<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
Pennsylvania Manufacturers Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
PENNSYLVANIA MANUFACTURERS CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1998
---------------------
To the Shareholders of
PENNSYLVANIA MANUFACTURERS CORPORATION:
The Annual Meeting of Shareholders of Pennsylvania Manufacturers Corporation
(the "Company") will be held at The PMA Building, 380 Sentry Parkway, Blue
Bell, Pennsylvania 19422 on Monday, April 27, 1998, at 9 a.m., local time, for
the following purposes:
1. To elect four directors of the Class of 2001, to serve for a term of
three years and until their successors are elected; and
2. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
A copy of the Company's Shareholders' Report for its fiscal year ended
December 31, 1997 is being mailed to shareholders with this notice.
Only shareholders of record at the close of business on March 12, 1998 will
be entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
Frederick W. Anton III
March 26, 1998 Chairman of the Board
- -------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND IN PERSON, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY. A
RETURN ENVELOPE REQUIRING NO POSTAGE IS ENCLOSED FOR YOUR CONVENIENCE.
- -------------------------------------------------------------------------------
<PAGE>
PENNSYLVANIA MANUFACTURERS CORPORATION
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
----------------
This Proxy Statement and form of proxy enclosed herewith, which are first
being mailed to shareholders on or about March 26, 1998, are furnished in
connection with the solicitation by the Board of Directors of Pennsylvania
Manufacturers Corporation (the "Company") of proxies to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the Company's
principal executive offices located at The PMA Building, 380 Sentry Parkway,
Blue Bell, Pennsylvania 19422 on Monday, April 27, 1998, at 9 a.m., local
time, and at any adjournments thereof.
Shares represented by proxies in the accompanying form, if properly signed
and returned, will be voted in accordance with the specifications made thereon
by the shareholders. Any proxy not specifying to the contrary will be voted
for the election of the nominees for director named in this Proxy Statement.
Any shareholder who signs and returns a proxy in the accompanying form may
revoke it at any time before it is voted by giving written notice of such
revocation to the Secretary of the Company or by attending the Annual Meeting
and voting in person.
The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing
this Proxy Statement. Such solicitation will be made by mail and may also be
made on behalf of the Company by the Company's regular officers, directors and
employees in person or by telephone or telegram. The Company, upon request
therefor, will also reimburse brokers or persons holding shares in their names
or in the names of nominees for their reasonable expenses in sending proxies
and proxy materials to beneficial owners.
Only holders of Common Stock, $5.00 par value, ("Common Stock") and Class A
Common Stock, $5.00 par value, ("Class A Common Stock") of record as of the
close of business on March 12, 1998 will be entitled to notice of and to vote
at the Annual Meeting. As of the close of business on March 12, 1998, the
Company had outstanding 14,555,342 shares of Common Stock and 9,462,690 shares
of Class A Common Stock.
On each matter to come before the Annual Meeting, each holder of Common
Stock will be entitled to cast ten votes for each share of Common Stock held,
and each holder of Class A Common Stock will be entitled to cast one vote for
each share of Class A Common Stock held. Therefore, a total of 155,016,110
votes will be entitled to be cast at the Annual Meeting.
The holders of Common Stock and Class A Common Stock representing a majority
of the votes entitled to be cast at the Annual Meeting will constitute a
quorum. The holders of Common Stock and Class A Common Stock will vote
together without regard to class on all matters presented at the Annual
Meeting. Cumulative voting rights exist with respect to the election of
directors, which means that each shareholder has the right, in person or by
proxy, to multiply the number of votes to which he is entitled by the number
of directors of the class to be elected, and to cast the whole number of such
votes for one candidate or to distribute them among two or more candidates.
The four nominees for directors of the Class of 2001 who receive the highest
number of votes cast by the holders of Common Stock and Class A Common Stock
entitled to vote, voting together without regard to class, will be elected as
directors of the Company.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth, as of February 28, 1998, except as otherwise
noted, (i) the number of shares and percentage of the Company's Common Stock
and Class A Common Stock beneficially owned by each person who is known by the
Company to own beneficially more than 5% of its outstanding Common Stock or
Class A Common Stock, and (ii) the percentage of the total number of votes
that such persons will be entitled to cast on matters submitted to the
shareholders of the Company:
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK PERCENT COMMON STOCK PERCENT
BENEFICIALLY OF BENEFICIALLY OF PERCENT OF
NAME AND ADDRESS OWNED CLASS OWNED(1) CLASS(1) TOTAL VOTES(2)
---------------- ------------ ------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C>
PMA Foundation.......... 4,561,225 31.3% 5,473,450 39.0% 30.0%
The PMA Building
380 Sentry Parkway
Blue Bell, PA 19422-
2328
Royce & Associates,
Inc.(3)................ -0- -- 1,362,511 14.4% 0.9%
1414 Avenue of the
Americas
New York, NY 10019
James F. Malone III..... 845,800 5.8% 1,344,000 13.0% 5.8%
Northridge Office Plaza
117 VIP Drive, Suite
310
Wexford, PA 15090
Edward H. Owlett........ 788,160(4) 5.4% 950,200(4) 9.3% 5.2%
One Charles Street
Wellsboro, PA 16901
John W. Miller, Jr...... 549,750 3.8% 649,000 6.5% 3.6%
1655 Crooked Oak Drive
Lancaster, PA 17601-
4299
Frederick W. Anton III.. 156,129 1.1% 560,884(5) 5.7% 1.1%
The PMA Building
380 Sentry Parkway
Blue Bell, PA 19422-
2328
John W. Smithson........ 195,000 1.3% 603,913(6) 6.1% 1.3%
The PMA Building
380 Sentry Parkway
Blue Bell, PA 19422-
2328
</TABLE>
- --------
(1) These columns reflect the shares of Class A Common Stock issuable upon
conversion of the shares of Common Stock, each of which is convertible
into one share of Class A Common Stock.
