SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 2000
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PMA Capital Corporation
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(Exact name of registrant as specified in its charter)
Pennsylvania 000-22761 23-2217932
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1735 Market Street, Suite 2800
Philadelphia, Pennsylvania 19103-7590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 665-5046
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Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
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A. This Current Report on Form 8-K is being filed to update the Company's
registration statements on Forms S-8 (File No. 333-45949, File No. 333-68855 and
File No. 333-77111) to cover Rights to Purchase Series A Junior Participating
Preferred Stock ("Rights"), which will attach to the shares of Class A Common
Stock registered under the above-referenced Registration Statements. The Rights
are being distributed in connection with the adoption on May 3, 2000 by the
Registrant's Board of Directors of a shareholder rights plan and declaration of
a dividend of one preferred share purchase right for each outstanding share of
Class A Common Stock of the Company. The dividend is payable to the shareholders
of record as of 5:00 p.m. (Eastern Time), on May 22, 2000.
B. This Current Report on Form 8-K is also being filed to include as Exhibit 99
a letter to the Company's shareholders announcing the adoption of the
Shareholder Rights Plan.
Item 7. Financial Statements and Exhibits.
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(c) The exhibits accompanying this report are listed in the Index to
Exhibits on the following page.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PMA Capital Corporation
Date: May 22, 2000 By: /s/ Francis W. McDonnell
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Francis W. McDonnell
Senior Vice President, Chief Financial
Officer and Treasurer
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Index to Exhibits
Number Description Method of Filing
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99 President's Letter to Shareholders Filed herewith.
and Summary of Rights to Purchase
Preferred Shares.
EXHIBIT 99
[PMA Capital Corporation Letterhead]
May 22, 2000
Dear PMA Capital Shareholder:
On May 3, 2000, your Board of Directors adopted a shareholder
rights plan. For your convenience, we have enclosed a summary description of the
principal features of the plan.
The plan is intended to protect your interests in the event the Company
is ever confronted in the future with coercive or unfair takeover tactics.
The plan has not been adopted in response to any current takeover plan
and the Board is not aware of any such effort. The plan contains provisions to
safeguard you in the event of an unsolicited offer to acquire the Company,
whether through a gradual accumulation of shares in the open market, a partial
or two-tiered tender offer that does not treat all shareholders equally or other
abusive takeover tactics, which the Board believes are not in the best interests
of the Company's shareholders.
The Rights do not become exercisable, and no separate certificates will
be issued evidencing the Rights, except in the special circumstances described
in the enclosed summary. Instead, the Rights will be automatically traded with
the Class A Common Stock. Issuance of the Rights will not have a dilutive
effect, will not affect earnings per share, will not be taxable to the Company
or you and will not change the way your stock is traded.
We have made great progress in the last few years, and we see the
opportunity for further growth ahead. Adoption of the shareholders rights plan
reflects the Board's commitment to representing your interests in the Company's
future success.
Sincerely,
/s/ John W. Smithson
John W. Smithson
President and Chief Executive Officer
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SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
Introduction. On May 3, 2000, the Board of Directors of PMA Capital
Corporation (the "Company") adopted a shareholder rights plan in the form of a
Rights Agreement, dated May 3, 2000, between the Company and The Bank of New
York, as Rights Agent (the "Rights Agreement") and pursuant to the Rights
Agreement declared a dividend distribution of one preferred share purchase right
(a "Right") for each outstanding share of Class A Common Stock, par value $5.00
per share ("Class A Stock"). The dividend will be payable May 22, 2000 to the
shareholders of record at the close of business on May 22, 2000 ("Record Date").
The Board has adopted the Rights Agreement to protect shareholders from
coercive or otherwise unfair takeover tactics. In general, the Rights Agreement
operates by imposing a significant economic penalty upon any person or group
that acquires 15% ("Threshold Percentage") or more of the Company's outstanding
Class A Stock without the approval of the Board. The Rights Agreement should not
interfere with any merger or other business combination approved by the Board.
Please note that the following description is only a summary and is not
complete. Those interested in the specific terms of the Rights Agreement should
read this summary together with the entire Rights Agreement, which has been
filed with the Securities and Exchange Commission as an exhibit to a
Registration Statement on Form 8-A dated May 5, 2000. A copy of the agreement is
available free of charge from the Company.
The Rights. The Board has authorized the issuance of a Right with
respect to each share of Class A Stock outstanding on the Record Date. The
Rights will initially trade with, and will be inseparable from, the Class A
Stock, and no separate Rights certificates will be issued. The Rights will be
evidenced only by certificates that represent shares of Class A Stock. New
Rights will accompany any new shares of Class A Stock issued after the Record
Date until the Distribution Date described below.
Exercise Price. Each Right will allow its holder to purchase from the
Company one one-thousandth of a share of Series A Junior Participating Preferred
Stock ("Preferred Share") for the price of $65 ("Exercise Price"), once the
Right becomes exercisable. This portion of a Preferred Share will give the
shareholder approximately the same dividend and liquidation rights as would one
share of Class A Stock. Prior to exercise, the Right does not give its holder
any dividend, voting, liquidation or other rights as a shareholder of the
Company.
