UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by
the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Philadelphia Consolidated Holding Corp.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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previous filing by registration statement number, or the Form or Schedule and the date of its
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PHILADELPHIA CONSOLIDATED HOLDING CORP.
One Bala Plaza, Suite 100
Bala Cynwyd, Pennsylvania 19004
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To The Holders of Common Stock:
The Annual Meeting of Shareholders of Philadelphia Consolidated Holding Corp. (the Company)
will be held on May 16, 2008 at 10:00 A.M. at the Hilton Philadelphia City Avenue, 4200 City
Avenue, Philadelphia Pennsylvania for the following purposes:
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To elect eleven Directors;
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To vote on an amendment to the Companys Articles of Incorporation to adopt a
majority voting standard for Directors in uncontested elections and eliminate
cumulative voting for Directors;
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To vote on an amendment to the Companys Articles of Incorporation to increase
the number of authorized shares of common stock from 100,000,000 to 125,000,000;
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To vote on the approval of the appointment of the Companys independent
registered public accounting firm for the year 2008; and
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To consider such other business as may properly come before the meeting.
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The Board of Directors recommends that you vote FOR the election of each nominee for director, FOR
the two amendments to the Companys Articles of Incorporation referenced above and FOR the
ratification and appointment of the independent registered public accounting firm for the 2008
fiscal year.
Important notice regarding the availability of Proxy Materials for the Annual Meeting of
Shareholders to be held on May 16, 2008.
The Proxy Statement and the 2007 Annual Report to Shareholders are available at:
http://ww3.ics.adp.com/streetlink/PHLY
Once you have reviewed the proxy materials, you may vote your proxy over the Internet at (have
your Proxy Card available when you access the web page):
www.voteproxy.com
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Directions to the site of the Meeting which you can use if you wish to vote in person can be found
on the last page of the Proxy Statement.
Shareholders of record at the close of business on March 7, 2008 are entitled to notice of, and to
vote at, the Meeting.
By Order of the Board of Directors
Craig P. Keller
Secretary
April 15, 2008
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PHILADELPHIA CONSOLIDATED HOLDING CORP.
One Bala Plaza, Suite 100
Bala Cynwyd, Pennsylvania 19004
The accompanying proxy is solicited by the Board of Directors of Philadelphia Consolidated
Holding Corp. (the Company), for use at the Annual Meeting of Shareholders to be held at the
Hilton Philadelphia City Avenue, 4200 City Avenue, Philadelphia, Pennsylvania on May 16, 2008 at
10:00 A.M. This Proxy Statement, the foregoing Notice and the enclosed proxy are being sent to
shareholders of the Company on or about April 15, 2008.
Any proxy may be revoked at any time before it is voted by written notice mailed or delivered
to the Secretary of the Company, by delivering a proxy bearing a later date or by attending the
meeting and voting in person. If your proxy card is signed and returned without specifying a vote
or an abstention on any proposal, it will be voted in accordance with the Board of Directors
recommendations on each proposal.
The Board of Directors knows of no other matters which are likely to be brought before the
meeting other than those specified in the notice thereof. If any other matters properly come
before the meeting however, the persons named in the enclosed proxy, or their duly constituted
substitutes acting at the meeting, will be authorized to vote or otherwise act thereon in
accordance with their judgment on such matters. You have four voting options:
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Internet: You can vote over the Internet at the web address shown on your
proxy card. Internet voting is available 24 hours a day. If you have access to the
Internet, we encourage you to vote this way. If you vote over the Internet, do not
return your proxy card.
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Telephone: You can vote by calling the toll-free telephone number on your
proxy card. Telephone voting is available 24 hours a day. Easy-to-follow voice
prompts allow you to vote your shares and confirm that your instructions have been
properly recorded. If you vote over the telephone, do not return your proxy card.
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Proxy Card: You can vote by signing, dating and mailing your proxy card in the
postage-paid envelope provided.
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Vote in Person: You can attend the Annual Meeting and vote at the meeting.
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If a proxy is properly submitted by any of these methods, and is not subsequently revoked, shares
will be voted in accordance with the instructions.
In the absence of instructions, executed proxies will be voted
FOR
the eleven nominees for
the Board of Directors;
FOR
the approval of an amendment to the Companys Articles of
Incorporation to adopt a majority voting standard for Directors in uncontested elections and to
eliminate cumulative voting;
FOR
the approval of an amendment to the Companys Articles of
Incorporation to increase the number of shares of authorized common stock from 100,000,000 to
125,000,000; and
FOR
the approval of the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for the year 2008.
Shareholders of record at the close of business on March 7, 2008 are entitled to vote at the
meeting. On March 7, 2008, the Company had outstanding 72,024,555 shares of common stock, no par
value. Shareholders are currently entitled to vote cumulatively for the election of directors and
to cast one vote per share on all other matters. For more information on cumulative voting, see
the description on page 2 under Proposal 1 Election of Directors. As to each proposal, the
presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes
that all shareholders are entitled to cast on the particular matter shall constitute a quorum for
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the purpose of considering that matter. Abstentions and broker non-votes will be counted only
for the purpose of determining whether a quorum is present.
Directors will be elected by a plurality of the votes cast. As to the other proposals, the
affirmative vote of a majority of the votes cast at the Annual Meeting by shareholders entitled to
vote shall constitute approval by the shareholders.
The Company has retained American Stock Transfer & Trust Company to solicit proxies by mail,
courier, telephone, or facsimile and to request brokerage houses to forward soliciting material to
beneficial owners. For these services the Company will pay a fee of approximately $112,500. The
Company will pay all costs of solicitation.
PROPOSAL 1 ELECTION OF DIRECTORS
The Board of Directors has nominated for election the eleven persons named below, to hold
office until the next annual meeting of shareholders and until their successors have been duly
elected and qualified. The Company believes that each nominee named below will be able to serve.
However, should any such nominee be unable to serve as a director, the proxies will be voted for
the election of such substitute nominee as the Board of Directors may propose.
Cumulative voting is currently permitted in the election of directors, so each shareholders
total number of votes equals the number of the shareholders shares of common stock multiplied by
eleven, which is the number of directors to be elected. Each shareholder may allocate these votes
equally among the nominees or otherwise as the shareholder specifies on the enclosed proxy card
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If you wish to exercise cumulative voting, you must provide us with written instructions on the
enclosed proxy card; you may not exercise cumulative voting by telephone or through the Internet.
When you sign the proxy card, you are giving the proxy holders named in the proxy card discretion
to cumulate votes for directors, unless you give instructions to the contrary. Unless a
shareholder chooses a different allocation and so marks on the shareholders proxy card, it is
anticipated that the proxy holders will allocate cumulative votes equally among all nominees for
whom authority to vote has not been withheld. However, the proxy holders will have the discretion
to allocate cumulative votes differently among those for whom authority to vote has not been
withheld, so as to elect all or as many nominees of the Board as possible, depending on the
circumstances at the Annual Meeting.
The Board of Directors is submitting for shareholder approval in this Proxy Statement a
proposal to approve an amendment to the Companys Articles of Incorporation to (1) adopt a majority
voting standard in uncontested elections of directors and (2) eliminate cumulative voting for the
election of directors. The proposal will not affect cumulative voting in this years election of
directors, but if the proposal is approved, it would eliminate cumulative voting in the election of
directors in future years.
Nominees for Director
The names and ages of the nominees, their principal occupations, length of service as
Directors of the Company, and certain other biographical information are set forth below:
JAMES J. MAGUIRE
, age 74, has served as Chairman of the Board of Directors of the Company
since its formation in 1981 and its subsidiaries since their formation. He previously served as
Chief Executive Officer of the Company and subsidiaries since their formation until October 2002.
Mr. Maguire also previously served as President of the Company until October 1999. He has worked
in the insurance industry for over 40 years with experience in insurance accounting, underwriting,
sales and marketing, claims management and administration.
JAMES J. MAGUIRE, JR.,
age 47, joined the Company in 1996 and has served on the Board of
Directors since 1997. He has served as Chief Executive Officer since October 2002 and as President
since October 1999. Prior to his appointment as Chief Executive Officer, Mr. Maguire, Jr. served
as Executive Vice President and Chief Operating Officer, and Vice President of Underwriting for the
Company. Mr. Maguire, Jr. serves as a trustee of
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Saint Josephs University. Mr. Maguire, Jr. is the son of Mr. James J. Maguire, the brother of
Christopher J. Maguire and a first cousin of Mr. Sean S. Sweeney.
SEAN S. SWEENEY,
age 50, joined the Company in 1979 and has served on the Board of Directors
of the Company since 1996. He has served as Executive Vice President, Director of Marketing since
October 1998. He served as Senior Vice President, Director of Marketing for the Company from 1987
until his appointment as Executive Vice President. Mr. Sweeney previously was employed by the
Company as a Regional Vice President, Regional Sales Manager, and Sales Representative. His
current responsibilities include management of all marketing and sales for the Company. Mr.