(2) This column sets forth the percentage of votes entitled to be cast by such
persons on matters submitted to shareholders for a vote on the basis of
ten votes per share of Common Stock and one vote per share of Class A
Common Stock. The calculation does not reflect any conversions of current
holdings of Common Stock into Class A Common Stock. The calculation of
these percentages also does not include shares of Class A Common Stock
issuable upon exercise of currently exercisable stock options held by such
persons under the Company's equity incentive plans.
(3) Information provided by Royce & Associates, Inc. as of December 31, 1997.
(4) Includes: (i) 385,200 shares of Common Stock and 9,500 shares of Class A
Common Stock held in certain Owlett family trusts, of which Mr. Owlett
shares voting and dispositive power with Citizens & Northern Bank with
respect to 47,500 of such shares of Common Stock and 9,500 of such shares
of Class A Common Stock; (ii) 20,660 shares of Common Stock and 7,840
shares of Class A Common Stock held by Mr. Owlett's wife, and Mr. Owlett
disclaims beneficial ownership of the shares held by his wife. Also
includes
2
<PAGE>
152,250 shares of Common Stock and 30,450 shares of Class A Common Stock
held in certain trusts for which Mr. Owlett serves as trustee, and Mr.
Owlett disclaims beneficial ownership of the shares held in these trusts.
(5) Includes options to purchase 267,016 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(6) Includes options to purchase 322,518 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of February 28, 1998, (i) the number of
shares and percentage of the Company's Common Stock and Class A Common Stock
beneficially owned by (a) each director and each nominee for director, (b)
each executive officer named in the Summary Compensation Table and (c) all
executive officers and directors of the Company as a group, and (ii) the
respective percentage of the total number of votes that such persons and group
will be entitled to cast on matters submitted to the shareholders of the
Company:
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK
NAME OF INDIVIDUAL BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF PERCENT OF
OR IDENTITY OF GROUP OWNED(1) CLASS(2) OWNED(1)(3) CLASS(2)(3) TOTAL VOTES(2)(4)
- -------------------- ------------ ---------- ------------ ----------- -----------------
<S> <C> <C> <C> <C> <C>
Frederick W. Anton III.. 156,129 1.1% 560,884(5) 5.7% 1.1%
Paul I. Detwiler, Jr.... 72,750(6) 83,175(6)
Joseph H. Foster........ -- 17,025
Anne S. Genter.......... 500 2,700
James F. Malone III..... 845,800 5.8% 1,344,000 13.0% 5.8%
A. John May............. 257,200(7) 1.8% 323,400(7) 3.3% 1.7%
Louis N. McCarter III... -- 33,575(8)
John W. Miller, Jr. .... 549,750 3.8% 649,000 6.5% 3.6%
Edward H. Owlett........ 788,160(9) 5.4% 950,200(9) 9.3% 5.2%
Louis I. Pollock........ 308,125(10) 2.1% 367,350(10) 3.8% 2.0%
Roderic H. Ross......... 3,500 6,050
L.J. Rowell, Jr. ....... 1 1,001
John W. Smithson........ 195,000 1.3% 603,913(11) 6.1% 1.3%
Stephen G. Tirney....... 106,375 258,565(12) 2.7%
Vincent T. Donnelly..... 1,125 92,190(13) 1.0%
Ronald S. Austin........ -- 24,230(14)
All executive officers
and directors
as a group (17 per-
sons).................. 3,284,415 22.6% 5,385,723(15) 39.6% 22.0%
</TABLE>
- --------
(1) Certain directors are shareholders, directors and/or officers of
organizations that are members of PMA Foundation (the "Foundation"),
formerly known as Pennsylvania Manufacturers' Association. As of February
28, 1998, the Foundation owned 4,561,225 shares of Common Stock and
912,225 shares of Class A Common Stock, which entitle the Foundation to
cast approximately 30.0% of the total number of votes that will be
entitled to be cast on matters submitted to the shareholders of the
Company. Certain directors and officers of the Company are also trustees
and officers of the Foundation. Also, certain officers of the Company are
trustees of the Pennsylvania Manufacturers Corporation Pension Plan (the
"Pension Plan"), and certain directors and officers of the Company are
directors and/or officers of Pennsylvania Manufacturers' Association,
Northeast Branch ("NE Branch"). As of February 28, 1998, the Pension Plan
owned 249,000 shares of Common Stock, and NE Branch owned 70,500 shares of
Common Stock and 14,100 shares of Class A Common Stock.
(2) Less than 1% unless otherwise indicated.
(3) These columns reflect the shares of Class A Common Stock issuable upon
conversion of the shares of Common Stock, each of which is currently
convertible into one share of Class A Common Stock.
3
<PAGE>
- --------
(4) This column sets forth the percentage of votes entitled to be cast by such
persons on matters submitted to shareholders for a vote on the basis of
ten votes per share of Common Stock and one vote per share of Class A
Common Stock. The calculation does not reflect any conversions of shares
of Common Stock into Class A Common Stock. The calculation of these
percentages also does not include shares of Class A Common Stock issuable
upon exercise of currently exercisable stock options held by such persons
under the Company's equity incentive plans.
(5) Includes options to purchase 267,016 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(6) Includes 1,000 shares of Class A Common Stock owned jointly by Mr.
Detwiler and his wife and 9,375 shares of Common Stock and 2,500 shares of
Class A Common Stock owned by one of Mr. Detwiler's children who resides
in his household.
(7) Includes 11,250 shares of Common Stock and 2,650 shares of Class A Common
Stock owned jointly by Mr. May and his wife; 1,550 shares of Class A
Common Stock owned by Mr. May's wife as custodian for their minor
grandchildren; and 17,250 shares of Class A Common Stock held by a
partnership of which Mr. May is a general partner.
(8) These shares are owned jointly by Mr. McCarter and his wife.
