SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 22, 2008
Philadelphia Consolidated Holding Corp.
(Exact Name of Registrant as Specified in Charter)
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Pennsylvania
(State or Other Jurisdiction
of Incorporation)
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0-22280
(Commission
File Number)
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23-2202671
(IRS Employer
Identification No.)
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One Bala Plaza, Suite 100, Bala Cynwyd, Pennsylvania
(Address of Principal Executive Offices)
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19004
(Zip Code)
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Registrants telephone number, including area code:
610-617-7900
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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þ
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger
On July 22, 2008, Philadelphia Consolidated Holding Corp. (the Philadelphia Consolidated) entered
into an Agreement and Plan of Merger (the Merger Agreement) with Tokio Marine Holdings, Inc., a
Japanese corporation (Tokio Marine). The Merger Agreement provides that, as promptly as
reasonably practicable after signing the Merger Agreement, Tokio Marine will cause a corporation to
be formed in Pennsylvania as an indirect wholly-owned subsidiary of Tokio Marine (Subsidiary),
and Tokio Marine will cause Subsidiary to become a party to the Merger Agreement. The Merger
Agreement provides that at the Effective Time (as defined in the Merger Agreement), Subsidiary will
be merged with and into Philadelphia Consolidated (the Merger), with Philadelphia Consolidated
continuing as the surviving corporation and becoming an indirect wholly-owned subsidiary of Tokio
Marine.
Pursuant to the Merger Agreement, at the Effective Time and as a result of the Merger, each then
issued and outstanding share of Philadelphia Consolidated common stock (each a Share), other than
Shares owned by Tokio Marine, Subsidiary or any other direct or indirect wholly owned subsidiary of
Tokio Marine (which will be cancelled without payment of any consideration), will be converted into
the right to receive $61.50 in cash per Share and will be cancelled. All stock options, stock
appreciation rights, performance awards, restricted shares, and stock purchase plan awards
outstanding immediately prior to the Effective Time of the Merger (collectively, the Stock
Awards) will vest, and the holders will be paid $61.50 for each share represented by their rights
and awards, less any amounts owed by the holder to Philadelphia Consolidated (the exercise price or
reference price, as applicable), and any applicable withholding taxes.
Some employees, including Philadelphia Consolidateds named executive officers, James J. Maguire,
Chairman of the Board, James J. Maguire, Jr., President and Chief Executive Officer (Principal
Executive Officer), Craig P. Keller, Executive Vice President and Chief Financial Officer
(Principal Financial Officer), Sean S. Sweeney, Executive Vice President, and Christopher J.
Maguire, Executive Vice President and Chief Operating Officer (collectively, the NEOs), may also
receive a gross-up payment for excise taxes due as a result of excess parachute payments (as that
term is used for purposes of Section 280G of the Internal Revenue Code) arising from the
accelerated vesting of their Stock Awards, as provided for in their current employment agreements
or as modified by an addendum to their current employment agreements entered into in connection
with the Merger. See Item 5.02 of this report for a description of these addenda. The Chairman of
the Board will be entitled to a gross-up payment for any excise tax liability imposed on him by
reason of the Merger under his existing employment agreement.
Completion of the Merger is subject to various customary closing conditions, including, but not
limited to, (1) the requisite approval of the Merger Agreement by Philadelphia Consolidateds
shareholders at a special meeting of the shareholders to be called for that purpose, (2) requisite
approval of the Japan Financial Services Agency of an approval application and notification filing
by Tokio Marine and its affiliates, (3) the receipt of all required insurance regulatory approvals
and (4) the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
The Merger Agreement provides certain termination rights for both Philadelphia Consolidated and
Tokio Marine, and further provides that upon termination of the Merger Agreement under certain
circumstances, Philadelphia Consolidated will be obligated to pay Tokio Marine a termination fee of
$141 million and reimburse Tokio Marine for up to $15 million of its reasonable and documented out
of pocket expenses.
The Merger Agreement contains a no shop provision that, in general, restricts Philadelphia
Consolidateds ability to solicit third party acquisition proposals or provide information to or
engage in discussions or negotiations with third parties that have made or are reasonably likely to
make an acquisition proposal. The no shop provision is subject to a fiduciary out provision that
allows Philadelphia Consolidated, under certain circumstances and in compliance with certain
obligations, to provide information and participate in discussions and negotiations with respect to
unsolicited written third party acquisition proposals that would reasonably be expected to result
in a Superior Proposal (as defined in the Merger Agreement) and to terminate the Merger Agreement
and accept a Superior Proposal upon payment to Tokio Marine of the termination fee and
reimbursement of expenses discussed above.
