UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 000-22761
PMA Capital Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2217932
------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Mellon Bank Center, Suite 2800
1735 Market Street
Philadelphia, Pennsylvania 19103-7590
-------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(215) 665-5046
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES /X/ NO / /
There were 22,119,667 shares outstanding of the registrant's Class A Common
Stock, $5 par value per share, as of the close of business on April 30, 2000.
<PAGE>
INDEX
- --------------------------------------------------------------------------------
Page
Part I. Financial Information
Item 1. Financial statements
Consolidated statements of operations for the three months
ended March 31, 2000 and 1999 (unaudited) 1
Consolidated balance sheets as of March 31, 2000 (unaudited)
and December 31, 1999 2
Consolidated statements of cash flows for the three
months ended March 31, 2000 and 1999 (unaudited) 3
Consolidated statements of comprehensive income (loss)
for the three months ended March 31, 2000 and 1999 (unaudited) 4
Notes to the consolidated financial statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
Exhibit Index 25
<PAGE>
PMA Capital Corporation
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands, except per share data) 2000 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Net premiums written $ 163,934 $ 168,517
Change in net unearned premiums (38,112) (59,195)
--------- ---------
Net premiums earned 125,822 109,322
Net investment income 28,193 27,109
Net realized investment gains (losses) (5,461) 877
Other revenues 3,387 3,138
--------- ---------
Total revenues 151,941 140,446
--------- ---------
Losses and expenses:
Losses and loss adjustment expenses 94,288 81,736
Acquisition expenses 26,697 20,398
Operating expenses 16,452 17,084
Dividends to policyholders 4,690 5,068
Interest expense 3,075 3,013
--------- ---------
Total losses and expenses 145,202 127,299
--------- ---------
Income before income taxes and cumulative
effect of accounting change 6,739 13,147
Income tax expense:
Current 2,099 945
Deferred 262 3,734
--------- ---------
Total 2,361 4,679
--------- ---------
Income before cumulative effect of accounting change 4,378 8,468
Cumulative effect of accounting change (net of
income tax benefit of $1,485) -- (2,759)
--------- ---------
Net income $ 4,378 $ 5,709
========= =========
Income per share:
Basic:
Income before cumulative effect of
accounting change $ 0.20 $ 0.36
Cumulative effect of accounting change -- (0.12)
--------- ---------
Net income $ 0.20 $ 0.24
========= =========
Diluted:
Income before cumulative effect of
accounting change $ 0.19 $ 0.35
Cumulative effect of accounting change -- (0.11)
--------- ---------
Net income $ 0.19 $ 0.24
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
1
<PAGE>
PMA Capital Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
As of As of
March 31, December 31,
(dollar amounts in thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments:
Fixed maturities available for sale, at fair value
(amortized cost: 2000 - $1,607,414; 1999 - $1,648,894) $ 1,553,337 $ 1,579,640
Equity securities, at fair value (cost: 2000 - $46,925; 1999 - $37,779) 46,869 34,966
Short-term investments, at amortized cost which approximates fair value 349,495 303,429
----------- -----------
Total investments 1,949,701 1,918,035
Cash 11,040 84,261
Accrued investment income 20,905 20,480
Premiums receivable (net of valuation allowance:
2000 - $17,373; 1999 - $18,088) 280,779 271,833
Reinsurance receivables (net of valuation allowance:
2000 - $3,890; 1999 - $5,528) 702,875 658,164
Deferred income taxes, net 98,825 105,363
Deferred acquisition costs 53,658 48,949
Other assets 165,575 138,002
----------- -----------
Total assets $ 3,283,358 $ 3,245,087
=========== ===========
Liabilities:
Unpaid losses and loss adjustment expenses $ 1,927,755 $ 1,932,601
Unearned premiums 305,350 260,352
Long-term debt 163,000 163,000
Accounts payable and accrued expenses 109,686 109,447
Funds held under reinsurance treaties 108,343 94,445
Dividends to policyholders 14,636 13,782
Payable under securities loan agreements 215,964 242,317
----------- -----------
Total liabilities 2,844,734 2,815,944
----------- -----------
Commitments and contingencies (Note 4)
Shareholders' Equity:
Common stock, $5 par value (40,000,000 shares authorized;
2000 - 11,933,404 shares issued and 11,497,397 outstanding;
1999 - 13,084,665 shares issued and 12,648,658 outstanding) 59,667 65,423
Class A Common stock, $5 par value (40,000,000 shares authorized;
2000 - 12,509,541 shares issued and 10,618,990 outstanding;
1999 - 11,358,280 shares issued and 9,692,854 outstanding) 62,547 56,791
Additional paid-in capital - Class A Common stock 339 339
Retained earnings 394,069 391,981
Accumulated other comprehensive loss (35,187) (46,844)
Notes receivable from officers (56) (56)
Treasury stock, at cost:
Common stock (shares: 2000 - 436,007 and 1999 - 436,007) (5,582) (5,582)
Class A Common stock (shares: 2000 - 1,890,551 and 1999 - 1,665,426) (37,173) (32,909)
----------- -----------
Total shareholders' equity 438,624 429,143
----------- -----------
Total liabilities and shareholders' equity $ 3,283,358 $ 3,245,087
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE>
PMA Capital Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,378 $ 5,709
Adjustments to reconcile net income to net cash flows provided by (used in)
operating activities:
Depreciation and amortization 1,468 2,002
Provision for deferred income taxes 262 3,734
Net realized investment (gains) losses 5,461 (877)
Cumulative effect of accounting change -- 2,759
Change in:
Premiums receivable and unearned premiums, net 36,052 31,331
Dividends to policyholders 854 315
Reinsurance receivables (44,711) 4,871
Unpaid losses and loss adjustment expenses (4,846) (26,158)
Accrued investment income (425) (3,071)
Deferred acquisition costs (4,709) (11,584)
Other, net (13,742) (1,863)
--------- ---------
Net cash flows provided by (used in) operating activities (19,958) 7,168
--------- ---------
Cash flows from investing activities:
Fixed maturities available for sale:
Purchases (247,036) (292,740)
Maturities or calls 45,187 30,955
Sales 236,789 278,168
Equity securities:
Purchases (14,539) --
Sales 6,142 --
Net (purchases) sales of short-term investments (72,420) 2,349
Other, net (813) (1,052)
--------- ---------
Net cash flows provided by (used in) investing activities (46,690) 17,680
--------- ---------
Cash flows from financing activities:
Dividends paid to shareholders (1,887) (1,909)
Proceeds from exercise of stock options 1,338 3,906
Purchase of treasury stock (6,024) (11,258)
Net repayments of notes receivable from officers -- 289
--------- ---------
Net cash flows used in financing activities (6,573) (8,972)
--------- ---------
Net increase (decrease) in cash (73,221) 15,876
Cash - beginning of period 84,261 2,562
--------- ---------
Cash - end of period $ 11,040 $ 18,438
========= =========
Supplementary cash flow information:
Income taxes paid $ 1,500 $ 2,997
Interest paid $ 3,014 $ 3,061
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
PMA Capital Corporation
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 4,378 $ 5,709
-------- --------
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Holding gains (losses) arising during the period 8,107 (24,299)
Less: reclassification adjustment for (gains)
losses included in net income (net of tax
expense (benefit): 2000 - ($1,911);
1999 - $307) 3,550 (570)
-------- --------
Other comprehensive income (loss), net of tax 11,657 (24,869)
-------- --------
Comprehensive income (loss) $ 16,035 $(19,160)
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
PMA Capital Corporation
Notes to the Consolidated Financial Statements
1. BUSINESS DESCRIPTION
The accompanying consolidated financial statements include the accounts of PMA
Capital Corporation and its wholly and majority owned subsidiaries (collectively
referred to as "PMA Capital" or the "Company"). PMA Capital is an insurance
holding company that operates three specialty risk management businesses, which
are more fully described below.
Reinsurance -- PMA Capital's reinsurance operations ("PMA Re") consist mainly of
PMA Reinsurance Corporation, a Pennsylvania domiciled insurance company, and
emphasize risk-exposed, excess of loss reinsurance and operate in the brokered
market. PMA Re's business is predominantly in casualty lines of reinsurance.
Workers' Compensation and Primary Standard Insurance -- PMA Capital's property
and casualty insurance subsidiaries ("The PMA Insurance Group") include
Pennsylvania domiciled insurance companies as well as certain foreign
subsidiaries. The PMA Insurance Group primarily writes workers' compensation,
integrated disability and to a lesser extent, other standard lines of commercial
insurance, primarily in the Mid-Atlantic and Southern regions of the U.S. The
majority of The PMA Insurance Group's business is produced by independent agents
and brokers.
Specialty Property and Casualty -- Caliber One writes business through surplus
lines brokers and managing general agents on a national basis. Caliber One's
excess and surplus lines insurance affiliate, Caliber One Indemnity Company, is
an eligible surplus lines insurer in 41 states, the District of Columbia and
Puerto Rico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation - The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. It is management's opinion that all adjustments,
including normal recurring accruals, considered necessary for a fair
presentation have been included. Certain reclassifications of prior year amounts
have been made to conform to the 2000 presentation.
The preparation of consolidated financial statements in conformity with GAAP
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the period. Due to this and certain other factors,
such as the seasonal nature of portions of the insurance business as well as
competitive and other market conditions, operating results for the three months
ended March 31, 2000 are not necessarily indicative of the results to be
expected for the full year.
The information included in this Form 10-Q should be read in conjunction with
the Company's audited consolidated financial statements and footnotes included
in its 1999 Annual Report to Shareholders and incorporated by reference in its
Form 10-K for the year ended December 31, 1999.
B. Recent Accounting Pronouncements - Effective January 1, 2000, the Company
adopted Statement of Position ("SOP") 98-7, "Deposit Accounting: Accounting for
Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk." This
statement identifies several methods of deposit accounting and provides guidance
on the application of each method. This statement classifies insurance and
reinsurance contracts for which the deposit method is appropriate as contracts
that (i) transfer only significant timing risk, (ii) transfer only significant
underwriting risk, (iii) transfer neither significant timing nor underwriting
risk and (iv) have an indeterminate risk. The adoption of SOP 98-7 did not have
a material impact on the Company's financial condition, results of operations or
liquidity.
5
<PAGE>
Effective January 1, 1999, the Company adopted SOP 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." SOP 97-3
provides guidance for determining when an insurance company should recognize a
liability for guaranty fund and other insurance related assessments and how to
measure that liability. As a result of adopting SOP 97-3, the Company recorded a
liability of $4.3 million pre-tax and a resulting charge to earnings of $2.8
million, net of income tax benefit of $1.5 million, which has been reported as a
cumulative effect of accounting change. This accounting change impacts The PMA
Insurance Group segment.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as "derivatives") and for
hedging activities. SFAS No. 133 requires an entity to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The accounting for changes in the fair
value of a derivative (that is, gains and losses) depends on the intended use of
the derivative and the resulting designation. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Date of FASB Statement No. 133," which defers the effective
date of SFAS No. 133 to fiscal years beginning after June 15, 2000. While the
Company is presently evaluating the impact of SFAS No. 133, the adoption of SFAS
No. 133 is not expected to have a material impact on the Company's financial
condition, results of operations or liquidity.
3. REINSURANCE
In the ordinary course of business, PMA Capital's reinsurance and insurance
subsidiaries assume and cede premiums with other insurance companies and are
members of various pools and associations. The reinsurance and insurance
subsidiaries cede business, primarily on an excess of loss basis, in order to
limit the maximum net loss from large risks and limit the accumulation of many
smaller losses. The reinsurance and insurance subsidiaries remain primarily
liable to their clients in the event their reinsurers are unable to meet their
financial obligations.
The components of net premiums earned and losses and loss adjustment expenses
("LAE") incurred are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- ------------------------------------------------------------------
<S> <C> <C>
Earned Premiums:
Direct $ 98,049 $ 75,326
Assumed 82,679 69,446
Ceded (54,906) (35,450)
--------- ---------
Net $ 125,822 $ 109,322
========= =========
Losses and LAE:
Direct $ 101,489 $ 62,643
Assumed 59,433 36,056
Ceded (66,634) (16,963)
--------- ---------
Net $ 94,288 $ 81,736
========= =========
</TABLE>
6
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
The Company's businesses are subject to a changing social, economic, legal,
legislative and regulatory environment that could affect them. Such changes
could include various legislative and regulatory changes which may affect the
pricing or profitability of the insurance products sold by the Company. In
addition, it is always possible that judicial reinterpretation of insurance
contracts after the policies were written may result in coverage unanticipated
by the Company at the time the policies were issued, such as coverage for Year
2000, tobacco and other claims. The eventual effect on the Company of the
changing environment in which it operates remains uncertain.
In the event a property and casualty insurer operating in a jurisdiction where
the Company's insurance subsidiaries also operate becomes or is declared
insolvent, state insurance regulations provide for the assessment of other
insurers to fund any capital deficiency of the insolvent insurer. Generally,
this assessment is based upon the ratio of an insurer's voluntary premiums
written to the total premiums written for all insurers in that particular
jurisdiction. The Company is not aware of any material potential assessments at
March 31, 2000 (see Note 2-B regarding SOP 97-3).
The Company has provided guarantees of approximately $7.8 million, primarily
related to loans on properties in which the Company has an interest.
The Company is continuously involved in numerous lawsuits arising, for the most
part, in the ordinary course of business, either as a liability insurer
defending third party claims brought against its insureds, or as an insurer
defending coverage claims brought against it by its policyholders or other
insurers. While the outcome of all litigation involving the Company, including
insurance-related litigation, cannot be determined, litigation is not expected
to result in losses that differ from recorded reserves by amounts that would be
material to the Company's financial condition, results of operations or
liquidity. In addition, reinsurance recoveries related to claims in litigation,
net of the allowance for uncollectible reinsurance, are not expected to result
in recoveries that differ from recorded recoverables by amounts that would be
material to the Company's financial condition, results of operations or
liquidity.
5. EARNINGS PER SHARE
A reconciliation of the shares used as the denominator of the basic and diluted
earnings per share computations is presented below. For all periods presented,
there were no differences in the numerator (income before cumulative effect of
accounting change) for the basic and diluted earnings per share calculation:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
Denominator:
Basic shares - weighted average
Common and Class A Common
shares outstanding 22,265,688 23,317,630
Effect of dilutive stock options 550,599 785,822
---------- ----------
Total diluted shares 22,816,287 24,103,452
========== ==========
</TABLE>
7
<PAGE>
6. BUSINESS SEGMENTS
The following table indicates the Company's revenues, all of which are generated
within the U.S., and pre-tax operating income (loss) by principal business
segment:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- ------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
PMA Re $ 77,991 $ 66,061
The PMA Insurance Group
Excluding Run-off Operations 70,870 68,835
Run-off Operations 1,086 1,126
--------- ---------
Total 71,956 69,961
Caliber One 6,975 3,046
Corporate and Other 480 501
Net realized investment gains (losses) (5,461) 877
--------- ---------
Total revenues $ 151,941 $ 140,446
========= =========
Components of pre-tax operating
income(1) and net income:
PMA Re $ 13,983 $ 12,749
The PMA Insurance Group:
Excluding Run-off Operations 5,383 4,919
Run-off Operations 219 66
--------- ---------
Total 5,602 4,985
Caliber One (2,273) (696)
Corporate and Other (5,112) (4,768)
--------- ---------
Pre-tax operating income 12,200 12,270
Net realized investment gains (losses) (5,461) 877
--------- ---------
Income before income taxes and
cumulative effect of accounting change 6,739 13,147
Income tax expense 2,361 4,679
--------- ---------
Income before cumulative effect of
accounting change 4,378 8,468
Cumulative effect of accounting change,
net of tax -- (2,759)
--------- ---------
Net income $ 4,378 $ 5,709
========= =========
<FN>
(1) Pre-tax operating income is defined as income from continuing operations
before income taxes, excluding net realized investment gains (losses). The
Company excludes net realized investment gains (losses) from the profit and loss
measure it utilizes to assess the performance of its operating segments because
(i) net realized investment gains (losses) are unpredictable and not necessarily
indicative of current operating fundamentals or future performance and (ii) in
many instances, decisions to buy and sell securities are made at the holding
company level, and such decisions result in net realized gains (losses) that do
not relate to the operations of the individual segments.
</FN>
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following is a discussion of the financial condition of PMA Capital as of
March 31, 2000, compared with December 31, 1999, and the results of operations
of PMA Capital for the quarter ended March 31, 2000, compared with the same
period last year. This discussion should be read in conjunction with
Management's Discussion and Analysis included in PMA Capital's 1999 Annual
Report to Shareholders (pages 28 through 43), to which the reader is directed
for additional information. The term "SAP" refers to the statutory accounting
practices prescribed or permitted by applicable state insurance departments and
the term "GAAP" refers to generally accepted accounting principles.
CONSOLIDATED RESULTS
The major components of operating revenues, pre-tax operating income and net
income are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operating revenues:
Net premiums written $ 163,934 $ 168,517
========= =========
Net premiums earned $ 125,822 $ 109,322
Net investment income 28,193 27,109
Other revenues 3,387 3,138
--------- ---------
Total operating revenues $ 157,402 $ 139,569
========= =========
Components of pre-tax operating
income (1) and net income:
PMA Re $ 13,983 $ 12,749
The PMA Insurance Group:
Excluding Run-off Operations 5,383 4,919
Run-off Operations 219 66
--------- ---------
Total 5,602 4,985
Caliber One (2,273) (696)
Corporate and Other (5,112) (4,768)
--------- ---------
Pre-tax operating income 12,200 12,270
Net realized investment gains (losses) (5,461) 877
--------- ---------
Income before income taxes and
cumulative effect of accounting change 6,739 13,147
Income tax expense 2,361 4,679
--------- ---------
Income before cumulative effect of
accounting change 4,378 8,468
Cumulative effect of accounting change,
net of tax -- (2,759)
--------- ---------
Net income $ 4,378 $ 5,709
========= =========
<FN>
(1) Pre-tax operating income is defined as income from continuing operations
before income taxes, excluding net realized investment gains (losses). The
Company excludes net realized investment gains (losses) from the profit and loss
measure it utilizes to assess the performance of its operating segments because
(i) net realized investment gains (losses) are unpredictable and not necessarily
indicative of current operating fundamentals or future performance and (ii) in
many instances, decisions to buy and sell securities are made at the holding
company level, and such decisions result in net realized gains (losses) that do
not relate to the operations of the individual segments
</FN>
</TABLE>
9
<PAGE>
Pre-tax operating income was $12.2 million for the three months ended March 31,
2000, compared to $12.3 million for the three months ended March 31, 1999.