Exercisability. The Rights will separate from the Class A Stock and
become exercisable as of the date which is the earlier of:
o 10 days after the date of a public announcement that a person or
group of affiliated or associated persons has become an
"Acquiring Person" (as further defined below) by obtaining
beneficial ownership of at least the Threshold Percentage of the
outstanding Class A Stock (except pursuant to a "Permitted Offer"
as described below), and
o 10 business days (or a later date determined by the Board before
a person or group becomes an Acquiring Person) after a person or
group begins, or publicly announces its intent to begin, a tender
or exchange offer, which, if consummated, would result in that
person or group becoming an Acquiring Person.
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The date when the Rights become exercisable is referred to as the
"Distribution Date." A person who, alone or together with its affiliates or
associates, obtains beneficial ownership of at least the Threshold Percentage is
an "Acquiring Person." However, in general, a person ("Exempted Person") who
owned 15% or more of the outstanding shares of Class A Stock on May 3, 2000 will
not be an Acquiring Person unless that person expresses an intent to control or
take over the Company, or purchases an additional 1% of the Class A Stock.
Until the Distribution Date, the Class A Stock certificates will also
evidence the Rights, and any transfer of shares of Class A Stock will constitute
a transfer of Rights. After the Distribution Date, the Rights will separate from
the Class A Stock and be evidenced by Rights certificates the Company will mail
to all eligible holders of Class A Stock. Any Rights held by an Acquiring Person
and certain transferees of an Acquiring Person will be void and may not be
exercised.
The Board may reduce the Threshold Percentage to not less than 10% of
the outstanding Class A Stock.
Consequences of a Person or Group Becoming Acquiring Person.
o Flip In. If a person or group becomes an Acquiring Person, all
holders of Rights except the Acquiring Person may purchase that
number of shares of the Class A Stock having a market value equal
to twice the Exercise Price of the Right. This feature of the
plan is referred to as a "Flip In."
o Flip Over. If, at any time after a person or group becomes an
Acquiring Person, the Company is acquired in a merger or similar
business combination or 50% or more of the Company's assets or
earning power is sold, all holders of Rights except the Acquiring
Person may purchase that number of shares of the acquiring entity
having a market value equal to twice the Exercise Price of the
Right. This feature of the plan is referred to as a "Flip Over."
Permitted Offer. A tender or exchange offer for all outstanding Class A
Stock at a price and on terms determined, prior to the purchase of any shares
under the tender or exchange offer, by at least a majority of the Disinterested
Directors to be adequate (taking into account all factors that such directors
deem relevant) and otherwise in the best interests of the Company and its
shareholders (other than the Acquiring Person) will be a Permitted Offer.
"Disinterested Directors" are directors of the Company who are not officers or
employees of the Company and who are not the Acquiring Person or an associate or
affiliate of the Acquiring Person, or have not been proposed or nominated as a
director of the Company by the Acquiring Person.
Preferred Share Provisions.
Each one one-thousandth of a Preferred Share, if issued:
o will not be redeemable.
o will entitle holders to quarterly dividend payments of $.001, or
an amount equal to the dividend paid on one share of Class A
Stock, whichever is greater.
o will entitle holders upon liquidation to receive $1.00, or an
amount equal to the payment made on one share of Class A Stock,
whichever is greater.
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o will have the same voting power as one share of Class A Stock.
o will entitle holders to receive a payment equal to the payment
made on one share of Class A Stock in the event shares of Class A
Stock are exchanged in a merger or similar business combination.
The value of each one one-thousandth of a Preferred Share should approximate the
value of one share of Class A Stock.
Expiration. The Rights will expire on May 22, 2010.
Redemption. The Board may redeem the Rights for $.001 per Right at any
time before the close of business on the tenth day after any person or group
becomes an Acquiring Person. If the Board redeems any Rights, it must redeem all
of the Rights. Once the Rights are redeemed, the only right of the holders of
Rights will be to receive the redemption price of $.001 per Right. The
redemption price will be adjusted in the event of a stock split or stock
dividends of the Class A Stock.
Exchange. After a person or group becomes an Acquiring Person, but
before an Acquiring Person owns 50% or more of the outstanding Class A Stock,
the Board may extinguish the Rights by exchanging one share of Class A Stock or
any equivalent security for each Right, other than Rights held by the Acquiring
Person.
Anti-Dilution Provisions. The Board may adjust the Exercise Price of
the Rights, the number of Preferred Shares or other securities issuable upon
exercise of the Rights and the number of outstanding Rights to prevent dilution
that may occur from, among other things, a stock dividend, a stock split, or a
reclassification of the Preferred Shares or Class A Stock. No adjustments to the
Exercise Price will be made until cumulative adjustments require an adjustment
of at least 1%. The Company will not be obligated to issue fractional Preferred
Shares, and may instead pay cash in lieu of fractional shares.
Amendments. The terms of the Rights Agreement may be amended by the
Board without the consent of the holders of the Rights. However, the Board may
not amend the Rights Agreement to lower the Threshold Percentage to below 10% of
the outstanding Class A Stock. In addition, the Board may not cause a person or
group to become an Acquiring Person by lowering the Threshold Percentage below
the percentage interest that such person or group already owns. After the
Distribution Date, the Board may not amend the Rights Agreement in a way that
adversely affects holders of the Rights.