(9) Includes: (i) 385,200 shares of Common Stock and 9,500 shares of Class A
Common Stock held in certain Owlett family trusts, of which Mr. Owlett
shares voting and dispositive power with Citizens & Northern Bank with
respect to 47,500 of such shares of common Stock and 9,500 of such shares
of Class A Common Stock; and (ii) 20,660 shares of Common Stock and 7,840
shares of Class A Common Stock held by Mr. Owlett's wife, and Mr. Owlett
disclaims beneficial ownership of the shares held by his wife. Also
includes 152,250 shares of Common Stock and 30,450 shares of Class A
Common Stock held in certain trusts for which Mr. Owlett serves as
trustee, and Mr. Owlett disclaims beneficial ownership of the shares held
in these trusts.
(10) Includes 164,375 shares of Common Stock and 31,625 shares of Class A
Common Stock held by Mr. Pollock's wife and 100 shares of Class A Common
Stock owned jointly by Mr. Pollock and his wife.
(11) Includes options to purchase 322,518 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(12) Includes options to purchase 125,315 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(13) Includes options to purchase 85,065 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(14) Includes options to purchase 4,875 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(15) Includes options to purchase 845,569 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
4
<PAGE>
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the officers and directors of a corporation, such as the
Company, which has a class of equity securities registered under Section 12 of
the Exchange Act, as well as persons who own more than 10% of a class of
equity securities of such a corporation, file reports of their ownership of
such securities, as well as monthly statements of changes in such ownership,
with the corporation and the Securities and Exchange Commission. Based upon
written representations received by the Company from its officers and
directors, and the Company's review of monthly ownership changes filed within
the Company by its officers and directors during 1997, the Company believes
that all such filings required during 1997 were made on a timely basis, except
that Mr. McCarter inadvertently filed one report late relating to a conversion
of shares of Common Stock into Class A Common Stock.
ELECTION OF DIRECTORS
The Company's Board of Directors consists of 13 members. Each director is
elected for a three-year term and until his successor has been duly elected.
The current three-year terms of the Company's directors expire in the years
1998, 1999 and 2000.
Four directors of the Class of 2001 are to be elected at the Annual Meeting.
Unless otherwise instructed, proxy holders will vote the proxies received by
them for the election of the nominees named below. All of the nominees are
currently directors of the Company. If any nominee becomes unavailable for any
reason, it is intended that the proxies will be voted for a substitute nominee
selected by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees named will be unable to serve if elected. Any
vacancy occurring on the Board of Directors for any reason may be filled by
the Board of Directors for the unexpired term. The four nominees for Class of
2001 directors receiving the highest number of votes cast at the Annual
Meeting will be elected as directors. Votes withheld and broker non-votes are
not counted toward a nominee's total.
5
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE
NOMINEES IDENTIFIED BELOW.
The names of the nominees for directors of the Class of 2001, and the
directors of the Classes of 1999 and 2000 who will continue in office after
the Annual Meeting until the expiration of their respective terms, together
with certain information regarding them, are as follows:
NOMINEES FOR DIRECTORS OF THE CLASS OF 2001
<TABLE>
<CAPTION>
DIRECTOR YEAR TERM WILL
NAME AGE SINCE EXPIRE IF ELECTED
---- --- -------- -----------------
<S> <C> <C> <C>
Louis N. McCarter III..................... 69 1975 2001
John W. Miller, Jr. ...................... 63 1988 2001
Edward H. Owlett.......................... 71 1964 2001
Louis I. Pollock.......................... 68 1984 2001
</TABLE>
DIRECTORS CONTINUING IN OFFICE
CLASS OF 1999
<TABLE>
<CAPTION>
DIRECTOR YEAR TERM
NAME AGE SINCE WILL EXPIRE
---- --- -------- ------------
<S> <C> <C> <C>
Paul I. Detwiler, Jr. ........................ 64 1984 1999
Anne S. Genter................................ 62 1991 1999
A. John May................................... 69 1977 1999
Roderic H. Ross............................... 67 1981 1999
John W. Smithson.............................. 52 1987 1999
</TABLE>
CLASS OF 2000
<TABLE>
<CAPTION>
DIRECTOR YEAR TERM
NAME AGE SINCE WILL EXPIRE
---- --- -------- ------------
<S> <C> <C> <C>
Frederick W. Anton III........................ 64 1972 2000
Joseph H. Foster.............................. 69 1982 2000
James F. Malone III........................... 54 1974 2000
L.J. Rowell, Jr. ............................. 65 1992 2000
</TABLE>
Frederick W. Anton III has served as Chairman of the Board since 1995 and as
a director of the Company since 1972. Mr. Anton served as Chairman of the
Board and Chief Executive Officer from 1995 to May 1997, as President and
Chief Executive Officer from 1981 to 1995, as President of the Company's
Property and Casualty Group from 1972 to 1989 and as Secretary and General
Counsel of Pennsylvania Manufacturers' Association Insurance Company from 1962
to 1972.
Paul I. Detwiler, Jr. is Chairman of the Board of New Enterprise Stone &
Lime Co., a quarrying and construction company. Mr. Detwiler is also a
director of Keystone Financial, Inc.
Joseph H. Foster has been a partner of White & Williams, a law firm, since
1958.
6
<PAGE>
Anne S. Genter has served as President of Anne S. Genter Interior Design, an
interior design company, since 1975.
James F. Malone III has been a partner of Malone, Larchuk & Middleman, P.C.,
a law firm, since 1997 and from 1980 to 1997 was a partner of Dickie, McCamey
& Chilcote, P.C., a law firm.
A. John May has been a partner of Duane, Morris & Heckscher LLP, a law firm,
since 1963.
Louis N. McCarter III has been President of the McCarter Corp., a
manufacturer of specialized mixing machinery, since 1954.
John W. Miller, Jr., M.D. has been a physician and has served as President
of Ear, Nose and Throat Associates of Lancaster since 1970.
Edward H. Owlett has been a partner of Owlett, Lewis & Ginn, P.C., a law
firm, since 1981. From 1960 to 1981, Mr. Owlett served as a partner of Cox,
Wilcox, Owlett & Lewis, a law firm. Mr. Owlett is also a director of Citizens
& Northern Corporation.