After-tax operating income was $7.9 million for both the three months ended
March 31, 2000 and 1999. PMA Re and The PMA Insurance Group reported
improvements in pre-tax operating income for the first quarter of 2000, compared
with the first quarter of 1999. These improvements were offset by higher pre-tax
operating losses at Caliber One and Corporate and Other. The Company currently
expects operating earnings per share to improve in 2000 primarily reflecting
higher operating income from PMA Re and The PMA Insurance Group, as well as the
favorable effects of the share repurchase activities. This expectation may
differ materially from actual results because of the risk factors noted in the
"Cautionary Statements" on page 22.
Net income was $4.4 million for the first quarter of 2000, compared to $5.7
million for the same period in 1999. Net income for 1999 includes an after-tax
charge of $2.8 million for the effect of adopting Statement of Position ("SOP")
97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." See Note 2-B to the Company's Consolidated Financial Statements
for additional information.
Net income also includes after-tax gains and losses on the sale of investments.
The timing and recognition of such gains and losses are unpredictable and not
necessarily indicative of current operating fundamentals or future operating
performance. Accordingly, such gains and losses are not included as a component
of operating income. After-tax net realized investment losses were $3.5 million
for the three months ended March 31, 2000, compared to after-tax net realized
investment gains of $600,000 for the same period in 1999. The net realized
investment losses in the first quarter of 2000 reflect sales of investments in
order to invest in yield enhancing investment opportunities.
PMA RE
Summarized financial results of PMA Re are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- -----------------------------------------------------------------------------
<S> <C> <C>
Net premiums written $66,992 $78,327
======= =======
Net premiums earned $63,137 $52,433
Net investment income 14,854 13,628
------- -------
Operating revenues 77,991 66,061
------- -------
Losses and loss adjustment expenses ("LAE") 45,416 37,861
Acquisition and operating expenses 18,592 15,451
------- -------
Total losses and expenses 64,008 53,312
------- -------
Pre-tax operating income $13,983 $12,749
======= =======
- -----------------------------------------------------------------------------
</TABLE>
PMA Re's pre-tax operating income increased to $14.0 million for the three
months ended March 31, 2000, compared to $12.7 million for the same period in
1999, primarily due to an increase in net investment income. Underwriting
results for the first quarter of 2000 were comparable to results for the first
quarter of 1999.
10
<PAGE>
Premiums
PMA Re's gross and net premiums written by major category of business are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- ---------------------------------------------------------
<S> <C> <C>
Gross premiums written:
Casualty lines $61,311 $73,188
Property lines 25,712 25,765
Other lines 457 542
------- -------
Total $87,480 $99,495
======= =======
Net premiums written:
Casualty lines $45,365 $56,547
Property lines 21,176 21,252
Other lines 451 528
------- -------
Total $66,992 $78,327
======= =======
- ---------------------------------------------------------
</TABLE>
Net premiums written were $67.0 million in the first quarter of 2000, compared
with $78.3 million for the same period last year. Absent a revision in 1999 to
PMA Re's estimation of unreported premiums on in-force contracts, gross and net
premiums written for the first quarter of 2000 would have been essentially flat,
compared to the first quarter of 1999. Expanded participations and improved rate
adequacy led to growth in premiums for PMA Re's Traditional and Finite Risk and
Financial Products units. However, this growth was substantially offset by lower
premiums from the Specialty unit reflecting the effects of the highly
competitive conditions in the professional liability reinsurance market.
Generally, trends in net premiums earned follow patterns similar to net premiums
written, with premiums being earned principally on a pro rata basis over the
terms of the contracts. However, due to a revision late in 1999 in PMA Re's
methodology used in estimating unearned premiums on in-force contracts, net
premiums earned increased $10.7 million, or 20%, in the first quarter of 2000,
compared to the first quarter of 1999.
Losses and Expenses
The components of PMA Re's GAAP combined ratios are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
- --------------------------------------------------------
<S> <C> <C>
Loss and LAE ratio 71.9% 72.2%
-------- --------
Expense ratio:
Acquisition expenses 23.7% 23.2%
Operating expenses 5.7% 6.3%
-------- --------
Total expense ratio 29.4% 29.5%
-------- --------
GAAP combined ratio(1) 101.3% 101.7%
======== ========
- --------------------------------------------------------
<FN>
(1) The combined ratio computed on a GAAP basis is equal to losses and LAE, plus
acquisition expenses and operating expenses, all divided by net premiums earned.
</FN>
</TABLE>
11
<PAGE>
The loss and LAE ratio declined modestly in the first quarter of 2000, compared
with the same period last year primarily reflecting a decline in the current
accident year loss and LAE ratio partially offset by a reduction in favorable
prior accident year loss development. The current accident year loss and LAE
ratio improved by 1.9 points, reflecting improved rate adequacy on business
written in 2000 and non-renewal of business that did not meet desired
profitability targets.
The acquisition expense ratio increased 0.5 points for the three months ended
March 31, 2000, compared to the same period in 1999, primarily due to a change
in the business mix in the quarter. The operating expense ratio decreased 0.6
points for the three months ended March 31, 2000, compared to the same period in
1999, primarily reflecting a 20% increase in earned premiums that outpaced a 10%
increase in operating expenses.
Net Investment Income
Net investment income was $14.9 million for the first quarter of 2000, compared
to $13.6 million for the same period last year. The improvement in net
investment income primarily reflects higher average invested assets and an
increase in investment yield resulting from a shift in invested assets towards
higher yielding securities.
12
<PAGE>
THE PMA INSURANCE GROUP
Summarized financial results of The PMA Insurance Group are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- ----------------------------------------------------------------
<S> <C> <C>
The PMA Insurance Group
Net premiums written $87,446 $83,021
======= =======
Net premiums earned $57,092 $54,399
Net investment income 12,233 13,133
Other revenues 2,631 2,429
------- -------
Operating revenues 71,956 69,961
------- -------
Losses and LAE 42,653 41,757
Acquisition and operating expenses 19,011 18,151
Dividends to policyholders 4,690 5,068
------- -------
Total losses and expenses 66,354 64,976
------- -------
Pre-tax operating income $ 5,602 $ 4,985
======= =======
The PMA Insurance Group
Excluding Run-off Operations
Net premiums written $87,446 $83,021
======= =======
Net premiums earned $57,092 $54,399
Net investment income 11,147 12,007
Other revenues 2,631 2,429
------- -------
Operating revenues 70,870 68,835
------- -------
Losses and LAE 41,950 41,209
Acquisition and operating expenses 18,847 17,639
Dividends to policyholders 4,690 5,068
------- -------
Total losses and expenses 65,487 63,916
------- -------
Pre-tax operating income $ 5,383 $ 4,919
======= =======
Run-off Operations (1)
Net investment income $ 1,086 $ 1,126
------- -------
Losses and LAE 703 548
Acquisition and operating expenses 164 512
------- -------
Total losses and expenses 867 1,060
------- -------
Pre-tax operating income $ 219 $ 66
======= =======
- ----------------------------------------------------------------
<FN>
- ----------------
(1) Run-off operations ("Run-off Operations") of The PMA Insurance Group
reinsure certain obligations primarily associated with workers'
compensation claims written by The PMA Insurance Group's Pooled Companies
for the years 1991 and prior.
</FN>
</TABLE>
13
<PAGE>
Operating Results
Pre-tax operating income for The PMA Insurance Group increased 12.4% to $5.6
million for the three months ended March 31, 2000, compared to $5.0 million for
the same period in 1999. The increase in operating income for The PMA Insurance
Group was primarily due to improved loss experience, partially offset by lower
net investment income.
The PMA Insurance Group Excluding Run-off Operations
Premiums
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
Workers' compensation and integrated disability:
Direct premiums written $ 77,475 $ 71,917
Premiums assumed 357 725
Premiums ceded (10,783) (9,624)
--------- ---------
Net premiums written $ 67,049 $ 63,018
========= =========
Commercial Lines:
Direct premiums written $ 26,752 $ 27,642
Premiums assumed 549 894
Premiums ceded (6,904) (8,533)
--------- ---------
Net premiums written $ 20,397 $ 20,003
========= =========
Total:
Direct premiums written $ 104,227 $ 99,559
Premiums assumed 906 1,619
Premiums ceded (17,687) (18,157)
--------- ---------
Net premiums written $ 87,446 $ 83,021
========= =========
- -----------------------------------------------------------------------------------
</TABLE>
Direct workers' compensation and integrated disability premiums written
increased by $5.6 million for the three months ended March 31, 2000, compared to
the same period in 1999, primarily due to an increase of $4.2 million in
integrated disability premiums written and, to a lesser extent, an increase in
the level of workers' compensation risks underwritten. Continued price
competition and selected non-renewal of non-profitable accounts tempered
increases in direct workers' compensation premiums written. Direct writings of
commercial lines of business other than workers' compensation, such as
commercial auto, general liability, umbrella, multi-peril and commercial
property lines (collectively, "Commercial Lines") decreased by $890,000 for the
three months ended March 31, 2000, compared to the same period in 1999.
The decrease in reinsurance premiums ceded reflects a decrease in ceded premiums
for Commercial Lines for the three months ended March 31, 2000, compared to the
same period in 1999, due to an increase in the reinsurance retention for the
commercial casualty lines of business from $175,000 to $250,000 effective
January 1, 2000 and the reduction in direct premiums written for Commercial
Lines. Partially offsetting this decrease was an increase in ceded premiums for
workers' compensation for the three months ended March 31, 2000, compared to the
same period in 1999 as a result of the increase in direct premiums written for
this line.
Net premiums earned increased $2.7 million for the three months ended March 31,
2000, compared to the same period in 1999. Generally, trends in net premiums
earned follow patterns similar to net premiums written adjusted for the
customary lag related to the timing of premium writings within the year. Direct
premiums are earned principally on a pro rata basis over the terms of the
policies.
14
<PAGE>
Losses and Expenses
The components of The PMA Insurance Group's GAAP combined ratios, excluding
Run-off Operations, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
- ---------------------------------------------------------------
<S> <C> <C>
Loss and LAE ratio 73.5% 75.8%
-------- --------
Expense ratio:
Acquisition expenses 18.9% 13.8%
Operating expenses(1)(2) 11.0% 15.4%
-------- --------
Total expense ratio 29.9% 29.2%
Policyholders' dividend ratio 8.2% 9.3%
-------- --------
GAAP combined ratio(1)(2)(3)(4) 111.6% 114.3%
======== ========
- ---------------------------------------------------------------
<FN>
(1) The expense ratio and the combined ratio for 1999 exclude the impact of the
cumulative effect of accounting change of $4.3 million ($2.8 million
after-tax) for insurance-related assessments.
(2) The expense ratio and the combined ratio exclude $1.8 million for both 2000
and 1999 for direct expenses related to service revenues, which are not
included in premiums earned.
(3) The combined ratio computed on a GAAP basis is equal to losses and LAE,
plus acquisition expenses, operating expenses and policyholders' dividends,
all divided by net premiums earned.
(4) The GAAP combined ratios for The PMA Insurance Group including the Run-off
Operations were 113.1% and 116.2% in the first quarter of 2000 and 1999,
respectively.
</FN>
</TABLE>
The loss and LAE ratio improved 2.3 points in the first quarter of 2000,
compared to the first quarter of 1999, primarily due to an improved current
accident year loss and LAE ratio and a decline in net discount accretion,
partially offset by less favorable development of prior accident year reserves,
excluding the accretion of discount ("prior year development"). The improvement
in the current accident year loss and LAE ratio for the first quarter of 2000,
compared to the same period in 1999, is due to pricing increases on renewal
business and continued improved loss trends.
The loss and LAE ratio is negatively impacted by accretion of discount on prior
year reserves and favorably impacted by setting up discount for current year
reserves. The net of these amounts is referred to as net discount accretion.
Accretion of prior year discounted reserves exceeded the setting up of discount
by $384,000 and $936,000 for the three months ended March 31, 2000 and 1999,
respectively. The decline in net discount accretion is due to the increase in
workers' compensation writings during the first quarter of 2000, compared to the
first quarter of 1999.
The PMA Insurance Group experienced $475,000 of favorable prior year development
for the first quarter of 2000, compared to $905,000 of favorable prior year
development for the same period in 1999. The favorable prior year development in
2000 reflects better than expected loss experience from rent-a-captive workers'
compensation business and the favorable prior year development in 1999 reflects
better than expected loss experience from loss-sensitive workers' compensation
business. Policyholders' dividends for rent-a-captive business substantially
offset the favorable prior year development in 2000, and premium adjustments for
loss-sensitive business substantially offset the favorable prior year
development in 1999.
Overall, the GAAP expense ratio increased by 0.7 points for the three months
ended March 31, 2000, compared to the same period in 1999.
The policyholders' dividend ratio was 8.2% for the three months ended March 31,
2000, compared to 9.3% for the same period in 1999. Under policies that are
subject to dividend plans, the customer may receive a dividend based upon loss
experience during the policy period. The decrease in the policyholders' dividend
ratio occurred primarily because The
15
<PAGE>
PMA Insurance Group sold less business under dividend plans in the first quarter
of 2000 than in the first quarter of 1999 and has shifted its participating
business towards lower paying dividend plans. This decrease has been partially
offset by higher dividends resulting from the favorable prior year development
from rent-a-captive workers' compensation business.
Net Investment Income
Net investment income was $11.1 million for the three months ended March 31,
2000, compared to $12.0 million for the same period in 1999. The decrease in net
investment income primarily reflects a lower asset base resulting from the
paydown of loss reserves from prior accident years.
Run-off Operations
Pre-tax operating income for the Run-off Operations was $219,000 and $66,000 for
the three months ended March 31, 2000 and 1999, respectively. The increase in
pre-tax operating income primarily reflects lower operating expenses, partially
offset by higher losses and LAE.
16
<PAGE>
CALIBER ONE
Summarized financial results of Caliber One are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
- -----------------------------------------------------------------
<S> <C> <C>
Net premiums written $ 9,590 $ 7,322
======= =======
Net premiums earned $ 5,687 $ 2,643
Net investment income 1,288 403
------- -------
Operating revenues 6,975 3,046
------- -------
Losses and LAE 6,219 2,118
Acquisition and operating expenses 3,029 1,624
------- -------
Total losses and expenses 9,248 3,742
------- -------
Pre-tax operating loss $(2,273) $ (696)
======= =======
- -----------------------------------------------------------------
</TABLE>
Caliber One recorded a pre-tax operating loss of $2.3 million, for the three
months ended March 31, 2000, compared to a pre-tax operating loss of $696,000
for the same period in 1999. The increase in pre-tax operating losses primarily
reflects higher than expected net losses and LAE in professional liability and
commercial automobile lines of business and an increase in acquisition and
operating expenses associated with a growing operation.
Premiums
Caliber One's gross and net premiums written are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(dollar amounts in thousands) 2000 1999
- ----------------------------------------------------------
<S> <C> <C>
Gross premiums written:
Products Liability $ 5,462 $ 2,435
Professional Liability 10,617 2,197
Other Liability 6,482 4,564
Property 10,647 3,595
------- -------
Total $33,208 $12,791
======= =======
Net premiums written:
Products Liability $ 4,001 $ 1,770
Professional Liability 809 1,729
Other Liability 1,379 3,293
Property 3,401 530
------- -------
Total $ 9,590 $ 7,322
======= =======
- ----------------------------------------------------------
</TABLE>
Gross premiums written increased $20.4 million for the three months ended March
31, 2000, compared to the same period last year. The increase in gross premiums
written reflects Caliber One's market acceptance and penetration as well as
expanded product offerings. Net premiums written increased $2.3 million, or 31%,
in the first quarter of 2000, compared to the first quarter of 1999, reflecting
the increase in gross premiums written, partially offset by increased
reinsurance premiums ceded pertaining primarily to the professional liability
and commercial automobile (included in "other liability" in the table above)
lines of business.
17
<PAGE>
Net premiums earned increased $3.0 million for the three months ended March 31,
2000, compared to the same period in 1999. Generally, trends in net premiums
earned follow patterns similar to net premiums written adjusted for the
customary lag related to the timing of premium writings within the year. The
increase in Caliber One's net premiums earned is greater than the increase in
net premiums written primarily due to the increase in net premiums written in
the latter half of 1999, compared to the latter half of 1998.
Losses and Expenses
The components of Caliber One's GAAP combined ratios are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
- --------------------------------------------------------
<S> <C> <C>
Loss and LAE ratio 109.4% 80.1%
-------- --------
Expense ratio:
Acquisition expenses 16.2% 27.2%
Operating expenses 37.0% 34.2%
-------- --------
Total expense ratio 53.2% 61.4%
-------- --------
GAAP combined ratio 162.6% 141.5%
======== ========
- --------------------------------------------------------
</TABLE>
Caliber One's loss and LAE ratio increased 29.3 points for the three months
ended March 31, 2000, compared to the same period last year. This increase was
primarily due to higher than expected losses and LAE in the professional
liability and commercial automobile lines of business. A substantial amount of
the losses and LAE was covered by reinsurance treaties. Additionally, other
steps were taken in the first quarter to minimize the impact of these lines,
including de-emphasizing certain segments of the professional liability and
commercial automobile lines, as well as refocusing underwriting emphasis on
other lines and classes of business.
As of December 31, 1999, Caliber One's reinsurance protection was $5.5 million
in excess of $500,000 for casualty lines and $4.5 million in excess of $500,000
for property lines. In the first quarter of 2000, additional reinsurance with
limits of at least $42 million was purchased on the professional liability and
commercial automobile lines of business.
The acquisition expense ratio decreased 11.0 points for the three months ended
March 31, 2000, compared to the same period last year. The decrease in the
acquisition expense ratio is primarily due to higher ceding commissions as a
result of reinsurance purchases in the first quarter of 2000.
The operating expense ratio increased 2.8 points for the quarter ended March 31,
2000, compared to the same period in 1999. This increase primarily reflects
increases in operating expenses associated with Caliber's continuing growth, and
net premiums earned that were reduced significantly in the first quarter of 2000
due to an increased use of reinsurance.
Net Investment Income
Net investment income increased to $1.3 million in the first quarter of 2000,
compared to $403,000 in the first quarter of 1999. This increase primarily
reflects a larger average invested asset base, due mainly to premium collections
in excess of paid losses and expenses and, to a lesser extent, capital
contributions received.
18
<PAGE>
LOSS RESERVES
Unpaid losses and LAE reflect management's best estimate of future amounts
needed to pay claims and related settlement costs with respect to insured events
which have occurred, including events that have not been reported to the
Company. In many cases, significant periods of time, ranging up to several years
or more, may elapse between the occurrence of an insured loss, the reporting of
the loss to the Company and the Company's payment of that loss. In general,
liabilities for reinsurers become known more slowly than for primary insurers
and are subject to more unforeseen development and uncertainty. As part of the
process for determining these amounts, historical data is reviewed and
consideration is given to the impact of various factors, such as legal
developments, changes in social attitudes and economic conditions.