Sweeney is the nephew of Mr. James J. Maguire, and a first cousin of Messrs. James J. Maguire, Jr.
and Christopher J. Maguire.
AMINTA HAWKINS BREAUX, Ph.D.
, age 49, has served on the Board of Directors of the Company
since October 2005. Dr. Breaux has held various administrative positions in higher education for
over twenty years. She is currently Vice President for Student Affairs at Millersville University.
Prior to joining Millersville University, Dr. Breaux served as Dean of Students at University of
the Sciences in Philadelphia from January 2000 to March 2008 and was Assistant Provost at Drexel
University in Philadelphia, Pa. She also is a member of the Board of Directors of Childrens
Hospital of Philadelphia, and a Director of Philadelphia Academies, Inc.
MICHAEL J. CASCIO
, age 52, has served on the Board of Directors of the Company since February
2003. Mr. Cascio has served as a consultant to Kingsway Financial, an insurance business, since
June 2003. Previously, Mr. Cascio served as President and CEO of Overseas Partners US Reinsurance
Company from 2001 until November 15, 2003. Prior to his appointment as President and CEO of
Overseas Partners US Reinsurance Company, Mr. Cascio served as Executive Vice President and Chief
Underwriting Officer for Overseas Partners Ltd. from 2000 to 2001, Executive Vice President, Chief
Underwriting Officer for Greenwich Re from 1998 to 1999, and Senior Vice President, Chief
Underwriting Officer for Stockton Re from 1994 to 1998. Mr. Cascio is a Fellow of the Casualty
Actuarial Society and a Member of the American Academy of Actuaries and has over 25 years of
experience in the insurance industry, with concentration in the actuarial, underwriting and
reinsurance areas.
ELIZABETH H. GEMMILL
, age 62, has served on the Board of Directors of the Company since
October 2000. Ms. Gemmill is an attorney and has served as Chairperson of the Board of Philadelphia University since
June 1998 and President of the Warwick Foundation, a private family foundation that provides grants
to not-for-profit organizations, since January 1999. Ms. Gemmill previously served as Vice
President and Secretary of the Tasty Baking Company from 1988 to 1999. Ms. Gemmill serves as a
director of Universal Display Corporation, a technology research and development company, and a
member of the Board of Trustees of Beneficial Mutual Bancorp, Inc.
PAUL R. HERTEL, JR.
, age 80, joined the Board of Directors of the Company in October 2007.
Mr. Hertel previously served as a member of the Board of Directors from July 1987 through February
2004. Mr. Hertel had been an insurance broker with Paul Hertel & Company, Inc. for over 40 years
and served as Chairman of the Executive Committee of that company until his retirement in 2001.
MICHAEL J. MORRIS
, age 73, has served on the Board of Directors of the Company since April
2006. Mr. Morris previously served as a member of the Board of Directors from October 1993 to
February 7, 2006. Mr. Morris served as Chairperson and Chief Executive Officer of Transport
International Pool Corporation, a multinational corporation that principally provides transport
services, from 1975 to his retirement in 1992. Mr. Morris is a member of the Board of Trustees and
a member of the Audit Committee of Beneficial Mutual Bancorp, Inc. and a director and the
Chairperson of the Audit Committee of Met-Pro Corp., a pollution control and fluid handling
company.
SHAUN F. OMALLEY
, age 72, has served on the Board of Directors of the Company since April
2006. Mr. OMalley has served as lead director of the Board of Federal Home Loan Mortgage Company
(Freddie Mac) since 2003, and has been a director of Freddie Mac since 2001. Mr. OMalley is
also a member of Freddie Macs audit committee. Mr. OMalley retired from Price Waterhouse LLP in
1995, where he was Chairman and Senior Partner from 1988 to 1995. He also was President of the
Financial Accounting Foundation from 1990 to 1992. Mr. OMalley serves on the Board of Directors
of Polymedix, Inc., an emerging biotechnology company, and the
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Finance Company of Pennsylvania, a registered management investment company and is a member of
the Audit Committee for each of these companies.
DONALD A. PIZER
, age 63, has served on the Board of Directors of the Company since March 2004.
Mr. Pizer served as an audit partner of Ernst & Young LLP from 1982 until his retirement in June
2003. Prior to his retirement, Mr. Pizer was the Associate National Director of Financial Services
Industry Services for Ernst & Young LLP and worked principally in their assurance and advisory
business services.
RONALD R. ROCK
, age 48, has served on the Board of Directors of the Company since February
2006. Mr. Rock is founder and has been CEO of Knowledge Rules, Inc., a provider of Business
Process Management initiatives to banking and insurance enterprises, since March 2003. Previously,
Mr. Rock was Senior Vice President of Business Development and Marketing at Pegasystems, a business
process and customer relationship management software development company.
Director Independence
The standards relied upon by the Board of Directors in affirmatively determining whether a
director is independent, in compliance with the rules of The Nasdaq Stock Market (Nasdaq), are
comprised, in part, of those objective standards set forth in the Nasdaq Marketplace Rules, which
generally provide that no director or nominee for director qualifies as independent unless the
Board of Directors affirmatively determines that such person has no relationship with the Company
which, in the opinion of the Board, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. Specifically, the following persons may not be
considered independent: (i) a director or nominee for director who is, or at any time during the
past three years was, employed by the Company or by any parent or subsidiary of the Company; (ii) a
director or nominee for director who accepted, or has a family member who accepted, any
compensation from the Company or any parent or subsidiary of the Company in excess of $100,000
during any period of twelve consecutive months within the three years preceding the determination
of independence, other than (1) compensation for Board or Board committee service, (2) compensation
paid to a family member who is an employee (other than an executive officer) of the Company or a
parent or subsidiary of the Company, or (3) benefits under a tax-qualified retirement plan, or
non-discretionary compensation; (iii) a director or nominee for director who is a family member of
an individual who is, or at any time during the past three years was, employed by the Company or by
any parent or subsidiary of the Company as an executive officer; (iv) a director or nominee for
director who is, or has a family member who is, a partner in, or a controlling shareholder or an
executive officer of, any organization to which the Company made, or from which the Company
received, payments for property or services in the current or any of the past three fiscal years
that exceed 5% of the recipients consolidated gross revenues for that year, or $200,000, whichever
is more, other than (1) payments arising solely from investments in the Companys securities or (2)
payments under non-discretionary charitable contribution matching programs; (v) a director or
nominee for director who is, or has a family member who is, employed as an executive officer of
another entity where at any time during the past three years any of the executive officers of the
Company serve on the compensation committee of such other entity; or (vi) a director or nominee for
director who is, or has a family member who is, a current partner of the Company s independent
registered public accounting firm, or was a partner or employee of the Company s independent
registered public accounting firm, who worked on the Company s audit at any time during the past
three years.
The Board of Directors, in applying the above-referenced standards, has affirmatively
determined that each of the following individuals is an independent director of the Company: Ms.
Breaux, Mr. Cascio, Ms. Gemmill, Mr. Hertel, Jr., Mr. Morris, Mr. OMalley, Mr. Pizer, and Mr.
Rock. As part of the Boards process in making such determination, each such director provided
confirmation that (a) all of the above-cited objective criteria for independence are satisfied and
(b) each such director has no other relationship with the Company which would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director.
Independent Directors
The Companys Board of Directors has determined that a majority of its members meet Nasdaqs
standards for independence. See Director Independence above. The Companys independent
directors met 3 times in executive session in 2007 and it is anticipated that they will meet in
executive session at least 2 times during 2008.
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Audit Committee
The Companys Board of Directors has determined that all members of the Audit Committee meet
the standards of independence required of audit committee members by Nasdaq and applicable United
States Securities and Exchange Commission (SEC or the Commission) rules. See Director
Independence above.
The Board of Directors has determined that: (i) none of the members of the Audit Committee has
participated in the preparation of the financial statements of the Company or any current
subsidiary of the Company at any time during the past three years, (ii) all of the members of the
Audit Committee are able to read and understand fundamental financial statements, including a
companys balance sheet, statement of operations and comprehensive income, and cash flow statement,
and (iii) Donald A. Pizer, who previously served as an audit partner of Ernst & Young LLP from 1982
until his retirement in June 2003, is an Audit Committee financial expert. The Board made a
qualitative assessment of Mr. Pizers level of knowledge and experience based on a number of
factors, including his formal education, past employment experience in accounting and professional
certification in accounting.
The Audit Committee operates under a formal written charter adopted by the Board of Directors
that governs its duties and conduct. The charter is reviewed annually for changes, as appropriate.
The charter is available on the Companys web site,
www.phly.com
under Investor Center: Corporate
Governance: Committee Composition and Charters: Audit Committee: Audit Committee Charter, and
copies can be obtained free of charge by contacting the Company at the address appearing on the
first page of this Proxy Statement to the attention of Secretary.
