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As filed with the Securities and Exchange Commission on May 10, 1999
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PHILADELPHIA CONSOLIDATED HOLDING CORP.
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 23-2202671
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation)
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PA 19004
(610) 617-7900
FAX: (610) 617-7600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. JAMES J. MAGUIRE, PRESIDENT
OR
MR. CRAIG P. KELLER, SECRETARY
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
(610) 617-7900
FAX: (610) 617-7600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL M. SHERMAN, ESQUIRE
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP
TWELFTH FLOOR, PACKARD BUILDING
111 SOUTH 15TH STREET
PHILADELPHIA, PENNSYLVANIA 19102-2678
(215) 977-2236
FAX: (215) 977-2334
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time
to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Calculation of Registration Fee
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Shares Amount to be Aggregate Price Aggregate Offering Amount of
to be Registered Registered Per Share(1) Price(1) Registration Fee
- ---------------- ---------- ------------ -------- ----------------
<S> <C> <C> <C> <C>
Common Stock, 200,000 $25.04 $5,008,000 $1,392.23
no par value
</TABLE>
(1) Estimated solely for the purpose of calculating the aggregate offering
price and the registration fee pursuant to Rule 457(c) promulgated under the
Securities Act of 1933, as amended, and computed on the basis of $25.04, which
price is the average of the high and low sales prices of the common stock as
reported on the Nasdaq National Market of the Nasdaq Stock Market Inc. on May 5,
1999.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion, Dated May 10, 1999
PROSPECTUS
200,000 SHARES
PHILADELPHIA CONSOLIDATED HOLDING CORP.
COMMON STOCK, NO PAR VALUE
We may offer from time to time to our eligible preferred agents shares of
the common stock, no par value, of Philadelphia Consolidated Holding Corp. at a
discount under The Philadelphia Insurance Companies Stock Purchase Plan for
Preferred Agents. An eligible preferred agent is an agent who is a party to an
agency agreement with us and who is designated as a preferred agent by our
Executive Vice President-Director of Marketing. The purchase price for the
common stock will be 85% of the market value of the common stock on the first
day of the offering period or the last day of the offering period, whichever is
lower. This prospectus relates to shares of common stock available for purchase
under the plan.
An eligible preferred agent may purchase common stock through the plan by
electing to have amounts deducted for that purpose from his or her commissions
or other compensation during the offering period or by making a voluntary cash
payment by the last day of the offering period.
The plan restricts the ability of a plan participant to transfer, encumber
or otherwise dispose of his or her shares of common stock for a period of two
years after the first day of the offering period in which they are purchased.
During this two-year restricted period, we have the right to repurchase the
shares of common stock if (1) a plan participant attempts to transfer, encumber
or otherwise dispose of the shares, or (2) a plan participant's status as a
preferred agent terminates other than due to death or disability. If we exercise
our right to repurchase shares, the purchase price will be equal to the lesser
of the purchase price paid by the plan participant for the shares or the market
value of the shares at the time of repurchase.
The common stock is listed on the Nasdaq National Market of the Nasdaq
Stock Market Inc. under the symbol PHLY. On May 7, 1999, the last reported sale
price of the common stock on the Nasdaq National Market was $24.00 per share.
We will receive all of the proceeds of the sale of the common stock
offered in this prospectus net of expenses which are estimated at
$40,000.
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Our principal executive offices are located at One Bala Plaza, Suite 100,
Bala Cynwyd, Pennsylvania, 19004 (telephone number: (610) 617-7900).
The date of this prospectus is , 1999.
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TABLE OF CONTENTS
Page
Risk Factors...................................................................3
The Company....................................................................9
The Plan......................................................................12
Certain Federal Income Tax Effects of Plan Participation......................16
Use of Proceeds...............................................................18
Where You Can Find More Information --
Incorporation of Certain Information by Reference.......................18
Special Note on Forward-looking Statements....................................20
Legal Opinions................................................................20
Experts.......................................................................21
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RISK FACTORS
WE HAVE THE RIGHT TO REPURCHASE SHARES FOR A PURCHASE PRICE THAT MAY BE LESS
THAN THE PURCHASE PRICE PAID BY THE PLAN PARTICIPANT FOR THE SHARES IF A PLAN
PARTICIPANT ATTEMPTS TO TRANSFER, ENCUMBER OR OTHERWISE DISPOSE OF SHARES OR
CEASES TO BE A PREFERRED AGENT DURING THE TWO-YEAR RESTRICTED PERIOD
The plan restricts transfers of shares purchased by plan participants for
a period of two years after the first day of the offering period in which the
shares were purchased. Plan participants may not sell, transfer, encumber or
otherwise dispose of these shares during the two-year restricted period. If a
plan participant purchases shares under the plan, he or she will bear the
economic risk of his or her investment in the common stock for the entire
two-year restricted period described above.
If a plan participant attempts to sell, transfer, encumber or otherwise
dispose of shares during the two-year restricted period, (1) the attempted
transfer will be null and void and (2) we will have the right, but not the
obligation, to repurchase the shares for the lower of the market value of the
shares on the date of repurchase or the actual purchase price paid for the
shares.
In addition, if a plan participant is no longer a preferred agent, we have
the right, but not the obligation, to repurchase any shares held by the plan
participant that are subject to the two-year restricted period for the lesser of
the market value of the shares at the time of repurchase or the actual purchase
price paid by the plan participant for the shares. However, we will not have
this repurchase right if the plan participant is no longer a preferred agent
because of death or disability.
Plan participants whose shares are repurchased as described above will
forfeit all rights to the shares. In addition, if the market value of the shares
on the day of repurchase is less than the amount that the plan participant paid
for the shares, the plan participant will suffer an economic loss at the time of
repurchase.
OUR HOLDING COMPANY STRUCTURE AND THE GOVERNMENT REGULATIONS THAT APPLY TO OUR
INSURANCE COMPANY SUBSIDIARIES LIMIT OUR ABILITY TO RECEIVE FUNDS FROM OUR
SUBSIDIARIES
We are a holding company. Our principal assets currently consist of all or
substantially all of the equity interests of our subsidiaries, (1) Philadelphia
Indemnity Insurance Company; (2) Philadelphia Insurance Company; (3) Maguire
Insurance Agency, Inc.; (4) PCHC Investment Corp., a Delaware investment
corporation; and (5) PCHC Financing I, a Delaware business trust. Philadelphia
Indemnity Insurance Company and Philadelphia Insurance Company are both
insurance companies. Maguire Insurance Agency, Inc. is an underwriting manager.
Our primary sources of funds are dividends and payments we receive under
tax allocation agreements from our subsidiaries. Our insurance company
subsidiaries are subject to significant government regulation. Our ability to
receive dividends and loans from the subsidiaries is
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restricted by these regulations. Accumulated profits of our insurance company
subsidiaries from which dividends may be paid totaled $80.5 million at December
31, 1998. Of this amount, our insurance company subsidiaries are entitled to pay
a total of approximately $17.7 million of dividends in 1999 without obtaining
prior approval from the Pennsylvania Department of Insurance. Further, our right
to receive any distribution of assets from a subsidiary if it liquidates its
assets or undergoes a reorganization or other similar transaction is subject to
the prior claims of creditors of that subsidiary, except to the extent, if any,
that we are recognized as a creditor of the subsidiary. In that event, the
ability of a holder of our common stock to benefit indirectly from the
distribution would be similarly restricted. At December 31, 1998, our
subsidiaries had total liabilities (excluding liabilities owed to us) of
approximately $231.6 million.
EXTENSIVE REGULATION OF OUR INSURANCE COMPANY SUBSIDIARIES MAY ADVERSELY AFFECT
OUR PROFITABILITY
Our insurance company subsidiaries are subject to a substantial degree of
regulatory oversight, which generally is designed to protect the interests of
policyholders as opposed to the interests of investors, such as the holders of
our common stock. Such regulation relates to:
- authorized lines of business;
- capital and surplus requirements;
- investment parameters;
- underwriting limitations;
- required participation in shared property-casualty insurance markets
or pooling arrangements;
- transactions with affiliates;
- dividend limitations;
- changes in control; and
- a variety of other financial and non-financial components of an
insurance company's business.
New regulations and legislation have been, and are being, proposed from
time to time to (1) limit damage awards; (2) bring the industry under regulation
by the federal government; (3) control premiums, policy terminations and other
policy terms; and (4) impose new taxes and assessments. It is not possible to
determine whether any of these proposals will be adopted in any jurisdictions
and, if so, in what form or in what jurisdictions. Accordingly, the impact of
these initiatives on us is impossible to determine.
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ADVERSE CONDITIONS IN PROPERTY AND CASUALTY INSURANCE MARKET COULD HAVE AN
ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our insurance company subsidiaries write:
- specialized commercial property and casualty insurance products for
- non-profit and social services organizations,
- the auto rental and leasing industries,
- homeowners associations,
- the health fitness and wellness industry, and
- private schools;
- select classes of specialty property risks and inland marine
insurance; and
- select classes of professional liability insurance.
Historically, the financial performance of the commercial property and
casualty insurance industry has tended to fluctuate in cyclical patterns of soft
markets, in which pricing is relatively low, followed by hard markets, in which
pricing levels are higher. Although an individual company's financial
performance is dependent on its own specific business characteristics, the
profitability of most commercial property and casualty insurance companies tends
to follow this cyclical market pattern. At present, the property and casualty
insurance industry is experiencing a prolonged soft market. Further
deterioration of the market could have an adverse effect on our financial
condition and operations. There can be no assurance that a hard market will
emerge or that the current market will not worsen.
IF OUR INSURANCE COMPANY SUBSIDIARIES' RATINGS ARE DOWNGRADED, OUR COMPETITIVE
POSITION, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD BE ADVERSELY
AFFECTED
Our insurance company subsidiaries are rated "A+" (Superior) by A.M. Best
Company. According to A.M. Best Company, the "A+" (Superior) rating is assigned
to companies that have, on balance, superior financial strength, operating
performance and market profile, when compared to the standards established by
the A.M. Best Company, and have a very strong ability to meet their ongoing
obligations to policyholders. A.M. Best Company ratings are based upon factors
relevant to policyholders and are not directed toward the protection of
investors, such as holders of our common stock. Our insurance company
subsidiaries also possess an "A" claims paying ability rating by Standard &
Poor's. According to Standard & Poor's, insurers rated "A" offer good financial
security for policyholders. We believe that the ratings assigned by A.M. Best
Company and Standard & Poor's are important factors in marketing our products.