Management believes that its unpaid losses and LAE are fairly stated at March
31, 2000. However, estimating the ultimate claims liability is necessarily a
complex and judgmental process inasmuch as the amounts are based on management's
informed estimates and judgments using data currently available. As additional
experience and data become available regarding claims payment and reporting
patterns, legislative developments, regulatory trends on benefit levels for both
medical and indemnity payments, and economic conditions, the estimates are
revised accordingly. If the Company's ultimate losses, net of reinsurance, prove
to differ substantially from the amounts recorded at March 31, 2000, the related
adjustments could have a material adverse effect on the Company's financial
condition, results of operations and liquidity.
For additional discussion of loss reserves and reinsurance, see pages 36 to 38
of the Management's Discussion and Analysis included in the Company's 1999
Annual Report to Shareholders, as well as pages 15 to 20 of the Company's Form
10-K for the year ended December 31, 1999.
CORPORATE AND OTHER
The Corporate and Other segment includes unallocated investment income,
expenses, including debt service, as well as the results of certain of the
Company's real estate properties. For the three months ended March 31, 2000,
Corporate and Other recorded a pre-tax operating loss of $5.1 million, compared
to a pre-tax operating loss of $4.8 million for the three months ended March 31,
1999. The increase in pre-tax operating loss primarily reflects higher operating
expenses in the first quarter of 2000, compared to the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measure of an entity's ability to secure enough cash to meet its
contractual obligations and operating needs. At the holding company level, the
Company requires cash to pay debt obligations, dividends to shareholders and
taxes to the Federal government, as well as to capitalize subsidiaries from time
to time. PMA Capital's primary sources of liquidity are dividends from
subsidiaries, net tax payments received from subsidiaries and borrowings.
At March 31, 2000 and December 31, 1999, the Company had $163.0 million of
outstanding debt under its Revolving Credit Facility (the "Credit Facility").
The final expiration of the Credit Facility is December 31, 2002, and the Credit
Facility matures in an installment of $38.0 million in December 2000 and
installments of $62.5 million in 2001 and 2002.
In addition to the Credit Facility, the Company maintains a committed facility
of $50.0 million for letters of credit (the "Letter of Credit Facility"). The
Letter of Credit Facility is utilized primarily for securing reinsurance
obligations of the Company's insurance subsidiaries. As of March 31, 2000, the
Company had $45.8 million outstanding in letters of credit under the Letter of
Credit Facility, compared with $45.9 million as of December 31, 1999.
The Company paid interest of $3.0 million and $3.1 million on both credit
facilities for the three months ended March 31, 2000 and 1999, respectively.
The Company's domestic insurance subsidiaries' ability to pay dividends to the
holding company is limited by the insurance laws and regulations of Pennsylvania
and Delaware (the laws of which are substantially similar with respect to
dividends). Under Pennsylvania laws and regulations, dividends may not be paid
without prior approval of the Pennsylvania Insurance Commissioner in excess of
the greater of (i) 10% of policyholders' surplus as of the end of the preceding
year or (ii) SAP net income for the preceding year, but in no event to exceed
SAP unassigned surplus. Under this standard, the Pooled Companies and PMA
Reinsurance Corporation can pay an aggregate of approximately $55
19
<PAGE>
million of dividends without the prior approval of the Pennsylvania Insurance
Commissioner during 2000. Caliber One Indemnity Company, a Delaware-domiciled
company, is directly owned by PMA Reinsurance Corporation and, as such, its
dividends may not be paid directly to PMA Capital. As stated above, Delaware's
insurance laws as they apply to restricting the payment of dividends are
substantially similar to Pennsylvania's insurance laws. Under Delaware insurance
laws, Caliber One Indemnity Company can pay up to $3.3 million in dividends
during 2000, without the prior approval of the Delaware Insurance Commissioner.
Dividends received from subsidiaries were $4.8 million and $10.8 million for the
first quarter of 2000 and 1999, respectively.
Net tax payments received from subsidiaries were $4.4 million and $3.5 million
for the three months ended March 31, 2000 and 1999, respectively.
PMA Capital's dividends to shareholders are restricted by its debt agreements.
Based upon the terms of the Credit Facility and the Letter of Credit Facility,
under the most restrictive debt covenant, PMA Capital would be able to pay
dividends of approximately $10 million in 2000. The Company paid dividends to
shareholders of $1.9 million for both the three months ended March 31, 2000 and
1999.
PMA Capital also made capital contributions in the form of cash to its
subsidiaries totaling $2.6 million during the first quarter of 1999. No cash
capital contributions were made to subsidiaries during the first quarter of
2000.
In 1998, the Company's Board of Directors authorized a plan to repurchase shares
of Common stock and Class A Common stock in an amount not to exceed $25.0
million. In 1999, an additional $50.0 million of share repurchase authority was
approved by the Company's Board of Directors. During the first quarter of 2000,
the Company repurchased 318,000 shares of Class A Common stock at a total cost
of $6.0 million. Since the inception of its share repurchase program in February
1998, PMA Capital has repurchased a total of 2.8 million Class A shares at a
total cost of $55.1 million, leaving $19.9 million of share repurchase
authorization remaining. Decisions regarding share repurchases are subject to
prevailing market conditions and the costs and benefits associated with
alternative uses of capital.
Management believes that the Company's sources of funds will provide sufficient
liquidity to meet short-term and long-term obligations.
The Company's total assets increased to $3,283.4 million at March 31, 2000,
compared to $3,245.1 million at December 31, 1999. The increase in total assets
is primarily attributable to increased reinsurance receivables related to the
purchase of reinsurance for Caliber One's professional liability and commercial
automobile lines of business.
Presently, management believes that the existing capital structure is
appropriate. However, management continually monitors the capital structure in
light of developments in the business, and the present assessment could change
as management becomes aware of new opportunities and challenges in the Company's
business.
20
<PAGE>
OTHER MATTERS
The Company's businesses are subject to a changing social, economic, legal,
legislative and regulatory environment that could affect them. Such changes
could include various legislative and regulatory changes which may affect the
pricing or profitability of the insurance products sold by the Company. In
addition, it is always possible that judicial reinterpretation of insurance
contracts after the policies were written may result in coverage unanticipated
by the Company at the time the policies were issued, such as coverage for Year
2000, tobacco and other claims. The eventual effect on the Company of the
changing environment in which it operates remains uncertain.
Comparison of SAP and GAAP Results
Results presented in accordance with GAAP vary in certain respects from
statutory accounting practices prescribed or permitted by the Pennsylvania
Insurance Department and the Delaware Insurance Department, (collectively
"SAP"). Prescribed SAP includes state laws, regulations and general
administrative rules, as well as a variety of National Association of Insurance
Commissioners ("NAIC") publications. Permitted SAP encompasses all accounting
practices that are not prescribed. In 1998, the NAIC adopted the Codification of
Statutory Accounting Principles ("Codification") guidance, which will replace
the current Accounting Practices and Procedures manual as the NAIC's primary
guidance on statutory accounting. Codification provides guidance for areas where
statutory accounting has been silent and changes current statutory accounting in
some areas, such as deferred income taxes.
The Company's insurance subsidiaries will implement the Codification guidelines
effective January 1, 2001. The Company is in the process of assessing the impact
that Codification will have on its statutory surplus and currently expects that
the impact of adopting Codification will not be material to statutory surplus.
Recent Accounting Pronouncements
Effective January 1, 2000, the Company adopted SOP 98-7, "Deposit Accounting:
Accounting for Insurance and Reinsurance Contracts That Do Not Transfer
Insurance Risk." This statement identifies several methods of deposit accounting
and provides guidance on the application of each method. This statement
classifies insurance and reinsurance contracts for which the deposit method is
appropriate as contracts that (i) transfer only significant timing risk, (ii)
transfer only significant underwriting risk, (iii) transfer neither significant
timing nor underwriting risk and (iv) have an indeterminate risk. The adoption
of SOP 98-7 did not have a material impact on the Company's financial condition,
results of operations or liquidity.
Effective January 1, 1999, the Company adopted SOP 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." SOP 97-3
provides guidance for determining when an insurance company should recognize a
liability for guaranty fund and other insurance related assessments and how to
measure that liability. As a result of adopting SOP 97-3, the Company recorded a
liability of $4.3 million pre-tax and a resulting charge to earnings of $2.8
million, net of income tax benefit of $1.5 million, which has been reported as a
cumulative effect of accounting change in 1999. This accounting change impacts
The PMA Insurance Group segment.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as "derivatives") and for
hedging activities. SFAS No. 133 requires an entity to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The accounting for changes in the fair
value of a derivative (that is, gains and losses) depends on the intended use of
the derivative and the resulting designation. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Date of FASB Statement No. 133," which defers the effective
date of SFAS No. 133 to fiscal years beginning after June 15, 2000. While the
Company is presently evaluating the impact of SFAS No. 133, the adoption of SFAS
No. 133 is not expected to have a material impact on the Company's financial
condition, results of operations or liquidity.
21
<PAGE>
CAUTIONARY STATEMENTS
Except for historical information provided in this Management's Discussion and
Analysis and otherwise in this report, statements made throughout this report
are forward-looking and contain information about financial results, economic
conditions, trends and known uncertainties. These forward-looking statements are
based on currently available financial, competitive and economic data and the
Company's current operating plans based on assumptions regarding future events.
The Company's actual results could differ materially from those expected by the
Company's management. The factors that could cause actual results to vary
materially, some of which are described with the forward-looking statements,
include, but are not limited to, changes in general economic conditions,
including the performance of financial markets and interest rates; regulatory or
tax changes, including changes in risk-based capital or other regulatory
standards that affect the ability of the Company to conduct its business;
competitive or regulatory changes that affect the cost of or demand for the
Company's products; the Company's ability to meet its marketing objectives; the
effect of changes in workers' compensation statutes and their administration;
the Company's ability to predict and effectively manage claims related to
insurance and reinsurance policies; reliance on key management; adequacy of
reserves for claim liabilities; adverse property and casualty loss development
for events the Company insured in prior years; adequacy and collectibility of
reinsurance purchased by the Company; severity of natural disasters and other
catastrophes; the effect of claims related to Year 2000 systems problems ("Y2K
Problems") asserted against the Company by insureds in which coverage is found
to exist by courts in various jurisdictions, and the costs of any litigation
with respect to Y2K Problems regardless of whether coverage is found; and other
factors disclosed from time to time in reports filed by the Company with the
Securities and Exchange Commission. Investors should not place undue reliance on
any such forward-looking statements. The Company disclaims any obligation to
update forward-looking statements.
22
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The Exhibits are listed in the Index to Exhibits on page 25.
(b) Reports on Form 8-K filed during the quarter ended March 31, 2000:
During the quarterly period ended March 31, 2000, the Company filed the
following Report on Form 8-K:
- dated February 2, 2000, Item 5 - containing news releases regarding its
1999 results and 2000 Annual Meeting of Shareholders.
23
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PMA CAPITAL CORPORATION
Date: 5/12/00 By: /s/ Francis W. McDonnell
------- -------------------------------------
Francis W. McDonnell
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
24
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Method of Filing
- ----------- ---------------------- ----------------
<S> <C> <C>
(3) Articles of Incorporation and Bylaws
3.1 Amended and Restated Articles of Incorporation Filed herewith
of the Company as last amended on May 3, 2000
3.2 Amended and Restated Bylaws of the Company Filed herewith
(10) Company's Annual Incentive Plan Filed as Annex C to the registrant's Definitive
Proxy Statement on Schedule 14A dated March 23, 2000
and incorporated herein by reference
(12) Computation of Ratio of Earnings to Fixed Charges Filed herewith
(27) Financial Data Schedule Filed herewith (EDGAR version only)
</TABLE>
25
Commonwealth of Pennsylvania
Department of State
To All to Whom These Presents Shall Come, Greeting:
Whereas, In and by Article VIII of the Business Corporation Law, approved
the fifth day of May, Anno Domini one thousand nine hundred and thirty-three,
P.L. 364, as amended, the Department of State is authorized and required to
issue a
CERTIFICATE OF AMENDMENT
evidencing the amendment and restatement of the Articles of Incorporation in
their entirety of a business corporation organized under or subject to the
provisions of that Law; and
Whereas, The stipulations and conditions of that Law pertaining to the
amendment of Articles of Incorporation have been fully complied with by
PENNSYLVANIA MANUFACTURERS CORPORATION
Henceforth The "Articles," as defined in Article I of the Business
Corporation Law, shall not include any prior documents;
Therefore, Know Ye, That subject to the Constitution of this Commonwealth
and under authority of the Business Corporation Law, I do by these presents,
which I have caused to be Sealed with the Great Seal of the Commonwealth, extend
the rights and powers of the corporation named above, in accordance with the
terms and provisions of the Articles of Amendment presented by it to the
Department of State, with full power and authority to use and enjoy such rights
and powers, subject to all the provisions and restrictions of the Business
Corporation Law and all other applicable laws of this Commonwealth.
Given under my Hand and the Great Seal of the Commonwealth, at the City of
Harrisburg, this 7th day of May in the year of our Lord one thousand nine
hundred and eighty seven and of the Commonwealth the two hundred eleventh,
/s/ James J. Hagerty
- - -----------------------------
Secretary of the Commonwealth
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
APPLICANT'S ACCT. NO. Filed this day of May 07 1987
DSCB: BCL-806 (REV. 8-72) Commonwealth of Pennsylvania
Department of State
/s/ James J. Hagerty
Secretary of the Commonwealth
(Box for Certification)
Articles of
Amendment--
Domestic Business Corporation
In compliance with the requirements of section 806 of the Business Corporation
Law, act of May 5, 1933 (P.L.364) (15 P.S. SS.1806), the undersigned
corporation, desiring to amend its Articles, does hereby certify that:
1. The name of the corporation is:
Pennsylvania Manufacturers Corporation
2. The location of its registered office in this Commonwealth is (the Department
of State is hereby authorized to correct the following statement to conform to
the records of the Department):
1021 West Eighth Avenue
-----------------------
(NUMBER) (STREET)
King of Prussia Pennsylvania 19406
--------------------------------------------------------------------
(CITY) (ZIP CODE)
3. The statute by or under which it was incorporated is:
Act of May 5, 1933, P.L. 364, as amended
4. The date of its incorporation is: February 23, 1982
5. (Check, and if appropriate, complete one of the following):
/X/ The meeting of the shareholders of the corporation at which the amendment
was adopted was held at the time and place and pursuant to the kind and period
of notice herein stated.
Time: The 27th day of April, 1987
Place: 925 Chestnut Street, Philadelphia, PA
Kind and period of notice Written notice (Proxy Statement); 30 days
/ / The amendment was adopted by a consent in writing, setting forth the action
so taken, signed by all of the shareholders entitled to vote thereon and filed
with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was:
797,476 shares
(b) The number of shares entitled to vote was:
797,476 shares
<PAGE>
7. In the action taken by the shareholders:
(a) The number of shares voted in favor of the amendment was:
699,557 shares
(b) The number of shares voted against the amendment was:
-0 against; 10,000 abstained
8. The amendment adopted by the shareholders, set forth in full, is as follows:
See Exhibit A attached and incorporated by reference herein for the text of the
Amended and Restated Articles of Incorporation of the Corporation.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer and its corporate seal, duly
attested by another such officer, to be hereunto affixed this 27th day of April,
1987.
PENNSYLVANIA MANUFACTURERS CORPORATION
--------------------------------------
(NAME OF CORPORATION)
Attest:
By: /s/ David L. Johnson By: /s/ Frederick W. Anton
------------------------------- ---------------------------------
(SIGNATURE) (SIGNATURE)
David L. Johnson, Secretary Frederick W. Anton, III, President
- - ----------------------------------- ----------------------------------
(TITLE; SECRETARY, (TITLE; PRESIDENT,
ASSISTANT SECRETARY, ETC.) VICE PRESIDENT, ETC.)
(CORPORATE SEAL)
INSTRUCTIONS FOR COMPLETION OF FORM
A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name)
or Form DSCB: 17.3 (Consent to Use of Similar Name) shall accompany
Articles of Amendment effecting a change of name.
B. Any necessary governmental approvals shall accompany this form.
C. Where action is taken by partial written consent pursuant to the Articles,
the second alternate of Paragraph 5 should be modified accordingly.
D. If the shares of any class were entitled to vote as a class, the number of
shares of each class so entitled and the number of shares of all other
classes entitled to vote should be set forth in Paragraph 6(b).
E. If the shares of any class were entitled to vote as a class, the number of
shares of such class and the number of shares of all other classes voted
for and against such amendment respectively should be set forth in
Paragraphs 7(a) and 7(b).
F. BCL Section 807 (15 P.S. Section 1807) requires that the corporation shall
advertise its intention to file or the filing of Articles of Amendment.
Proof of publication of such advertising should not be delivered to the
Department, but should be filed with the minutes of the corporation.
<PAGE>
EXHIBIT A
RESOLVED that, the Articles of Incorporation of Pennsylvania Manufacturers
Corporation shall be amended and restated in their entirety as follows:
AMENDED AND RESTATED ARTICLES OF INCORPORATION
1. The name of the Corporation is Pennsylvania Manufacturers Corporation.
2. The location and post office address of the registered office of the
Corporation in this Commonwealth is 1021 West Eighth Avenue, King of Prussia,
Pennsylvania 19406.
3. The Corporation is incorporated under the Business Corporation Law of
the Commonwealth of Pennsylvania for the following purpose or purposes: The
Corporation shall have unlimited power to engage in and to do any or all lawful
business for which corporations may be incorporated under the Act of Assembly
approved May 5, 1933, P.S. 364, as amended, under which Act the Corporation is
incorporated, including, without limitation of the foregoing, the power to
manufacture, buy, sell, trade and generally deal in products, merchandise, goods
and articles of any kind and description whatsoever.
4. The term for which the Corporation is to exist is perpetual.
5. The aggregate number of shares which the Corporation shall have the
authority to issue is: Two Million (2,000,000) shares of Common Stock, $5.00 par
value per share (the "Common Stock"), and Two Million (2,000,000) shares of
Class A Common Stock, $5.00 par value per share (the "Class A Common Stock").
A. Voting Rights and Powers. Except as otherwise required by the
Pennsylvania Business Corporation Law or as otherwise provided in these Articles
of Incorporation or the By-laws of the Corporation, with respect to all matters
upon which shareholders are entitled to vote or to which shareholders are
entitled to give consent, the holders of the outstanding shares of the Common
Stock and the holders of any outstanding shares of the Class A Common Stock
shall vote together without regard to class, and every holder of the outstanding
shares of the Common Stock shall be entitled to cast thereon ten (10) votes in
person or by proxy for each share of the Common Stock standing in his name, and
every holder of any outstanding shares of the Class A Common Stock shall be
entitled to cast thereon one (1) vote in person or by proxy for each share of
the Class A Common Stock standing in his name. In all elections for directors,
each shareholder is entitled to cumulate his votes. With respect to any proposed
amendment to these Articles of Incorporation which would increase or decrease
the number of authorized shares of either the Common Stock or the Class A Common
Stock, increase or decrease the par value of the shares of the Common Stock or
the Class A Common Stock, or alter or change the powers, preferences, relative
voting power or special rights of the shares of the Common Stock or the Class A
Common Stock so as to affect it adversely, the approval of a majority of the
votes entitled to be cast by the holders of the class affected by the proposed
amendment, voting separately as a class, shall be obtained in addition to the
approval of a majority of the votes entitled to be cast by the holders of the
Common Stock and the Class A Common Stock voting together without regard to
class as hereinbefore provided.