Louis I. Pollock has served as President and Chief Executive Officer of
Morris Coupling Company, a manufacturer of pipe and tubing, since 1957.
Roderic H. Ross has served as Chairman of the Board and Chief Executive
Officer of Keystone State Life Insurance Company since 1985. Prior to 1985,
Mr. Ross held various positions at Philadelphia Life Insurance Company and was
an employee of Philadelphia Life Insurance Company from 1970 to 1984. Mr. Ross
is also a director of Hunt Corporation and PNC Bank Corp.
L.J. Rowell, Jr. was Chairman, President and Chief Executive Officer of
Provident Mutual Life Insurance Company from 1992 until his retirement in July
1996. Prior to 1992, Mr. Rowell held various positions at Provident Mutual
Life Insurance Company and was an employee of Provident Mutual Life Insurance
Company from 1980 until July 1996.
John W. Smithson has served as President and Chief Executive Officer of the
Company since May 1997, and as a director of the Company since 1987. Mr.
Smithson served as President and Chief Operating Officer of the Company from
1995 to May 1997, as Chairman and Chief Executive Officer of PMA Reinsurance
Corporation ("PMA Re") from 1984 to 1997, as Chairman and Chief Executive
Officer of the Company's Property and Casualty Group since April 1995 and as
Chairman and Chief Executive Officer of Caliber One Management Company since
April 1997, and was employed by Pennsylvania Manufacturers' Association
Insurance Company from 1972 to 1984. Mr. Smithson is a designated Chartered
Property-Casualty Underwriter.
7
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times in 1997. The Board of Directors has
Executive and Finance Committees, an Audit Committee, a Nominating Committee
and a Compensation and Stock Option Committee. During 1997, no director
attended fewer than 75% of the total number of meetings of the Board of
Directors and all committees on which such directors served, except for L.J.
Rowell, Jr. who attended three of five meetings of the Board of Directors and
did not attend the one Audit Committee meeting.
The Executive and Finance Committees met seven times in 1997. Messrs. Anton,
Malone, May, McCarter, Miller, Owlett and Smithson are the members of the
Executive and Finance Committees. The Executive and Finance Committees have
the authority to take all action that may be taken by the full Board of
Directors, consistent with Pennsylvania law, between Board of Directors'
meetings.
The Audit Committee of the Company consists of Messrs. Owlett, Pollock and
Rowell. The Audit Committee, which met one time in 1997, reviews audit reports
and management recommendations made by the Company's outside auditing firm.
The Nominating Committee of the Company consists of Messrs. Malone, May,
Miller and Owlett. The Nominating Committee, which met one time in 1997, is
responsible for nomination of candidates to stand for election to the Board of
Directors at the Annual Meeting and the nomination of candidates to fill
vacancies on the Board of Directors between meetings of shareholders. The
Nominating Committee will consider nominations for directors from shareholders
to the extent such nominations are made in accordance with the Company's
Bylaws. Under the Company's Bylaws, every director is required to be a
shareholder of the Company, and no person may be considered as a candidate,
and no votes may be counted for any person, unless written notice of such
person's nomination or candidacy shall have been filed with the Secretary of
the Company not less than 60 days prior to the date of the election; provided,
however, that current directors whose terms will expire at the upcoming
election and nominees selected by the Board of Directors or the Nominating
Committee thereof may be candidates and voted for without such notice.
During 1997, the Compensation and Stock Option Committee of the Company
consisted of Messrs. Malone, May and Owlett. The Compensation and Stock Option
Committee met three times in 1997 to review and recommend compensation plans,
approve certain compensation changes and grant options under and determine
participants in the Company's equity incentive plans. The current Compensation
and Stock Option Committee of the Company consists of Messrs. Miller, Owlett
and Rowell.
DIRECTOR COMPENSATION
In addition to expenses of attendance, which are paid to all directors,
directors of the Company who are not also employees of the Company are paid an
annual retainer of $7,000 for their services and a fee of $300 for each Board
of Directors meeting attended. A non-employee director who serves on the
Executive and Finance Committees receives a $2,000 annual retainer and a fee
of $600 for each Executive and Finance Committees meeting attended. A non-
employee director who serves on the Audit Committee receives a $1,000 annual
retainer and a fee of $300 for each Audit Committee meeting attended.
8
<PAGE>
INFORMATION REGARDING MANAGEMENT
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during the two fiscal years ended
December 31, 1997 to the chief executive officer of the Company and the four
most highly compensated executive officers of the Company and its principal
subsidiaries whose compensation exceeded $100,000 in the fiscal year ended
December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
------------------ ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Frederick W. Anton
III(1)................. 1997 $700,000 -- -- -- $49,160(1)
Chairman of the Board 1996 700,311 -- -- 75,000 71,198
John W. Smithson(2)..... 1997 $692,115 $350,000 -- 40,000 $45,626(2)
President and Chief
Executive 1996 675,440 330,000 -- 75,000 55,765
Officer
Stephen G. Tirney(3).... 1997 $362,428 $100,000 -- 19,500 $18,112(3)
President and Chief
Operating 1996 315,544 -- -- 25,000 32,466
Officer of PMA Re
Vincent T. Donnelly(4).. 1997 $329,511 $100,000 -- 19,500 $16,475(4)
President and Chief Op-
erating Officer of the
Property and
Casualty Group
Ronald S. Austin(5)..... 1997 $219,358 $150,000 -- 19,500 $10,626(5)
President and Chief
Operating Officer of
Caliber One Management
Company
</TABLE>
9
<PAGE>
(1) On May 7, 1997, Mr. Anton was elected Chairman of the Board of the
Company. This amount includes Company contributions to the Company's non-
qualified defined contribution plan of $27,000, Company contributions to
the Company's 401(k) plan of $1,846 and $20,314 of life insurance premiums
paid by the Company.
(2) On May 7, 1997, Mr. Smithson was elected President and Chief Executive
Officer of the Company. This amount includes Company contributions to the
Company's non-qualified defined contribution plan of $26,593, Company
contributions to the Company's 401(k) plan of $8,000 and $11,033 of life
insurance premiums paid by the Company.