If these
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ratings were to be downgraded in the future, it is likely that our competitive
position and, as a result, our financial condition and results of operations,
would be adversely affected.
IF THE RESERVES WE HAVE ESTABLISHED FOR LOSSES AND LOSS ADJUSTMENT EXPENSES ARE
NOT ADEQUATE, WE MAY BE REQUIRED TO INCREASE OUR RESERVES WHICH COULD RESULT IN
REDUCTIONS IN NET INCOME AND POLICYHOLDER'S SURPLUS, DOWNGRADING OF RATINGS OF
OUR INSURANCE COMPANY SUBSIDIARIES AND ADVERSE REGULATORY CONSEQUENCES
We establish reserves for losses and loss adjustment expenses representing
our best estimate of the losses and loss adjustment expenses we will incur on
existing insurance policies. We obtain annual statements of actuarial opinions
on loss and loss adjustment expense reserves by independent actuaries. While we
believe that our reserves for losses and loss adjustment expenses are adequate,
loss and loss adjustment expenses reserves necessarily are based on assumptions
as to future events. Accordingly, actual losses and loss adjustment expenses may
vary from established reserves. If our reserves are later determined to be
understated, we will be required to increase reserves with a corresponding
reduction in net income in the period in which the deficiency is identified.
Furthermore, changes in inflation, claim settlement patterns, legislative
activity and litigation trends may have a substantial impact on our future loss
experience. Accordingly, there can be no assurance that our reserves will be
adequate to cover actual losses. If we are required to strengthen reserves, such
action could result in a reduction in policyholders' surplus, a downgrading of
our insurance company subsidiaries' A.M. Best pooled rating and/or adverse
regulatory consequences.
CONTINUED AVAILABILITY OF REINSURANCE TO INSURE AGAINST A PORTION OF OUR RISK IS
IMPORTANT TO OUR FINANCIAL CONDITION AND OPERATIONS
We purchase reinsurance coverage to insure against a portion of our risk
on policies we write directly. Limiting our insurance risks through reinsurance
will continue to be important to us. Reinsurance does not affect our direct
liability to our policyholders on the business we write. Although our
reinsurance is currently maintained with reinsurers rated "A" (Excellent) or
better by A.M. Best, a reinsurer's insolvency or inability to make payments
under the terms of its reinsurance treaty with us could have a material adverse
effect on us. In addition, there can be no assurance that reinsurance will
remain continuously available to us to the same extent and on the same terms as
are currently available.
IF WE ARE NOT ABLE TO COMPETE SUCCESSFULLY WITH OUR COMPETITORS, SOME OF WHOM
ARE LARGER AND HAVE GREATER RESOURCES, OUR RESULTS OF OPERATIONS AND FINANCIAL
CONDITION MAY BE ADVERSELY AFFECTED
The commercial property and casualty insurance industry is highly
competitive. Many of our existing and potential competitors are larger, have
considerably greater financial and other resources, have greater experience in
the insurance industry and offer a broader line of insurance products than we.
Not only do we compete with other insurers, we also compete with other forms of
insurance organizations such as self-insurance mechanisms.
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THE SUCCESS OF OUR BUSINESS IS DEPENDENT ON KEY PERSONNEL
The success of our business is dependent on the efforts and abilities of
our principal executive officers, particularly James J. Maguire, Philadelphia
Consolidated's founder, principal shareholder, Chairman of the Board, President
and Chief Executive Officer. We maintain $3.6 million of "key man" insurance on
Mr. Maguire's life. However, Mr. Maguire does not have an employment contract
with us and there can be no assurance that he will remain in his present
positions for any period of time. If we were to lose the services of Mr. Maguire
or other principal executive officers, there could be a material adverse effect
on our business.
WE HAVE CONTROLLING SHAREHOLDERS WHO HAVE THE PRACTICAL ABILITY TO ELECT ALL OF
OUR DIRECTORS AND TO PREVENT A CHANGE OF CONTROL CONTRARY TO THE INTERESTS OF
OTHER SHAREHOLDERS
James J. Maguire and his wife, Frances Maguire, beneficially own 38.4% of
our common stock. Therefore, Mr. and Mrs. Maguire have a substantial level of
control over us and over matters submitted to our shareholders. Mr. James J. and
Mrs. Frances Maguire are likely to have the practical ability to elect all of
our directors and to prevent a potential change of control (even if such change
of control would be advantageous to the public investors).
YEAR 2000 READINESS DISCLOSURE: DUE TO YEAR 2000 ISSUES, THERE IS A RISK OF
FAILURE OF OUR SYSTEMS AND INCREASED CLAIMS ON POLICIES WE WRITE THAT COULD
AFFECT OUR OPERATIONS, LIQUIDITY OR FINANCIAL POSITION
Many existing computer programs use only two digits, instead of four, to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create incorrect results on
or after the Year 2000. The Year 2000 issue affects computer and information
technology systems, as well as non-information technology systems which include
embedded technology such as micro-processors and micro-controllers (or
micro-chips) that have date sensitive programs that may not properly recognize
the year 2000 or beyond. If the systems and products we use are not properly
equipped to identify and recognize the year 2000, our information technology
systems and non-information technology systems could fail or create erroneous
results.
We have completed a Year 2000 readiness assessment of our information
technology systems and non-information technology systems and have repaired or
replaced systems or components of systems that we have identified as Year 2000
non-compliant. We are not aware of any remaining Year 2000 issues with respect
to our systems that could have a material adverse effect on our operations or
financial condition. We are engaged in an ongoing effort to assess the impact on
us of the failure of any of the third parties with whom we maintain significant
business relationships to become Year 2000 compliant. We anticipate that this
assessment of material third parties will be completed by June 30, 1999.
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We use computer systems in virtually all aspects of our business. We also
maintain relationships with a number of vendors, suppliers and customers whose
own state of readiness with regard to the Year 2000 issue could potentially
impact us. These parties include software, hardware, and telecommunication
providers, banks and investment brokers, reinsurers and reinsurance
intermediaries, certain agents and utilities. The failure to correct a material
Year 2000 issue by us or a material third party could materially and adversely
impact our operations, liquidity and financial position. Due to the uncertainty
inherent in the Year 2000 issue, we are unable to determine whether the
consequences of Year 2000 failures will have a material impact on our statement
of operations, liquidity or financial position. However, we believe that with
the completion of our Year 2000 project the risk of significant interruptions of
operations should be reduced.
Additionally, we issue professional liability coverage, including
directors and officers liability, and commercial multi-peril insurance policies.
Coverage under certain of these policies may cover losses suffered by insureds
as a result of the Year 2000 issues. Our professional liability policies are
written on a "claim made and reported" basis. Since early 1997 approximately 50%
of these policies have included a Year 2000 exclusion endorsement. We are
including a Year 2000 exclusion endorsement on virtually all new or renewing
professional liability policies providing coverage effective January 1, 1999 and
thereafter. On occasion, for qualifying accounts, our underwriters may remove
the exclusion after receipt and review of a satisfactory supplemental
application (which includes a warranty statement) and other underwriting
information. With respect to our commercial multi-peril policies, we believe
that we should not be held liable for claims arising from the Year 2000 issue
under our comprehensive general liability policies. However, we cannot determine
whether or to what extent courts may find us liable for such claims.
Additionally, we could incur expense to contest Year 2000 issue coverage claims,
even if we prevail in our position. As a result, we cannot determine what, if
any, exposure we may ultimately have for Year 2000 issue claims.
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THE COMPANY
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. You should assume that the
information appearing in this prospectus, as well as information we previously
filed with the Securities and Exchange Commission and incorporated by reference,
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date. We are not making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted.
All reference to "we" or "us" or "Philadelphia Consolidated" in this
prospectus and any accompanying prospectus supplement mean Philadelphia
Consolidated Holding Corp., except where it is made clear that the term means
Philadelphia Consolidated Holding Corp. and its consolidated subsidiaries.
Philadelphia Consolidated Holding Corp. was incorporated in Pennsylvania
in 1984 to serve as a holding company for its subsidiaries.
We design property and casualty insurance products incorporating
value-added coverages and services for select target industries or niches. We
use a "mixed" marketing strategy in which our production underwriting
organization markets our insurance products to the insured, directly or through
our preferred agents, and also accepts business from independent insurance
brokers. Our production underwriting organization operates from proprietary
field offices located across the United States and includes telemarketing staffs
at its regional offices and our Philadelphia home office.
We offer the following product lines:
COMMERCIAL AUTOMOBILE AND EXCESS LIABILITY. We have provided Commercial
Automobile Products to the leasing and rent-a-car industries for over 35 years.
Products offered to the rent-a-car industry include coverage for the business
owner's property, dual interest liability, and physical damage on the rental
vehicle.
Additionally, through arrangements with a number of the largest rent-a-car
companies, we offer our excess liability product at the rental car counter to
rent-a-car customers. This coverage protects renters against liability for
bodily injury and property damage, which is in excess of the statutory coverage
provided with the rental vehicle, and is primary over the renter's personal
automobile insurance coverage.
We also offer a full range of liability and physical damage coverages to
automobile leasing companies and their customers. For the driver (the lessee),
we offer both primary liability coverage and physical damage coverage on the
vehicle. For the owner (the lessor), we offer contingent and excess liability
coverage over the primary liability coverage layer which protects lessors in the
event of a loss when the primary coverage is absent or inadequate and provides
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contingent physical damage coverage. Additional products offered to leasing
companies include:
- interim primary liability and physical damage coverage, which
protects the lessor of the vehicle before and after it is delivered
to the lessee;
- residual value coverage which guarantees the value of the leased
vehicle at the termination of the lease; and
- guaranteed asset protection coverage which protects the lessor and
lessee for the difference between the leased vehicle's actual cash
value and the lease or loan net value in instances where the vehicle
is stolen or damaged beyond repair.
COMMERCIAL PACKAGE. We have been providing Commercial Multi Peril Package
Policies ("Package Programs") to specific targeted niche markets for over 10
years. Among the organizations to which we offer our specialty niche Package
Programs are non-profit social service agencies, health and fitness
organizations, private and specialty training schools, condominium/homeowner
association facilities and home health care operations and day care facilities.