<PAGE>
B. Dividends and Distributions.
(a) Cash Dividends. At any time shares of the Class A Common Stock are
outstanding, as and when cash dividends may be declared by the Board of
Directors, the cash dividend payable on shares of the Class A Common Stock shall
in all cases be at least ten percent (10%) higher on a per share basis than the
cash dividend payable on shares of the Common Stock.
(b) Other Dividends and Distributions. Each share of the Common Stock and
each share of the Class A Common Stock shall be equal in respect of rights to
dividends (other than cash) and distributions, when and as declared, in the form
of stock or other property of the Corporation, except that in the case of
dividends or other distributions payable in stock of the Corporation, including
distributions pursuant to stock split-ups or divisions, which occur after the
date shares of the Class A Common Stock are first issued by the Corporation,
only shares of the Common Stock shall be distributed with respect to the Common
Stock and only shares of Class A Common Stock shall be distributed with respect
to Class A Common Stock.
C. Other Rights. Except as otherwise required by the Pennsylvania Business
Corporation Law or as otherwise provided in these Articles of Incorporation,
each share of the Common Stock and each share of Class A Common Stock shall have
identical powers, preferences and rights, including rights in liquidation.
D. Conversion of the Common Stock. Each share of Common Stock may at any
time be converted at the election of the holder thereof into one fully paid and
nonassessable share of Class A Common Stock. Any holder of shares of Common
Stock may elect to convert any or all of such shares at one time or at various
times in such holder's discretion. Such right shall be exercised by the
surrender of the certificate representing each share of Common Stock to be
converted to the agent for the registration for transfer of shares of Common
Stock at its office, or to the Corporation at its principal executive offices,
accompanied by a written notice of the election by the holder thereof to convert
and (if so required by the transfer agent or by the Corporation) by instruments
of transfer, in form satisfactory to the transfer agent and to the Corporation,
duly executed by such holder of his duly authorized attorney. The issuance of a
certificate or certificates for shares of Class A Common Stock upon conversion
of shares of Common Stock shall be made without charge for any stamp or other
similar tax in respect of such issuance. However, if any such certificate or
certificates is or are to be issued in a name other than that of the holder of
the share or shares of Common Stock converted, the person or persons requesting
the issuance thereof shall pay to the transfer agent or to the Corporation the
amount of any tax which may be payable in respect of any such transfer, or shall
establish to the satisfaction of the transfer agent or of the Corporation that
such tax has been paid. As promptly as practicable after the surrender for
conversion of a certificate or certificates representing shares of Common Stock
and the payment of any tax as hereinbefore provided, the Corporation will
deliver or cause to be delivered at the office of the transfer agent to, or upon
the written order of, the holder of such certificate or certificates, a
certificate or certificates representing the number of shares of Class A Common
Stock issuable upon such conversion, issued in such name or names as such holder
may direct. Such conversion shall be irrevocable and shall be deemed to have
been made immediately prior to the close of business on the date of the
surrender of the certificate or certificates representing shares of Common Stock
(if on such date the transfer books of the Corporation shall be closed, then
immediately prior to the close of business on the first date thereafter that
said books shall be open), and all rights of
A-2
<PAGE>
such holder arising from ownership of such shares of Common Stock shall cease at
such time, and the person or persons in whose name or names the certificate or
certificates representing shares of Class A Common Stock are to be issued shall
be treated for all purposes as having become the record holder or holders of
such shares of Class A Common Stock at such time and shall have and may exercise
all the rights and powers appertaining thereto. No adjustments in respect of
past cash dividends shall be made upon the conversion of any share of Common
Stock; provided, however, that if any shares of Common Stock shall be converted
subsequent to the record date for the payment of a cash or stock dividend or
other distribution on shares of Common Stock but prior to such payment, the
registered holder of such shares at the close of business on such record date
shall be entitled to receive the cash or stock dividend or the distribution
payable to holders of the Common Stock. The Corporation shall at all times
reserve and keep available, solely for the purpose of issue upon conversion of
outstanding shares of Common Stock, such number of shares of Class A Common
Stock as may be issuable upon the conversion of all such outstanding shares of
Common Stock, provided, the Corporation may deliver shares of Class A Common
Stock which are held in the treasury of the Corporation for shares of Common
Stock to be converted. If any shares of Class A Common Stock require
registration with or approval of any governmental authority under any federal or
state law before such shares of Class A Common Stock may be issued upon
conversion, the Corporation will cause such shares to be duly registered or
approved, as the case may be. All shares of Class A Common Stock which may be
issued upon conversion of shares of Common Stock will, upon issue, be fully paid
and nonassessable.
6. Except with respect to shares, rights, options and other securities of
the Corporation that are issued or granted in connection with any stock purchase
plan, stock option plan or other similar benefit plan that has been approved by
the holders of a majority of the Corporation's outstanding Common Stock, the
holders of Common Stock of the Corporation shall be entitled, as such, as a
matter of right, to subscribe for and to purchase any part of any new or
additional issue of Common Stock, any rights or options to purchase Common
Stock, or any securities convertible into, exchangeable for or carrying rights
or options to purchase Common Stock, whether now or hereafter authorized, but
only in those instances in which such shares of Common Stock, rights or options
to purchase Common Stock are issued for a consideration consisting solely of
money. In the event of the issuance of such shares or other securities solely
for money, the preemptive right herein granted shall only be an opportunity to
acquire such shares or other securities under such terms and conditions as the
Board of Directors shall fix. The preemptive right herein granted shall not
apply in any respect to the Corporation's Class A Common Stock, and holders of
such Class A Common Stock, as such, shall have no preemptive rights.
A-3
<PAGE>
Commonwealth of Pennsylvania
Department of State
To All to Whom These Presents Shall Come, Greeting:
Whereas, In and by Article VIII of the Business Corporation Law,
approved the fifth day of May, Anno Domini one thousand nine hundred and
thirty-three, P.L. 364, as amended, the Department of State is authorized and
required to issue a
CERTIFICATE OF AMENDMENT
evidencing the amendment of the Articles of Incorporation of a business
corporation organized under or subject to the provisions of that Law; and
Whereas, The stipulations and conditions of that Law pertaining to the
amendment of Articles of Incorporation have been fully complied with by
PENNSYLVANIA MANUFACTURERS CORPORATION
Therefore, Know Ye, That subject to the Constitution of this
Commonwealth and under the authority of the Business Corporation Law, I do by
these presents, which I have caused to be sealed with the Great Seal of the
Commonwealth, extend the rights and powers of the corporation named above, in
accordance with the terms and provisions of the Articles of Amendment presented
by it to the Department of State, with full power and authority to use and enjoy
such rights and powers, subject to all the provisions and restrictions of the
Business Corporation Law and all other applicable laws of this Commonwealth.
Given under my Hand and the Great Seal of the Commonwealth, at the City
of Harrisburg, this 27th day of April in the year of our Lord one thousand nine
hundred and eighty eight and of the Commonwealth the two hundred twelfth.
/s/ James J. Hagerty
- - -----------------------------
Secretary of the Commonwealth
pjd
DSCB-21 (7-73)
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
Filed this day of April 27 1988
Commonwealth of Pennsylvania
Department of State
/s/ James J. Hagerty
Secretary of the Commonwealth
(Box for Certification)
Articles of
Amendment--
Domestic Business Corporation
In compliance with the requirements of section 806 of the Business Corporation
Law, act of May 5, 1933 (P.L.364) (15 P.S. SS.1806), the undersigned
corporation, desiring to amend its Articles, does hereby certify that:
1. The name of the corporation is:
Pennsylvania Manufacturers Corporation
2. The location of its registered office in this Commonwealth is (the Department
of State is hereby authorized to correct the following statement to conform to
the records of the Department):
1021 West Eighth Avenue
-----------------------
(NUMBER) (STREET)
King of Prussia Pennsylvania 19406
--------------------------------------------------------------------
(CITY) (ZIP CODE)
3. The statute by or under which it was incorporated is:
Act of May 5, 1933, P.L. 364, as amended
4. The date of its incorporation is: February 23, 1982
5. (Check, and if appropriate, complete one of the following):
/X/ The meeting of the shareholders of the corporation at which the amendment
was adopted was held at the time and place and pursuant to the kind and period
of notice herein stated.
Time: The 25th day of April, 1988
Place: 925 Chestnut Street, Philadelphia, PA
Kind and period of notice Written notice (proxy statement); 30 days
/ / The amendment was adopted by a consent in writing, setting forth the
action so taken, signed by all of the shareholders entitled to vote thereon and
filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was:
749,605 shares of Common Stock and 206,511 shares of Class A Common
Stock.
(b) The number of shares entitled to vote was:
749,605 shares of Common Stock (entitled to cast ten votes per share)
and 206,511 shares of Class A Common Stock (entitled to cast one vote
per share).
<PAGE>
7. In the action taken by the shareholders:
(a) The number of shares voted in favor of the amendment was: 652,403
shares of Common Stock and 184,675 shares of Class A Common Stock.
(b) The number of shares voted against the amendment was: 11,680 shares of
Common Stock and 2,336 shares of Class A Common Stock.
8. The amendment adopted by the shareholders, set forth in full, is as follows:
RESOLVED, that the first full paragraph of Article 5 of the Articles of
Incorporation of Pennsylvania Manufacturers Corporation shall be amended and
restated in its entirety as follows:
5. The aggregate number of shares which the Corporation shall have
authority to issue is: Ten Million (10,000,000) shares of Common Stock, $5.00
par value per share (the "Common Stock"), and Ten Million (10,000,000) shares of
Class A Common Stock, $5.00 par value per share (the "Class A Common Stock").
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer and its corporate seal, duly
attested by another such officer, to be hereunto affixed this 25th day of April,
1988.
PENNSYLVANIA MANUFACTURERS CORPORATION
--------------------------------------
(NAME OF CORPORATION)
Attest:
By: /s/ David L. Johnson By: /s/ Frederick W. Anton
------------------------------- ---------------------------------
(SIGNATURE) (SIGNATURE)
David L. Johnson, Secretary Frederick W. Anton, III, President
- - ----------------------------------- --------------------------------
(TITLE; SECRETARY, (TITLE; PRESIDENT,
ASSISTANT SECRETARY, ETC.) VICE PRESIDENT, ETC.)
(CORPORATE SEAL)
INSTRUCTIONS FOR COMPLETION OF FORM
A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name)
or Form DSCB: 17.3 (Consent to Use of Similar Name) shall accompany
Articles of Amendment effecting a change of name.
B. Any necessary governmental approvals shall accompany this form.
C. Where action is taken by partial written consent pursuant to the Articles,
the second alternate of Paragraph 5 should be modified accordingly.
D. If the shares of any class were entitled to vote as a class, the number of
shares of each class so entitled and the number of shares of all other
classes entitled to vote should be set forth in Paragraph 6(b).
E. If the shares of any class were entitled to vote as a class, the number of
shares of such class and the number of shares of all other classes voted
for and against such amendment respectively should be set forth in
Paragraphs 7(a) and 7(b).
F. BCL Section 807 (15 P.S. Section 1807) requires that the corporation shall
advertise its intention to file or the filing of Articles of Amendment.
Proofs of publication of such advertising should not be delivered to the
Department, but should be filed with the minutes of the corporation.
<PAGE>
Commonwealth of Pennsylvania
Department of State
To All to Whom These Presents Shall Come, Greeting:
Whereas, In and by Article VIII of the Business Corporation Law,
approved the fifth day of May, Anno Domini one thousand nine hundred and
thirty-three, P.L. 364, as amended, the Department of State is authorized and
required to issue a
CERTIFICATE OF AMENDMENT
evidencing the amendment of the Articles of Incorporation of a business
corporation organized under or subject to the provisions of that Law; and
Whereas, The stipulations and conditions of that Law pertaining to the
amendment of Articles of Incorporation have been fully complied with by
PENNSYLVANIA MANUFACTURERS CORPORATION
Therefore, Know Ye, That subject to the Constitution of this
Commonwealth and under the authority of the Business Corporation Law, I do by
these presents, which I have caused to be sealed with the Great Seal of the
Commonwealth, extend the rights and powers of the corporation named above, in
accordance with the terms and provisions of the Articles of Amendment presented
by it to the Department of State, with full power and authority to use and enjoy
such rights and powers, subject to all the provisions and restrictions of the
Business Corporation Law and all other applicable laws of this Commonwealth.
Given under my Hand and the Great Seal of the Commonwealth, at the City
of Harrisburg, this 24th day of April in the year of our Lord one thousand nine
hundred and eighty-nine and of the Commonwealth the two hundred thirteenth.
/s/ James J. Hagerty
- ------------------------------
Secretary of the Commonwealth
cas
DSCB-21 (7-73)
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
Filed this day of April 24 1989
Commonwealth of Pennsylvania
Department of State
/s/ James J. Hagerty
Secretary of the Commonwealth
(Box for Certification)
Articles of
Amendment--
Domestic Business Corporation
In compliance with the requirements of section 806 of the Business Corporation
Law, act of May 5, 1933 (P.L.364) (15 P.S. SS.1806), the undersigned
corporation, desiring to amend its Articles, does hereby certify that:
1. The name of the corporation is:
Pennsylvania Manufacturers Corporation
2. The location of its registered office in this Commonwealth is (the Department
of State is hereby authorized to correct the following statement to conform to
the records of the Department):
1021 West Eighth Avenue
-----------------------
(NUMBER) (STREET)
King of Prussia Pennsylvania 19406
--------------------------------------------------------------------
(CITY) (ZIP CODE)
3. The statute by or under which it was incorporated is:
Act of May 5, 1933, P.L. 364, as amended
4. The date of its incorporation is: February 23, 1982
5. (Check, and if appropriate, complete one of the following):
/X/ The meeting of the shareholders of the corporation at which the amendment
was adopted was held at the time and place and pursuant to the kind and period
of notice herein stated.
Time: The 17th day of April, 1989
Place: 925 Chestnut Street, Philadelphia, PA
Kind and period of notice Written notice (proxy statement); 31 days
/ / The amendment was adopted by a consent in writing, setting forth the
action so taken, signed by all of the shareholders entitled to vote thereon and
filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was: 805,275 shares of Common
Stock and 220,725 shares of Class A common Stock.
(b) The number of shares entitled to vote was: 805,275 shares of Common
Stock (entitled to cast ten votes per share) and 220,725 shares of
Class A Common Stock (entitled to cast one vote per share).
<PAGE>
7. In the action taken by the shareholders:
(a) The number of shares voted in favor of the amendment was: 720,853
shares of Common Stock and 196,822 shares of Class A Common Stock.
(b) The number of shares voted against the amendment was: 10,000 shares of
Common Stock and 2,000 shares of Class A Common Stock.
8. The amendment adopted by the shareholders, set forth in full, is as follows:
RESOLVED, that the first full paragraph of Article 5 of the Articles of
Incorporation of Pennsylvania Manufacturers Corporation shall be amended and
restated in its entirety as follows:
5. The aggregate number of shares which the Corporation shall have
authority to issue is: Twenty Million (20,000,000) shares of Common Stock, $5.00
par value per share (the "Common Stock"), and Twenty Million (20,000,000) shares
of Class A Common Stock, $5.00 par value per share (the "Class A Common Stock").
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer and its corporate seal, duly
attested by another such officer, to be hereunto affixed this 17th day of April,
1989.
PENNSYLVANIA MANUFACTURERS CORPORATION
--------------------------------------
(NAME OF CORPORATION)
Attest:
By: /s/ David L. Johnson By: /s/ Frederick W. Anton
------------------------------- ---------------------------------
(SIGNATURE) (SIGNATURE)
David L. Johnson, Secretary Frederick W. Anton, III, President
- ------------------------------------ ----------------------------------
(TITLE; SECRETARY, (TITLE; PRESIDENT,
ASSISTANT SECRETARY, ETC.) VICE PRESIDENT, ETC.)
(CORPORATE SEAL)
INSTRUCTIONS FOR COMPLETION OF FORM
A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name)
or Form DSCB: 17.3 (Consent to Use of Similar Name) shall accompany
Articles of Amendment effecting a change of name.
B. Any necessary governmental approvals shall accompany this form.
C. Where action is taken by partial written consent pursuant to the Articles,
the second alternate of Paragraph 5 should be modified accordingly.
D. If the shares of any class were entitled to vote as a class, the number of
shares of each class so entitled and the number of shares of all other
classes entitled to vote should be set forth in Paragraph 6(b).
E. If the shares of any class were entitled to vote as a class, the number of
shares of such class and the number of shares of all other classes voted
for and against such amendment respectively should be set forth in
Paragraphs 7(a) and 7(b).
F. BCL Section 807 (15 P.S. Section 1807) requires that the corporation shall
advertise its intention to file or the filing of Articles of Amendment.
Proofs of publication of such advertising should not be delivered to the
Department, but should be filed with the minutes of the corporation.
<PAGE>
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa. C.S. ss. 1915 (relating
to articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is Pennsylvania Manufacturers Corporation
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 1021 West Eighth Avenue King of Prussia Pennsylvania 19046 Montgomery
----------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
---------------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which it was incorporated is: Act of Assembly
approved May 5, 1933, P.S. 364
4. The date of its incorporation is: February 23, 1982
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of Amendment
in the Department of State.
__ The amendment shall be effective on _________________ at _______________
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant to 15
Pa.C.S. ss. 1914(a) and (b).
__ The amendment was adopted by the board of directors pursuant to 15 Pa.
C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
__ The amendment adopted by the corporation, set forth in full, as follows:
X The amendment adopted by the corporation as set forth in full in Exhibit A
attached hereto and made a part hereof.
<PAGE>
8. (Check if the amendment restates the Articles):
__ The restated Articles of Incorporation supersede the original Articles and
all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
22nd day of April 1991.
PENNSYLVANIA MANUFACTURERS CORPORATION
---------------------------------------
(Name of Corporation)
BY: /s/ Frederick W. Anton, III
-------------------------------
Frederick W. Anton, III
TITLE: President
-----------------
<PAGE>
EXHIBIT A
TO ARTICLES OF AMENDMENT OF
PENNSYLVANIA MANUFACTURERS CORPORATION
The first full paragraph of Article 5 of the Articles of Incorporation
of Pennsylvania Manufacturers Corporation is amended and restated to read in its
entirety as follows:
"5. The aggregate number of shares which the Corporation shall
have authority to issue is: Forty Million (40,000,000) shares of Common
Stock, $5.00 par value per share (the "Common Stock"), and Forty
Million (40,000,000) shares of Class A Common Stock, $5.00 par value
per share (the "Class A Common Stock")."