PricewaterhouseCoopers LLP, the Companys independent registered public accounting firm,
reports directly to the Audit Committee. The Audit Committee meets with management and the
Companys independent registered public accounting firm prior to the filing of officers
certifications with the SEC to receive information concerning, among other things, any significant
deficiencies in the design or operation of internal control over financial reporting. The Audit
Committee has also established procedures to enable confidential and anonymous reporting to the
Audit Committee of concerns regarding accounting or auditing matters. The Company conducts an
appropriate review of all related party transactions required to be disclosed under Section 404 of
Regulation S-K for potential conflict of interest situations on an ongoing basis, and all such
transactions must be approved by the Audit Committee.
Compensation Committee
All members of the Compensation Committee have been determined to meet Nasdaqs standards for
independence. See Director Independence above. Further, each member is a non-employee
director, as defined under Rule 16b-3(b)(3) of the Securities Exchange Act of 1934, and an
outside director as defined in Treasury Regulations Section 1.162-27, promulgated under the
Internal Revenue Code of 1986, as amended. The Compensation Committee has a charter, which may be
found at www.phly.com under Investor Center: Corporate Governance: Committee Composition and
Charters: Compensation Committee: Compensation Committee Charter. Copies can be obtained free of
charge by contacting the Company at the address appearing on the first page of this Proxy Statement
to the attention of Secretary.
See the section below captioned Compensation Discussion and Analysis for a discussion of
certain processes and procedures for the consideration and determination of compensation of the
Companys executives and directors.
The Compensation Committee has delegated authority to the Companys Chief Executive Officer to
determine bonuses for the officer levels below Executive Vice President not to exceed a total bonus
amount for these officers established by the Compensation Committee.
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Governance and Nominating Committee
All members of the Governance and Nominating Committee have been determined to meet Nasdaqs
standards for independence. See Director Independence above. The Governance and Nominating
Committee operates under a formal written charter that governs its duties and standards of
performance. The charter is available on the Companys web site,
www.phly.com
under Investor
Center: Corporate Governance: Committee Composition and Directors: Governance and Nominating
Committee: Governance and Nominating Committee Charter, and copies can be obtained free of charge
by contacting the Company at the address appearing on the first page of this Proxy Statement to the
attention of Secretary.
As part of its duties, the Committee develops and recommends to the Board corporate governance
principles. The Committee also identifies and recommends individuals for Board membership. To be
considered for membership on the Board a candidate should meet the following criteria, at a
minimum: a solid education, extensive business, professional or academic experience, and the
requisite reputation, character, skills and judgment, which, in the Committees view, have prepared
him or her for dealing with the multifaceted financial, business and other issues that confront a
Board of Directors of a corporation with the size, complexity, reputation and success of the
Company.
In connection with each of the Companys annual meetings of shareholders, the Committee will
consider candidates for director recommended by any shareholder who (a) has been a continuous
record owner of at least 2% of the Companys common stock for at least one year prior to submission
and (b) provides a written statement that the holder intends to continue ownership of the shares
through the shareholders meeting. Such recommendation must be made by written notice addressed to
the Secretary of the Company given no more than 120 days and no less than 90 days prior to the
anniversary date of the last annual meeting of shareholders. Consequently, any such recommendation
for consideration by the Committee with respect to the Companys 2009 annual meeting of
shareholders must be made no earlier than January 15, 2009 or later than February 14, 2009.
Once the Governance and Nominating Committee has identified prospective nominees, background
information will be elicited about the candidates, following which they will be interviewed and
evaluated by the Committee, which will then report to the Board of Directors. No distinctions will
be made as between internally-recommended candidates and those recommended by shareholders.
All the director nominees named in this Proxy Statement met the Boards criteria for
membership and were recommended by the Governance and Nominating Committee for election by
shareholders at this Annual Meeting.
Code of Conduct
The Company has adopted a Code of Conduct that includes provisions ranging from restrictions
on gifts to conflicts of interest, portions of which Code are intended to meet the definition of a
code of ethics under applicable SEC rules. The Code is applicable to all directors, officers and
employees, including the principal executive officer, principal financial officer, controller and
persons performing similar functions. The Code is available on the Companys web site,
www.phly.com
under Investor Center: Corporate Governance: Code of Conduct, and copies can be
obtained free of charge by contacting the Company at the address appearing on the first page of
this Proxy Statement to the attention of Secretary.
Communication With the Board of Directors
A shareholder who wishes to communicate with the Board of Directors, or specific individual
directors, may do so by sending such communication in writing addressed to such directors or
director at the address appearing on the first page of this Proxy Statement. All communications
directed to members of the Board will be relayed to the intended Board member(s).
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Additional Information Regarding the Board
Meetings.
During 2007, the Board of Directors met 4 times. Each director attended all of the
meetings of the Board of Directors and any committee on which such director served.
Board Committees.
The Audit Committee met 8 times in 2007. The Audit Committee consists of
Mr. Pizer (Chairperson), Mr. Morris and Mr. OMalley. Among other duties, the Audit Committee
recommends the selection of the Companys independent registered public accounting firm; reviews
and recommends action by the Board regarding the Companys quarterly and annual reports filed with
the SEC; discusses the Companys audited financial statements with management and the independent
registered public accounting firm; and reviews the scope and results of the independent audit and
any internal audit.
The Compensation Committee met 9 times in 2007. The Compensation Committee consists of Mr.
Cascio (Chairperson), Ms. Breaux, Ms. Gemmill and Mr. Hertel, Jr. Among other duties, the
Compensation Committee evaluates the performance of the Companys principal officers, determines,
and in certain cases recommends to the Board of Directors for approval, compensation of principal
officers, and administers the Companys various compensation plans.
The Investment Committee met 4 times in 2007 and is responsible for monitoring investment
policy and activities of the Company. The Investment Committee consists of Ms. Gemmill
(Chairperson), Messrs. Hertel, Jr., Maguire, Maguire, Jr., Rock and Sweeney.
The Governance and Nominating Committee met 2 times in 2007 and consists of Mr. Morris
(Chairperson), Mr. OMalley, and Mr. Rock. Among other duties, the Governance and Nominating
Committee is responsible for recommending to the Board of Directors candidates for nomination to
the Board.
The Company does not have a policy with regard to Board members attendance at annual
shareholder meetings. 9 of the Companys 10 directors who then comprised the Board attended the
2007 Annual Meeting of Shareholders.
The information in the section of this Proxy Statement captioned Related Party Transactions
is incorporated in this section by reference.
Related Party Transactions
During 2007, Messrs. James J. Maguire, James J. Maguire, Jr., Sean S. Sweeney and Christopher
J. Maguire purchased 100,000, 100,000, 1,546 and 35,000 shares of the Companys common stock,
respectively, under the terms of the Companys Non-Qualified Employee Stock Purchase Plan for a
purchase price of $3,231,000, $3,231,000, $49,951 and $1,130,850, respectively. Under the terms of
the Plan, which is open to all salaried employees of the Company, the purchase price of the stock
was the lesser of 85% of the fair market value of the shares on the first business day of the 30
day offering period during which the stock could be purchased under the Plan or the date the shares
were purchased. The purchase price of the shares represented a discount of $1,247,000, $1,247,000,
$19,279 and $436,450 from the market value at the time of purchase by James J. Maguire, James J.
Maguire, Jr., Sean S. Sweeney and Christopher J. Maguire, respectively. Also during 2007, Mr.
Sweeney purchased 566 shares of the Companys common stock under the terms of the Companys
Qualified Employee Stock Purchase Plan, which is open to all salaried employees of the Company, for
a purchase price of $21,225. The purchase price of the shares represented a discount of $3,747
from the market value at the time of purchase by Mr. Sweeney.
Mr. Timothy J. Maguire, the son of Mr. James J. Maguire and the brother of Messrs. James J.
Maguire, Jr. and Christopher J. Maguire, is an employee of the Company. During 2007, Mr. Timothy
J. Maguire purchased 100,000 shares of the Companys common stock under the terms of the Companys
Non-Qualified Employee Stock Purchase Plan for a purchase price of $3,231,000. The purchase price
of the shares represented a discount of $1,247,000 from the market value at the time of purchase by
Mr. Timothy J. Maguire. Mr. Timothy J. Maguire has incurred indebtedness to the Company in
connection with this purchase and prior purchases of shares of the Companys common stock under the
Companys Non-Qualified Employee Stock Purchase Plan, as permitted by the terms of such Plan. Such
indebtedness is payable in equal annual installments over a nine year period. The largest
9
aggregate principal amount of such indebtedness during the period January 1, 2007 through March 14,
2008 was $7,951,163, and as of March 14, 2008, the aggregate principal amount of such indebtedness
outstanding was $6,825,095. $2,192,124 in principal and $23,767 in interest payments,
respectively, were made during such period on the indebtedness. The indebtedness is interest free,
except after failure to timely pay principal or interest due on the indebtedness. Interest accrues
on any payment not paid within fifteen days of the date due at three percentage points over the
prime rate as quoted in The Wall Street Journal. During 2007 Mr. Timothy J. Maguire earned
$471,000 in salary and bonus. He also received fringe benefits typical for the Companys employees
of the same class.