The Package Programs policies are tailored to include special value-added
features addressing the unique aspects of each of the above niche markets
differentiating our product offerings from those of our competitors.
SPECIALTY LINES. We have been providing specialty professional liability
products for approximately 10 years, initially offering Directors & Officers
Liability coverage to Nonprofit 501(c)(3) tax exempt organizations. In 1996, we
introduced a proprietary package of coverages in our Executive Safeguard(sm)
policy offered to public and private companies. The coverages offered in the
Executive Safeguard(sm) policy include directors and officers liability,
employment practices liability, fiduciary liability and kidnap ransom insurance.
Our recent efforts have been focused on broadening the target market for our
specialty lines product offerings through the expansion of our field production
underwriting staff and the introduction of new products. During 1998 we
introduced a variety of coverage enhancements to several of our policies,
including Executive Safeguard(sm), miscellaneous professional and non-profit
directors and officers and two new products, accountants and dentists
professional liability.
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SPECIALTY PROPERTY AND INLAND MARINE LINE. In September 1998, we
introduced a Specialty Property and Inland Marine underwriting organization
which brings a new line of business to Philadelphia Consolidated. This
underwriting organization specializes in:
- insuring large property risks for a wide range of businesses, from
shopping malls to hotels; and
- underwriting and providing marketing for all classes of inland
marine insurance (concentrating on the larger segments of inland
marine), including builder's risk, contractor's equipment and motor
truck cargo.
In addition, we now have the expertise to create insurance coverage for the
unusual, one-of-a-kind account.
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THE PLAN
The following is a summary of the terms and conditions of the Philadelphia
Insurance Companies Stock Purchase Plan for Preferred Agents (the "Plan"):
PURPOSE
We established the Plan in order to provide our Preferred Agents, as
defined below, with an opportunity to acquire our common stock at a discounted
purchase price. This is intended to encourage our Preferred Agents to own our
common stock and to align their interests with those of our other shareholders.
PLAN ADMINISTRATION
The Plan will be administered by the Board of Directors of Philadelphia
Consolidated Holding Corp. (the "Board") or by any committee designated by the
Board at its discretion from time to time. The committee designated to
administer the Plan by the Board, or the Board itself in its capacity as
administrator of the Plan, are referred to in this prospectus as the
"Committee." The Committee may engage an agent to perform custodial and
record-keeping functions for the Plan, such as holding record title to Share
certificates of Plan participants ("Participants"), maintaining an individual
investment account for each Participant and providing annual status reports to
Participants regarding their investment accounts.
The Committee will have full discretionary authority to interpret the
Plan, to issue rules for administering the Plan and to make all other
determinations necessary or appropriate for the administration of the Plan,
including, but not limited to, the manner in which Participants must complete
subscription agreements in order to participate in the Plan and limitations on
numbers of shares of common stock available for purchase in any Offering Period,
as hereinafter defined.
Additional information concerning the Plan and/or its administration may
be obtained from:
Craig P. Keller
Vice President, Secretary, Treasurer and Chief Financial Officer
Philadelphia Consolidated Holding Corp.
One Bala Plaza, Suite 100
Bala Cynwyd, PA 19004
(610) 617-7900
SECURITIES TO BE OFFERED
Under the Plan, our common stock will be offered for sale to eligible
Preferred Agents. The maximum number of shares of common stock available for
purchase under the Plan is 200,000, subject to adjustment in the event of
certain events affecting the common stock, such as a stock split or stock
dividend.
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PREFERRED AGENTS WHO MAY PARTICIPATE IN THE PLAN
All Preferred Agents will be eligible to participate in the Plan, other
than any Preferred Agent who is serving, or who has been elected to serve, as
(1) a Board member, (2) Chairman or Vice Chairman of the Board, (3) President,
Vice President, Secretary or Treasurer of Philadelphia Consolidated, or (4) in
any other position, regardless of title, that obligates the individual to file
reports under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
A "Preferred Agent" is any agent of ours who is both:
- party to an agency agreement with us and
- designated as a "Preferred Agent" by the Executive Vice
President-Director of Marketing of Philadelphia Consolidated.
A person's status as a Preferred Agent for any particular Offering Period,
as defined below, will be based on whether the person is a Preferred Agent as of
the first day of the Offering Period.
PURCHASE OF COMMON STOCK PURSUANT TO THE PLAN AND PAYMENT FOR COMMON STOCK
OFFERED
ELECTION TO PARTICIPATE IN THE PLAN. The Committee may establish one or
more offering periods under the Plan (each, an "Offering Period") at any time
and for any length of time the Committee determines is appropriate. The
Committee will provide eligible Preferred Agents with notice of the dates of
each Offering Period, the enrollment period for the Offering Period and any
other terms or conditions that must be met in order for an eligible Preferred
Agent to participate in the Plan for that Offering Period. Such notice will be
delivered to each eligible Preferred Agent as soon as practicable on or after
the first day of the Offering Period. Any eligible Preferred Agent may elect to
participate in the Plan and purchase common stock during an Offering Period by
filing with the Committee during the enrollment period a subscription agreement
specifying either the number of shares of common stock or the dollar amount of
common stock to be purchased for that Offering Period. While we intend to
provide each eligible Preferred Agent with the notice described above in this
paragraph, we have no obligation or liability to any otherwise eligible
Preferred Agent who does not receive a notice for any Offering Period including,
but not limited to, any obligation to allow that Preferred Agent to participate
in the offering for that Offering Period.
PURCHASE OF SHARES. Except as described below in "Revocation of Election
to Participate in the Plan," each Participant who has properly submitted a
subscription agreement for an Offering Period will be deemed, without further
action, to have purchased on the last business day of the Offering Period the
number of shares of common stock specified in his or her subscription agreement.
The Committee will hold the shares in a special investment account (an
"Investment Account") for the Participant until the two-year Restricted Period,
as defined below, has passed. If we pay cash dividends on our common stock, we
will distribute to Participants the
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<PAGE> 16
cash dividends that are paid with respect to the shares held in the
Participant's Investment Account. We will retain in the investment account any
distributions that are in the nature of a stock split or distribution of stock
until the shares to which the stock split or distribution is attributable are
themselves distributed to the Participant in accordance with the Plan. Shares
delivered to Participants under the Plan will be shares that currently are held
in treasury or are authorized but unissued.
PURCHASE PRICE OF COMMON STOCK PURCHASED UNDER THE PLAN. The purchase
price of shares of common stock purchased under the Plan for any Offering Period
will be an amount that is equal to the lesser of 85% of the Market Value, as
defined below, of the shares (1) on the first day of the Offering Period and (2)
on the last day of the Offering Period.
"Market Value" on any date means the last reported sale price of the
shares reported on the Nasdaq National Market, or the closing price of the
shares on such other stock exchange as the common stock may be listed, on the
date in question as reported in the Wall Street Journal. If there is no closing
price reported, then the "Market Value" will mean the average between the
closing bid and asked prices for shares on the date in question as reported. If
there are no sales reports or bid or asked quotations, as the case may be, for
the date in question, the closest preceding date on which there were sales
reports or bid or asked quotations will be used. If the Committee determines, in
its discretion, that the valuation as described above in this paragraph does not
accurately reflect the value of the shares or if the shares are not then
publicly traded, the Market Value of a share will be determined by the
Committee.
PAYMENT OF PURCHASE PRICE. Each Participant purchasing shares of common
stock under the Plan will elect in his or her subscription agreement to pay for
the shares to be purchased under the subscription agreement either by (1) paying
in cash on or before the last day of the Offering Period, or (2) having amounts
specified by the Participant withheld from commissions or other compensation
that would otherwise have been paid to the Participant during the Offering
Period. There is no provision in the Plan for changing the manner in which
payments for common stock are to be made.
CASH ACCOUNTS. Any cash contributed by a Participant for the purpose of
making purchases of shares of common stock under the Plan, whether through
direct payment by the Participant or through withholding from commissions
otherwise payable to the Participant, will be accumulated in a non-interest
bearing account for the Participant until used to purchase shares. We will
maintain records of the cash contributed by each Participant (a "Participant's
Cash Account"). We have no obligation to hold these funds in a separate account
for a Participant, and no interest will be payable with respect to any amounts
allocated to a Cash Account. If a Participant revokes his or her election to
participate in the Plan for an Offering Period, we will pay to the Participant
any amounts accumulated in his or her Cash Account for that Offering Period,
without interest, as soon as practicable following the date of revocation. If
the amount accumulated in a Participant's Cash Account for an Offering Period is
more than the amount required to purchase the number of shares for which the
Participant has subscribed, we will pay to the Participant the excess in the
Participant's Cash Account over the amount used to purchase the common stock on
the last day of the Offering Period, without interest, as soon as practicable
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<PAGE> 17
following the last day of the Offering Period. Other than as described above,
the Plan does not provide a mechanism for a Participant to withdraw
contributions that have been made under the plan.
PARTICIPANT CONTRIBUTIONS. Participants do not contribute to the Plan
except as they may elect in their subscription agreements. See "Payment of
Purchase Price" above.
PURCHASE LIMITATIONS. No Participant may purchase under the Plan during
any three consecutive calendar years shares of common stock having an aggregate
value in excess of $100,000. For purposes of this limitation, the value of
shares of common stock purchased under the Plan will be equal to their Market
Value as of the first day of the Offering Period in which they are purchased.
REPORTS TO BE MADE TO PARTICIPANTS. The Committee will cause reports on
the status of Participants' Investment Accounts to be prepared and delivered to
Participants annually.
REVOCATION OF ELECTION TO PARTICIPATE IN THE PLAN
A Participant may revoke his or her participation in the Plan for any
Offering Period at any time up to and including the last day of the Offering
Period by providing written notice of the revocation according to any revocation
notice provisions that are established by the Committee. In addition, if a
Participant fails to pay the purchase price of shares of common stock for which
he or she has subscribed in full on or before the last day of the Offering
Period, he or she will be deemed to have revoked his or her participation for
that Offering Period and will have no further rights to purchase shares for that
Offering Period. If a Participant revokes his or her participation for an
Offering Period, any cash that has been accumulated in a Cash Account for the
Participant for that Offering Period will be refunded to the Participant,
without interest, as soon as practicable following our receipt of notice of
revocation.