(3) Mr. Tirney was appointed President and Chief Operating Officer of PMA Re
in February 1997. This amount represents Company contributions to the
Company's 401(k) plan of $8,000 and Company contributions to the Company's
non-qualified defined contribution plan of $10,112.
(4) Mr. Donnelly was appointed President and Chief Operating Officer of the
Property and Casualty Group in February 1997. This amount includes Company
contributions to the Company's non-qualified defined contribution plan of
$8,475 and Company contributions to the Company's 401(k) plan of $8,000.
(5) Mr. Austin was appointed President and Chief Operating Officer of Caliber
One Management Company, the Company's specialty insurance operation, in
April 1997. This amount includes Company contributions to the Company's
non-qualified defined contribution plan of $5,395 and Company
contributions to the Company's 401(k) plan of $5,231.
The following table sets forth certain information with respect to options
to purchase shares of Class A Common Stock granted to the persons named in the
Summary Compensation Table during the fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE POTENTIAL REALIZABLE VALUE AT ASSUMED
OPTIONS EMPLOYEES IN PRICE EXPIRATION ANNUAL RATES OF STOCK PRICE APPRECIATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE FOR OPTION TERM
- ---- ------------- ------------ --------- ---------- ------------------------------------------
5% ($) 10% ($)
------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Frederick W. Anton III.. -- -- -- -- -- --
John W. Smithson........ 40,000(2) 12.3% $17.00 9/3/07 $ 333,987 $ 934,605
Stephen G. Tirney....... 19,500(3) 6.0% 17.00 9/3/07 162,819 455,620
Vincent T. Donnelly..... 19,500(3) 6.0% 17.00 9/3/07 162,819 455,620
Ronald S. Austin........ 19,500(4) 6.0% 17.00 9/3/07 162,819 455,620
</TABLE>
- --------
(1) All of the options in the above table represent options to purchase the
Company's Class A Common Stock under the 1996 Equity Incentive Plan. The
fair market value of the Company's Class A Common Stock on September 3,
1997 was $15.5625 per share.
(2) These options vest as follows: (i) 34,118 shares on March 4, 1998; and
(ii) 5,882 shares on January 2, 2001.
(3) These options vest as follows: (i) 4,540 shares on March 4, 1998; (ii)
installments of 4,539 shares each on January 2, 1999 and 2000,
respectively; and (iii) 5,882 shares on January 2, 2001.
(4) These options vest as follows: (i) 4,875 shares on September 30, 1997; and
(ii) installments of 4,875 shares each on September 30, 1998, 1999 and
2000, respectively.
10
<PAGE>
The following table sets forth information with respect to options to
purchase shares of Class A Common Stock exercised by the persons named in the
Summary Compensation Table during the fiscal year ended December 31, 1997 and
options held by such persons at December 31, 1997.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(2)
------------------------------- -------------------------
SHARES
ACQUIRED ON VALUE
EXERCISE(#) REALIZED(1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE UNEXERCISABLE
----------- ----------- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frederick W. Anton III.. 44,838 $305,465 305,422 21,500 $1,046,313 $65,625
John W. Smithson........ 29,700 282,150 282,600 57,400 993,750 --
Stephen G. Tirney....... 7,150 67,925 114,975 44,025 555,156 6,219
Vincent T. Donnelly..... 6,000 33,000 74,725 43,775 274,669 5,781
Ronald S. Austin........ -- -- 4,875 14,625 -- --
</TABLE>
- --------
(1) Represents the difference between the aggregate exercise price and the
aggregate market value as of the date of exercise.
(2) Represents the difference between the aggregate exercise price and the
aggregate market value as of December 31, 1997.
Pension Plans
Under The PMC Pension Plan and The PMC Supplemental Executive Retirement
Plan, participants are entitled to benefits pursuant to the formula set forth
under such plans, without regard to the limits under Section 415 and Section
401(a)(17) of the Internal Revenue Code of 1986. The benefit is based upon the
accrued pension benefit for the participant at December 31, 1992 plus annual
accruals beginning January 1, 1993 equal to the sum of (i) 1.5% of the
participant's compensation for the applicable benefit year, consisting of
wages and commissions but excluding bonus, severance payments or other
supplementary payments, plus (ii) .3% of the participant's covered
compensation, consisting of the average of the participant's taxable wage base
in effect for each calendar year during the 35-year period ending the last day
of the calendar year in which the participant attains Social Security
retirement age. A maximum of 25 years of service is considered in calculating
the annual benefit payable upon normal retirement at normal retirement age.
Based upon this formula, the estimated annual benefits payable upon normal
retirement at age 65 for each person named in the Summary Compensation Table
are as follows: (i) Mr. Anton, $158,660; (ii) Mr. Smithson, $105,448; (iii)
Mr. Tirney, $50,349; and (iv) Mr. Donnelly, $40,924. Because Mr. Austin was
appointed as President of Caliber One Management Company in April 1997, he was
not a participant under these plans as of December 31, 1997. The amounts for
Mr. Anton and Mr. Smithson do not include other retirement payments that would
be provided pursuant to their respective employment agreements.
Employment Agreements
Frederick W. Anton III has an employment agreement with the Company for a
term that commenced April 1, 1995 and ends March 31, 2002, and is subject to
automatic extension for an additional period of one year for each year Mr.
Anton is elected as Chairman of the Board of the Company commencing with the
1998 organizational meeting of the Board of Directors of the Company. The
employment agreement provides for a salary of not less than $700,000, which
may be increased but not decreased by the Company at any time or from time to
time. Mr. Anton is also entitled to receive such bonus compensation as he may
be awarded from time to time. Mr. Anton has agreed during the term of the
employment agreement not to engage or have a material financial interest in
any business that competes with the business of the Company as then conducted.