Mr. John W. Glomb, Jr., the son-in-law of Mr. James J. Maguire and the brother-in-law of
Messrs. James J. Maguire, Jr. and Christopher J. Maguire, is an employee of the Company. During
2007, Mr. Glomb, Jr. purchased 25,000 shares of the Companys common stock under the terms of the
Companys Non-Qualified Employee Stock Purchase Plan for a purchase price of $807,750. The
purchase price of the shares represented a discount of $311,750 from the market value at the time
of purchase by Mr. Glomb, Jr. Mr. Glomb, Jr. has incurred indebtedness to the Company in
connection with this purchase of shares of the Companys common stock under the Companys
Non-Qualified Employee Stock Purchase Plan, as permitted by the terms of such Plan. Such
indebtedness is payable in equal annual installments over a nine year period. The largest
aggregate principal amount of such indebtedness during the period January 1, 2007 through March 14,
2008 was $807,750, and as of March 14, 2008, the aggregate principal amount of such indebtedness
outstanding was $718,000. $89,750 in principal payments were made during 2007 on the indebtedness.
The indebtedness is interest free, except after failure to timely pay principal or interest due on
the indebtedness. Interest accrues on any payment not paid within fifteen days of the date due at
three percentage points over the prime rate as quoted in The Wall Street Journal. During 2007 Mr.
Glomb, Jr. earned $295,400 in salary and bonus. He also received fringe benefits typical for the
Companys employees of the same class.
Under the terms of the Stock Purchase Plans referred to above, all shares purchased under the
Plans are restricted, and may not be sold, transferred or made subject to any lien for a period of
five years (or, in the case of the Qualified Employee Stock Purchase Plan, two years), measured
from the first day of the applicable offering period. If an employee ceases to be employed by the
Company or any of its subsidiaries on account of the employees retirement, death or disability,
the employee (or, in the case of the employees death, the employees beneficiary if one has been
designated, or the employees estate otherwise) will be entitled to the shares held in the
employees investment account maintained under the Plans for these purposes, provided that any
payment obligation of the employee with respect to such shares is satisfied. In those events, the
Companys right to repurchase during the five-year restricted period for the lesser of the
purchase price or current fair market value will lapse with respect to such an employees shares.
If an employee ceases to be employed by the Company or any of its subsidiaries for any reason other
than retirement, disability or death, any shares purchased under the Plans which have not been
beyond the five-year restricted period may be repurchased by the Company for the lesser of the
fair market value of the shares or the purchase price paid for the shares.
Management Directors and Executive Officers
Directors hold office until the next annual meeting of the shareholders, or until their
successors are duly elected and qualified. Officers are elected by and serve at the discretion of
the Board of Directors. The nominees for Director and the Executive Officers of the Company are as
follows:
10
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
James J. Maguire
|
|
|
74
|
|
|
Chairman of the Board of Directors
|
James J. Maguire, Jr.
|
|
|
47
|
|
|
Director, President and Chief Executive Officer
|
Sean S. Sweeney
|
|
|
50
|
|
|
Director, Executive Vice President
|
Aminta Hawkins Breaux
|
|
|
49
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|
|
Director
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Michael J. Cascio
|
|
|
52
|
|
|
Director
|
Elizabeth H. Gemmill
|
|
|
62
|
|
|
Director
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Paul R. Hertel, Jr.
|
|
|
80
|
|
|
Director
|
Michael J. Morris
|
|
|
73
|
|
|
Director
|
Shaun F. OMalley
|
|
|
72
|
|
|
Director
|
Donald A. Pizer
|
|
|
63
|
|
|
Director
|
Ronald R. Rock
|
|
|
48
|
|
|
Director
|
Craig P. Keller
|
|
|
57
|
|
|
Executive Vice President, Secretary, Treasurer, and Chief Financial
Officer
|
Christopher J. Maguire
|
|
|
43
|
|
|
Executive Vice President
|
T. Bruce Meyer
|
|
|
53
|
|
|
President and Chief Executive Officer, Liberty American Insurance
Group
|
See Nominees for Director for the biographies of the Directors.
CRAIG P. KELLER
, age 57, joined the Company as Vice President and Chief Financial Officer in
December 1992 and was appointed Secretary in 1993, Treasurer in 1997, Senior Vice President in 1999
and Executive Vice President in 2003.
CHRISTOPHER J. MAGUIRE
, age 43, joined the Company in 1987. He has served as Executive Vice
President and Chief Underwriting Officer since February 2003. Prior to his appointment as
Executive Vice President in February 2003, he served as Senior Vice President, Chief Underwriting
Officer from 2000 to 2003 and Vice President-Underwriting from 1997 to 2000. Mr. Maguire was
previously employed by the Company as Assistant Vice President and in various underwriting
positions. Mr. Maguire is the son of James J. Maguire, the brother of James J. Maguire, Jr. and a
first cousin of Sean S. Sweeney.
T. BRUCE MEYER,
age 53, joined the Company in 1999 upon the acquisition of the Liberty
American Insurance Group. He currently serves as President and Chief Executive Officer of Liberty
American Insurance Group. Prior to his appointment as President and Chief Executive Officer of
Liberty American Insurance Group in October 2005, he served as Chief Financial Officer of Liberty
American Insurance Group and was appointed Assistant Secretary in 2000 and Senior Vice President in
2001.
The information in the sections of this Proxy Statement captioned Section 16(a) Beneficial
Ownership Reporting Compliance, Code of Conduct, Additional Information Regarding the Board
Board Committees (the first paragraph thereof) and Audit Committee are incorporated in this
section by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the ownership of the Companys
common stock as of March 7, 2008 by: (i) each person known to the Company to own beneficially more
than 5% of the outstanding common stock; (ii) each of the Companys directors, nominees for
directors and persons referred to in the Summary Compensation Table; and (iii) all of the directors
and executive officers as a group. As used in this table, beneficially owned means the sole or
shared power to vote or dispose of, or to direct the voting or disposition of, the shares, or the
right to acquire such power within 60 days after March 7, 2008 with respect to any shares.
11
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|
|
|
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|
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|
|
|
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Shares
|
|
Percent
|
|
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Beneficially
|
|
Beneficially
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Name
(1)
|
|
Owned
(2)
|
|
Owned
|
|
James J. Maguire
|
|
|
11,107,907
|
(3)
|
|
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15.4
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%
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James J. Maguire, Jr.
|
|
|
1,674,511
|
(4)
|
|
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2.3
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%
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Frances M. Maguire
|
|
|
8,257,530
|
(5)
|
|
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11.5
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%
|
Aminta Hawkins Breaux
|
|
|
3,754
|
|
|
|
*
|
|
Michael J. Cascio
|
|
|
14,517
|
|
|
|
*
|
|
Elizabeth H. Gemmill
|
|
|
21,563
|
|
|
|
*
|
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Paul R. Hertel, Jr.
|
|
|
54,270
|
(6)
|
|
|
*
|
|
Michael J. Morris
|
|
|
18,152
|
|
|
|
*
|
|
Shaun F. OMalley
|
|
|
4,870
|
|
|
|
*
|
|
Donald A. Pizer
|
|
|
5,012
|
|
|
|
*
|
|
Ronald R. Rock
|
|
|
4,910
|
|
|
|
*
|
|
Sean S. Sweeney
|
|
|
419,227
|
(7)
|
|
|
*
|
|
Craig P. Keller
|
|
|
115,440
|
(8)
|
|
|
*
|
|
Christopher J. Maguire
|
|
|
1,447,788
|
(9)
|
|
|
2.0
|
%
|
T. Bruce Meyer
|
|
|
7,609
|
|
|
|
*
|
|
EARNEST Partners, LLC
|
|
|
5,048,167
|
(10)
|
|
|
7.0
|
%
|
FMR Corp.
|
|
|
4,342,420
|
(11)
|
|
|
6.0
|
%
|
All Directors and Executive Officers as a Group (14 persons)
|
|
|
14,311,530
|
|
|
|
19.4
|
%
|
|
|
|
*
|
|
Less than 1%
|
|
(1)
|
|
The named shareholders business address is One Bala Plaza, Suite 100, Bala Cynwyd, PA 19004,
except that the business address of EARNEST Partners, LLC is 1180 Peachtree Street, NE, Suite
2300, Atlanta, GA 30309; and the business address of FMR Corp. is 82 Devonshire Street,
Boston, MA 02109.