The Merger Agreement contains customary representations, warranties and covenants. The assertions
embodied in those representations and warranties were made solely for purposes of the Merger
Agreement. No person should rely on the representations and warranties in the Merger Agreement as
characterizations of the actual state of facts or the condition of Philadelphia Consolidated or
Tokio Marine or any of their respective affiliates, because, among other reasons, they may be
modified by information provided in the Disclosure Letter referenced in the Merger Agreement, they
may be subject to a contractual standard of materiality different from that generally applicable to
Philadelphia Consolidateds filings with the U.S. Securities and Exchange Commission (the SEC),
or they may have been used for the purpose of allocating risk among the parties to the Merger
Agreement rather than establishing matters as facts.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified
in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit
2.1 hereto and is incorporated herein by reference.
Employment Agreement Addenda
On July 22, 2008, in connection with the execution of the Merger Agreement, each of the NEOs
entered into an addendum to his employment agreement providing for, among other things, his
continued employment after the Effective Time and a retention payment (other than the addendum with
respect to the Chairman of the Board, which does not provide for such retention payments) under
certain circumstances at various times after the Effective Time. See Item 5.02 of this report for
a description of these addenda.
Voting and Support Agreements
The Board of Directors of Philadelphia Consolidated has been advised that, on July 22, 2008, in
connection with the execution of the Merger Agreement and after the approval of the Merger
Agreement by the Board of Directors, certain shareholders of Philadelphia Consolidated, consisting
of each of the NEOs, Maguire family members Frances M. Maguire and Timothy J. Maguire, The Maguire
Foundation, and several trusts for the benefit of Maguire family members,
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each entered into and delivered to Tokio Marine a Voting and Support Agreement with Tokio Marine
(each, a Voting Agreement) substantially in the form filed herewith as Exhibit 99.1. Pursuant to
the Voting Agreements, each such shareholder has agreed, among other things, to vote (or cause to
be voted) such shareholders Shares in favor of the approval of the Merger Agreement and has agreed
not to dispose of such Shares while the Merger Agreement is in effect, other than as contemplated
by the Merger Agreement.
The foregoing description of the Voting Agreements does not purport to be complete and is qualified
in its entirety by reference to the full text of the form of Voting Agreement, which is filed as
Exhibit 99.1 hereto and is incorporated herein by reference.
Share Purchase Agreements
The Board of Directors of Philadelphia Consolidated has been further advised that each of the NEOs
has entered into an agreement with Tokio Marine to make certain open market purchases of Tokio
Marines common stock (or shares of common stock represented by American Depository Shares) after
the Effective Time.
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officer.
On July 22, 2008, in connection with the execution of the Merger Agreement, as described Item 1.01
of this Report, each of Philadelphia Consolidateds NEOs entered into an Addendum to Employment
Agreement (each, an Addendum and collectively, the Addenda), by and among Philadelphia
Consolidated, Tokio Marine, Maguire Insurance Agency, Inc. (a wholly-owned subsidiary of
Philadelphia Consolidated and the employer entity) (the employer or MIA) and such NEO.
Except as otherwise stated below, each NEOs Addendum provides that:
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It will be effective immediately as of the Effective Time (as defined in the Merger
Agreement), except for certain covenants that are effective immediately upon signing the
Addendum. The covenants that are effective immediately include, in general, requirements
that the NEO not terminate his employment, including for Good Reason as defined in his
employment agreement as in effect immediately prior to entering into the Addendum (Unamended
Employment Agreement) on or prior to the Effective Time and that Philadelphia Consolidated
not take any action that would constitute Good Reason for the NEO to terminate his
employment, and not otherwise terminate the NEOs employment for any reason, on or prior to
the Effective Time, other than for unlawful activity related to employment, demonstrable
fraud or material malfeasance against Philadelphia Consolidated.
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After the Merger, each NEO will continue his employment under the terms of his employment
agreement as amended by his Addendum. James J. Maguire will continue his employment as
Chairman of the Board of Philadelphia Consolidated and will also serve as a Senior
International Advisor to Philadelphia Consolidated, MIA and Tokio Marine.