TRANSFER RESTRICTIONS ON SHARES OF COMMON STOCK PURCHASED UNDER THE PLAN
Participants will not be permitted to transfer shares of common stock
purchased under the Plan for a period of two years, measured from the first day
of the Offering Period of the purchase (the "Restricted Period"). If a
Participant attempts to sell, transfer, make subject to any lien, or otherwise
dispose of shares prior to the end of the Restricted Period, the attempted
transfer, lien or other disposition will be null and void and we will have the
right, but not the obligation, to repurchase the shares for the lesser of the
Market Value of the shares at the time of forfeiture or the actual purchase
price paid by the Participant for the shares. The Participant will forfeit all
rights to those shares upon receipt of payment from us of the repurchase price.
If a Participant's status as a Preferred Agent terminates, for any reason
other than due to his or her death or disability, the Participant will be
entitled to his or her shares of common stock that have been held beyond the
Restricted Period. We have the right, but not the obligation, within 90 days
after we receive notice of the termination of a Participant's Preferred Agent
status, to repurchase from the Participant any shares for which the Restricted
Period has not passed for
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<PAGE> 18
the lesser of the Market Value of the shares at the time of repurchase or the
actual purchase price paid by the Participant for the shares.
VOTING OF SHARES HELD IN INVESTMENT ACCOUNT
The Agent or, if there is no Agent, the Committee will vote all of a
Participant's shares that are held in an Investment Account in accordance with
the Participant's instructions.
OFFERING AND PLAN ADMINISTRATION EXPENSES
Philadelphia Consolidated will pay all of the expenses associated with the
offering of shares of common stock under the Plan and the administration of the
Plan.
TRANSFER OF STOCK CERTIFICATES
We will distribute to Participants certificates for the shares of common
stock purchased under the Plan once the shares are no longer subject to the two
year Restricted Period, provided the Participant has paid in full the purchase
price of the shares.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend the Plan as it deems appropriate, from time to time,
and may terminate the Plan at any time, at its discretion.
CERTAIN FEDERAL INCOME TAX EFFECTS OF PLAN PARTICIPATION
The following discussion summarizes, as of the date of this prospectus, general
principles of federal income tax law applicable to the Plan and the shares of
common stock acquired under the Plan. Participants should consult their own tax
advisors concerning the tax consequences of participation in the Plan and the
disposition of shares acquired under the Plan, since federal tax laws are
subject to change, individual tax situations differ and the effect of state and
local taxation may be material.
GENERAL. The Plan is not intended to qualify as a "stock purchase plan"
under the applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code") nor are contributions by Participants in the Plan tax deductible.
As a consequence, any Preferred Agent who participates in the Plan will be
subject to tax on the amount of his or her income that is used to purchase
shares under the Plan (even if such income is withheld by Philadelphia
Consolidated) as ordinary compensation income, and will be subject to additional
amounts of ordinary compensation income attributable to the purchase of shares
under the Plan at a discount. In general, whenever property is purchased by an
individual at a discount in connection with arrangements related to compensation
for services provided by that individual, the excess of the Market Value over
the purchase price of the property is treated as taxable compensation income
(that is taxed as additional ordinary income, and not as a capital gain). This
additional compensation income will generally be recognized at the time of the
purchase or at the time the
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<PAGE> 19
property purchased ceases to be subject to a substantial risk of forfeiture,
whichever is later.
Because the shares of common stock purchased under the Plan are subject to
a Restricted Period, and are subject to repurchase at the lesser of the purchase
price or then Market Value if a Participant's status as a Preferred Agent
terminates during the Restricted Period, the shares should be viewed for federal
income tax purposes as being subject to a substantial risk of forfeiture. As a
consequence, a Participant will recognize as additional compensation income the
excess of the Market Value of the shares purchased as of the date the Restricted
Period ends over the amount paid for the shares. For example, if a Participant
purchases $1,000 worth of shares under the Plan with respect to an Offering
Period that commenced on July 1, 1999, and remains as a Preferred Agent through
July 1, 2001, the following tax treatment would generally be applicable. If the
Participant paid $850 through withholding from his or her commissions during
1999, his or her income for 1999 will include the $850, even though this amount
was never paid to the Participant in cash. No additional income would be
recognized in 1999, absent a special "83(b) election" (described below), as a
result of the purchase. If the Market Value of the shares purchased rises to
$1,500 as of July 1, 2001, the Participant will recognize additional
compensation income for the taxable year 2001 equal to $650 (that is, the $1,500
Market Value of the shares reduced by the $850 paid for them).
On a subsequent sale of the shares, the Participant will be treated for
federal income tax purposes as though he or she had purchased the shares for
their Market Value (i.e., $1,500) on July 1, 2001. This will determine the
amount of gain or loss recognized on the sale, and will also establish the
beginning of the holding period applicable for purposes of determining the
maximum federal capital gains rate with respect to the gain realized on a sale
of the shares.
ELECTION UNDER SECTION 83(B) OF THE CODE. A Participant may make an
election under Section 83(b) of the Code (an "83(b) Election") which will cause
the Participant to recognize immediately as of the date the purchase of shares
occurs an additional amount of ordinary income equal to the excess of the Market
Value of the shares as of that date over the price paid for them. If this
election is made, the Market Value of the shares purchased is determined by
disregarding the restrictions in the Plan that otherwise cause the shares to be
subject to a substantial risk of forfeiture. In addition, if the shares are
repurchased, the Participant will only be able to claim a loss if the repurchase
is at a price below the price actually paid (that is, if the repurchase price is
based on a Market Value for the shares that has dropped below the original
discounted purchase price). If the repurchase is at the original purchase price,
the Participant will not be allowed any tax loss, even though income will have
been recognized as a result of the 83(b) Election.
In order to make an 83(b) Election, a Participant must file the election
no later than 30 days after the date the shares were purchased (that is, the
last day of the Offering Period), by filing a written statement with the IRS
office where the Participant files his or her returns, and a copy with
Philadelphia Consolidated. A copy of the filing must also be included in the
Participant's tax return for the year of the purchase. The statement must
contain: the name, address and taxpayer identification number of the taxpayer, a
description of the shares purchased, the date of the purchase and the taxable
year for which the election is made, the nature of the restrictions on the
shares, the Market Value of the shares at the time of purchase, the purchase
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<PAGE> 20
price paid for the shares and a statement indicating that copies of the election
have been furnished to other persons as required. The statement must be signed
and must indicate that it is made under Section 83(b) of the Code. PARTICIPANTS
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE ADVISABILITY OF AND
PROCEDURE INVOLVED IN MAKING AN 83(B) ELECTION.
The effect of an 83(b) Election may be illustrated as follows: Assume, as
above, that a Participant purchases $1,000 worth of shares under the Plan with
respect to an Offering Period that commenced on July 1, 1999. Assume that the
Offering Period ended on December 31, 1999 (the purchase date) and the
Participant files an 83(b) Election within thirty days following the purchase
date. Assume also that the shares were worth $1,000 as of July 1, 1999 (fixing
the purchase price at $850), but rose in value to $1,100 as of December 31,
1999. The $850 which the Participant paid for the shares through withholding
from his commissions between July 1 and December 31, 1999 will still be included
in his or her income for 1999 even though this amount was never paid to the
Participant in cash. In addition, as a consequence of electing to include the
bargain purchase amount in income for 1999, the Participant's taxable income
will be increased by $250 (the excess of the $1,100 Market Value of the shares
purchased, over the $850 purchase price paid). If the Participant continues to
be a Preferred Agent until July 1, 2001 and then sells the shares for $1,500 on
July 2, 2001, the Participant will recognize a capital gain of $400 (the excess
of the $1,500 realized on the sale over the $1,100 basis in the shares). This
will be treated as a sale of property held from December 31, 1999 through July
2, 2001, and would be treated as a long-term capital gain in determining the
maximum applicable federal tax rate. If, however, the Participant ceases to be a
Preferred Agent prior to July 1, 2001 and Philadelphia Consolidated repurchases
the shares for $850 (the original purchase price), the Participant will not be
permitted to recognize a loss as no loss is permitted to be recognized under
applicable tax rules for such a forfeiture.
USE OF PROCEEDS
Unless otherwise set forth in a Prospectus Supplement, we will use the net
proceeds of the offering for general corporate purposes.
WHERE YOU CAN FIND MORE INFORMATION --
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Philadelphia Consolidated files annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). You may read and copy any document we file at the
following public reference rooms maintained by the SEC at:
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<PAGE> 21
Judiciary Plaza 7 World Trade Center
450 Fifth Street, N.W. 13th Floor
Washington, D.C. 20549 New York, New York 10048
You may obtain information on the operation of the SEC's public reference
rooms by calling the SEC at 1-800-SEC-0330. Philadelphia Consolidated's SEC
filings also are available to the public from the SEC's website at
http.//www.sec.gov.
Philadelphia Consolidated has filed a registration statement on Form S-3
with the SEC to register the shares offered by this prospectus. This prospectus
is part of the registration statement but, as permitted by SEC rules and
regulations, this prospectus does not contain all the information that you can
find in the registration statement or the exhibits to the registration
statement. You should refer to the registration statement and to the exhibits
filed with the registration statement for further information about Philadelphia
Consolidated, our consolidated subsidiaries and the shares.
The SEC allows us to "incorporate by reference" the information we file
with them. This means that we are permitted to disclose certain information to
you by referring you to other documents we have filed with the SEC. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file with the SEC after the date of this
prospectus will automatically update and supersede this information.
We incorporate by reference in this prospectus all the documents listed
below and any filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and before all the
shares of shares offered by this prospectus have been sold or de-registered:
- Annual Report on Form 10-K for the fiscal year ended December 31,
1998 (the "Form 10-K");
- the Current Report on Form 8-K dated May 10, 1999; and
- description of our common stock, no par value, that is contained in
Philadelphia Consolidated's registration statement on Form 8-A/A,
dated September 13, 1993, including any amendments or reports filed
for the purpose of updating the description of the shares.
We will deliver, without charge, to anyone receiving this prospectus, upon
written or oral request, a copy of any document incorporated by reference in
this prospectus but not delivered to you with this prospectus, excluding all
exhibits to those documents except any exhibit that has been specifically
incorporated by reference. You may request a copy of these documents by
telephoning or writing to:
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<PAGE> 22
Craig P. Keller
Vice President, Secretary, Treasurer and Chief Financial Officer
Philadelphia Consolidated Holding Corp.