In the event
11
<PAGE>
of Mr. Anton's death during the term of the agreement, Mr. Anton's survivors
are entitled to an annual payment of 60% of Mr. Anton's annual salary on the
date of his death for a period of 10 years. If Mr. Anton retires at any time
after April 1, 1996, Mr. Anton would be entitled to receive monthly payments
equal to 5% of his annual salary on the date of his retirement and continuing
throughout his lifetime. If, during his retirement and prior to his death, the
total payments made during retirement are less than 60% of his annual salary
at retirement multiplied by 15, the difference is to be paid to his survivors
within one year of the date of his death. Under the agreement, the Company is
required to maintain a split-dollar life insurance policy in the face amount
of $1,000,000 on the life of Mr. Anton.
John W. Smithson has an employment agreement with the Company for a term
that commenced April 1, 1995 and currently ends March 31, 2000, and is subject
to automatic extension for an additional period of one year for each year Mr.
Smithson is elected President of the Company commencing with the 1998
organizational meeting of the Board of Directors of the Company. The
employment agreement provides for a salary of not less than $670,000 per year,
which may be increased but not decreased at the discretion of the Company at
any time or from time to time. Mr. Smithson is also entitled to receive such
bonus compensation as he may be awarded from time to time. Mr. Smithson has
agreed during the term of the employment agreement not to engage in or have a
material financial interest in any business that competes with the Company as
then conducted. In the event of Mr. Smithson's death during the term of the
agreement, Mr. Smithson's survivors are entitled to 180 consecutive monthly
payments of an amount equal to 25% of Mr. Smithson's monthly salary as of the
date of his death, reduced by the amount of any similar payments for
disability paid to Mr. Smithson during his lifetime in the event Mr. Smithson
becomes disabled during the employment term. Under the agreement, the Company
is required to maintain a split-dollar life insurance policy in the face
amount of $1,000,000 on the life of Mr. Smithson.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors constitute the current members of the Compensation
Committee of the Board of Directors: John W. Miller, Jr., L.J. Rowell, Jr. and
Edward H. Owlett. During 1997, James F. Malone III, A. John May and Edward H.
Owlett served as members of the Compensation Committee. Mr. Malone, Mr. May
and Mr. Owlett are or have been members of law firms that furnished legal
representation to the Company and its subsidiaries during 1997. In the opinion
of the Company's management, the amounts paid to such firms represented
reasonable charges for the services rendered and were as fair as the charges
would have been had such services been furnished by law firms unaffiliated
with any of the directors.
REPORT OF THE COMPENSATION COMMITTEE ON THE COMPENSATION OF EXECUTIVE OFFICERS
OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 1997
The Compensation Committee of the Board of Directors makes decisions
regarding the aggregate compensation of the Company's executive officers
consisting of base salary, cash bonuses and stock option awards. In 1997, the
Compensation Committee consisted of James F. Malone III, A. John May and
Edward H. Owlett, none of whom are employees of the Company or its
subsidiaries.
In 1997, the Compensation Committee met three times to review and approve
the Company's compensation program for senior executive employees. The
Compensation Committee also independently administered the stock option plans
of the Company.
The Compensation Committee has implemented compensation policies that are
intended to support the Company's overall objective of enhancing value for our
shareholders. All of the compensation policies are designed to align executive
compensation with the Company's long-term business objectives and performance
of the Company and to enable the Company to attract, retain and reward
executive officers whose leadership and contributions are essential to the
Company's long-term success. In order to achieve these objectives, the
Company's compensation program for executive officers is based on the
following principles:
12
<PAGE>
. The Company pays base salary to executive officers that is reasonably
competitive with comparable United States insurance and reinsurance
companies.
. The Company rewards executives for their leadership, strategic
management, corporate performance and individual performance through
discretionary cash bonuses.
. The Company seeks to provide additional incentive to executive officers
and to align their interests with the long-term interests of shareholders
through the granting of stock options.
. The Company seeks to compensate its executive officers on an equitable
basis, taking into consideration each individual's degree of
responsibility and contribution to the achievement of the Company's
overall objectives.
In 1997, compensation for the Company's executive officers consisted of
three key elements: base salary and benefits, discretionary annual cash bonus
and stock-based compensation. The Compensation Committee evaluated and
determined each element separately and collectively to ensure that the
executive officers were appropriately compensated in a manner that satisfies
the basic compensation principles described above. During 1997, the
Compensation Committee engaged an independent compensation consultant to
assist in evaluating the competitiveness of the Company's executive
compensation program to compensation paid by 18 peer companies in the
property-casualty insurance and reinsurance industries and a broader group of
insurance companies included in three published surveys.
Base Salary
In 1997, the President of the Company recommended to the Committee a base
salary for the executive officers, other than himself and the Chairman of the
Board. The base salary for each executive officer is set on the basis of the
Compensation Committee's evaluation of each executive officer's value to the
Company and with reference to the base salary levels in effect for comparable
positions in the reinsurance or property casualty industry, which is further
subject to adjustment based upon an executive's experience and performance.
Based upon its review of the companies it surveyed, the Compensation Committee
concluded that the base salaries that had been paid to the Company's executive
officers were generally below the competitive level of salaries paid by other
companies. Therefore, the Compensation Committee made appropriate adjustments
to the base salary paid to executive officers in order to be reasonably
competitive with the peer companies it surveyed.
Cash Bonus
Prior to 1997, the Company had not awarded any cash bonuses to its executive
officers other than Mr. Smithson. In 1997, Mr. Smithson recommended that a
cash bonus be paid to each of the Presidents of PMA Re and the Property and
Casualty Group and the Company's Chief Financial Officer based upon their
individual achievements for the year ended December 31, 1996 and their
contributions to the long-range objectives of the Company. The Compensation
Committee approved a cash bonus of $100,000 to Mr. Tirney, President of PMA
Re, in recognition of PMA Re's underwriting results, contribution to the
Company's net income, and growth in premiums for the year ended December 31,
1996. The Compensation Committee approved a cash bonus of $100,000 to Mr.
Donnelly, President of the Property and Casualty Group, in recognition of his
efforts during 1996 to focus the activities of the Property and Casualty Group
as a speciality workers' compensation carrier, and to institute measures to
reduce its operating expenses and improve its contribution to the Company's
net income. The Compensation Committee approved a $50,000 cash bonus to
Francis W. McDonnell, the Company's Chief Financial Officer, in recognition of
his role in restructuring the Company's credit facilities and holding company
operations. The Compensation Committee also approved a $250,000 employment
incentive cash bonus to Ronald S. Austin, President of Caliber One Management
Company, the Company's newly-established specialty insurance operation payable
in two installments of $150,000 in 1997 and $100,000 in 1998.