<PAGE>
STATEMENT OF CHANGE OF REGISTERED OFFICE
Indicate type of entity (check one)
X Domestic Business Corporation (15 PA.C.S. ss. 1507)
- ---
Foreign Business Corporation (15 PA.C.S. ss. 4144)
- ---
Domestic Nonprofit Corporation (15 PA.C.S. ss. 5507)
- ---
Foreign Nonprofit Corporation (15 PA.C.S. ss. 6144)
- ---
Domestic Limited Partnership (15 PA.C.S. ss. 8506)
- ---
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations) the
undersigned corporation or limited partnership, desiring to effect a change of
registered office, hereby states that:
1. The name of the corporation or limited partnership is:
Pennsylvania Manufacturers Corporation
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2. The (a) address of this corporation's or limited partnership's current
registered office in this Commonwealth or (b) name of its commercial
registered office provider and the county of venue is: (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a) 1021 W. Eighth Avenue, King of Prussia PA 19406 Montgomery
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Number and Street City State Zip County
(b) c/o:
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Name of Commercial Registered Office Provider County
For a corporation or a limited partnership represented by a commercial
registered office provider, the county in (b) shall be deemed the county in
which the corporation or limited partnership is located for venue and
official publication purposes.
3. (Complete part (a) or (b)):
(a) The address to which the registered office of the corporation or limited
partnership in this Commonwealth is to be changed is:
380 Sentry Parkway Blue Bell PA 19422-0754 Montgomery
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Number and Street City State Zip County
(b) The registered office of the corporation or limited partnership shall be
provided by:
c/o:
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Name of Commercial Registered Office Provider County
For a corporation or a limited partnership represented by a commercial
registered office provider, the count in (b) shall be deemed the county in
which the corporation or limited partnership is located for venue and
official publication purposes.
<PAGE>
4. (Strike out if a limited partnership): Such change was authorized by the
Board of Directors of the corporation.
IN TESTIMONY WHEREOF, the undersigned corporation or limited partnership has
caused this statement to be signed by a duly authorized officer thereof this
14 day of September, 1974.
--- --------- ----
Pennsylvania Manufacturers Corporation
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(Name of Corporation/Limited Partnership)
BY: /s/ Robert Gaffney
------------------------------------
(Signature)
TITLE: Secretary
---------------------------------
<PAGE>
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa.C.S. (section) 1915 (relating
to articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: Pennsylvania Manufacturers Corporation
------------------------------------------
- --------------------------------------------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) The PMA Building, 380 Sentry Parkway Blue Bell PA 19422 Montgomery
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Number and Street City State Zip County
(b) c/o N/A
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Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was incorporated is: Act of May 5, 1934,
P.L. 364, as amended
--------------------
4. The date of its incorporation is: February 23, 1982
---------------------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
--- Amendment in the Department of State.
--- The amendment shall be effective on: at
-------------- ---------------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant to
--- 15 Pa.C.S. (section) 1914(a) and (b).
--- The amendment was adopted by the board of directors pursuant to
15 Pa.C.S. (section) 1914(c).
7. (Check, and if appropriate, complete one of the following):
X The amendment adopted by the corporation, set forth in full,
--- as follows:
Article 7, the full text of which is set forth in its entirety
below, is hereby added to the Amended and Restated Articles of Incorporation of
the Corporation:
"7. Subchapters E, F, G, H, I and J of Chapter 25 and Sections 2538 and
2539 of Subchapter D of Chapter 25 of the Pennsylvania Business Corporation
Law of 1988, as amended, shall not be applicable to the Corporation."
--- The amendment adopted by the corporation is set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
8. (Check if the amendment restates the Articles):
The restated articles of Incorporation supercede the original
--- Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this
25th day of June , 1997.
---------- ----------- ----
Pennsylvania Manufacturers Corporation
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(Name of Corporation)
BY: /s/ Francis W. McDonnell
-----------------------------------
(Signature)
Francis W. McDonnell, Senior Vice President,
TITLE: Chief Financial Officer and Treasurer
----------------------------------------------
<PAGE>
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 91)
In compliance with the requirements of 15 Pa.C.S. (S) 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: PENNSYLVANIA MANUFACTURERS CORPORATION
--------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) The PMA Building, 380 Sentry Parkway,
Blue Bell, Pennsylvania 19422-2328 Montgomery
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Number and Street City State Zip County
(b) c/o: N/A
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Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which it was incorporated is:
Act of May 5, 1933, P.L. 364, as amended
----------------------------------------
4. The date of its incorporation is: February 23, 1982
-----------------
5. (Check, and if appropriate complete, one of the following):
The amendment shall be effective upon filing these Articles of Amendment in
the Department of State.
X The amendment shall be effective on: December 7, 1998 at 12:01 a.m.
---------------- ---------
Date Hour
6. (Check one of the following):
The amendment was adopted by the shareholders (or members) pursuant to 15
Pa.C.S. (S) 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15 Pa.C.S.
(S) 1914(c).
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full, is as follows:
Resolved, that Article I of the Articles of Incorporation of the
Corporation is hereby amended in its entirety, to read as follows:
"I. The name of the Corporation is: PMA Capital Corporation."
The amendment adopted by the corporation is set forth in full in Exhibit A
attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 91)-2
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original Articles and
all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this
1st day of December, 1998.
- -------------------------
Pennsylvania Manufacturers Corporation
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(Name of Corporation)
BY: /s/ Francis W. McDonnell
----------------------------------
(Signature)
Francis W. McDonnell,
TITLE: Senior Vice President, Chief Financial
Officer and Treasurer
-------------------------------
<PAGE>
Microfilm Number Filed with the Department of State on DEC 07 1998
----------- ------------
Entity Number 742680 /s/ Kim Pizzingrilli
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ACTING Secretary of the Commonwealth
STATEMENT OF CHANGE OF REGISTERED OFFICE
DSCB:15-1507/4144/5507/6144/8506 (Rev 90)
Indicate type of entity (check one):
X Domestic Business Corporation (15 PA.C.S. ss. 1507)
- ---
Foreign Business Corporation (15 PA.C.S. ss. 4144)
- ---
Domestic Nonprofit Corporation (15 PA.C.S. ss. 5507)
- ---
Foreign Nonprofit Corporation (15 PA.C.S. ss. 6144)
- ---
Domestic Limited Partnership (15 PA.C.S. ss. 8506)
- ---
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations) the
undersigned corporation or limited partnership, desiring to effect a change of
registered office, hereby states that:
1. The name of the corporation or limited partnership is:
PMA Capital Corporation
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2. The (a) address of this corporation's or limited partnership's current
registered office in this Commonwealth or (b) name of its commercial
registered office provider and the county of venue is: (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a) The PMA Building,
380 Sentry Parkway Blue Bell Pennsylvania 19422-2328 Montgomery
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Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation or a limited partnership represented by a commercial
registered office provider, the county in (b) shall be deemed the county in
which the corporation or limited partnership is located for venue and
official publication purposes.
3. (Complete part (a) or (b)):
(a) The address to which the registered office of the corporation or limited
partnership in this Commonwealth is to be changed is:
1735 Market Street,
Suite 2800 Philadelphia Pennsylvania 19103-7590 Philadelphia
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Number and Street City State Zip County
(b) The registered office of the corporation or limited partnership shall be
provided by:
c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation or a limited partnership represented by a commercial
registered office provider, the county in (b) shall be deemed the county in
which the corporation or limited partnership is located for venue and
official publication purposes.
<PAGE>
DSCB:15-1507/4144/5507/6144/8506 (Rev 90)-2
4. (Strike out if a limited partnership): Such change was authorized by the
Board of Directors of the corporation.
IN TESTIMONY WHEREOF, the undersigned corporation or limited partnership has
caused this statement to be signed by a duly authorized officer thereof this
7th day of December, 1998.
--- --------- ----
PMA Capital Corporation
----------------------------------------
(Name of Corporation/Limited Partnership)
BY: /s/ Francis W. McDonnell
------------------------------------
(Signature)
TITLE: Francis W. McDonnell,
Senior Vice President, Chief
Financial Officer and Treasurer
---------------------------------
<PAGE>
Microfilm Number
--------------------
Filed with the Department of State on April 24, 2000
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Entity Number
--------------------
- -------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 91)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: PMA Capital Corporation
------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 1735 Market Street, Suite 2800 Philadelphia PA 19103-7590 Philadelphia
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Number and Street City State Zip County
(b) c/o __________________________________________________________________:
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was incorporated is: Pennsylvania Business
-----------------------
Corporation Law, Act of May 5, 1933, P.L. 364, as amended
- ---------------------------------------------------------
4. The date of its incorporation is: February 23, 1982
-----------------
5. (Check, and if appropriate complete, one of the following):
- --- The amendment shall be effective upon filing these Articles of Amendment in
the Department of State.
X The amendment shall be effective on: April 24, 2000 at 5:00 P.M.
- --- -------------- ---------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant to 15
- --- Pa., C.S.ss.1914(a) and (b).
- --- The amendment was adopted by the board of directors pursuant to 15 Pa.
C.S.ss.1914(c).
7. (Check, and if appropriate complete, one of the following):
The amendment adopted by the corporation, set forth in full, is as follows:
- ---
X The amendment adopted by the corporation is set forth in full in Exhibit A
- --- attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 91)-2
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original Articles and
- --- all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 24th day of
----
April 2000 .
- ----------
PMA Capital Corporation
----------------------------------
(Name of Corporation)
BY: /s/ Charles A. Brawley, III
---------------------------
(Signature)
Charles A. Brawley, III
TITLE: Vice President -Corporate Counsel
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT TO AMENDED AND RESTATED ARTICLES OF
----------------------------------------------------------
INCORPORATION OF PMA CAPITAL CORPORATION
----------------------------------------
Article 6 of the Amended and Restated Articles of Incorporation of PMA
Capital Corporation (the "Corporation") is deleted in its entirety and Article 5
thereof is amended and restated to read in its entirety as follows:
5. The aggregate number of shares which the corporation shall have
authority to issue is: Forty Million (40,000,000) shares of Class A
Common Stock, $5.00 par value per share ("Class A Common Stock") and
Two Million (2,000,000) shares of Preferred Stock $.01 par value per
share ("Preferred Stock").
A. Class A Common Stock
Except as otherwise required by the Pennsylvania Business
Corporation Law or as otherwise provided in these Articles of
Incorporation, with respect to all matters upon which shareholders
are entitled to vote or to which shareholders are entitled to give
consent, every holder of any outstanding shares of the Class A
Common Stock shall be entitled to cast thereon one (1) vote in
person or by proxy for each share of the Class A Common Stock
standing in his name. In all elections for directors, holders of
Class A Common Stock shall not be entitled to cumulate their
votes.
B. Conversion of the Common Stock.
Each share of Common Stock, $5.00 par value per share ("Common
Stock"), shall automatically, and without any action by the holder
thereof, effective as of 5 p.m. (Eastern Time) on the date of the
filing of these Articles of Amendment with the Pennsylvania
Department of State ("Effective Time"), be converted into one
fully paid and nonassessable share of Class A Common Stock. The
issuance of a certificate or certificates for shares of Class A
Common Stock, if requested by the holder thereof by reason of the
foregoing conversion of shares of Common Stock, shall be made
without charge. As of the Effective Time, the holder of any shares
of Common Stock shall be treated for all purposes as having become
the holder of the identical number of shares of Class A Common
Stock at such time and shall have and may exercise all the rights
and powers appertaining thereto. No adjustments in respect of past
cash dividends shall be made by reason of the foregoing conversion
of shares of Common Stock; provided, however, that if any shares
of Common Stock shall be converted subsequent to the record date
for the payment of a cash or stock dividend or other distribution
on shares of Common Stock but prior to such payment, the
registered holder of such shares at the close of business on such
record date shall be entitled to receive the cash or stock
dividend or the distribution payable to holders of the Common
Stock.
C. Preferred Stock
(1) The Preferred Stock may be issued from time to time in
one or more series by action of the Board of Directors of the
Corporation. The Board of Directors of the Corporation shall have
the full authority permitted by the Pennsylvania Business
Corporation Law to establish by resolution one or more series, to
determine the designation and the number of shares constituting
each such series and to determine the voting rights, preferences,
limitations, conversion rights and special or relative rights of
any series of the Preferred Stock that may be desired. Except as
otherwise provided in the terms of any series of the Preferred
<PAGE>
Stock and subject to the limitation on the total number of shares
of Preferred Stock that the Corporation has authority to issue
hereunder, the Board of Directors of the Corporation is also
authorized to increase or decrease the number of shares of any
series, subsequent to the issue of that series, but not below the
number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status that they had
prior to the adoption of the resolutions originally fixing the
number of shares of such series. Without limiting the generality
of the foregoing, the Board of Directors of the Corporation shall
have full authority with respect to:
(a) the designation of the series and the number of
shares to constitute each series;
(b) the dividend rate on the shares of each series, any
conditions on which and times at which dividends are payable,
whether dividends shall be cumulative, and the preference or
relation (if any) with respect to such dividends (including
possible preferences over dividends on the Class A Common
Stock or any other class or classes or series of stock);
(c) whether the series will be redeemable (at the option
of the Corporation or the holders of such shares or both, or
upon the happening of a specified event) and, if so, the
redemption prices and the conditions and times upon which
redemption may take place and whether for cash, property or
rights, including securities of the Corporation or another
corporation;
(d) the terms and amount of any sinking, retirement
or purchase fund;
(e) the conversion or exchange rights (at the option of
the Corporation or the holders of such shares or both, or upon
the happening of a specified event), if any, including the
conversion or exchange price and other terms of conversion or
exchange;
(f) the voting rights, if any (other than any voting
rights that the Preferred Stock may have as a matter of
law);
(g) any restrictions on the issue or reissue or sale
of additional Preferred Stock;
(h) the rights of the holders upon voluntary or
involuntary liquidation of the Corporation (including
preferences, if any, over the Class A Common Stock or any
other class or classes or series of stock);
(i) the preemptive rights, if any, to subscribe to
additional issues of stock or securities of the
Corporation; and
(j) such other special rights and privileges, if any, for
the benefit of the holders of the Preferred Stock, as shall
not be inconsistent with provisions of these Articles of
Incorporation.
(2) All shares of Preferred Stock of the same series shall be
identical in all respects, except that shares of any one series
issued at different times may differ as to dates, if any, from
which dividends thereon may accumulate. All shares of Preferred
Stock of each series shall be of equal rank and shall be identical
in all respects except that any series may differ from any other
series with respect to any one or more of the designations,
relative rights, preferences and limitations described or referred
to in subparagraph 5.C.(1) hereof.
<PAGE>
Microfilm Number
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Filed with the Department of State on May 3, 2000
------------
Entity Number
--------------------
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Secretary of the Commonwealth
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
DSCB:15-1522 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1522(b) (relating
to statement with respect to shares), the undersigned corporation, desiring to
state the designation and voting rights, preferences, limitations, and special
rights, if any, of a class or series of its shares, hereby states that:
1. The name of the corporation is: PMA Capital Corporation
------------------------
2. (Check and complete one of the following):
The resolution amending the Articles under 15 Pa.C.S.ss. 1522(b) (relating
- -- to divisions and determinations by the board), set forth in full, is as
follows:
X The resolution amending the Articles under 15 Pa.C.S.ss. 1522(b) is set
- -- forth in full in Exhibit A attached hereto and made a part hereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements, if any, filed
under 15 Pa.C.S.ss. 1522 or corresponding provisions of prior law with
respect thereto, and (c) any other provision of the Articles is 2,000,000
---------
shares of preferred stock and 40,000 shares of Series A Junior
Participating Preferred Stock.
4. The resolution was adopted by the Board of Directors or an authorized
committee thereof on: May 3, 2000
-------------
5. (Check, and if appropriate complete, one of the following):
The resolution shall be effective upon the filing of this statement with
respect to shares in the Department of State.
X The amendment shall be effective on: May 3, 2000 at 5:00 P.M.
- -- ----------- ---------
Date Hour
IN TESTIMONY WHEREOF, the undersigned corporation has caused this statement
to be signed by a duly authorized officer thereof this 3rd day of May, 2000.
PMA Capital Corporation
----------------------------------
(Name of Corporation)
BY: /s/ Charles A. Brawley, III
---------------------------
(Signature)
Charles A. Brawley, III
TITLE: Vice President and Corporate Counsel
<PAGE>
EXHIBIT A
ATTACHED TO
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
--------------------------------------------------------------
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
PMA CAPITAL CORPORATION
ESTABLISHING GENERAL TERMS OF PREFERRED STOCK AND DESIGNATING
FIRST SERIES THEREOF ENTITLED
"SERIES A JUNIOR PARTICIPATING PREFERRED STOCK"
A. General Terms of Preferred Stock
--------------------------------
RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of PMA Capital Corporation (herein called the "Corporation") by
Article 5 of the Amended and Restated Articles of Incorporation of the
Corporation, ("Articles of Incorporation") the Board of Directors hereby fixes
and determines the number of shares and the voting rights, designations,
preferences, limitations and special rights applicable to all shares of all
series of the class of stock hereby designated as the "Preferred Stock" as
follows:
Section 1. General. The class of Preferred Stock shall consist of
2,000,000 shares, par value $.01 per share. The shares of Preferred Stock may be
divided into and issued in series from time to time. All shares of any
particular series Preferred Stock shall be identical to all other shares of that
series. Except as otherwise subordinated in a resolution or resolutions of the
Board of Directors creating a series of the Preferred Stock (any such resolution
referred to hereinafter as an "Adopting Resolution"), all shares of Preferred
Stock of all series shall rank ratably as to dividends and assets according to
the respective rates and amounts provided in this resolution and in any Adopting
Resolution.
B. Specific Terms of Series A Junior Participating Preferred Stock
---------------------------------------------------------------
RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of the Corporation by Article 5 of the Articles of Incorporation,
the Board of Directors hereby fixes and determines the number of shares and the
voting rights, designations, preferences, limitations and special rights of
shares of a series of Preferred Stock, by establishing and designating such
series as follows:
Section 1. Designation. There shall be a series of Preferred Stock
which shall consist of 40,000 shares and designated as the "Series A Junior
Participating Preferred Stock" (such series being herein called the "Series A
Preferred Stock"). Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
<PAGE>
Section 2. Definitions.
------------
(A) The term "Common Stock" as used in this resolution shall be deemed
to mean the Class A Common Stock of the Corporation and stock of the Corporation
of any class, whether now or hereafter authorized, which has the right to
participate in the distribution of either earnings or assets of the Corporation
without limit as to the amount or percentage.