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The term of James J. Maguires employment agreement will be extended under his Addendum to
the second anniversary of the Effective Time, and the employer may, at its option, elect to
extend the term for an additional year thereafter. The terms of the other NEOs employment
agreements will be extended under their Addenda and will expire on the fifth anniversary of
the Effective Time.
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The NEOs could be entitled to a gross-up payment for excise taxes imposed on them as a
result of excess parachute payments under Section 280G of the Internal Revenue Code, unless
the liability for the excise tax can be eliminated by a reduction in the payments to the NEOs
generally in an amount not in excess of 10% of the amount of the parachute payments that
would be made to the NEOs (except for the Chairman of the Board,
whose payment is not subject to such
potential 10% cut-back under the terms of his gross-up agreement in his Unamended Employment
Agreement, as described under Item 1.01 of this report). Of the NEOs other than the Chairman
of the Board, only Christopher J. Maguire is expected to receive a gross-up payment. None of
the NEOs is expected to be subject to a reduction in payments to avoid excise taxes on excess
parachute payments.
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For each NEO other than the Chairman of the Board (who will not receive a retention
bonus), if the NEO remains employed through the first three anniversaries of the Effective
Time, the employer will pay to him a retention bonus, in the aggregate amount of $1,800,000
in the case of James J. Maguire, Jr., and $1,500,000 in the case of each of Messrs. Keller,
Sweeney and Christopher J. Maguire. The retention bonus will be paid in equal installments
of one-third of such aggregate retention bonus, on each of such anniversaries. If, during
the three-year period, the NEOs employment is terminated by Philadelphia Consolidated or MIA
for Cause (as defined in the Unamended Employment Agreement) or by the NEO, or as a result of
the NEOs death or disability, any unearned installments of the retention bonus will not be
paid. If, during such period, MIA or Philadelphia Consolidated terminates the NEO without
Cause, or in the event of any reduction in or failure to timely pay the NEOs base salary,
the assignment to the NEO of duties that are not of a senior executive level or not
consistent with his experience and training, or failure to pay any installment of the
retention bonus when due, then any unpaid amount of the full retention bonus will be
immediately due and payable in a lump sum.
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As of the Effective Time, the employer will provide each NEO, other than the Chairman of
the Board, with compensation opportunities comparable in the aggregate to those provided to
the NEO immediately prior to the Merger.
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As of the Effective Time, the base salary of the Chairman of the Board will increase from
$1,000,000 per year to $2,000,000 per year, and the employer will provide him with
compensation opportunities comparable in the aggregate to those provided to him immediately
prior to the Merger, taking into account the increase in base salary described above, on a
risk-adjusted basis.
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Each NEOs Addendum also amends and broadens the scope of the restrictive covenants and
confidentiality provisions of his Unamended Employment Agreement.
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James J. Maguires Addendum provides that he will be subject to the terms of a
non-competition provision during his employment and for two years thereafter.
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The foregoing description of the Addenda does not purport to be complete and is qualified
in its entirety by reference to the full text of each of the Addenda, which are filed as Exhibits
10.1, 10.2, 10.3, 10.4 and 10.5 hereto and are incorporated herein by reference.
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On July 23, 2008, Philadelphia Consolidated and Tokio Marine issued a joint press release
announcing the execution of the Merger Agreement and related agreements. A copy of that press
release is furnished as Exhibit 99.2.
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Item 9.01
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Financial Statements and Exhibits.
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(d) Exhibits
The following exhibits are filed with this Current Report on Form 8-K:
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Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger among Philadelphia Consolidated
Holding Corp. and Tokio Marine Holdings, Inc., dated as of
July 22, 2008 (exhibits and schedules omitted pursuant to
Regulation S-K Item 601(b)(2)).
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10.1*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James
J. Maguire.
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10.2*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James
J. Maguire, Jr.
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10.3*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Craig
P. Keller.
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10.4*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Sean
S. Sweeney.
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10.5*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and
Christopher J. Maguire.
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99.1
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Form of Voting and Support Agreement.
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99.2
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Joint Press Release of Tokio Marine Holdings, Inc. and
Philadelphia Consolidated Holding Corp., dated July 23, 2008.
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Management contract or compensatory plan or arrangement.