One Bala Plaza, Suite 100
Bala Cynwyd, PA 19004
(610) 617-7900
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking
statements. These statements can be identified by the use of forward-looking
phrases such as "will likely result," "may," "are expected to, "is anticipated,"
"estimate," "projected," "intends to," or other similar words. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected, as
described below.
Significant risks and uncertainties include:
- changes in the business environment in which we operate;
- inflation and changes in interest rates;
- changes in taxes, laws and governmental regulations;
- competitive product and pricing activity;
- difficulties of managing growth profitably; and
- the impact of Year 2000 issues.
Additional risks that may affect our future performance are included
elsewhere in this prospectus and in our other filings with the SEC. When
considering forward-looking statements, you should keep in mind these risk
factors and other cautionary statements in this prospectus. You should not place
undue reliance on any forward-looking statement that speaks only as of the date
made.
LEGAL OPINIONS
The validity of the shares of common stock offered hereby will be passed
on for Philadelphia Consolidated by Wolf, Block, Schorr and Solis-Cohen LLP.
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EXPERTS
The consolidated financial statements of Philadelphia Consolidated and its
subsidiaries as of December 31, 1998 and 1997 and for each of the three years in
the period ended December 31, 1998 incorporated by reference in this prospectus
have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission
Registration Fee................................................... $1,393
*Accounting Fees and Expenses...................................... 4,500
*Legal Fees and Expenses........................................... 30,000
*Printing.......................................................... 2,000
*Miscellaneous..................................................... 2,107
Total Expenses..................................................... $ 40,000
======
- ----------
* Estimated for purposes of completing the information required pursuant to this
Item 14.
Philadelphia Consolidated will pay all fees and expenses associated with
filing the Registration Statement.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subchapter D (Sections 1741 through 1750) of Chapter 17 the Pennsylvania
Business Corporation Law of 1988, as amended (the "BCL"), contains provisions
for mandatory and discretionary indemnification of a corporation's directors,
officers, employees and agents (collectively "Representatives"), and related
matters.
Under Section 1741, subject to certain limitations, a corporation has the
power to indemnify Representatives under certain prescribed circumstances
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with a threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, to which any of them is a party or threatened
to be made a party by reason of his or her being a Representative of the
corporation or serving at the request of the corporation as a Representative of
another corporation, partnership, joint venture, trust or other enterprise, if
he or she acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation and, with
respect to any criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
Section 1742 provides for indemnification with respect to derivative and
corporate actions similar to that provided by Section 1741. However,
indemnification is not provided under Section 1742 in respect of any claim,
issue or matter as to which a Representative has been adjudged to be liable to
the corporation unless and only to the extent that the proper court determines
upon application that, despite the adjudication of liability but in view of all
the
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<PAGE> 25
circumstances of the case, a Representative is fairly and reasonably entitled to
indemnity for the expenses that the court deems proper.
Section 1743 provides that indemnification against expenses is mandatory
to the extent that a Representative has been successful on the merits or
otherwise in defense of any such action or proceeding referred to in Section
1741 or 1742.
Section 1744 provides that, unless ordered by a court, any indemnification
under Section 1741 or 1742 shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of a
Representative is proper because the Representative met the applicable standard
of conduct. Section 1744 further provides that such determination will be made
by the board of directors by a majority vote of a quorum consisting of directors
not parties to the action or proceeding; if a quorum is not obtainable or if
obtainable and a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel; or by the shareholders.
Section 1745 provides that expenses incurred by a Representative in
defending any action or proceeding referred to in Subchapter D of Chapter 17 of
the BCL may be paid by the corporation in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of the
Representative to repay such amount if it shall ultimately be determined that
such Representative is not entitled to be indemnified by the corporation.
Section 1746 provides generally that except in any case where 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, the
indemnification and advancement of expenses provided by Subchapter D of Chapter
17 of the BCL shall not be deemed exclusive of any other rights to which a
Representative seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in such Representative's official
capacity and as to action in another capacity while holding that office.
Section 1747 grants a corporation the power to purchase and maintain
insurance on behalf of any Representative against any liability incurred by such
Representative in his or her capacity as a Representative, whether or not the
corporation would have the power to indemnify such Representative against that
liability under Subchapter D of Chapter 17 of the BCL.
Sections 1748 and 1749 apply the indemnification and advancement of expenses
provisions contained in Subchapter D of Chapter 17 of the BCL to all constituent
corporations absorbed in a consolidation, merger or division, as well as the
surviving or new corporations surviving or resulting therefrom, and to service
as a representative of a corporation or an employee benefit plan.
Section 1750 provides that the indemnification and advancement of expenses
provided by, or granted pursuant to, Subchapter D of Chapter 17 of the BCL
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a Representative and shall inure to the benefit of
the heirs and personal representative of such person.
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Section 9 of Article IV of Philadelphia Consolidated's By-Laws provides
indemnification to directors for all actions taken by them and for all failures
to take action to the fullest extent permitted by Pennsylvania law against all
expense, liability and loss reasonably incurred or suffered by them in
connection with any threatened, pending or completed action, suit or proceeding
(including, without limitation, an action, suit or proceeding by or in the right
of Philadelphia Consolidated), whether civil, criminal, administrative,
investigative or through arbitration. Section 9 of Article IV of the By-Laws
also permits Philadelphia Consolidated, by action of its board of directors, to
indemnify officers, employees and other persons to the same extent as directors.
The provisions of Section 9 of Article IV of the By-Laws relating to the
limitation of directors' liability, to indemnification and to the advancement of
expenses constitute a contract between Philadelphia Consolidated and each of its
directors which may be modified as to any director only with that director's
consent or as otherwise specifically provided in Section 9. Any repeal or
amendment of Section 9 of Article IV of the By-Laws which is adverse to any
director will apply to such director only on a prospective basis, and will not
reduce any limitation on the personal liability of a director of Philadelphia
Consolidated, or limit the rights of an indemnitee to indemnification or to the
advancement of expenses with respect to any action or failure to act occurring
prior to the time of such repeal or amendment. No repeal or amendment of the
By-Laws will affect any or all of Section 9 of Article IV so as either to reduce
the limitation of directors' liability or limit indemnification or the
advancement of expenses in any manner unless adopted by the unanimous vote of
the directors of Philadelphia Consolidated then serving or the affirmative vote
of shareholders entitled to cast not less than a majority of the votes that all
shareholders are entitled to cast in the election of directors.
Section 9 of Article IV further permits Philadelphia Consolidated to
maintain insurance, at its expense, for the benefit of any person on behalf of
whom insurance is permitted to be purchased by Pennsylvania law against any such
expenses, liability or loss, whether or not Philadelphia Consolidated would have
the power to indemnify such person against such expense, liability or loss under
Pennsylvania or other law. Philadelphia Consolidated has purchased directors'
and officers' liability insurance.
Section 3c of the Plan provides that service on the Committee constitutes,
for purposes of rights to indemnification by Philadelphia Consolidated, service
as a member of Board. Committee members are entitled, under Section 3c, to
indemnity from Philadelphia Consolidated and limitation of liability to the
fullest extent provided by applicable law, Philadelphia Consolidated's Articles
of Incorporation and/or Philadelphia Consolidated's By-Laws in connection with
or arising out of any action, suit or proceeding with respect to the
administration of the Plan in which a Committee member is involved by reason of
being or having been a member of the Committee, whether or not the Committee
member continues to be a member of the Committee at the time of the action, suit
or proceeding.
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ITEM 17. UNDERTAKINGS.
(a) The Undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in such
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report
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pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, such Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation of Philadelphia Consolidated, as
amended (incorporated by reference to Exhibit 3.1 filed with
Philadelphia Consolidated's Form S-1 Registration Statement
under the Securities Act of 1933 (Registration No. 33-65958)).
4.1 Philadelphia Insurance Companies Stock Purchase Plan for
Preferred Agents.*
4.2 Form of Subscription Agreement*
5.1 Opinion of Wolf, Block Schorr and Solis-Cohen LLP regarding
the legality of the securities being registered by
Philadelphia Consolidated hereby.*
23.1 Consent of PricewaterhouseCoopers LLP related to the financial
statements of Philadelphia Consolidated Holding Corp.*
23.2 Consent of Wolf, Block Schorr and Solis-Cohen LLP (included in
Exhibit 5.1).*
24.1 Powers of attorney (included on signature pages of this
Registration Statement).
- ----------
* Filed electronically herewith.
II-5
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Philadelphia
Consolidated Holding Corp. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement, to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Bala Cynwyd, Pennsylvania on May 7, 1999.
PHILADELPHIA CONSOLIDATED HOLDING CORP.
By: /s/ James J. Maguire
-------------------------
James J. Maguire
Chairman of the Board of Directors,
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James J. Maguire and Craig P. Keller, and each of
them, the undersigned's true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement (including, without limitation,
post-effective amendments to this Registration Statement), and to file the same,
with all exhibits thereto, and other documents in connection therewith
(including, without limitation, any related registration statement or amendment
thereto filed in accordance with Rule 462 under the Securities Act of 1933, as
amended), with the Commission, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on May 7, 1999.
Signature Title
--------- -----
/s/ James J. Maguire Chairman of the Board of Directors,
- --------------------- President, Chief Executive Officer
James J. Maguire and Director (Principal Executive Officer)
/s/ Craig P. Keller Vice President, Secretary, Treasurer and
- --------------------- Chief Financial Officer (Principal
Craig P. Keller Financial and Accounting Officer)
/s/ Sean P. Sweeney Executive Vice President and Director
- ---------------------
Sean P. Sweeney
II-6
<PAGE> 30
/s/ James J. Maguire, Jr. Executive President, Chief Operating Officer
- --------------------------- and Director
James J. Maguire, Jr.
/s/ William J. Henrich, Jr. Director
- ---------------------------
William J. Henrich, Jr.
/s/ Roger R. Larson Director
- ---------------------------
Roger R. Larson
/s/ Paul R. Hertel, Jr. Director
- ---------------------------
Paul R. Hertel, Jr.