|
|
(2)
|
|
To the Companys knowledge, the persons named in the table have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by them, unless
otherwise noted in the footnotes to this table.
|
|
(3)
|
|
Of these shares, 5,251,500 are owned jointly by Mr. Maguire and his wife Frances M. Maguire,
as to which Mr. Maguire shares the voting and investment power with his wife; 824,798 shares
are owned by The Maguire Foundation, of which Mr. Maguire is co-director with his wife and
shares voting and investment power with his wife for such shares; and 588,000 are owned of
record by his wife. Mr. Maguire disclaims beneficial ownership of the 588,000 shares owned of
record by his wife.
|
|
|
|
As of March 14, 2008, 1,734,228 shares were pledged in connection with margin loans made by
a broker.
|
|
(4)
|
|
Of these shares, 332,448 shares are owned by a trust for the benefit of Mr. James J. Maguire,
Jr.; and 840,000 shares are subject to currently outstanding options exercisable on or before
60 days from March 7, 2008.
|
|
|
|
As of March 14, 2008, 337,748 shares were pledged in connection with margin loans made by a
broker.
|
|
(5)
|
|
Of these shares, 989,836 are held by a trust established by Mr. James J. Maguire of which the
children of Ms. Maguire and Mr. James J. Maguire are the beneficiaries and of which Ms.
Maguire is sole trustee and possesses sole voting and investment power with respect to such
shares; 603,396 shares are in trusts for the children of Mr. and Mrs. James J. Maguire, as to
which Ms. Maguire is deemed to be beneficial owner of such shares because she has shared
voting and investment power of such shares as co-trustee of these trusts; 5,251,500 shares are
owned jointly by Ms. Maguire and her husband James J. Maguire, as to which Ms. Maguire shares
the voting and investment power with her husband; and 824,798 shares are owned by The Maguire
Foundation, of which Ms. Maguire is co-director with her husband, and shares voting and
investment power with her husband for such shares.
|
|
|
|
As of March 14, 2008, 1,278,480 shares were pledged in connection with margin loans made by
a broker.
|
12
|
|
|
(6)
|
|
Of these shares, 50,000 are owned by P&E Limited Partnership, a family limited partnership,
in which Mr. Hertel, Jr. and his wife own the stock of the corporate general partner and are
also limited partners.
|
|
(7)
|
|
Shares beneficially owned include 135,000 shares subject to currently outstanding options
exercisable on or before 60 days from March 7, 2008.
|
|
(8)
|
|
Shares beneficially owned include 90,000 shares subject to currently outstanding options
exercisable on or before 60 days from March 7, 2008.
|
|
(9)
|
|
Shares beneficially owned include 596,448 shares subject to currently outstanding options
exercisable on or before 60 days from March 7, 2008 and 299,448 shares held by a trust for Mr.
Maguire as to which he has shared voting and investment power. These 299,448 shares are
pledged to an investment banking firm to secure the obligations to such firm of a trust for
Mr. Maguire, of which he is a co-trustee, in connection with a forward transaction entered
into in 2006 by the trust with such firm.
|
|
|
|
As of March 14, 2008, 162,774 shares were pledged in connection with margin loans made by a
broker.
|
|
(10)
|
|
According to the Schedule 13G filed in February 2008 with the SEC by EARNEST Partners, LLC:
EARNEST Partners, LLC has sole voting power with respect to 1,689,447 of such shares, shared
voting power with respect to 1,596,538 of such shares and sole investment power with respect
to 5,048,167 of such shares; and all of its shares were acquired in the ordinary course of
business and were not acquired and are not held for the purpose of or with the effect of
changing or influencing the control of the Company and were not acquired and are not held in
connection with or as a participant in any transaction having that purpose or effect.
|
|
(11)
|
|
According to the Schedule 13G filed in February 2008 with the SEC by FMR Corp.: FMR Corp.
has sole voting power with respect to 109,620 of such shares and sole investment power with
respect to 4,342,420 of such shares; and all of its shares were acquired in the ordinary
course of business and were not acquired for the purpose of and do not have the effect of
changing or influencing the control of the Company and were not acquired in connection with or
as a participant in any transaction having such purpose or effect.
|
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that the Companys executive
officers and directors, and persons who own more than ten percent of a registered class of the
Companys equity securities, file reports of ownership and changes in ownership with the SEC.
Executive officers, directors, and greater than ten percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, and various
representations made to it by its directors and executive officers as to the filing of Forms 5, for
the period January 1, 2007 through December 31, 2007 the Company believes that all filing
requirements applicable to its executive officers and directors were complied with, except for: two
late filings of a Form 4, each of which related to one transaction for Mr. Maguire, Jr.
13
Executive Compensation
Compensation Discussion and Analysis
Overview
During the last several years we have experienced very significant growth in our operations,
net income and revenue. As we have grown into a larger organization, the Compensation Committee of
our Board of Directors has implemented a compensation program for senior executives that is
competitive with similarly sized insurance companies and rewards executives for their performance.
The Compensation Committee has increased annual salaries for our executive officers and granted
stock options, stock appreciation rights and other equity incentives that recognize the excellent
performance of our business and help to align the interests of our executives with those of our
shareholders. It also establishes performance goals in connection with annual bonuses.
Unless we specifically state otherwise, this Compensation Discussion and Analysis relates to
the compensation earned by our named executive officers, which we also refer to as NEOs, for
2007. Our NEOs are James J. Maguire, Jr., our Chief Executive Officer, or CEO, James J. Maguire,
our Chairman, Craig P. Keller, our Chief Financial Officer, or CFO, and Executive Vice President,
and Sean S. Sweeney and Christopher J. Maguire, Executive Vice Presidents.
Compensation Philosophy and Objectives
We have a pay-for-performance philosophy which seeks to provide a compensation program that
attracts, motivates and retains key executives, delivers rewards for high levels of performance and
includes consequences for underperformance. This philosophy has been effective in retaining our
top executives, with virtually no defections to competitors for many years. We tie a significant
portion of the NEOs compensation, specifically that related to bonuses and equity awards, to the
achievement of both short term financial objectives (the Companys earnings per share, gross
written premium growth, accident year loss and loss adjustment expense ratio, and departmental
operating expenses) and long term financial objectives (the price of the Companys common stock,
which is typically affected by such financial metrics as earnings per share and the Companys
combined ratio), since a significant portion of the NEOs compensation consists of equity based
awards. Equity awards provide for three or five year cliff vesting and become, to the extent the
Companys stock price increases, more valuable to the recipients. We are committed to a strong
link between stated goals, which are reviewed and approved by the Compensation Committee, and our
compensation program. The Compensation Committee designed a significant portion of the
compensation program so that executives compensation opportunity is related to our stock
performance and other financial metrics that the Compensation Committee believes influence the
creation of long term shareholder value. For 2007, the financial metrics were the Companys
earnings per share, gross written premium growth, accident year loss and loss adjustment expense
ratio, and departmental operating expenses.
Under this approach, we provide (1) annual base salaries that in part recognize the value an
employee has to us and (2) annual bonus opportunities for NEOs and other officers that reward them
for our achievement of specified financial metrics that reflect the success of our operations and
for the achievement by the NEOs and other officers of a number of individual, personal goals. We
also make equity based awards to NEOs and other officers in order to link their ability to increase
their net worth with the success of our stock performance, and to encourage retention by providing
for multiple-year cliff vesting schedules. Finally, we offer retirement and other benefit plans
that are available to our executives and other employees to provide for some measure of financial
security, such as medical insurance and a 401(k) savings plan, as well as benefits intended to
provide for work/life balance, such as paid holidays and vacation time.
Role of the Compensation Committee in Compensation Matters
The Compensation Committees purposes include (1) the establishment and implementation of
policies and programs relating to the compensation of our officers, (2) the determination, in some
cases with the approval of our Board of Directors, of the amount and mix of the compensation of the
NEOs and other executive officers, and (3) the evaluation of the performance of those officers.
14
The Compensation Committee annually reviews and approves the corporate goals that relate to
the compensation of the NEOs and evaluates whether the performance goals have been met in
determining those officers compensation. The Compensation Committee considers our performance
based awards in relation to similar incentive awards to CEOs and officers of comparable companies,
internal pay equity and any other factors that the Compensation Committee deems appropriate.
The provisions of any compensation plan or any regulatory requirement applicable to executive
compensation that is intended to qualify as performance based compensation under applicable
regulations promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended, also
referred to as the Code, may require that the Compensation Committee alone take any action or
make any determination. In such event the Compensation Committee will make all applicable
determinations and take all related actions in its sole discretion, and those determinations or
actions will not require any approval by the Board of Directors. The Compensation Committee also
makes recommendations to the Board of Directors in connection with the adoption of any new
incentive compensation plans and equity based plans. The Compensation Committee reviews employee
compensation policies and their impact on, and relation to, our culture. The members of the
Compensation Committee are appointed by our Board of Directors and may be removed by the Board of
Directors with or without cause.