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Forward-Looking Statements
Statements included in this report that are not historical facts are forward-looking statements
within the meaning of the federal securities laws, including the Private Securities Litigation
Reform Act of 1995. These forward-looking statements include statements regarding
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expectations as to the completion of the Merger and the other transactions contemplated by the
Merger Agreement. Forward-looking statements are based on our current expectations and beliefs
concerning future events and involve risks, uncertainties and assumptions. The factors that could
cause actual results to differ materially include, in addition to Risk Factors referred to in
filings made with the Securities and Exchange Commission (SEC), the following: operating costs,
customer loss and business disruption (including, without limitation, difficulties in maintaining
relationships with employees, customers or suppliers) may be greater than expected following the
announcement of the transaction; the retention of certain key employees at Philadelphia
Consolidated; the conditions to the completion of the transaction may not be satisfied, or the
regulatory approvals required for the transaction may not be obtained on the terms expected or on
the anticipated schedule; the parties may not be able to meet expectations regarding the timing,
completion and accounting and tax treatments of the merger. Philadelphia Consolidated assumes no
obligation to, and expressly disclaims any obligation, to update the information in this report,
except as otherwise required by law. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date hereof.
Additional Information and Where to Find It
This communication may be deemed solicitation material in respect of the proposed acquisition of
Philadelphia Consolidated by Tokio Marine. In connection with the proposed acquisition,
Philadelphia Consolidated intends to file relevant materials with the SEC, including Philadelphia
Consolidateds proxy statement on Schedule 14A.
WE URGE SHAREHOLDERS OF PHILADELPHIA CONSOLIDATED
TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, INCLUDING
PHILADELPHIA CONSOLIDATEDS PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION
. Investors and security holders will be able to obtain copies of the
proxy statement (when available) as well as other filed documents containing information about
Philadelphia Consolidated free of charge at the SECs web site, http://www.sec.gov, and
shareholders of Philadelphia Consolidated will receive information at an appropriate time on how to
obtain transaction-related documents for free from Philadelphia Consolidated. Such documents are
not currently available. Free copies of Philadelphia Consolidateds SEC filings are also available
from Philadelphia Consolidated Holding Corp., One Bala Plaza, Suite 100, Bala Cynwyd, PA 19004,
Attention: Joseph Barnholt, Assistant Vice President, Finance and Tax Reporting, Investor
Relations.
Participants in the Solicitation
Philadelphia Consolidated, and its directors and executive officers, and Tokio Marine, and its
directors and executive officers, may be deemed to be participants in the solicitation of proxies
from the holders of Philadelphia Consolidateds common stock in respect of the proposed
transaction. Information about Philadelphia Consolidateds directors and executive officers is set
forth in the proxy statement for Philadelphia Consolidateds 2008 Annual Meeting of Shareholders,
which was filed with the SEC on April 15, 2008. Certain information about the directors and
executive officers of Tokio Marine will be set forth in its Schedule 13D to be filed with the SEC
with respect to Philadelphia Consolidateds shares pursuant to the Exchange Act. Shareholders and
investors may obtain additional information regarding the interest of such participants by reading
the proxy statement regarding the acquisition when it becomes available.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: July 23, 2008
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Philadelphia Consolidated Holding Corp.
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By:
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/s/ Craig P. Keller
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Name:
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Craig P. Keller
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Title:
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Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
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EXHIBIT INDEX
Each of the following exhibits is being filed electronically with this Current Report on Form
8-K:
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Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger among Philadelphia Consolidated
Holding Corp. and Tokio Marine Holdings, Inc., dated as of
July 22, 2008 (exhibits and schedules omitted pursuant to
Regulation S-K Item 601(b)(2)).
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10.1*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James
J. Maguire.
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10.2*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James
J. Maguire, Jr.
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10.3*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Craig
P. Keller.
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10.4*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Sean
S. Sweeney.
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10.5*
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Addendum to Employment Agreement, dated as of July 23, 2008,
by and among Philadelphia Consolidated Holding Corp., Maguire
Insurance Agency, Inc., Tokio Marine Holdings, Inc., and
Christopher J. Maguire.
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99.1
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Form of Voting and Support Agreement.
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99.2
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Joint Press Release of Tokio Marine Holdings, Inc. and
Philadelphia Consolidated Holding Corp., dated July 23, 2008.
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Management contract or compensatory plan or arrangement.
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