(B) The term "Dividend Parity Stock" as used in this resolution with
respect to Series A Preferred Stock shall be deemed to mean all other stock of
the Corporation ranking equally therewith as to the payment of dividends. The
term "Liquidation Parity Stock" as used in this resolution with respect to
Series A Preferred Stock shall be deemed to mean all other stock of the
Corporation ranking equally therewith as to distribution of assets upon
liquidation.
(C) The term "Junior Stock" as used in this resolution with respect to
Series A Preferred Stock shall be deemed to mean the Common Stock and all other
stock of the Corporation ranking junior to the Series A Preferred Stock as to
the payment of dividends and the distribution of assets upon liquidation.
(D) The term "Senior Stock" as used in this resolution with respect to
Series A Preferred Stock shall be deemed to mean all other stock of the
Corporation ranking senior to the Series A Preferred Stock as to the payment of
dividends or the distribution of assets upon liquidation.
Section 3. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any
class of Senior Stock, the holders of shares of Series A Preferred
Stock, in preference to the holders of Common Stock and of any other
Junior Stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the 10th day of January, April,
July and October in each year (or, in each case if not a date the
Corporation is open for business, the next date on which the
Corporation is so open) (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 or (b) subject
to the provision for adjustment hereinafter set forth, one thousand
times the aggregate per share amount of all cash dividends, and one
thousand times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares
of Common Stock or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment
2
<PAGE>
of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 90 days prior to the
date fixed for the payment thereof.
Section 4. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to one thousand votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which
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is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event;
provided, however, that in no event shall any share of Series A
Preferred Stock have more than one thousand votes per share.
(B) Except as otherwise provided herein, in any other Adopting
Resolution, or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 5. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(1) declare or pay dividends or make any other
distributions, on any shares of Junior Stock;
(2) declare or pay dividends, or make any other
distributions, on any shares of Dividend Parity Stock, except
dividends paid ratably on the Series A Preferred Stock and all
such Dividend Parity Stock on which dividends are payable or
in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(3) redeem or purchase or otherwise acquire for
consideration shares of any Junior Stock, provided that the
Corporation may at any time redeem, purchase or otherwise
acquire shares of any such Junior Stock in exchange for shares
of any other class of Junior Stock; or
(4) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of Dividend Parity Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or
classes.
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(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 5, purchase or otherwise acquire such
shares at such time and in such manner.
Section 6. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any other Adopting Resolution creating another
series of Preferred Stock or as otherwise required by law.
Section 7. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation, dissolution or winding up (collectively a
"Liquidation") of the Corporation, no distribution shall be made (1) to the
holders of shares of Junior Stock unless, prior thereto, the holders of shares
of Series A Preferred Stock shall have received $1000 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision of adjustment hereinafter set forth, equal to
one thousand times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (2) to the holders of shares of Dividend Parity
Stock, except distributions made ratably on the Series A Preferred Stock and all
such Dividend Parity Stock in proportion to the total amounts to which the
holders of all such shares are entitled upon Liquidation. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the provision in clause (1) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) None of the following shall be considered a Liquidation within the
meaning of this section:
(1) a consolidation or merger of the Corporation with or into any
other corporation;
(2) a merger of any other corporation into the Corporation;
(3) a reorganization of the Corporation;
(4) the purchase or redemption of all or part of the outstanding
shares of any class or classes of the Corporation;
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(5) a sale or transfer of all or any part of the assets of the
Corporation;
(6) a share exchange to which the Corporation is a party; or
(7) a division of the Corporation
Section 8. Consolidation, Merger etc. In case the Corporation shall
enter into any consolidation, merger, division, share exchange, business
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash or any other
property, or a combination thereof, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to one thousand times the aggregate amount of stock, securities, cash or
any other property, or a combination thereof (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 9. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 10. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets upon liquidation,
junior to all other classes of Preferred Stock (and series thereof) of the
Corporation, whether now or hereafter authorized.
Section 11. Amendment. The Articles of Incorporation shall not be
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
PH3-638400-8
6
AMENDED AND RESTATED BYLAWS OF
PMA CAPITAL CORPORATION
<PAGE>
Table of Contents
Article/Section Title Page No
Article 1 Corporate Office ................................... 1
Section 1.1 Registered Office .................................. 1
Section 1.2 Other Offices ...................................... 1
Article 2 Shareholder; Share Certificates .................... 1
Section 2.1 Shares; Share Certificates ........................ 1
Section 2.2 Lost Certificates .................................. 1
Section 2.3 Transfer of Shares ................................ 1
Section 2.4 Transfer Agents and Registrars .................... 2
Section 2.5 Transfer Rules .................................... 2
Section 2.6 Uncertificated Shares ............................. 2
Article 3 Shareholders Meetings ............................. 2
Section 3.1 Place of Meeting .................................. 2
Section 3.2 Annual Meetings ................................... 2
Section 3.3 Special Meetings .................................. 2
Section 3.4 Notice of Meetings ................................ 2
Section 3.5 Notice of Meeting Not Required .................... 2
Section 3.6 Electronic Shareholder Meetings ................... 3
Section 3.7 Nomination of Directors ........................... 3
Section 3.8 Notice of Shareholder Business .................... 4
Article 4 Quorum of Shareholders ............................ 5
Section 4.1 Requirement of Quorum ............................. 5
Section 4.2 Quorum ............................................ 5
Section 4.3 Continuation of Business .......................... 6
Section 4.4 Adjournments ...................................... 6
Section 4.5 Limits on Adjournments ............................ 6
Section 4.6 Votes Necessary ................................... 6
Article 5 Proxies ........................................... 6
Section 5.1 Proxies; Revocability ............................. 6
Section 5.2 Multiple Proxies .................................. 7
Article 6 Record Date ....................................... 7
Section 6.1 Fixing of Record Date ............................. 7
Article 7 Shareholder List .................................. 7
Section 7.1 Shareholder List .................................. 7
Section 7.2 Validity of Action ................................ 7
Section 7.3 Transfer Books .................................... 7
Section 7.4 Registered Shareholders ........................... 7
<PAGE>
Article 8 Judges of Election ................................ 8
Section 8.1 Appointment ....................................... 8
Section 8.2 Vacancy ........................................... 8
Section 8.3 Duties ............................................ 8
Section 8.4 Reports ........................................... 8
Article 9 No Consent of Shareholders in Lieu of Meeting 8
Section 9.1 No Action by Consent .............................. 8
Article 10 Directors ......................................... 9
Section 10.1 Number; Powers .................................... 9
Section 10.2 Election .......................................... 9
Section 10.3 Qualification ..................................... 9
Section 10.4 Meeting without Notice ............................ 9
Section 10.5 Regular Meetings .................................. 9
Section 10.6 Special Meetings .................................. 9
Section 10.7 Quorum ............................................ 9
Section 10.8 Electronic Meetings ............................... 9
Article 11 Removal of Directors .............................. 10
Section 11.1 Removal by Shareholders ........................... 10
Section 11.2 Declared Vacancies ................................. 10
Section 11.3 Removal of Board .................................. 10
Article 12 Vacancies in the Board of Directors ............... 10
Section 12.1 Filling Vacancies .................................. 10
Section 12.2 Vacancies; Resignations ........................... 10
Article 13 Director Action by Unanimous Written Consent ....... 10
Section 13.1 Unanimous Consent ................................. 10
Article 14 Compensation of Directors ......................... 11
Section 14.1 Compensation ...................................... 11
Article 15 Committees ........................................ 11
Section 15.1 Establishment ..................................... 11
Section 15.2 Executive Committees .............................. 11
Section 15.3 Audit Committee ................................... 11
Section 15.4 Alternative Members ............................... 12
Section 15.5 Status of Committee Action ........................ 12
Article 16 Liability of Directors ............................ 12
Section 16.1 Fiduciary Duties .................................. 12
Section 16.2 Fiduciary Duties; Consideration ................... 12
Section 16.3 Presumption of Good Faith ......................... 13
Section 16.4 No Personal Liability; Exceptions................... 13
Section 16.5 Amendments ........................................ 13
<PAGE>
Article 17 Officers .......................................... 13
Section 17.1 Numbers and Qualifications ........................ 13
Section 17.2 Election; Resignation ............................. 13
Section 17.3 Actions in Good Faith ............................. 14
Section 17.4 Removal ........................................... 14
Section 17.5 Voting of Stock in Other Corporations .............. 14
Article 18 Duties of Officers ................................ 14
Section 18.1 Chairman of the Board ............................. 14
Section 18.2 President ......................................... 14
Section 18.3 Vice President .................................... 15
Section 18.4 Secretary ......................................... 15
Section 18.5 Treasurer ......................................... 15
Section 18.6 Assistant Secretary ............................... 15
Section 18.7 Assistant Treasurer ............................... 15
Section 18.8 Assistant Officers ................................ 15
Section 18.9 Bonds ............................................. 15
Section 18.10 Designations ...................................... 16
Article 19 Indemnification of Officers, Directors,
Employees, and Agents .............................. 16
Section 19.1 Indemnification ................................... 16
Section 19.2 Non-Exclusivity .................................... 16
Section 19.3 Expenses .......................................... 16
Section 19.4 Continuation ...................................... 16
Section 19.5 Securing Obligations .............................. 16
Section 19.6 Separate Agreement ................................ 17
Section 19.7 Defense of Claims ................................. 17
Section 19.8 Insurance ......................................... 17
Section 19.9 Amendment ......................................... 18
Article 20 Fiscal Year ....................................... 18
Section 20.1 Fiscal Year ....................................... 18
Article 21 Notices ........................................... 18
Section 21.1 Manner of Giving Written Notice ................... 18
Section 21.2 Waiver of Notice .................................. 18
Article 22 Amendments ........................................ 19
Section 22.1 Amendments Requiring Shareholder Approval ......... 19
Section 22.2 Amendments Requiring Notice ....................... 19
Section 22.3 Other Amendments .................................. 19
<PAGE>
AMENDED AND RESTATED BYLAWS OF
PMA CAPITAL CORPORATION
ARTICLE 1
Corporate Office
Section 1.1 Registered Office. The Corporation shall have and
continuously maintain in the Commonwealth of Pennsylvania a registered office at
an address to be designated from time to time by the Board of Directors which
may, but need not, be the same as its place of business.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places as the Board of Directors may from time to time designate or
the business of the Corporation may require.
ARTICLE 2
Shareholders; Share Certificates
Section 2.1 Shares; Share Certificates. Except as set forth in Section
2.6, all shares issued by the Corporation shall be represented by certificates.
The share certificates of the Corporation shall be numbered and registered in a
share register as they are issued; shall state that the Corporation is
incorporated under the laws of the Commonwealth of Pennsylvania; shall bear the
name of the registered holder, the number and class of shares and the
designation of the series, if any, represented thereby, the par value, if any,
of each share or a statement that the shares are without par value, as the case
may be; shall be signed by the President or a Vice President, and the Secretary
or the Treasurer or any other person properly authorized by the Board of
Directors, and shall bear the corporate seal, which seal may be facsimile
engraved or printed. Where the certificate is signed by a transfer agent or a
registrar, the signature of any corporate officer on such certificate may be a
facsimile engraved or printed. In case any officer who has signed, or whose
facsimile signature has been placed upon, any share certificate shall have
ceased to be such officer because of death, resignation or otherwise before the
certificate is issued, such share certificate may be issued by the Corporation
with the same effect as if the officer had not ceased to be such at the date of
its issue.
Section 2.2 Lost Certificates. Duplicate certificates may be issued for
those lost or destroyed, under such terms as may be prescribed by the Board of
Directors.
Section 2.3 Transfer of Shares. Upon surrender to the Corporation or
the transfer agent of the Corporation of a share certificate duly endorsed by
the person named in the certificate or by attorney duly appointed in writing and
accompanied where necessary by the proper evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the person entitled
thereto and the old certificate canceled and the transfer recorded on the share
register of the Corporation. A transferee of shares of the Corporation shall not
be a record holder of such shares entitled to the rights and benefits associated
therewith unless and until the share transfer has been recorded on the share
transfer books of the Corporation. No transfer shall be made if it would be
inconsistent with the provisions of (i) Article 8 of the Pennsylvania Uniform
Commercial Code or (ii) Article 2 of these Bylaws.
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Section 2.4 Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
Section 2.5 Transfer Rules. The Board of Directors may make such
additional rules and regulations, not inconsistent with these Bylaws, as it may
deem expedient concerning the issue, transfer and registration of certificates
for shares of stock of the Corporation.
Section 2.6 Uncertificated Shares. Notwithstanding anything herein to
the contrary, any or all classes and series of shares, or any part thereof, may
be represented by uncertificated shares to the extent determined by the Board of
Directors, except that shares represented by a certificate that is issued and
outstanding shall continue to be represented thereby until the certificate is
surrendered to the Corporation. Within a reasonable time after the issuance or
transfer of uncertificated shares, the Corporation shall send to the registered
owner thereof, a written notice containing the information required to be set
forth or stated on certificates. The rights and obligations of the holders of
shares represented by certificates and the rights and obligations of the holders
of uncertificated shares of the same class and series shall be identical.
Notwithstanding anything herein to the contrary, the provisions of Section 2.3
shall be inapplicable to uncertificated shares and in lieu thereof the Board of
Directors shall adopt alternative procedures for registration of transfers.
ARTICLE 3
Shareholders Meetings
Section 3.1 Place of Meetings. All meetings of the shareholders shall
be held at such time and place, within or without the Commonwealth of
Pennsylvania, as may be determined from time to time by the Board of Directors
and need not be held at the registered office of the Corporation.
Section 3.2 Annual Meetings. An annual meeting of the shareholders for
the election of directors and the transaction of such other business as may
properly be brought before the meeting shall be held in each calendar year at
such time and place as may be determined by the Board of Directors.
Section 3.3 Special Meetings. Special meetings of the shareholders, may
be called at any time only by the Chairman, President or the Board of Directors.
Section 3.4 Notice of Meetings. Written notice of each meeting other
than an adjourned meeting of shareholders, stating the place and time, and, in
the case of a special meeting of shareholders, the general nature of the
business to be transacted, shall be provided to each shareholder of record
entitled to vote at the meeting at such address as appears on the books of the
Corporation. Business transacted at any special meeting shall be limited to the
purposes stated in the notice. Such notice shall be given, in accordance with
the provisions of Article 21 of these Bylaws, at least (i) ten days prior to the
day named for a meeting to consider a fundamental change under Chapter 19 of the
Pennsylvania Business Corporation Law of 1988 (the "BCL") or (ii) five days
prior to the day named for the meeting in any other case.
Section 3.5 Notice of Meeting Not Required. Whenever the Corporation
has been unable to communicate with a shareholder for more than 24 consecutive
months because communications to the shareholder are returned unclaimed or the
shareholder has otherwise failed to provide the Corporation with a current
address, the giving of notice to such shareholder pursuant to Section 3.4 of
these Bylaws shall not be required. Any action or meeting that is taken or held
without notice or
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<PAGE>
communication to that shareholder shall have the same validity as if the notice
or communication had been duly given. Whenever a shareholder provides the
Corporation with a current address this Section 3.5 shall cease to be applicable
to such shareholder. The Corporation shall not be required to give notice to any
shareholder pursuant to Section 3.4 hereof if and for as long as communication
with such shareholder is unlawful.
Section 3.6 Electronic Shareholder Meetings. The Board of Directors may
provide by resolution with respect to a specific meeting or with respect to a
class of meetings that one or more shareholders may participate in such meeting
or meetings of shareholders by means of conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear one another. Participation in the meeting by such means shall
constitute presence in person at the meeting. Any notice otherwise required to
be given in connection with any meeting at which participation by conference
telephone or other communications equipment is permitted shall so specify.
Section 3.7 Nomination of Directors.
(a) Nominations of persons for election to the Board of Directors of
the Corporation may be made at an annual meeting of shareholders (x) by or at
the direction of the Board of Directors or by a Nominating Committee appointed
by the Board of Directors and consisting of directors continuing in office (the
"Nominating Committee") or (y) by any shareholder of the Corporation who is a
shareholder of record at the time of giving of notice provided for in this
Section 3.7(a), who shall be entitled to vote for the election of directors at
the meeting and who complies with the notice procedures set forth in this
Section 3.7(a). Such nominations, other than those made by or at the direction
of the Board of Directors or Nominating Committee, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not later than the close of
business on the 60th day nor earlier than the close of business on the 90th day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice by the
shareholder to be timely must be so received not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the earlier of the date on which public announcement of
the date of the meeting is first made or the date the notice of the meeting is
first mailed to shareholders. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
shareholder's notice as described above. Such shareholder's notice shall set
forth (x) as to each person whom the shareholder proposes to nominate for
election or reelection as a director the name and address of such person and all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); and (y) as to the shareholder giving notice (i) the name and address
of the shareholder as they appear on the Corporation's share transfer books who
intends to make the nomination ("Nominating Shareholder"); (ii) the name and
address of the beneficial owner, if different than the Nominating Shareholder,
of any of the shares owned of record by the Nominating Shareholder ("Beneficial
Holder"); (iii) the number of shares of each class and series of shares of the
Corporation which are owned of record and beneficially by the Nominating
Shareholder and the number which are owned beneficially by any Beneficial
Holder; (iv) a description of all arrangements and understandings between the
Nominating Shareholder and any Beneficial Holder and any other person or persons
(naming such person or persons) pursuant to which the
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nomination is being made; and (v) a representation that the Nominating
Shareholder is at the time of giving of the notice, was or will be on the record
date for the meeting, and will be on the meeting date a holder of record of
shares of the Corporation entitled to vote at such meeting, and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice. No person shall be eligible for election at any meeting
of shareholders as a director of the Corporation unless nominated in compliance
with the procedures set forth in this Section. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in compliance with the procedures prescribed by the
Bylaws, and if he should so determine, he shall so declare to the meeting and
the defective nominations shall be disregarded. Notwithstanding the foregoing
provisions of this Section, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 3.7.
(b) Nominations of persons for election to the Board of Directors may
be made at a special meeting of shareholders at which directors are to be
elected pursuant to the Corporation's notice of meeting (x) by or at the
direction of the Board of Directors or by the Nominating Committee or (y)
provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any shareholder of the Corporation who is a
shareholder of record at the time of giving of notice provided for in this
Section 3.7(b) who shall be entitled to vote for the election of directors at
the meeting and who complies with the notice procedures set forth in this
Section 3.7(b). In the event the Corporation calls a special meeting of
shareholders for the purpose of electing one or more directors to the Board of
Directors, any such shareholder may nominate a person or persons ( as the case
may be), for election to such position(s) as specified in the Corporation's
notice of meeting, if the shareholder's notice in the form required by Section
3.7(a) shall be delivered to the Secretary at the principal executive offices of
the Corporation not earlier than the close of business on the 90th day prior to
such special meeting and not later than the close of business on the later of
the 60th day prior to such special meeting or the 10th day following the earlier
of the date on which public announcement is first made of the date of the
special meeting or the date the notice of the special meeting is first mailed to
shareholders. In no event shall the pubic announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(c) For purposes of this Section 3.7, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, PR
Newswire, Associate Press or comparable national news or wire service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.