/s/ Thomas J. McHugh Director
- ---------------------------
Thomas J. McHugh
/s/ Michael J. Morris Director
- ---------------------------
Michael J. Morris
/s/ J. Eustace Wolfington Director
- ---------------------------
J. Eustace Wolfington
II-7
<PAGE> 31
EXHIBIT INDEX
Exhibit No. Description Method of Filing
----------- ----------- ----------------
3.1 Articles of Incorporation of Philadelphia
Consolidated, as amended (incorporated by
reference to Exhibit 3.1 filed with
Philadelphia Consolidated's Form S-1
Registration Statement under the Securities
Act of 1933 (Registration No. 33-65958)).
4.1 Philadelphia Insurance Companies Stock *
Purchase Plan for Preferred Agents.
4.2 Form of Subscription Agreement *
5.1 Opinion of Wolf, Block Schorr and Solis-Cohen *
LLP regarding the legality of the securities
being registered by Philadelphia Consolidated
hereby.
23.1 Consent of PricewaterhouseCoopers LLP related *
to the financial statements of Philadelphia
Consolidated Holding Corp.
23.2 Consent of Wolf, Block Schorr and Solis-Cohen *
LLP (included in Exhibit 5.1).
24.1 Powers of attorney (included on signature pages
of this Registration Statement).
- ----------
* Filed electronically herewith.
<PAGE> 1
EXHIBIT 4.1
PHILADELPHIA INSURANCE COMPANIES
STOCK PURCHASE PLAN FOR PREFERRED AGENTS
1. Purpose.
a. The purpose of the Philadelphia Insurance Companies Stock Purchase
Plan for Preferred Agents (the "Plan") is to assist the Philadelphia
Consolidated Holding Corp., a Pennsylvania corporation (the
"Company"), and its Subsidiaries in retaining its Preferred Agents
in a continuing relationship with the Company by offering them a
greater stake in the Company's success and a closer identity with
it. This is to be accomplished by providing Preferred Agents a
continuing opportunity to purchase Shares (as hereinafter defined)
from the Company through periodic offerings.
b. The Plan is not intended to comply with the provisions of Section
423 of the Code (as hereinafter defined).
2. Definitions. For purposes of the Plan:
a. "Agent" means the person or persons appointed by the Board in
accordance with Section 3.d.
b. "Board" means the Board of Directors of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the committee described in Section 3.
e. "Company" means Philadelphia Consolidated Holding Corp., a
Pennsylvania corporation.
f. "Disability" means a condition such that a Participant ceases to be
a Preferred Agent for the Company on account of his or her
"disability" as determined by the Committee.
g. "Fair Market Value" on any date means the last reported sale price
for Shares as reported on the NASDAQ National Market, or the closing
price reported on such other stock exchange as the Shares may be
listed, on such date as reported in the Wall Street Journal, or if
there is no closing price reported, then Fair Market Value of a
Share shall mean the average between the closing bid and asked
prices for Shares on such date as reported. If there are no sales
reports or bid or asked
<PAGE> 2
quotations, as the case may be, for a given date, the closest
preceding date on which there were sales reports or bid or asked
quotations shall be used. If the Committee determines, in its
discretion, that such valuation does not accurately reflect the
value of the Shares or if Shares are not publicly traded, the Fair
Market Value of a Share shall be determined by the Committee.
h. "Investment Account" means the account established for a Participant
pursuant to Section 8.b to hold Shares acquired for a Participant
pursuant to the Plan.
i. "NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations System.
j. "Offering Period" means each any period or periods as may be
designated at the discretion of the Committee as an Offering Period.
k. "Participant" means a Preferred Agent who is eligible to participate
in the Plan and who makes an election to participate in the Plan in
accordance with Section 5 as well as any former Participant to the
extent such former Participant has any Shares held for his or her
benefit in an Investment Account.
l. "Plan" means the Philadelphia Insurance Companies Stock Purchase
Plan for Preferred Agents as set forth in this document, and as may
be amended from time to time.
m. "Plan Year" means the 12 month period commencing each September 1
and ending on the subsequent August 31. The first Plan Year shall be
the period commencing May 15, 1999 and ending August 31, 1999.
n. "Preferred Agent" shall be those agents of the Company who are
parties to an agency agreement with the Company and designated as a
"Preferred Agent" by the Executive Vice President - Director of
Marketing. A person's status as a Preferred Agent as of any
particular Offering Period shall be based on whether such person is
party to a Preferred Agent Agreement as of the first day of the
Offering Period.
o. "Purchase Date" means the last business day of each Offering Period.
p. "Purchase Price" means the lesser of 85% of the Fair Market Value of
a Share on
i. the first business day of the Offering Period or
ii. the Purchase Date.
2
<PAGE> 3
q. "Restricted Period" means the two year period described in Section
6.d.
r. "Share" or "Shares" means a share or shares of the Company's common
stock, no par value, of the Company.
s. "Subscription Agreement" means the agreement, in a form established
by the Committee, between the Participant and the Company pursuant
to which the Participant agrees to purchase Shares pursuant to the
Plan.
3. Administration of the Plan. The Plan shall be administered by the Board or
by such committee as may be designated by the Board, as determined from
time to time at the discretion of the Board. The committee designated to
administer the Plan by the Board, or the Board itself in its capacity as
administrator of the Plan are referred to herein as the "Committee."
Subject to the express provisions of the Plan, the Committee shall have
full discretionary authority to interpret the Plan, to issue rules for
administering the Plan, to change, alter, amend or rescind such rules, and
to make all other determinations necessary or appropriate for the
administration of the Plan. All determinations, interpretations and
constructions made by the Committee with respect to the Plan shall be
final and conclusive.
a. Meetings. The Committee shall hold meetings at such times and places
as it may determine, shall keep minutes of its meetings, and shall
adopt, amend and revoke such rules or procedures as it may deem
proper; provided, however, that it may take action only upon the
agreement of a majority of the whole Committee. Any action which the
Committee shall take through a written instrument signed by a
majority of its members shall be as effective as though it had been
taken at a meeting duly called and held. The Committee shall report
all actions taken by it to the Board of Directors.
b. Exculpation. No member of the Committee shall be personally liable
for monetary damages as such for any action taken or any failure to
take any action in connection with the administration of the Plan
unless
i. the member of the Committee has breached or failed to perform
the duties of his office under Subchapter B of Chapter 17 of
the Pennsylvania Business Corporation Law of 1988, as amended,
and
ii. the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness; provided, however, that
the provisions of this Section 3.b shall not apply to the
responsibility or liability of a member of the Committee
pursuant to any criminal statute or to the liability of a
3
<PAGE> 4
member of the Committee for the payment of taxes pursuant to
local, state or federal law.
c. Indemnification. Service on the Committee shall constitute, for
purposes of rights to indemnification from the Company, service as a
member of the Board of Directors of the Company. Each member of the
Committee shall be entitled, without further act on his part, to
indemnity from the Company and limitation of liability to the
fullest extent provided by applicable law and by the Company's
Articles of Incorporation and/or bylaws in connection with or
arising out of any action, suit or proceeding with respect to the
administration of the Plan in which he or she may be involved by
reason of his or her being or having been a member of the Committee,
whether or not he or she continues to be such member of the
Committee at the time of the action, suit or proceeding.
d. Agent. The Committee may engage an Agent to perform custodial and
record-keeping functions for the Plan, such as holding record title
to the Participants' Share certificates, maintaining an individual
Investment Account for each such Participant and providing annual
status reports to such Participants.
e. Delegation. The Committee shall have full discretionary authority to
delegate ministerial functions to management of the Company.
4. Eligibility. All Preferred Agents of the Company shall be eligible to
participate in the Plan as of the first day of an Offering Period.
Notwithstanding the foregoing, no person shall be eligible to participate
in the Plan if such person is an Excluded Individual. For purposes of this
Section 4, an "Excluded Individual" means, as of the date of
determination, any individual who is then serving, or who has been
elected, nominated or appointed by the Board or by the Company's
shareholders to serve, in any of the following capacities: (i) as a member
of the Board, (ii) as Chairman of the Board, Vice Chairman of the Board,
President, a Vice President, Secretary or Treasurer of the Company, or
(iii) in any other position (regardless of title) obligating such
individual to file reports pursuant to Section 16(a) of the Securities
Exchange Act of 1934.
5. Election to Participate.
a. Notice of Offering Period. Notice shall be provided to each
Preferred Agent who is eligible to participate in the Plan setting
forth the dates of the Offering Period and any other terms or
conditions which must be met in order for an eligible Preferred
Agent to become a Participant in the Plan. Such notice shall be
delivered to each eligible Preferred Agent as soon as practicable on
or after the first day of the Offering Period. Notwithstanding the
foregoing, the Company shall have no obligation or liability to any
otherwise eligible Preferred Agent who does not receive a notice for
any Offering Period including, but not limited to,
4
<PAGE> 5
any obligation to allow that Preferred Agent to participate in the
offering for the Offering Period.
b. Initial Subscription Agreements. Each Preferred Agent may become a
Participant by filing with the Committee a Subscription Agreement
electing to purchase Shares during an Offering Period.
c. Subsequent Subscription Agreements. In order to participate in the
Plan for any subsequent Offering Period, a Preferred Agent must file
with the Committee a new Subscription Agreement electing to purchase
Shares during such Offering Period.
6. Conditions and Terms of Purchases of Shares.
a. The number of Shares that are to be purchased under a Subscription
Agreement shall not exceed the limitations set forth in Section 7.
b. Any Preferred Agent purchasing Shares under the Plan shall complete
a Subscription Agreement, on a form provided by the Committee, with
respect to an Offering Period. To become a Participant with respect
to a particular Offering, an eligible Preferred Agent must submit
his or her Subscription Agreement during the enrollment period
established by the Committee with respect to such Offering Period.
Under the Subscription Agreement, the Participant may elect either
to have a specified dollar amount or a portion of amounts otherwise
payable to the Participant as commissions or other compensation
withheld by the Company for the purpose of purchasing Shares under
the terms of the Plan, or to make a payment in cash on or before the
last day of the Offering Period equal to a amount agreed to be paid
by the Participant for the purchase of Shares under the terms of the
Plan.
i. If a Preferred Agent elects to have amounts withheld from
amounts otherwise payable to him or her as commissions or
other compensation, such withheld amounts shall be held by the
Company until used for the purchase of Shares under the terms
of the Plan on the last day of the Offering Period.
ii. No interest or other earnings shall be paid with respect to
amounts withheld for the purchase of Shares under the Plan.
iii. The Company shall maintain a bookkeeping account for the
purpose of accounting for amounts withheld under the Plan;
provided, however, that the Company shall be under no
obligation to segregate or to hold any withheld amounts in a
separate account for any Participant.
