETIONARY AUTHORITY TO VOTE UPON ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of the Proxy Statement and Notice of
said meeting, both dated April 10, 2000, and the Company's 1999 Annual
Report to Shareholders.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
17
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
PHILADELPHIA CONSOLIDATED HOLDING CORP.
MAY 4, 2000
+ Please Detach and Mail in the Envelope Provided +
[x] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. ELECTION OF FOR WITHHELD
DIRECTORS. [ ] [ ]
For, except vote withheld from the following nominee(s):
NOMINEES: William J. Henrich, Jr.
Paul R. Hertel, Jr.
Roger L. Larson
James J. Maguire, Sr.
James J. Maguire, Jr.
Thomas J. McHugh
Michael J. Morris
Dirk A. Stuurop
Sean S. Sweeney
J. Eustace Wolfington
2. EMPLOYEE STOCK PURCHASE PLAN: Amendment to FOR AGAINST ABSTAIN
the Employee Stock Purchase Plan. [ ] [ ] [ ]
3. APPOINTMENT OF INDEPENDENT AUDITORS:
Appointment of PricewaterhouseCoopers LLP as FOR AGAINST ABSTAIN
independent auditors for the fiscal year [ ] [ ] [ ]
ending December 31, 2000.
THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THIS PROXY SHALL BE VALID AND MAY BE
VOTED WHETHER OR NOT THE SHAREHOLDER'S NAME IS SET FORTH BELOW OR A SEAL IS
AFFIXED OR THE DESCRIPTION, AUTHORITY OR CAPACITY OF THE PERSON SIGNING IS GIVEN
OR OTHER DEFECT OF SIGNATURE EXISTS.
Signature of Shareholder(s)_______________________________ DATE___________ 2000
NOTE: Please sign your name exactly as it appears hereon. When signing as
attorney-in-fact, executor, administrator, trustee, or guardian, please
add your title as such, and if signer is a corporation, please sign
with full corporate name by duly authorized officer or officers and
affix the corporate seal. Where stock is issued in the name of two or
more persons, all such persons should sign.