13
<PAGE>
Stock Options
The Compensation Committee administers the Company's stock option plans
which provide for the issuance of options to purchase up to an aggregate of
3,864,903 shares of Class A Common Stock, of which options to purchase
3,117,612 shares of Class A Common Stock were outstanding as of December 31,
1997. All of the Company's stock option plans have been previously approved by
the Company's Board of Directors and shareholders. The primary purpose of the
stock option plans is to provide additional incentive to executive officers
and other key employees to further the growth, development and financial
success of the Company and to align the option recipients' interests with
those of the Company's shareholders. The Compensation Committee has a policy
of considering annual grants under the stock option plans to executive
officers. In 1997, the Compensation Committee granted options to purchase
324,500 shares of the Class A Common Stock to key employees of the Company, of
which 118,000 options were granted to executive officers. In making grants,
the Compensation Committee considered the number of options remaining
available for grant under the stock option plans, the aggregate amount of
options previously granted and the amount of options previously granted to
each of the executive officers. All of the options granted in 1997 to the
executive officers were at exercise prices in excess of the fair market value
of the Class A Common Stock on the date of grant.
Compliance with Internal Revenue Code Section 162(m)
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 and the four other most highly compensated
executive officers. However, qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are met. The Company
believes that Section 162(m) will not have any effect on the deductibility of
compensation of the executive officers named in the Summary Compensation Table
for 1997. The policy of the Compensation Committee is to structure the
compensation of the Company's executive officers to avoid the loss of
deductibility for any compensation, although Section 162(m) will not preclude
the Compensation Committee from awarding compensation in excess of $1 million
if it should be warranted in the future.
Compensation of the Chief Executive Officer
In May 1997, Mr. Smithson, previously President and Chief Operating Officer
of the Company since 1995, became President and Chief Executive Officer of the
Company. Mr. Anton, the previous Chief Executive Officer of the Company,
continues to serve as the Chairman of the Board of the Company.
Mr. Anton's base salary of $700,000 was determined in accordance with the
minimum specified in his employment contract, which currently expires March
31, 2002, and is subject to automatic one-year extensions if Mr. Anton is re-
elected Chairman of the Board of the Company at each annual organizational
meeting of the Board of Directors. Mr. Anton did not receive any bonus or
stock option awards in 1997.
Mr. Smithson has an employment contract with the Company which currently
expires March 31, 2000, and is subject to automatic one-year extensions if Mr.
Smithson is re-elected President of the Company at each annual organizational
meeting of the Board of Directors. The contract requires the Company to pay
Mr. Smithson a salary of not less than $670,000 per year. During 1997, the
Compensation Committee recommended to the Board of Directors, and the Board of
Directors approved, the payment of a base salary at an annual rate of $700,150
to Mr. Smithson. In establishing the base salary for Mr. Smithson, the
Compensation Committee used the same criteria as for the other executive
officers. The Compensation Committee determined Mr. Smithson's base salary
based upon its evaluation of his long-term contribution to the Company, his
strategic leadership, his stature in the insurance industry and his ongoing
value to the Company and its shareholders. The amount of base salary paid to
Mr. Smithson in 1997 was reasonably competitive with the base salaries paid to
the chief executive officers of the peer companies surveyed by the
Compensation Committee.
In 1997, Mr. Smithson received a cash bonus of $350,000 in recognition of
his leadership of the Company, the continuing development of the Company's
reinsurance business, the restructuring of the Property and
14
<PAGE>
Casualty Group, Mr. Smithson's commitment to the Company and in order to bring
Mr. Smithson's total cash compensation to a competitive level for comparable
positions in the survey of companies reviewed by the Compensation Committee.
The Compensation Committee also approved the award to Mr. Smithson of options
to purchase 40,000 shares of Class A Common Stock pursuant to the 1996 Equity
Incentive Plan at an exercise price of $17.00 per share, which was in excess of
the fair market value of the Class A Common Stock on the date of grant.
James F. Malone III
A. John May
Edward H. Owlett
COMPARISON OF TOTAL RETURN ON THE COMPANY'S CLASS A COMMON STOCK WITH CERTAIN
INDICES
The following graph provides an indicator of cumulative total shareholder
return on the Company's Class A Common Stock since July 31, 1997 compared with
the cumulative total return of the Standard & Poor's 500 Stock Index (the "S&P
500") and the Standard & Poor's Property/Casualty Insurance Index (the "S&P
P/C") for the same period, and assumes that with respect to the Company's Class
A Common Stock, the S&P 500 and the S&P P/C, $100 was invested on July 31, 1997
and all dividends were reinvested.
LOGO
<TABLE>
<CAPTION>
MONTHS ENDED
--------------------------------------------------
7/31/97 8/31/97 9/30/97 10/31/97 11/30/97 12/31/97
------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
S&P 500...................... 100 94.40 99.57 96.25 100.70 102.43
S&P P/C...................... 100 93.58 101.54 100.69 102.07 108.49
The Company.................. 100 98.80 109.01 115.47 115.88 108.79
</TABLE>
- --------
(1) The Company's cumulative returns are based upon over-the-counter market
quotations, which reflect interdealer prices, without retail mark-up, mark-
down or commission, and may not represent actual transactions. The
Company's registration of its Class A Common Stock under the Exchange Act
became effective in August 1997, and the Class A Common Stock commenced
trading on the Nasdaq National Market on February 5, 1998.