Each member of the Compensation Committee is an independent director under applicable NASDAQ
rules, a non-employee director under applicable SEC rules and an outside director under
applicable IRS rules.
The Compensation Committee held 9 meetings during 2007.
Role of Executives in Establishing Compensation
The Compensation Committee believes that having the input of management is important to the
overall effectiveness of our executive compensation program. The Chairman, CEO, CFO and the Senior
Vice President Operations and Human Resources are the primary representatives of management who
interact with the Compensation Committee to provide their perspectives on reward strategies and how
to align them with our business and personnel strategies. These officers also attend Compensation
Committee meetings when appropriate to participate in the presentation of materials and discussion
of managements views on compensation issues.
The Compensation Committee relies on the CEO for input on the performance of the executive
team and individual executives, and for recommendations on various compensation awards for
executives other than the CEO. The Chairman makes recommendations to the Compensation Committee
with respect to the compensation of the CEO. In addition, in January 2007, the Compensation
Committee delegated to the CEO authority to determine bonuses for the officer levels below
Executive Vice President not to exceed a total bonus amount for these officers established by the
Compensation Committee.
Compensation Consultant and Benchmarking of Compensation
The Compensation Committee has sole discretion to decide whether to retain an advisor. The
Compensation Committee has retained Hay Group, a human resources and compensation consulting firm,
to work at the direction of the committee as its independent advisor on executive compensation.
The Compensation Committee Chairperson works directly with Hay Group to determine the scope of the
work needed to assist the committee in its decision making processes. Hay Group meets periodically
with the Compensation Committee to review issues and provide input on plan design and alternatives
and interacts with Compensation Committee members, the CEO and other members of senior management
to facilitate the development of our executive compensation strategy and approach to determining
compensation levels.
Hay Group prepares competitive pay analyses regarding both peer groups and the broader market,
and provides percentile rank information on our asset size, revenues, and market capitalization as
compared to the peer group. Hay Group attends Compensation Committee meetings, as needed, and the
Compensation Committees executive sessions to present and discuss this market data and to advise
the Compensation Committee on the level
15
and design of compensation programs for the executive officers. In addition, with the
approval of the Compensation Committee, Hay Group works with our management team on broad-based
compensation design issues and overall executive compensation strategy.
In January 2007, the Compensation Committee retained Hay Group to identify current trends and
best practices in incentive compensation, review our long term incentive practices, suggest
alternatives to the design of long term incentives and advise the Committee on the relative
advantages and disadvantages of each of the identified alternatives. The Compensation Committee
also asked Hay Group to recommend a peer group of other insurance companies for compensation
comparison purposes. The Compensation Committee reviewed and approved the use of the peer group
shown below for purposes of setting 2007 compensation. While some of these companies are in the
NASDAQ Insurance Stocks Index and some are not, the Compensation Committee selected them for the
peer group because they were considered comparable to us, either in terms of revenue size, asset
size or market capitalization, or because they are in lines of business related to our business, or
because we compete with them for both talent and business.
The companies in the peer group are:
|
|
|
Argonaut Group Inc.
|
|
|
|
|
Aspen Insurance Group Inc.
|
|
|
|
|
Cincinnati Financial Corp.
|
|
|
|
|
Commerce Group Inc. / MA
|
|
|
|
|
Endurance Specialty Holdings LTD
|
|
|
|
|
Erie Indemnity Co.
|
|
|
|
|
Financial Security Assurance Holdings LTD/NY
|
|
|
|
|
Harleysville Group Inc.
|
|
|
|
|
HCC Insurance Holdings Inc.
|
|
|
|
|
Horace Mann Educators Corp.
|
|
|
|
|
Markel Corp.
|
|
|
|
|
Infinity Property & Casualty Corp.
|
|
|
|
|
Max Re Capital Ltd.
|
|
|
|
|
Ohio Casualty Corp.
|
|
|
|
|
Platinum Underwriters Holdings Ltd.
|
|
|
|
|
Renaissance Holdings Ltd
|
|
|
|
|
RLI Corp.
|
|
|
|
|
Selective Insurance Group Inc.
|
|
|
|
|
State Auto Financial Corp.
|
|
|
|
|
21st Century Insurance Group
|
|
|
|
|
WR Berkley Corp.
|
|
|
|
|
Zenith National Insurance Corp.
|
Based upon the peer group review, the 2007 total cash compensation, consisting of base salary
and target cash bonus, for the Companys CEO was positioned slightly above the 25th percentile of
total cash compensation for CEOs in the peer group, based on the public information most recently
available in January 2007. His equity based compensation was positioned at the median. Total cash
and equity based compensation for the Companys CEO was positioned slightly below the 25th
percentile. The 2007 total cash compensation for the Companys Executive Vice President NEOs was
positioned slightly below the 75th percentile of total cash compensation for NEOs with similar
positions in the peer group. The Executive Vice President NEOs equity based compensation was
positioned slightly above the 75th percentile, and the total cash and equity based compensation was
positioned at the 75th percentile. The primary reason for the difference in the percentile ranks
of the cash compensation of the CEO and the Executive Vice President NEOs is the Compensation
Committees determination that the salary and bonus for the CEO should not be significantly higher
than such compensation for the other Executive Vice President NEOs,
to be consistent with our team philosophy. In contrast, a number of the
other companies in the peer group award cash compensation to their CEOs at levels which are at
least twice as high as the cash compensation of any of their other
NEOs.
16
Compensation Program
The principal components of our executive compensation program are:
|
|
|
annual base salary;
|
|
|
|
|
annual incentive bonuses;
|
|
|
|
|
long term incentive compensation, which may consist of stock
appreciation rights, stock options, performance based share awards,
restricted stock and other equity based awards; and
|
|
|
|
|
retirement and other benefits.
|
The Compensation Committee establishes the mix of these components so that the total is
competitive with other insurance companies. Although we do not have a fixed policy for allocating
compensation between cash and non-cash compensation or between short term and long term
compensation, the Committee determined that the 2008 target bonuses for the CEO and the Executive
Vice President NEOs should be set at 80% and 67%, respectively, of their base salaries. The
Compensation Committee uses information provided by Hay Group to determine the appropriate level
and mix of compensation components.
The Compensation Committee used a summary tally sheet of all components of NEO compensation,
prepared by our Senior Vice President-Operations and Human Resources, in reviewing all NEO
compensation. The information in the tally sheet relating to the NEOs differed from that in the Summary Compensation
Table set forth below only to the extent that the tally sheet included data for prior years. The
Compensation Committee found the tally sheet useful in determining various elements of compensation
for the NEOs in that it showed how those elements increased on a year-over-year basis, and how the
compensation of the NEOs compared to each other and the other officers of the Company.
1. Annual Base Salary
The Compensation Committee views a competitive annual base salary as an important compensation
component to attract and retain executive talent. The Compensation Committee makes annual
recommendations for NEO base salaries to the Board of Directors for the Boards approval. In
making its recommendations, the Compensation Committee considers a number of factors, including:
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internal pay equity;
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external competitiveness base salaries of NEOs in the peer group;
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the NEOs level of responsibility;
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the NEOs performance;
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the CEOs recommendations for each of the NEOs other than the CEO
and the Chairman; and
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the Chairmans recommendations for the CEO.
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With
the exception of James J. Maguire, Chairman, the Compensation
Committee recommended to the Board of Directors 2007 base
salaries for the NEOs and the Board approved such base salaries. Mr. Maguires 2007 base salary of $1,000,000 was established by his
employment agreement. The Chairmans base salary has not been increased during the term of his
current employment agreement. We set the Chairmans annual base salary at $1,000,000 under his
employment agreement for the following reasons: Mr. Maguire founded the Company and was the
Companys President and CEO until October 2002. Consequently, Mr. Maguire has had significantly
more experience with the Company and the insurance industry than any other executive officer, and
continues to take an active role in the determination of various Company policies. He also advised
the Company during the course of the negotiation of his employment agreement that he did not expect
to receive equity awards from the Company in the future. In addition, Pearl, Meyer & Partners, an
independent executive compensation consulting firm advised us that in its view, Mr. Maguires
annual salary was appropriate and within normal market practice.
17
Because our executive compensation philosophy is primarily focused on incentive compensation,
the Compensation Committee targeted the 2007 annual base salaries for the NEOs to be not greater
than one-third of the total compensation package.