5
<PAGE> 6
c. The purchase of Shares by a Participant shall be made at the
Purchase Price set with respect to the particular Purchase Date on
which the Shares are purchased.
d. Any Shares purchased pursuant to the Plan shall be restricted for a
period of two years, measured from the first day of the relevant
Offering Period (the "Restricted Period"). Any attempt to sell,
transfer, make subject to any lien, or otherwise dispose of such
Shares prior to the end of the Restricted Period shall be null and
void, and the Preferred Agent shall forfeit all rights to such
Shares on receipt of payment from the Company of the lesser of Fair
Market Value or the Purchase Price of such Shares. All certificates
for Shares shall be legended so as to indicate the restrictions on
sales of such Shares under the Plan in the manner and to the extent
required by law.
e. The Committee shall have complete discretion to establish rules and
procedures in connection with the election by Participants to
participate in the Plan, which rules and procedures may govern all
aspects of the participation election, including, but not limited to
the manner in which a Subscription Agreement is to be completed, and
the limits, if any, on purchases permitted with respect to a
particular Offering Period that may be made applicable in addition
to such limits as are imposed under the terms of the Plan.
7. Limit on Purchase of Shares. No Participant shall be permitted to purchase
Shares under the Plan during any three consecutive calendar years having
an aggregate value in excess of $100,000. For purposes of the preceding
sentence, the value of Shares purchased shall be equal to their Fair
Market Value as of the first day of the Offering Period in which they are
purchased.
8. Method of Purchase, Cash Accounts and Investment Accounts.
a. Method of Purchase of Shares. Except as otherwise provided in the
Plan, each Participant who has elected to participate in the Plan
under the provisions of Section 5 shall be deemed, without any
further action, to have purchased on the Purchase Date applicable to
such Subscription Agreement, the number of Shares specified in the
Subscription Agreement consistent with the terms for such purchase
set forth in the Plan. Each Participant who has elected to
participate in the Plan by making a cash payment under the
provisions of Section 5 shall be required to make such payment on or
before the last day of the Offering Period. If no such payment is
made, the Participant shall be deemed to have revoked his or her
participation for the Offering Period, and shall have no further
rights to purchase Shares for such Offering Period.
6
<PAGE> 7
b. Cash Accounts. Any cash contributed by a Participant for the purpose
of making purchases of Shares under the Plan, whether by direct
payment by the Participant or through withholding from commissions
otherwise payable to the Participant, shall be accumulated in a
non-interest bearing bookkeeping account ("Cash Account") for the
Participant until used to purchase Shares. The Company shall be
under no obligation to hold any funds in a separate account for a
Participant, and no interest shall be payable with respect to any
amounts allocated to such a Cash Account.
c. Investment Accounts. All Shares purchased under the Plan shall,
until the Restricted Period applicable to such Shares has passed, be
held in a separate Investment Account established for each
Participant.
d. Dividends or Other Distributions on Shares Held in Investment
Accounts. All cash dividends paid with respect to Shares which are
held in an Investment Account of a Participant shall be paid to the
Participant. Any distribution that is in the nature of a stock split
shall be retained in the Investment Account until such time as the
Share or Shares with respect to which such distribution was made are
distributed from the Investment Account to the Participant.
e. Adjustment of Shares on Application of Aggregate Limits. If the
total number of Shares that would be purchased pursuant to properly
filed Subscription Agreements for a particular Offering Period
exceeds the number of Shares then available for purchase under the
Plan, then the number of available Shares shall be allocated among
the Participants filing Subscription Agreements for such Offering
Period pro-rata on the basis of the number of Shares set forth in
each such Subscription Agreement. The payment obligation for each
such Subscription Agreement shall be deemed modified to take into
account the purchase of a number of Shares that is less than the
number specified in the Subscription Agreement, and any amounts
withheld in excess of the amount needed to make the pro-rata
purchase shall be distributed to the Participant as soon as
practicable following the Purchase Date.
f. Revocation of Participation. A Participant shall have the right to
revoke his or her election to participate in the Plan with respect
to an Offering Period at any time on or before the last day of the
Offering Period, subject to such reasonable notification
requirements as may be imposed by the Committee on such revocation
rights, by filing with the Committee a written notice indicating his
or her intention to revoke his or her election to participate. In
addition, if a Participant fails to pay the Purchase Price of Shares
for which he or she has subscribed in full on or before the Purchase
Date, he or she shall be deemed to have revoked his or her
participation for that Offering Period and will have no further
rights to purchase Shares for that Offering Period. If any amounts
have
7
<PAGE> 8
been accumulated in a cash account for a Participant with respect to
an Offering Period and such Participant revokes or is deemed to have
revoked his or her election to participate in the Plan for such
Offering Period, the Company shall distribute to the Participant the
amount accumulated in his or her cash account for such Offering
Period as soon as practicable following the date of revocation.
g. Repayment of Amounts in Cash Accounts. In the event there has been
accumulated in a Cash Account with respect to an Offering Period an
amount in excess of the amount required to purchase the number of
shares for which the Participant has subscribed with respect to such
Offering Period, the excess in the Cash Account over the amount used
to purchase the Shares on the last day of the Offering Period shall
be returned to the Participant, without interest, as soon as
practicable following the last day of the Offering Period.
9. Shares Subject to Plan. The aggregate maximum number of Shares that may be
issued pursuant to the Plan is two hundred thousand (200,000), subject to
adjustment as provided in Section 17 of the Plan. The Shares delivered
pursuant to the Plan shall be Shares held in treasury or Shares authorized
but previously unissued.
10. Distribution of Certificates. Each Participant shall receive a certificate
or certificates for those Shares held in an Investment Account for the
benefit of such Participant as soon as practicable following the end of
the Restricted Period applicable to such Shares, provided the payment
obligation with respect to such Shares has been fully satisfied.
11. Registration of Certificates. Each certificate withdrawn by a Participant
may be registered only in the name of the Participant, or, if the
Participant so indicated on the Participant's Subscription Agreement, in
the Participant's name jointly with a member of the Participant's family,
with right of survivorship. A Participant who is a resident of a
jurisdiction which does not recognize such a joint tenancy may have
certificates registered in the Participant's name as tenant in common or
as community property with a member of the Participant's family without
right of survivorship.
12. Voting. The Agent or, if there is no Agent, the Committee, shall vote all
Shares held in an Investment Account in accordance with the Participant's
instructions.
13. Death or Other Termination of Status as Preferred Agent.
a. In the event of a Participant's termination of his or her status as
a Preferred Agent on account of death or Disability, the
Participant, or the Participant's beneficiary, if one has been
designated, or the Participant's estate, as the case may be, shall
be entitled to the Shares held in the Participant's Investment
Account. The Restricted Period shall cease to be applicable to the
Shares of a Participant whose termination is described in this
Section 13.a. The Participant, or the Participant's
8
<PAGE> 9
beneficiary or estate, as the case may be, shall be issued a
certificate or certificates for such Shares as soon as practicable
after the payment obligation is satisfied.
b. In the event a Participant's status as a Preferred Agent terminates
for any reason other than a termination described in Section 13.a,
the Participant shall be entitled to the Shares which have been held
beyond the Restricted Period applicable to such Shares. With respect
to those Shares for which the Restricted Period has not passed, the
Company shall have the right, but not the obligation, to repurchase
any such Shares for the lesser of Fair Market Value or the Purchase
Price of such Shares. If the Company does not so elect to repurchase
such Shares, the Participant shall be entitled to such Shares. The
Participant shall be issued a certificate or certificates for any
Shares to which the Participant is entitled as soon as practicable
after termination of his or her status as a Preferred Agent. The
Company may exercise its right to repurchase by giving written
notice thereof to the Participant at such address for Participant as
the Company has on its books and records within ninety days after
the Company receives notice of a Participant's termination which
would give the Company the right to repurchase shares pursuant to
this Section 13.b. Closing of the repurchase shall be held within
thirty days after the Company gives such written notice at such time
and place as the Company shall designate to the Participant. As part
of the Closing, the Participant shall execute such stock powers and
other documents as the Company determines are necessary or
appropriate to be signed by the Participant in connection with the
repurchase of the shares, and in addition the Participant shall
grant in the Participation Agreement executed by the Participant in
connection with the granting of the right to purchase shares under
the Plan an irrevocable power of attorney designating the Company
and each of its officers as Participant's attorney-in-fact to
execute and deliver on behalf of the Participant, and in the
Participant's name, place and stead, such stock powers and other
documents.
14. Rights Not Transferable. Except as permitted under Section 13, rights
under the Plan are not transferable by a Participant and are exercisable
during the Participant's lifetime only by the Participant.
15. No Right to Continued Preferred Agent Status. Neither the Plan nor any
right granted under the Plan shall confer upon any Participant any right
to continuance of his or her status as a Preferred Agent with the Company,
or interfere in any way with the right of the Company to terminate the
Preferred Agent status of such Participant.
16. Application of Funds. All funds received or held by the Company under this
Plan may be used for any corporate purpose.
9
<PAGE> 10
17. Adjustments in Case of Changes Affecting Shares. In the event of a
subdivision or split of outstanding Shares, or the payment of a stock
dividend, the Share limit set forth in Section 9 shall be adjusted
proportionately, and such other adjustments shall be made as may be deemed
equitable by the Committee.
18. Amendment of the Plan. The Board of Directors of the Company may at any
time, or from time to time, amend the Plan in such manner as it may deem
advisable.
19. Termination of the Plan. The Plan and all rights of Preferred Agents under
any offering hereunder shall terminate at such time as the Board of
Directors, at its discretion, determines to terminate the Plan. Upon
termination of this Plan, any Shares held in Investment Accounts for
Participants shall be carried forward into the Participant's Investment
Account under a successor plan, if any, or, if there is no successor plan,
certificates for such Shares shall be forwarded to the Participant upon
satisfaction of all requirements for distribution of such Shares.