Section 3.8 Notice of Shareholder Business. At the annual meeting of
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be a proper subject for shareholder action under these Bylaws and
Pennsylvania law and must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the annual meeting
by a shareholder of the Corporation who is a shareholder of record at the time
of giving of notice provided for in this Section and who shall be entitled to
vote at the meeting. For business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not later than the close of business on the 60th day
nor earlier than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
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more than 60 days after such anniversary date, notice by the shareholder, to be
timely, must be so received not earlier than the close of business on the 90th
day prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following the
earlier of the date on which public announcement of the date of the annual
meeting is first made or the date notice of the meeting is first mailed to
shareholders. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for giving of a shareholder's notice
as described above. A shareholder's notice to the Secretary shall set forth as
to each matter the shareholder proposes to bring before the annual meeting (a)
the name and address of the shareholder as it appears on the Corporation's share
transfer books who intends to bring the business before the annual meeting
("Proposing Shareholder"); (b) the name and address of the beneficial owner, if
different than the Proposing Shareholder, of any of the shares owned of record
by the Proposing Shareholder ("Beneficial Owner"); (c) the number of shares of
each class and series of shares of the Corporation which are owned of record and
beneficially by the Proposing Shareholder and the number which are owned
beneficially by any Beneficial Owner; d) any interest (other than an interest
solely as a shareholder) which the Proposing Shareholder or a Beneficial Owner
has in the business being proposed by the Proposing Shareholder; e) a
description of all arrangements and understandings between the Proposing
Shareholder and any Beneficial Owner and any other person or persons (naming
such person or persons) pursuant to which the proposal in the Shareholder Notice
is being made; (f) a description of the business which the Proposing Shareholder
seeks to bring before the annual meeting, the reason for doing so and, if a
specific action is to be proposed, the text of the resolution or resolutions
which the Proposing Shareholder proposes that the Corporation adopt; and (g) a
representation that the Proposing Shareholder is at the time of giving the
Shareholder Notice, was or will be on the record date for the meeting, and will
be on the meeting date a holder of record of shares of the Corporation entitled
to vote at such meeting, and intends to appear in person or by proxy at the
meeting to bring the business specified in the shareholder notice before the
meeting. Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at an annual meeting except in compliance with the procedures
set forth in this Section 3.8. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in compliance with the provisions of this Section
3.8, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
At any special meeting of shareholders, only such business shall be conducted as
shall have been brought before the meeting by or at the direction of the Board
of Directors. For purposes of this Section 3.8, "public announcement" shall have
the same meaning as set forth in Section 3.7(c).
ARTICLE 4
Quorum of Shareholders
Section 4.1 Requirement of Quorum. A meeting of shareholders duly
called shall not be organized for the transaction of business unless a quorum is
present.
Section 4.2 Quorum. The presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter to be voted upon at the
meeting shall constitute a quorum for purposes of consideration and action on
such matters. To the extent that a quorum is present with respect to
consideration of and action on a particular matter or matters but a quorum is
not present as to another matter or matters, consideration of an action on the
matter or matters for which a quorum is present may occur and, after such
consideration and action, the meeting may be adjourned for purposes of the
consideration of and action on the matter or matters for which a quorum is not
present.
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Section 4.3 Continuation of Business. The shareholders present at a
duly organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 4.4 Adjournments. If a meeting of shareholders cannot be
organized because a quorum is not present, those present in person or by proxy,
may, except as otherwise provided by statute, adjourn the meeting to such time
and place as they may determine, without notice other than an announcement at
the meeting, until the requisite number of shareholders for a quorum shall be
present in person or by proxy.
Section 4.5 Limits on Adjournments. Notwithstanding the provisions of
Sections 4.1, 4.2, 4.3 and 4.4 of these Bylaws:
(1) Any meeting at which directors are to be elected may be
adjourned only from day to day, or for such longer periods not
exceeding 15 days each, as the shareholders present and
entitled to vote shall direct.
(2) Those shareholders entitled to vote who attend a meeting
called for election of directors that has been once previously
adjourned for lack of a quorum, although less than a quorum as
fixed in these Bylaws, shall nevertheless constitute a quorum
for the purpose of electing directors.
(3) Those shareholders entitled to vote who attend a meeting that
has been previously adjourned for one or more periods
aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in these Bylaws,
shall nevertheless constitute a quorum for the purpose of
acting upon any matter set forth in the notice of the meeting
if the notice states that those shareholders who attend the
adjourned meeting shall nevertheless constitute a quorum for
the purpose of acting upon the matter.
Section 4.6 Votes Necessary. Except as otherwise provided by statute,
the Articles of Incorporation or these Bylaws, at any duly organized meeting of
shareholders, the affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon shall decide any question brought before
such meeting, and, if any shareholders are entitled to vote thereon as a class,
the affirmative vote of a majority of the votes by the shareholders entitled to
vote as a class shall decide any such question.
ARTICLE 5
Proxies
Section 5.1 Proxies; Revocability. Every shareholder entitled to vote
at a meeting of shareholders, or to express consent or dissent to corporate
action in writing without a meeting, may authorize another person or persons to
act for him by proxy. Every proxy shall be executed in writing by the
shareholder or his duly authorized attorney-in-fact and filed with the Secretary
of the Corporation. A proxy, unless coupled with an interest shall be revocable
at will, notwithstanding any other agreement or any provision in the proxy to
the contrary, but the revocation of a proxy shall not be effective until written
notice thereof has been given to the Secretary of the Corporation. An unrevoked
proxy shall not be valid after three years from the date of its execution unless
a longer time is expressly
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provided therein. A proxy shall not be revoked by the death or incapacity of the
maker, unless before the vote is counted or the authority is exercised, written
notice of such death or incapacity is given to the Secretary of the Corporation.
Section 5.2 Multiple Proxies. Where two or more proxies of a
shareholder are present, the Corporation shall, unless otherwise expressly
provided in the proxy, accept as the vote of all shares represented thereby the
vote cast by a majority of them and, if a majority of the proxies cannot agree
whether the shares represented shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally among those persons.
ARTICLE 6
Record Date
Section 6.1 Fixing of Record Date. The Board of Directors may fix a
time prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall not be
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date so fixed shall be entitled to notice of, or
to vote at, such meeting, notwithstanding any transfer of shares on the books of
the Corporation after any record date fixed as aforesaid. The Board of Directors
may similarly fix a record date for the determination of shareholders of record
for any other purpose, such as the payment of a distribution or conversion or
exchange of shares.
ARTICLE 7
Shareholder List
Section 7.1 Shareholder List. The officer or agent having charge of the
share transfer books of the Corporation shall make a complete alphabetical list
of the shareholders entitled to vote at any meeting, with their addresses and
the number of shares held by each. The list shall be produced and kept open at
the time and place of the meeting for inspection by any shareholder during the
entire meeting except that if the Corporation has 5,000 or more shareholders, in
lieu of the making of the list the Corporation may make the information
available at the meeting by other means.
Section 7.2 Validity of Action. Failure to comply with the provisions
of Section 7.1 of these Bylaws shall not affect the validity of any action taken
at a meeting prior to a demand at the meeting by any shareholder entitled to
vote thereat to examine the list.
Section 7.3 Transfer Books. The original transfer books for shares of
the Corporation, or a duplicate thereof kept in the Commonwealth of
Pennsylvania, shall be prima facie evidence as to who are the shareholders
entitled to examine the list or transfer books for shares or to vote at any
meeting.
Section 7.4 Registered Shareholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of a share of stock to receive dividends and to vote as such owner, shall
be entitled to hold liable for calls and assessments, if any, a person
registered on its records as the owner of shares of stock, and shall not be
bound to recognize any
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equitable or other claim to or interest in such share or shares of stock on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the BCL.
ARTICLE 8
Judges of Election
Section 8.1 Appointment. Prior to any meeting of shareholders, the
Board of Directors may appoint judges of election, who may but need not be
shareholders, to act at such meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of any such meeting may,
and on the request of any shareholder or his proxy shall, make such appointment
at the meeting. The number of judges shall be one or three. No person who is a
candidate for an office to be filled at the meeting shall act as a judge of
election.
Section 8.2 Vacancy. In case any person appointed as a judge of
election fails to appear or fails or refuses to act, the vacancy so created may
be filled by appointment made by the Board of Directors in advance of the
convening of the meeting or at the meeting by the presiding officer thereof.
Section 8.3 Duties. The judges of election shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum and the authenticity, validity and effect
of proxies. The judges of election shall also receive votes or ballots, hear and
determine all challenges and questions in any way arising in connection with the
right to vote, count and tabulate all votes, determine the result and do such
other acts as may be proper to conduct the election or vote with fairness to all
shareholders. The judges of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as practicable. If
there are three judges of election, the decision, act or certificate of a
majority shall be the decision, act or certificate of all.
Section 8.4 Reports. On request of the presiding officer of the meeting
or of any shareholder, the judges of election shall make a report in writing of
any challenge, question or matter determined by them and execute a certificate
of any fact found by them. Any report or certificate made by them shall be prima
facie evidence of the facts found by them.
ARTICLE 9
No Consent of Shareholders in Lieu of Meeting
Section 9.1 No Action by Consent. No action of the shareholders shall
be taken by either unanimous consent or partial consent or other consent in lieu
of a meeting.
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ARTICLE 10
Directors
Section 10.1 Number; Powers. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors of not
less than 9 or more than 24 directors. The number of directors will be fixed
from time to time exclusively pursuant to a resolution adopted by the Board of
Directors. The Board of Directors shall be divided into three classes consisting
of as nearly equal in number of directors as possible, and directors of each
class shall be elected for a term of three years and until their successors are
elected and qualified or until their earlier death, resignation or removal. A
decrease in the number of directors shall not have the effect of shortening the
term of any incumbent director. The Board of Directors shall increase or
decrease the number of directors in one or more classes as may be appropriate
whenever it increases or decreases the number of directors that constitute the
full Board of Directors in order to ensure that the three classes shall be as
nearly equal in number of directors as possible. The Board of Directors may
exercise all such powers of the Corporation and do all such lawful acts and
things as are required or permitted to be exercised and done by statute, the
Articles of Incorporation or these Bylaws.
Section 10.2 Election. In all elections of directors, each shareholder,
or his proxy, shall be entitled to the number of votes to which the shares of
stock owned by him are entitled to cast under the Articles of Incorporation of
the Corporation and shall not be entitled to cumulate his votes.
Section 10.3 Qualification. Each director shall be a natural person of
at least 18 years of age and need not be a resident of the Commonwealth of
Pennsylvania or a shareholder of the Corporation. The Board may adopt such
policies regarding qualifications for directors as it deems appropriate.
Section 10.4 Meeting without Notice. A meeting of the Board of
Directors may be held immediately following the annual meeting of shareholders
at which directors have been elected without the necessity of notice to the
directors.
Section 10.5 Regular Meetings. Regular Meetings of the Board of
Directors shall be held at such times and places within or without the
Commonwealth of Pennsylvania as may be designated by the Board of Directors or
in the notice of meeting.
Section 10.6 Special Meetings. A special meeting of the Board of
Directors may be called at any time by the Chairman of the Board or the
President on 24 hours' notice to each director, either by telephone, or if in
writing, in accordance with Article 21 of these Bylaws and shall be called by
either of them or, in their absence, by the Secretary, upon the written request
of three members of the Board of Directors. Such special meeting of the Board of
Directors shall be held at a time and place designated in the notice.
Section 10.7 Quorum. A majority of the directors then in office shall
constitute a quorum for the transaction of business at any regular or special
meeting of the Board of Directors, and the acts of a majority of the directors
present and voting at a meeting at which a quorum is present shall be the acts
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the Articles of Incorporation or by these Bylaws.
Section 10.8 Electronic Meetings. One or more directors may participate
in any meeting of the Board of Directors, or of any committee thereof, by means
of a conference telephone or similar
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communications equipment by means of which all persons participating in the
meeting can hear one another. Participation in a meeting by such means shall
constitute presence in person at the meeting.
ARTICLE 11
Removal of Directors
Section 11.1 Removal by Shareholders. Except as otherwise provided in
Section 11.3 of these Bylaws, the entire Board of Directors, or any class of the
Board of Directors or any individual director, may be removed from office by
vote of the shareholders entitled to vote thereon only for cause. If any
directors are so removed, new directors may be elected at the same meeting.
Section 11.2 Declared Vacancies. The Board of Directors may declare
vacant the office of a director who has been judicially declared of unsound mind
or who has been convicted of an offense punishable by imprisonment for a term of
more than one year.
Section 11.3 Removal of Board. The Board of Directors may be removed at
any time with or without cause by the unanimous vote of shareholders entitled to
vote thereon.
ARTICLE 12
Vacancies in the Board of Directors
Section 12.1 Filling Vacancies. Vacancies in the Board of Directors
occurring for any reason, including vacancies resulting from an increase in the
number of directors, shall be filled by a majority vote of the remaining members
of the Board of Directors, though less than a quorum, or by a sole remaining
director, and each person so elected shall be a director to serve for the
balance of the unexpired term and until his successor has been elected and
qualified or until his earlier death, resignation or removal.
Section 12.2 Vacancies; Resignations. When one or more directors
resign from the Board of Directors effective at a future date, the directors
then in office, including those who have so resigned, shall have the power by a
majority vote to fill the vacancies, the vote thereon to take effect when the
resignations become effective.
ARTICLE 13
Director Action by Unanimous Written Consent
Section 13.1 Unanimous Consent. Any action required or permitted to be
taken at a meeting of the Board of Directors may be taken without a meeting if,
prior or subsequent to the action, a consent or consents thereto signed by all
of the directors is filed with the Secretary of the Corporation.
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ARTICLE 14
Compensation of Directors
Section 14.1 Compensation. Directors, as such, may receive a stated
salary for their services or a fixed sum and expenses for attendance at regular
and special meetings, or any combination of the foregoing as may be determined
from time to time by resolution of the Board of Directors, and nothing contained
herein shall be construed to preclude any director from receiving compensation
for services rendered to the Corporation in any other capacity.
ARTICLE 15
Committees
Section 15.1 Establishment. The Board of Directors may, by resolution
adopted by a majority of the directors in office, establish one or more
committees consisting of one or more directors as may be deemed appropriate or
desirable by the Board of Directors to serve at the pleasure of the Board. Any
committee, to the extent provided in the resolution of the Board of Directors
pursuant to which it was created, shall have and may exercise all of the powers
and authority of the Board of Directors, except that no committee shall have any
power or authority as to the following:
(1) The submission to shareholders of any action requiring approval
of shareholders;
(2) The creation or filling of vacancies in the Board of Directors;
(3) The adoption, amendment or repeal of these Bylaws;
(4) The amendment or repeal of any resolution of the Board of
Directors that by its terms is amendable or repealable only by
the Board of Directors; and
(5) Action on matters committed by the Bylaws or resolution of the
Board of Directors to another committee of the Board of
Directors, except that the Executive Committee of the Board of
Directors may take action upon a subject matter committed by the
Bylaws or resolution of the Board of Directors to another
committee of the Board of Directors, unless the Bylaws or
resolution of the Board of Directors expressly provides that
another committee shall have exclusive authority with respect to
such matters.
Section 15.2 Executive Committee. There shall be an Executive
Committee, which shall consist of at least three (3) and not more than six (6)
directors. The Executive Committee shall have supervision of all business of the
Corporation and shall have the authority in between the time of regular meetings
of the Board of Directors to exercise all powers of the Corporation and do all
such lawful acts and things as are required or permitted to be exercised and
done by statute, the Articles of Incorporation or these Bylaws. The Executive
Committee shall have the power to create offices and titles as deemed desirable
or advisable. The holders of such offices need not be directors of the
Corporation.
Section 15.3 Audit Committee. There shall be an Audit Committee, which
shall consist of at least three (3) members of the Board of Directors, none of
whom shall be an officer or employee of the Corporation or of any entity
controlling, controlled by or under common control with the Corporation and who
are not beneficial owners of a controlling interest in the voting stock of the
Corporation or any such entity. The Audit Committee shall perform such duties as
are set for the in its charter.
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Section 15.4 Alternate Members. The Board of Directors may designate
one or more directors as alternate members of any committee who may replace any
absent or disqualified members at any meeting of the committee or for the
purposes of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another director to act at the meeting in the place of the absent or
disqualified member.
Section 15.5 Status of Committee Action. The term "Board of Directors"
or "Board," when used in any provision of these Bylaws relating to the
organization or procedures of or the manner of taking action by the Board of
Directors, shall be construed to include and refer to any committee of the Board
of Directors. Any provision of these Bylaws relating or referring to action to
be taken by the Board of Directors or the procedure required thereafter shall be
satisfied by the taking of corresponding action by a committee of the Board of
Directors to the extent the authority to take the action has been delegated to
the committee by the Board of Directors.
ARTICLE 16
Liability of Directors
Section 16.1 Fiduciary Duties. A director of the Corporation shall
stand in a fiduciary relation to the Corporation and shall perform his duties as
a director, including his duties as a member of any committee of the Board of
Directors upon which he may serve, in good faith, in a manner he reasonably
believes to be in the best interests of the Corporation, and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. In performing his duties, a
director shall be entitled to rely in good faith on information, opinions,
reports or statements, including financial statements and other financial data,
in each case prepared or presented by any of the following: (i) one or more
officers or employees of the Corporation whom the director reasonably believes
to be reliable and competent in the matters presented; (ii) legal counsel,
public accountants or other persons as to matters which the director reasonably
believes to be within the professional or expert competence of such persons; or
(iii) a committee of the Board of Directors upon which he does not serve, duly
designated in accordance with law, as to matters within its designated
authority, which committee the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause his reliance to be
unwarranted.
Section 16.2 Fiduciary Duties; Consideration. In discharging the duties
of their respective positions, the Board of Directors, committees of the Board
of Directors and individual directors may, in considering the best interests of
the Corporation, consider to the extent they deem appropriate those factors set
forth in Section 1715 of the BCL, including without limitation:
(1) The effects of any action upon any or all groups affected by such
action, including shareholders, employees, suppliers, customers
and creditors of the Corporation, and upon communities in which
offices or other establishments of the Corporation are located.
(2) The short-term and long-term interests of the Corporation,
including benefits that may accrue to the Corporation from its
long-term plans and possibility that these interests may be best
served by the continued independence of the Corporation.
(3) The resources, intent and conduct (past, stated and potential) of
any person seeking to acquire control of the Corporation.
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(4) All other pertinent factors.
The consideration of these factors shall not constitute a violation of Section
16.1 of this Article 16.
Section 16.3 Presumption of Good Faith. Absent breach of fiduciary
duty, lack of good faith or self-dealing, actions taken as a director or any
failure to take any action shall be presumed to be in the best interests of the
Corporation.