We increased the NEOs base salaries in 2007 as follows: $50,000 for Mr. Maguire, Jr., $60,000
for Mr. Keller and $35,000 for Messrs. Sweeney and Christopher J. Maguire. In determining these
increases, the Compensation Committee took into account the performance of the NEOs, the
compensation data for the peer group and the recommendation of Hay Group. Consistent with our team
philosophy, we increased Mr. Kellers base salary by a greater dollar amount to implement the
Compensation Committees determination that for 2007 Mr. Kellers annual base salary should be the
same as such salary for the other Executive Vice Presidents. The Compensation Committee determined
that for 2006 and 2007 the proportion of the total compensation of the NEOs consisting of base
salary and annual incentive bonus should be increased, and the proportion of the total compensation
of the NEOs consisting of equity incentives should be reduced. This
movement is meant to better align the compensation mix with
competitive practice.
2. Annual Incentive Compensation
We use cash bonuses as a principal method of tying compensation to performance and determine
the amount of cash bonuses annually. We determined the amounts of cash bonuses paid for 2007 based
on achievement of both the individualized goals that we had established for each of the Executive
Vice President NEOs and Company financial goals.
For 2007, 100% of the CEOs target bonus was payable if we achieved specified levels of
earnings per share for 2007. For 2007, 50% of the target bonuses for the Executive Vice Presidents
was payable if we achieved specified levels of earnings per share in 2007 and 50% of the target
bonuses was payable in various amounts if the Executive Vice Presidents achieved a number of
individualized goals which we established for each of them. The
CEOs target bonus was
based solely on achievement of specific levels of earnings per share because, by doing so, the
Companys deduction of his 2007 compensation should not be limited by Section 162(m) of the
Internal Revenue Code.
For 2007, the percentage payable of the portion of an NEOs target bonus that was based on our
2007 earnings per share was as follows:
150% if earnings per share were $3.50 or more;
100% if earnings per share were $3.30;
75% if earnings per share were $3.10;
50% if earnings per share were $2.97; and
0% if earnings per share were less than $2.97.
These percentages were adjustable on a pro-rata basis to the extent earnings per share were
between the above amounts. In addition, if earnings per share were above the $3.30 target level,
the excess percentage over 100%, up to 50%, would be applied to both the portion of the bonuses
attributable to the earnings per share level and the portion of the bonuses attributable to the
individualized goals, assuming that the individualized goals were met. Our 2007 earnings per share
were $4.40.
The individualized goals established for the NEOs related to the achievement in 2007 of the
following: For Mr. Keller, (1) the absence of significant deficiencies in our internal controls
relating to our accounting department, (2) accomplishment of the outsourcing of the responsibility
for calculating our option expense under SFAS 123R to an independent investment firm, (3) the
automation of the calculation of our reinsurance premiums, and (4) The establishment of an
independently developed performance benchmark which takes into account our asset allocation by
which to measure the performance of our independent fixed income investment advisor. For Mr.
Sweeney, (1) our aggregate gross written premiums exceeding budget, (2) our 2007 pure accident year
loss and loss adjustment expense ratio (paid and case reserve loss and loss adjustment expense
divided by net earned premiums) at 35% or less, (3) the expenses of our marketing department
being at or below the budgeted expenses for such department, and (4) 300 or more agents being
admitted to our Firemark group of insurance agents. For Mr. Christopher J. Maguire, (1) the
expenses of our underwriting department at or below the budgeted expenses for such
18
department, (2) our 2007 pure accident year loss and loss adjustment expense ratio at 35% or
less, (3) the average time for policy issuance at fifteen days or less from the date the policy
became effective, and (4) the absence of significant deficiencies in our internal controls relating
to our underwriting department.
The
CEO presents to the Compensation Committee a summary appraisal for
the Executive Vice President NEOs which
discusses their achievement of the individual goals described above. The Compensation Committee
then utilizes this information in determining whether such goals were attained.
In February, 2008 the Compensation Committee determined that the NEOs which had individual
goals had met all such goals. Consequently, we paid 150% of each NEOs target bonus in February
2008. See the Summary Compensation Table below under the column captioned Non-Equity Incentive
Plan Compensation for the amount of the NEOs bonuses for 2007.
For the past 2 years, the Compensation Committee has not exercised any discretion to award
bonuses absent achievement of the performance goals on which the bonuses were based.
3. Long Term Equity Incentive Compensation
Long term incentive compensation is another principal component of our executive compensation
program. Before 2006, we typically awarded long term compensation to the NEOs in the form of stock
options. In 2007 and 2006, we awarded long term compensation to NEOs in the form of stock
appreciation rights, also referred to as SARs, instead. The Compensation Committee decided to
do so because SARs are less dilutive than stock options. SARs are the economic equivalent of a
hypothetical option to acquire a specified number of shares of our common stock on the terms and
conditions of the Stock Appreciation Right Grant Agreement that we issue in connection with each
SAR grant. In 2007, awards of restricted stock, whose vesting is related to the achievement by the
Company of certain financial goals, were also made to the NEOs as part of their long-term
compensation. These awards of restricted stock are sometimes referred to as performance share
awards. Under our Amended and Restated Employees Stock Incentive and Performance Based
Compensation Plan, also referred to in this section as the Plan, we also may award long term
incentive compensation in the form of restricted stock, performance shares and other forms of
equity based incentive compensation. The Compensation Committee administers the Plan. The awards
under the Plan encourage recipients to focus on long term company performance and enable recipients
to increase their stake in us through equity based awards. This is intended to align the
participants interests with those of other shareholders by increasing the proportion of their
compensation that is related to our long term performance. The Compensation Committee periodically
makes awards under the Plan in order to reward executives individual achievement and to retain key
executives. The Compensation Committee took into account the value of the SARs which were awarded
in 2007 and 2006, computed using the Black Scholes option pricing model, the value of the
performance share awards issued in 2007, computed using 75% of the market price of the underlying
shares as of the grant date, and the non-equity based compensation in determining the total
compensation awarded to the NEOs. Any gains or profits realized by the NEOs arising from their
exercise of stock options or other equity awards have not had, and are not expected to have, an
impact on compensation policies or specific awards to the NEOs, nor are they expected to be
considered in setting any future retirement benefits.
During 2007 the Compensation Committee granted SARs to the NEOs in the amounts reflected in
the Grants of Plan Based Awards table under the column captioned All Other Stock Awards; Number
of Securities Underlying Stock Appreciation Rights. The amount of the SARs and performance share
awards referred to below which the Committee granted in 2007 was based upon the Committees
determination that the total compensation of the NEOs consisting of equity incentives should be
a smaller proportion of the NEOs total compensation. The
SARs cliff vest five years after the grant date or, if earlier, upon a hostile change in control of
the Company and the related hypothetical option expires ten years after the grant date. If we
terminate the holders employment for cause, as determined by the Compensation Committee, any
unexercised portion of the SARs terminates. If termination of employment is (1) by the holder for
any reason other than death, or (2) by us other than for cause, as determined by the Compensation
Committee, then any portion of the SAR and the corresponding portion of the hypothetical option
that had become exercisable as of the date of termination remains exercisable during the 30 days
following the date of termination. If employment terminates because of the holders death, the SAR
and the related hypothetical option, if not previously expired, will be fully vested and
exercisable by
19
the executor of the decedents estate until the earlier of the expiration date of the SAR or
the six month anniversary date of death. Upon any proper exercise of a SAR, we will deliver to the
holder shares of our common stock as provided for in the SAR grant without payment from the holder,
other than any payments required under the Plan for tax withholding.
The price of our common stock relating to the SARs above which the recipient would receive
gains upon exercise was set at the closing price of our common stock on the NASDAQ Stock Market on
the date of the grant by the Compensation Committee.
Also during 2007 the Compensation Committee granted performance share awards to the NEOs in
the amounts reflected in the Grants of Plan Based Awards table below. The shares of our common
stock subject to the performance share award cliff vest on the date in 2010 on which the
Compensation Committee certifies that the performance goal has been met or, if earlier, upon a
hostile change in control of the Company. The performance goal for this award is the relative
performance of the Companys 2007 accident year statutory combined ratio measured against a Peer
Group taking into account loss and loss adjustment expense development through December 31, 2009.
Shares of our common stock subject to this award vest as follows:
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100% if our 2007 statutory combined ratio is within the top quartile of the peer
group;
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50% if our 2007 statutory combined ratio is within the second quartile of the peer
group; and
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0% if our 2007 statutory combined ratio is below the second quartile of the peer
group.
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The peer group is comprised of the following companies:
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Ace Group
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AIG Companies
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American Financial Group Inc
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Arch Capital Group Ltd
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Argo Group International Holdings
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Baldwin Lyons
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Berkley (W R) Corp
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Chubb Group
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Cincinnati Financial Corp
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CNA Insurance Companies
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Darwin Underwriters
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Firemans Fund
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HCC Insurance Holdings Inc.