20. Governmental Regulations.
a. Anything contained in this Plan to the contrary notwithstanding, the
Company shall not be obligated to sell or deliver any Shares
certificates under this Plan unless and until the Company is
satisfied that such sale or delivery complies with (i) all
applicable requirements of the governing body of the principal
market in which such Shares are traded, (ii) all applicable
provisions of the Securities Act of 1933, as amended (the "Act"),
and the rules and regulations thereunder and (iii) all other laws or
regulations by which the Company is bound or to which the Company is
subject.
b. The Company may make such provisions as it may deem appropriate for
the withholding of any taxes or payment of any taxes which it
determines it may be required to withhold or pay in connection with
any Shares. The obligation of the Company to deliver certificates
under this Plan is conditioned upon the satisfaction of the
provisions set forth in the preceding sentence.
21. Repurchase of Shares. The Company shall not be required to repurchase from
any Participant any Shares which such Participant acquires under the Plan.
10
<PAGE> 1
EXHIBIT 4.2
PHILADELPHIA INSURANCE COMPANIES
STOCK PURCHASE PLAN FOR PREFERRED AGENTS
SUBSCRIPTION AGREEMENT FOR OFFERING PERIOD
COMMENCING AS OF __________ AND
ENDING ON ______________
1. I hereby elect to participate in the Philadelphia Insurance Companies
Stock Purchase Plan for Preferred Agents (the "Stock Purchase Plan") for
the purpose of purchasing shares of the common stock of Philadelphia
Consolidated Holding Corp., a Pennsylvania Corporation (the "Company"), no
par value ("Common Stock"), in accordance with this Subscription Agreement
and the Stock Purchase Plan.
2. By means of filing this subscription I am hereby electing, subject to any
applicable limitations under the Stock Purchase Plan, to purchase shares
of Common Stock on the terms set forth herein and in the Stock Purchase
Plan. I am hereby also authorizing, to the extent indicated herein,
regular deductions from my commissions in connection with my purchase
election under the terms of the Stock Purchase Plan. I understand that the
amount of my purchases may be limited as set forth in the Stock Purchase
Plan. I also (a) understand that in no event shall the Company be
obligated to accept this subscription agreement if my principal residence
is in a jurisdiction in which any action must be taken by the Company to
comply with securities laws of such jurisdiction, and (b) represent that
my principal residence is at the address shown on the signature page
hereof.
3. I understand that the regular deductions, if any, from my commissions made
pursuant to this subscription to purchase shares under the Stock Purchase
Plan shall be accumulated for the purpose of paying the purchase price of
the shares of Common Stock as determined in accordance with the Stock
Purchase Plan, and that the purchase shall take place automatically as of
the last day of the Offering Period to which this election applies.
4. I understand that whole shares of Common Stock will be purchased on my
behalf in accordance with this subscription agreement and the terms of the
Stock Purchase Plan using the accumulated amount of the authorized
deductions, if any, from my commissions along with the amount or amounts I
pay in cash in connection with this election prior to the last day of the
Offering Period to which this election applies; provided, however, that no
purchase shall be made on my behalf under the Stock Purchase Plan unless I
sign and deliver to the Company a stock power, endorsed in blank, that may
be used in the event the Company repurchases my shares under the terms of
the Stock Purchase Plan. I understand that my election to purchase shares
of Common Stock as set forth in this election is only applicable to the
Offering Period to which this election applies, and that any election to
participate in the Stock Purchase Plan with
<PAGE> 2
respect to a subsequent Offering Period must be made by filing a new
Subscription Agreement.
5. I understand that the shares of Common Stock purchased under the Stock
Purchase Plan, the associated stock power executed by me and this
Subscription Agreement will be kept in an investment account until the
expiration of two years (measured from the first day of the Offering
Period to which this Subscription Agreement relates (the "Restricted
Period")). I understand further than any certificates representing such
shares of Common Stock may be legended to indicate the restrictions
applicable during the Restricted Period.
6. I understand that, except as otherwise specifically provided in the Stock
Purchase Plan, I have no right to sell or otherwise dispose of the shares
of Common Stock purchased under the Stock Purchase Plan until after the
end of the Restricted Period, and that any attempt to sell or otherwise
dispose of such shares before the end of the Restricted Period may result
in a forfeiture of such shares upon my receipt of the lesser of the
original purchase price of such shares or their then Fair Market Value, as
defined in the Stock Purchase Plan. I also understand that, in the event
my status as a Preferred Agent for the Company terminates prior to the end
of the Restricted Period for any reason other than my death or Disability
(as defined in the Stock Purchase Plan), the Company has the right, but
not the obligation, to purchase my interest in the shares of Common Stock
purchased under this Subscription Agreement for the lesser of the purchase
price paid for such shares, or the then fair market value of such shares.
7. I have received a copy of the Company's most recent prospectus which
describes the Stock Purchase Plan and a copy of the Stock Purchase Plan
itself. I understand that my participation in the Stock Purchase Plan is
in all respects subject to the terms of the Stock Purchase Plan.
8. I understand that, under current federal tax laws, my participation in the
Stock Purchase Plan may result in my recognizing compensation income. I
also understand that the timing of this compensation income may be
affected by the filing of an election under Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"). In the event I decide to
file such an election, I will also provide notice of such election to the
Company as required under applicable federal tax rules. In the event there
are any federal, state or local tax withholding obligations of the Company
that arise out of my participation in the Stock Purchase Plan, I agree
that the obligation of the Company to permit my purchase of shares and/or
to transfer certificates for such shares to me is contingent on my taking
such actions or making amounts available as may be required to satisfy
such withholding obligations, as determined by the Company.
2
<PAGE> 3
9. I hereby agree to be bound by the terms of the Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.
10. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Stock
Purchase Plan:
Number of Shares or Dollar Amount of Purchase:
Authorized Withholding from Commissions (Describe below the amount or percentage
to be withheld from each commission payment made during the Offering Period):
I acknowledge and agree that my election to participate in the Stock Purchase
Plan for the Offering Period is dictated by the number of shares or the dollar
amount I specify in this Subscription Agreement. If the amount I authorize in
this Subscription Agreement to be withheld from my commissions is not sufficient
to pay the purchase price for the shares I have elected to purchase, I agree to
pay the difference in cash prior to the end of the Offering Period. I further
agree that if I authorize an amount to be withheld from my commissions, and make
no indication of a number of shares or a dollar amount of purchase, the amount
withheld from my commissions shall be accumulated and used to purchase shares as
of the last day of the Offering Period and the number of shares so purchased
shall be determined by the Purchase Price as determined under the provisions of
the Stock Purchase Plan.
I hereby grant an irrevocable power of attorney to the Company and to each of
its officers to act as my attorney-in-fact for the purpose of executing and
delivering on my behalf and in my name, place and stead, any and all stock
powers and other documents as may be necessary or appropriate for the repurchase
by the Company, at its election, of shares purchased under the Stock Purchase
Plan as permitted under the terms of the Stock Purchase Plan.
Preferred Agent's Signature:___________________________ Date:____________
Preferred Agent's Name: ___________________________
Principal Residence:
3
<PAGE> 1
EXHIBIT 5.1
[Wolf, Block, Schorr and Solis-Cohen LLP Letterhead]
May 7, 1999
Philadelphia Consolidated Holding Corp.
One Bala Plaza, Suite 100
Bala Cynwyd, Pennsylvania 19004
Re: Registration Statement on Form S-3
Gentlemen:
As counsel to Philadelphia Consolidated Holding Corp. (the "Company"), we
have assisted in the preparation of a Registration Statement on Form S-3
(together with all exhibits thereto and documents incorporated by reference
therein, the "Registration Statement") in the form proposed to be filed with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement relates to the issuance and sale from time to time, pursuant to Rule
415 of the General Rules and Regulations promulgated under the Securities Act of
1933, as amended (the "Securities Act"), of up to 200,000 shares of Common
Stock, no par value ("Common Shares"), of the Company.
This opinion is being delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K promulgated under the Securities Act.
In connection with the opinions expressed herein, we have examined the
originals or copies, certified or otherwise identified to our satisfaction, of
such records, instruments, documents and matters of law as we have deemed
necessary or appropriate for the purpose of rendering this opinion.
In our examination, we have assumed without independent verification (i)
the legal capacity of all natural persons, (ii) the genuineness of all
signatures, (iii) the authenticity of all documents submitted to us as
originals, (iv) the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies and the authenticity of the
originals of such documents, and (v) the power and authority of all persons
other than the Company signing such documents to execute, deliver and perform
such documents, and the valid authorization, execution and delivery of such
documents by such other persons. As to any facts material to the opinions
expressed herein which were not independently established or verified, we have
relied upon oral or written statements and representations of officers or other
representatives of the Company.
<PAGE> 2
May 7, 1999
Page 2
We also have assumed that (i) the Registration Statement, and any
amendments thereto (including post-effective amendments), including the form of
prospectus included therein (as supplemented, the "Prospectus"), will have
become effective under the Securities Act, and the Common Shares issued will be
issued and sold in compliance with applicable federal and state securities laws
and solely in the manner stated in the Registration Statement and the
Prospectus.
We are admitted to practice in the Commonwealth of Pennsylvania and we do
not express any opinion as to the laws of any other jurisdiction other than the
federal laws of the United States of America to the extent referred to
specifically herein. The Common Shares may be issued from time to time on a
delayed or continuous basis, and this opinion is limited to the laws, including
applicable rules and regulations, in effect on the date hereof, and to the facts
in existence on the date hereof. We assume no obligation to update such opinion.
Based upon and subject to the foregoing, and our examination of law and
such other matters as we have deemed relevant under the circumstances, it is our
opinion that the Common Shares, when duly issued and sold in the manner and for
the consideration contemplated by the Registration Statement and the Prospectus,
will be legally issued, fully paid and non-assessable.
We hereby consent to the reference to our firm in the Registration
Statement under the Prospectus caption "Legal Opinions" and to the filing of
this opinion with the Commission as an exhibit to the Registration Statement. In
giving this consent, we do not hereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules or regulations of the Commission.
Very truly yours,
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 of our
report dated February 5, 1999, on our audits of the financial statements and
financial statement schedules of Philadelphia Consolidated Holding Corp. and
Subsidiaries. We also consent to the references to our firm under the captions
"Experts."
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
May 7, 1999