15
<PAGE>
CERTAIN TRANSACTIONS
The Company's largest shareholder is PMA Foundation (the "Foundation"),
formerly known as Pennsylvania Manufacturers' Association, which is a not-for-
profit corporation qualified under Section 501(c)(6) of the Internal Revenue
Code and whose purposes include the promotion of the common business interests
of its members and the economic prosperity of the Commonwealth of
Pennsylvania. As of February 28, 1998, the Foundation owned 4,561,225 shares
of Common Stock, and 912,225 shares of Class A Common Stock, which entitle the
Foundation to cast 30.0% of the total number of votes available to be cast in
matters brought before the Company's shareholders. All of the members of the
Company's Board of Directors currently serve as the members of the
Foundation's Board of Trustees. Also, Frederick W. Anton III, Chairman and
former Chief Executive Officer of the Company, serves as President and Chief
Executive Officer of the Foundation. The Company and certain of its
subsidiaries provide certain administrative services to the Foundation for
which the Company and its affiliates receive reimbursement. Total
reimbursements in 1997 amounted to $34,000. The Foundation also leases its
Harrisburg, Pennsylvania headquarters facility from a subsidiary of the
Company under a monthly operating lease presently requiring rent payments of
$20,000 per month and reimburses a subsidiary of the Company for its use of
office space in the Blue Bell, Pennsylvania facility. Rent and related
reimbursements paid in 1997 to the Company's affiliates by the Foundation
amounted to $249,757.
James F. Malone III, A. John May, Edward H. Owlett and Joseph H. Foster, who
are directors of the Company, are or have been members of law firms that
furnished legal representation to the Company and its subsidiaries during
1997. In the opinion of the Company's management, the amounts paid to such
firms represented reasonable charges for the services rendered and were as
fair as the charges would have been had such services been furnished by law
firms unaffiliated with any of the directors.
The Company has provided demand loans to certain officers of the Company and
its subsidiaries, for the purpose of providing such officers with funds to
purchase Common Stock or Class A Common Stock. The loans are collateralized by
the Common Stock or the Class A Common Stock purchased by the officer and bear
interest at a rate of 6% per annum. The following table sets forth certain
information with respect to indebtedness of executive officers of the Company
during 1997 under such program:
<TABLE>
<CAPTION>
LARGEST AMOUNT BALANCE AT
EXECUTIVE OFFICER OUTSTANDING DURING PERIOD END OF PERIOD
----------------- ------------------------- -------------
<S> <C> <C>
Stephen G. Tirney.................. $220,000 $ 0
Francis W. McDonnell............... 437,813 118,588
</TABLE>
The Company has arranged an executive loan program (the "Financial Support
Program") with financial institutions, whereby such institutions will provide
prime rate personal loans to officers of the Company and its subsidiaries
collateralized by Common Stock and Class A Common Stock at a maximum 50% loan
to value ratio. The Company has agreed to purchase any loan made under the
Financial Support Program (including accrued interest and related expenses)
from the financial institution in the event that the borrower defaults on such
loan. The following table sets forth certain information with respect to
indebtedness of executive officers of the Company during 1997 under the
Financial Support Program:
<TABLE>
<CAPTION>
LARGEST AMOUNT BALANCE AT
EXECUTIVE OFFICER OUTSTANDING DURING PERIOD END OF PERIOD
----------------- ------------------------- -------------
<S> <C> <C>
John W. Smithson................... $1,319,535 $1,319,535
Stephen G. Tirney.................. 407,100 407,100
Vincent T. Donnelly................ 9,900 9,900
Francis W. McDonnell............... 488,000 488,000
</TABLE>
Subsidiaries of the Company, in the ordinary course of their business, have
had and intend to continue to have insurance transactions with directors and
officers of the Company and the various businesses with which directors and
officers of the Company are associated. Such insurance is written in
accordance with rates and terms authorized for use in the applicable
jurisdictions.
16
<PAGE>
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. has been selected as the Company's independent
accountants with respect to the year ending December 31, 1998. Representatives
of Coopers & Lybrand L.L.P. will attend the Annual Meeting and will be given
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
ANNUAL REPORT
A copy of the Company's 1997 Annual Report to Shareholders is being mailed
to the Company's shareholders with this Proxy Statement.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the provisions of the
proxy rules of the Securities and Exchange Commission, wishes to submit a
proposal for inclusion in the Company's proxy statement for its 1999 Annual
Meeting of Shareholders must deliver such proposal in writing to the Company's
Secretary at the Company's principal executive offices at The PMA Building,
380 Sentry Parkway, Blue Bell, Pennsylvania 19422, not later than November 26,
1998.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration at the Annual Meeting other than the matters described herein,
but if other matters are presented, it is the intention of the persons named
in the accompanying proxy to vote on such matters in accordance with their
judgment.
By Order of the Board of Directors,
March 26, 1998 Frederick W. Anton III
Chairman of the Board
17
<PAGE>
PENNSYLVANIA MANUFACTURERS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 27, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Frederick W. Anton III,
Edward H. Owlett and A. John May, and each or any of them, proxies of the
undersigned, with full power of substitution, to vote all of the shares of
Common Stock and Class A Common Stock of Pennsylvania Manufacturers Corporation
(the "Company") that the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Company to be held at The PMA Building, 380
Sentry Parkway, Blue Bell, Pennsylvania 19422 on Monday, April 27, 1998, at 9
a.m., local time, and at any adjournment thereof.
This proxy when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the nominees for director set forth in Item 1.
(Continued, and to be marked, dated and signed on other side)
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
<PAGE>
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends a vote FOR Item 1. WITHHELD
FOR FOR ALL
Item 1 ELECTION OF DIRECTORS - CLASS OF 2001 [_] [_]
Nominees:
Louis N. McCarter III
John W. Miller, Jr.
Edward H. Owlett
Louis I. Pollock
WITHHELD FOR: (Write that nominee's name in the space
provided below.)
- -----------------------------------------------------
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting and any adjournments thereof.
Dated:___________________________________________________________________, 1998
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Signature
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