Section 16.4 No Personal Liability; Exceptions. A director of the
Corporation shall not be personally liable for monetary damages as such for any
action taken, or any failure to take any action, unless: (i) the director has
breached or failed to perform the duties of his office under Sections 16.1
through 16.3 of this Article 16; and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. The provisions of
this Section 16.4 of this Article 16 shall not apply to: (i) the responsibility
or liability of a director pursuant to any criminal statute; or (ii) the
liability of a director for the payment of taxes pursuant to local, state or
federal law.
Section 16.5 Amendments. Notwithstanding any other provisions of these
Bylaws, the approval by the affirmative vote of the holders of a majority of the
outstanding voting power of the shares of stock of the Corporation shall be
required to amend, repeal or adopt any provision as part of these Bylaws that is
inconsistent with the purpose or intent of Sections 16.1, 16.2, 16.3, 16.4, or
16.5 of this Article 16, and, if any such action shall be taken, it shall become
effective only on a prospective basis from and after the date of such
shareholder approval. The provisions of Section 16.1, 16.3, and 16.4 were
originally adopted by the shareholders of the Corporation on April 27, 1987.
ARTICLE 17
Officers
Section 17.1 Numbers and Qualifications. The Corporation shall have a
Chairman of the Board, a President, a Secretary and a Treasurer or persons who
shall act as such, regardless of the name or title by which they may be
designated, elected or appointed and may have such other officers and assistant
officers as the Board of Directors may authorize from time to time. The Chairman
of the Board, President and Secretary shall be natural persons of at least 18
years of age. The Treasurer may be a corporation, but if a natural person shall
be of at least 18 years of age. The Chairman of the Board or the President shall
be the chief executive officer of the Corporation, as the Board of Directors may
determine from time to time. The Chairman of the Board of Directors and the
President shall be, and each officer may be, a director of the Corporation. The
offices of Secretary and Treasurer may be filled by one person.
Section 17.2 Election; Resignation. The officers shall be elected by
the Board of Directors, or the Board of Directors may authorize the Chairman of
the Board or President to appoint one or more classes of officers with such
titles (including the titles of Vice President, Secretary and Treasurer),
powers, duties and compensation as may be approved by such persons. Each officer
shall hold office at the pleasure of the Board of Directors and until his
successor has been elected and qualified or until his earlier death, resignation
or removal. Any officer may resign at any time upon written notice to the
Corporation. The resignation shall be effective upon receipt thereof by the
Corporation or at such subsequent time as may be specified in the notice of
resignation.
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Section 17.3 Actions in Good Faith. Except as otherwise provided in the
Articles of Incorporation, an officer shall perform his duties as an officer in
good faith, in a manner he reasonably believes to be in the best interests of
the Corporation and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his duties shall not be liable by reason
of having been an officer of the Corporation.
Section 17.4 Removal. Any officer or agent of the Corporation may be
removed by the Board of Directors, with or without cause, at any time. Any
officer appointed by the Chairman of the Board or President may also be removed,
either with or without cause, at any time, by the Chairman of the Board or
President. The removal shall be without prejudice to the contract rights, if
any, of any person so removed. Election or appointment of an officer or agent
shall not of itself create contract rights.
Section 17.5 Voting of Stock in Other Corporations. If authorized by
the Board of Directors, any officer of the Corporation may appoint an attorney
or attorneys (who may be or include such officer), in the name and on behalf of
the Corporation, to cast the votes which the Corporation may be entitled to cast
as a shareholder or otherwise in any other corporation any of whose shares or
other securities are held by or for the Corporation, at meetings of the holders
of the shares or other securities of such other corporation, or in connection
with the ownership of such shares or other securities, to consent in writing to
any action by such other corporation, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and may
execute or cause to be executed in the name and on behalf of the Corporation and
under its seal such written proxies or other instruments as such proxy may deem
necessary or proper in the circumstances.
ARTICLE 18
Duties of Officers
Section 18.1 Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors and at all meetings of the
shareholders, appoint all committees not otherwise provided for in the Bylaws.
To be eligible to serve, the Chairman of the Board must be a director of the
Corporation. He may serve as a member of any committee of the Board, attend all
meetings of any such committee and participate in the discussions of any such
committee, except as may otherwise be determined by the Board or provided in
these Bylaws. He shall perform all duties incident to the office of Chairman of
the Board and such other duties as may be from time to time assigned to him by
the Board of Directors.
Section 18.2 President. In the absence of the Chairman of the Board,
the President shall preside at all meetings of the Board of Directors and at all
meetings of the shareholders. He shall be the chief executive of the
Corporation, unless the Chairman of the Board is serving as Chief Executive
Officer in which event the President shall be the Chief Operating Officer of the
Corporation. Except as otherwise provided herein, the President shall be
responsible for the general and active management of the business of the
Corporation; shall see that all orders and resolutions of the Board of Directors
are put into effect, subject, however, to the right of the Board of Directors to
delegate any specific powers, except such as may be by statute exclusively
conferred on the President, to any other officer or officers of the Corporation;
and shall have the authority to execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. He may serve as
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a member of any committee of the Board, attend all meetings of any such
committee and participate in the discussions of any such committee, except as
may otherwise be determined by the Board or provided in these Bylaws. He shall
perform all duties incident to the office of President and such other duties as
may be from time to time assigned to him by the Board of Directors.
Section 18.3 Vice President. The Vice President or, if more than one,
the Vice Presidents in the order, if any, established by the Board of Directors
shall, in the absence or incapacity of the President, have the authority to
exercise all the powers and perform the duties of the President. The Vice
Presidents, respectively, shall also have such other authority and perform such
other duties as may be provided in the Bylaws or as shall be determined by the
Board of Directors or the President. Any Vice President may, in the discretion
of the Board of Directors, be designated as "executive," "senior" or by
departmental or functional classification.
Section 18.4 Secretary. The Secretary shall act under the direction and
superintendence of the Corporation's chief executive officer; attend all the
meetings of shareholders, directors and committees, and keep in suitable books
the minutes thereof; superintend the keeping and have charge of the seal, books,
papers and records pertaining to his office, sign such documents as shall
require his attention, issue notices for all meetings; and perform generally all
the duties incident to the office of Secretary and such other duties as may be
assigned to him by the Board of Directors or the President.
Section 18.5 Treasurer. The Treasurer shall be responsible for the
custody of the corporate funds and securities; shall be responsible for full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; and shall perform such other duties as may be assigned to him by
the Board of Directors or the President. He shall give bond in such sum and with
such surety as the Board of Directors may from time to time directs.
Section 18.6 Assistant Secretary. The Assistant Secretary (and if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors (or if there is no determination then by seniority)) shall, in the
absence of the Secretary, perform the duties of the Secretary and such other
duties as may be assigned to him by the Board of Directors, Chairman of the
Board, President, Secretary, or such other officer as may be designated by one
of the foregoing.
Section 18.7 Assistant Treasurer. The Assistant Treasurer (and if there
be more than one, the Assistant Treasurers in the order determined by the Board
of Directors (or if there is no determination then by seniority)) shall, in the
absence of the Treasurer, perform the duties of the Treasurer and such other
duties as may be assigned to him by the Board of Directors, Chairman of the
Board, President, Treasurer, or such other officer as may be designated by one
of the foregoing.
Section 18.8 Assistant Officers. Each assistant officer shall assist in
the performance of the duties of the officer to whom he is assistant and shall
perform such duties in the absence of the officer. He shall perform such
additional duties as the Board of Directors, the President or the officer to
whom he is assistant may from time to time assign him. Such officers may be
given such functional titles as the Board of Directors shall from time to time
determine.
Section 18.9 Bonds. If required by the Board of Directors, any officer
or employee shall give bond for the faithful performance of their duties in such
amount as is required by the Board of Directors or the Executive Committee of
the Board of Directors.
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Section 18.10 Designations. The Board of Directors may, by resolution,
designate one or more officers to be any of the following: Chief Operating
Officer, Chief Financial Officer, General Counsel, or Chief Accounting Officer.
ARTICLE 19
Indemnification of Officers, Directors, Employees, and Agents
Section 19.1 Indemnification. The Corporation shall indemnify any
director or officer, and may indemnify any other employee or agent who was or is
a party to, or is threatened to be made a party to or who is called as a witness
in connection with, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
an action by or in the right of the Corporation by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding unless the act or failure to act giving
rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
Section 19.2 Non-Exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article 19 shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, contract,
vote of shareholders or disinterested directors or pursuant to the direction,
howsoever embodied, of any court of competent jurisdiction or otherwise, both as
to action in their official capacity and as to action in another capacity while
holding such office. It is the policy of the Corporation that indemnification
of, and advancement of expenses to, directors and officers of the Corporation
shall be made to the fullest extent permitted by law. To this end, the
provisions of this Article 19 shall be deemed to have been amended for the
benefit of directors and officers of the Corporation effective immediately upon
any modification of the BCL or any modification or adoption of any other laws
that expands or enlarges the power or obligation of corporations organized under
the BCL to indemnify, or advance expenses to, directors and officers of
corporations.
Section 19.3 Expenses. The Corporation shall pay expenses incurred by
an officer or director, and may pay expenses incurred by any other employee or
agent in defending a civil or criminal action, suit or proceeding in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation.
Section 19.4 Continuation. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article 19 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
Section 19.5 Securing Obligations. The Corporation shall have the
authority to create a fund of any nature, which may, but need not, be under the
control of an independent trustee, or otherwise secure or insure in any manner,
its indemnification obligations, whether arising under these Bylaws or
otherwise. The authority shall include, without limitation, the authority to:
(i) deposit funds in trust or in escrow, (ii) establish any form of
self-insurance, (iii) secure its indemnity obligation by
-16-
<PAGE>
grant of a security interest, mortgage or other lien on the assets of the
Corporation or (iv) establish a letter of credit, guaranty or surety arrangement
for the benefit of such persons in connection with the anticipated
indemnification or advancement of expenses contemplated by this Article 19. The
provisions of this Article 19 shall not be deemed to preclude the
indemnification of, or advancement of expenses to, any person who is not
specified in Section 19.1 of this Article 19 but whom the Corporation has the
power or obligation to indemnify, or to advance expenses for, under the
provisions of the BCL or otherwise. The authority granted by this Section 19.5
shall be exercised by the Board of Directors of the Corporation.
Section 19.6 Separate Agreement. The Corporation shall have the
authority to enter into a separate indemnification agreement with any officer,
director, employee or agent of the Corporation or any subsidiary providing for
such indemnification of such person as the Board of Directors shall determine up
to the fullest extent permitted by law.
Section 19.7 Defense of Claims. As soon as practicable after receipt by
any person specified in Section 19.1 of this Article 19 of notice of the
commencement of any action, suit or proceeding specified in Section 19.1 of this
Article 19, such person shall, if a claim with respect thereto may be made
against the Corporation under Article 19 of these Bylaws, notify the Corporation
in writing of the commencement or threat thereof; however, the omission so to
notify the Corporation shall not relieve the Corporation from any liability
under Article 19 of the Bylaws unless the Corporation shall have been prejudiced
thereby or from any other liability which it may have to such person other than
under Article 19 of these Bylaws. With respect to any such action as to which
such person notifies the Corporation of the commencement or threat thereof, the
Corporation may participate therein at its own expense, and except as otherwise
provided below, to the extent that it desires, the Corporation, jointly with any
other indemnifying party similarly notified, shall be entitled to assume the
defense thereof, with counsel selected by the Corporation to the reasonable
satisfaction of such person. After notice from the Corporation to such person of
its election to assume the defense thereof, the Corporation shall not be liable
to such person under Article 19 of these Bylaws for any legal or other expenses
subsequently incurred by such person in connection with the defense thereof
other than as otherwise provided below. Such person shall have the right to
employ his own legal counsel in such action, but the fees and expenses of such
legal counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of such person unless: (i) the
employment of legal counsel by such person shall have been authorized by the
Corporation; (ii) such person shall have reasonably concluded that there may be
a conflict of interest between the Corporation and such person in the conduct of
the defense of such proceeding; or (iii) the Corporation shall not in fact have
employed legal counsel to assume the defense of such action. The Corporation
shall not be entitled to assume the defense of any proceeding brought by or on
behalf of the Corporation or as to which such person shall have reasonably
concluded that there may be a conflict of interest. If indemnification under
Article 19 of these Bylaws or advancement of expenses are not paid or made by
the Corporation, or on its behalf, within 90 days after a written claim for
indemnification or a request for an advancement of expenses has been received by
the Corporation, such person may, at any time thereafter, bring suit against the
Corporation to recover the unpaid amount of the claim or the advancement of
expenses. The right to indemnification and advancement of expenses provided
hereunder shall be enforceable by such person in any court of competent
jurisdiction. The burden of proving that indemnification is not appropriate
shall be on the Corporation. Expenses reasonably incurred by such person in
connection with successfully establishing the right to indemnification or
advancement of expenses, in whole or in part, shall also be indemnified by the
Corporation.
Section 19.8 Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the
-17-
<PAGE>
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another domestic or foreign corporation
for profit or not-for-profit, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article 19.
Section 19.9 Amendment. Notwithstanding any other provisions of these
Bylaws, the approval by (i) the affirmative vote of the holders of a majority of
the outstanding voting power of the shares of stock of the Corporation or (ii) a
majority vote of the members of the Board of Directors shall be required to
amend, repeal or adopt any provision as part of these Bylaws which is
inconsistent with the purpose or intent of this Article 19, and, if any such
action shall be taken, it shall become effective only on a prospective basis
from and after the date of such approval. The provisions of Sections 19.1, 19.2,
19.3, 19.4, 19.5, 19.6, 19.7 and 19.8 were originally adopted by the
shareholders of the Corporation on April 27, 1987.
ARTICLE 20
Fiscal Year
Section 20.1 Fiscal Year. The fiscal year of the Corporation shall be a
calendar year, unless otherwise determined by the Board of Directors.
ARTICLE 21
Notices
Section 21.1 Manner of Giving Written Notice. Whenever written notice
is required to be given to any person under the provisions of these Bylaws or
the BCL, it may be given to the person either personally or by sending a copy
thereof by first class or express mail, postage prepaid, or by telegram (with
messenger service specified), telex or TWX (with answer back received) or
courier service, charges prepaid, or by facsimile transmission, to his address
(or to his telex, TWX or facsimile number) appearing on the books of the
Corporation or, in the case of written notice to directors, supplied by each
director to the Corporation for the purpose of the notice. If the notice is sent
by mail, telegraph or courier service, it shall be deemed to have been given to
the person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex, TWX or facsimile, when dispatched.
Section 21.2 Waiver of Notice. Any written notice required to be given
to any person under the provisions of statute, the Corporation's Articles of
Incorporation or these Bylaws may be waived in a writing signed by the person
entitled to such notice whether before or after the time stated therein. Except
as otherwise required by statute, and except in the case of a special meeting,
neither the business to be transacted at, nor the purpose of, a meeting need be
specified in the waiver of notice. In the case of a special meeting of
shareholders, the waiver of notice shall specify the general nature of the
business to be transacted. Attendance of any person, whether in person or by
proxy, at any meeting shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened.
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<PAGE>
ARTICLE 22
Amendments
Section 22.1 Amendments Requiring Shareholder Approval. Neither this
Section 22.1 nor Article 16 of these Bylaws may be altered, amended or repealed
unless approved by the affirmative vote of the holders of a majority of the
outstanding voting power of the shares of stock of the Corporation at a duly
organized meeting of shareholders called for that purpose, provided that 30
days' notice of the proposed amendments shall have been mailed to the last
recorded address of each shareholder as furnished to the Corporation, and that
the same shall have been submitted to the Board of Directors at least 30 days
prior to such meeting.
Section 22.2 Amendments Requiring Notice. Neither this Section 22.2 nor
Article 19 of these Bylaws may be altered, amended or repealed unless approved
by: (i) the affirmative vote of the holders of a majority of the outstanding
voting power of the shares of stock of the Corporation at a duly organized
meeting called for that purpose, provided that 30 days' notice of the proposed
amendments shall have been mailed to the last recorded address of each
shareholder as furnished to the Corporation, and that the same shall have been
submitted to the Board of Directors at least 30 days prior to such meeting, or
(ii) a majority vote of the members of the Board of Directors at any regular
meeting or any special meeting duly convened after notice to the directors of
that purpose, subject to the power of the shareholders to change such action by
the affirmative vote of the holders of a majority of the outstanding voting
power of the shares of stock of the Corporation at any duly organized meeting
called for that purpose.
Section 22.3 Other Amendments. All provisions of these Bylaws other
than Articles 16 and 19 and Sections 22.1 and 22.2 may be altered, amended or
repealed: (i) by the affirmative vote of the holders of a majority of the
outstanding voting power of the shares of stock of the Corporation at a duly
organized meeting called for that purpose, or (ii) by a majority vote of the
members of the Board of Directors at any regular meeting or any special meeting
duly convened after notice to the directors of that purpose, subject to the
power of the shareholders to change such action by the affirmative vote of the
holders of a majority of the outstanding voting power of the shares of stock of
the Corporation at any duly organized meeting called for that purpose.
-19-
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands, except ratio)
<TABLE>
<CAPTION>
For the three months ended
March 31,
2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
EARNINGS
Pre-tax income $ 6,739 $13,147
Fixed charges 3,334 3,217
------- -------
Total(a) $10,073 $16,364
======= =======
FIXED CHARGES
Interest expense and amortization of debt discount
and premium on all indebtedness $ 3,075 $ 3,013
Interest portion of rental expenses 259 204
------- -------
Total fixed charges(b) $ 3,334 $ 3,217
======= =======
Ratio of earnings to fixed charges(a)/(b) 3.0x 5.1x
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in Form 10-Q for the quarter ended March 31, 2000
for PMA Capital Corporation and is qualified in its entirety by reference to
such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 1,553,337
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 46,869
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,949,701
<CASH> 11,040
<RECOVER-REINSURE> 702,875<F1>
<DEFERRED-ACQUISITION> 53,658
<TOTAL-ASSETS> 3,283,358
<POLICY-LOSSES> 1,927,755
<UNEARNED-PREMIUMS> 305,350
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 14,636
<NOTES-PAYABLE> 163,000
0
0
<COMMON> 122,214
<OTHER-SE> 316,410
<TOTAL-LIABILITY-AND-EQUITY> 3,283,358
125,822
<INVESTMENT-INCOME> 28,193
<INVESTMENT-GAINS> (5,461)
<OTHER-INCOME> 3,387
<BENEFITS> 94,288
<UNDERWRITING-AMORTIZATION> 26,697
<UNDERWRITING-OTHER> 21,142
<INCOME-PRETAX> 6,739
<INCOME-TAX> 2,361
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,378
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.19
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> - Represents reinsurance recoverable on paid and unpaid losses.
</FN>
</TABLE>