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Markel Corp
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Navigators
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RLI Corp
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Safeco Corp
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Selective Ins Group Inc
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The Travelers Companies
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United America Indemnity Ltd
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XL Capital
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The Compensation Committee selected this peer group because it included companies which have
lines of business similar to those of the Company or the Company competes with the companies in
this peer group. This peer group is different than the peer group identified above under
Compensation Consultant and Benchmarking Compensation which was used for benchmarking the
compensation of our CEO and Executive Vice President NEOs. The peer group used for benchmarking
compensation was chosen because it included companies with which the Company competes for executive
personnel in that such companies have a similar business and are similar to the Company in terms of
revenues, assets and market capitalization. The peer group used for benchmarking compensation was
not appropriate for use in comparing statutory combined ratios, because such peer group included a
number of personal lines companies.
20
The
shares of common stock subject to this award are forfeited if an
NEOs employment with the
Company terminates for any reason prior to the vesting date.
We have both a qualified employee stock purchase plan and a nonqualified employee stock
purchase plan. Both plans permit purchases of our common stock at a discounted purchase price,
equal to 85% of fair market value, determined on the date of purchase or the opening date of the
offering period, whichever results in the lower price. Both plans have similar terms and are
available to all salaried employees. However, the qualified employee stock purchase plan limits to
$25,000 the total value of shares a participant may purchase in any one calendar year, as required
by Section 423 of the Code. The nonqualified plan permits larger total purchases in a calendar
year.
While we do not have specific share ownership requirements for our NEOs or other officers, we
incentivize NEOs and other officers who receive equity awards by including extended cliff vesting
requirements in the awards.
4. Benefits and Perquisites
We summarize the NEOs 2007 and 2006 perquisites in the column of the Summary Compensation
Table below captioned All Other Compensation and in the footnotes to such column. Through 2006,
we provided the NEOs with core benefits, including medical, dental, vision care and prescription
drug coverage, basic life insurance, and long term disability coverage. In 2007, we provided the
NEOs with non-accountable expense allowances. Our overall benefits philosophy is to focus on
providing certain limited perquisites to our executives, while allowing the executives to use their
non-accountable expense allowances to purchase the additional benefits that they determine to be
appropriate for their individual situations. In addition, executives may select additional
voluntary benefits, such as supplemental life insurance, the costs of which are paid by the
executive.
5. Key Employee Deferred Compensation Plan
Under our Key Employee Deferred Compensation Plan, which is unfunded, we may provide an annual
credit for each participants benefit to a notional deferred account. The amount of the credit is
based on the participants job description, age and title. The credits for 2007 that we made for
the NEOs benefit are shown under the column captioned Registrant Contributions in Last FY of the
Nonqualified Deferred Compensation table below.
Employment Agreements and Payments Upon Termination or Hostile Change in Control
We have entered into employment agreements with each of the NEOs. See Employment Agreements
below. These employment agreements include arrangements which would provide severance compensation
in the event of a termination by us without Cause, a termination by the NEO for Good Reason, or a
Hostile Change in Control, as those terms are defined in the employment agreements. We designed
these arrangements to provide for stability and continuity of our senior management. Information
regarding potential payments under these arrangements is provided below under the heading
Potential Payments upon Termination or Change in Control.
Our rationale for including the Hostile Change in Control protection in the employment
agreements was to decrease the potential distraction due to personal uncertainties and risks that
inevitably arise when a Hostile Change in Control is threatened or pending. For this reason, the
Compensation Committee and our Board of Directors determined to provide competitive change of
control compensation and benefits to the NEOs.
The enhanced termination benefits payable in connection with a Hostile Change in Control
require a double trigger. This means that there must be both a Hostile Change in Control and,
following the Hostile Change in Control, the termination of an NEOs employment either
involuntarily without Cause or by the executive for Good Reason. We selected the double
trigger to enhance the likelihood that an
executive would remain in our employ after a Hostile Change in Control, given that the NEO
will not receive the additional payments if he or she voluntarily resigns or is terminated with
Cause after the Hostile Change in Control.
21
Tax Deductibility of Compensation
Section 162(m) of the Code limits to $1.0 million the annual tax deduction for compensation
paid to NEOs, unless certain requirements for performance based compensation are met. The
Compensation Committee considers the anticipated tax consequences when structuring and reviewing
executive compensation. While the Compensation Committee currently intends to comply with the
requirements of Section 162(m) to preserve the deductibility of compensation payments, it reserves
the right to provide compensation that is not deductible in order to retain or secure the services
of key executives if it believes that doing so would be in the best interests of us and our
shareholders.
The Compensation Committee, the Board of Directors and the Companys shareholders have
approved the Companys 2007 Cash Bonus Plan and the Non-qualified Employee Stock Purchase Plan.
Both of these plans are structured to be performance based, as defined in Section 162(m), in order
to preserve or maximize the deductibility of the amount of future bonuses paid to NEOs and the
income attributable to discounted stock purchases made by NEOs under those plans.
Impact of Regulatory Requirements on Compensation
The Compensation Committee has considered the impact of the $1 million cap on the
deductibility of non-performance based compensation imposed by Code Section 162(m) and the
non-deductibility of excess parachute payments under Code section 280G, including the related
excise tax imposed on those payments under Code section 4999, in its design of executive
compensation programs. In addition, the Compensation Committee considered other tax and accounting
provisions in developing the pay programs for our NEOs. These include the special rules applicable
to non-qualified deferred compensation arrangements under Code Section 409A and the accounting
treatment of various types of equity-based compensation under the Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment, also referred to as SFAS 123R. While the
Compensation Committee attempts to compensate executives in a manner that produces favorable tax
and accounting treatment, its main objective is to develop fair and equitable compensation
arrangements that appropriately incent, reward and retain executives.
Compensation Committee Report
The Compensation Committee of the Board of Directors has reviewed and discussed the
Compensation Discussion and Analysis with management and, based on such review and discussion, the
Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be
included in this Proxy Statement.
The Compensation Committee
Michael J. Cascio, Chairperson
Aminta Hawkins Breaux
Elizabeth H. Gemmill
Paul R. Hertel, Jr.
22
Summary Compensation Table
The following table shows information about compensation of the Companys chief executive
officer, chief financial officer, and the Companys three other most highly compensated executive
officers (the Named Executive Officers) for 2007 and 2006.
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Non-Equity
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Incentive Plan
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All Other
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Name and Principal
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Salary
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Bonus (1)
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Stock Awards
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Option Awards (3)
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Compensation
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Compensation (4)
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Total
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Position
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Year
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($)
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($)
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(2) ($)
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($)
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($)
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($)
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($)
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James J. Maguire, Jr.,
President and Chief
Executive Officer
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2007
2006
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550,000
500,000
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67,296
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1,224,216
1,104,300
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600,000
375,000
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171,332
131,659
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2,612,844
2,110,959
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Craig P. Keller,
Executive Vice
President,Secretary,
Treasurer and Chief
Financial Officer
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2007
2006
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435,000
375,000
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44,753
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695,855
621,213
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412,500
250,000
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125,694
80,728
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1,713,802
1,326,941
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James J. Maguire,
Chairman of the
Board
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2007
2006
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1,000,000
1,000,000
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91,488
73,197
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1,091,488
1,073,197
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Sean S. Sweeney,
Executive Vice
President
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2007
2006
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435,000
400,000
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44,753
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583,927
696,833
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412,500
281,250
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129,314
88,841
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1,605,494
1,466,924
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Christopher J.
Maguire, Executive
Vice President
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2007
2006
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435,000
400,000
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44,753
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818,759
858,490
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412,500
281,250
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121,701
77,474
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1,832,713
1,617,214
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(1)
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Bonuses are awarded based upon the achievement of certain performance targets. Accordingly,
for 2007 and 2006 these bonus amounts are reported in the Non-Equity Incentive Plan
Compensation column.
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(2)
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The amounts in this column are calculated based on SFAS 123R (excluding estimate of
forfeiture) and equal the aggregate dollar amount of compensation expense related to awards of
performance based shares to each of the Named Executive Officers that was recognized in our
2007 Consolidated Statements of Operation and Comprehensive Income. No such shares were
issued during 2006. Under SFAS 123R, a pro-rata portion of the total expense at time of grant
is recognized over the vesting schedule of the grant. The initial expense is based on the
fair value of such shares as of the date of grant.
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(3)
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The amounts in this column are calculated based on SFAS 123R (excluding estimate of
forfeiture) and equal the aggregate dollar amount of compensation expense related to awards of
options and stock appreciation rights to each of the Named Executive Officers that was
recognized in our 2006 and 2007 Consolidated Statements of Operations and Comprehensive
Income. Under SFAS 123R, a pro-rata portion of the total expense at time of grant is
recognized over the vesting schedule of the grant. The initial expense is based on the fair
value of the stock option and stock appreciation rights grants as estimated using the
Black-Scholes option-pricing model. The assumptions used to arrive at the Black-Scholes values
are disclosed in Note 11 and Note 13 to our consolidated financial statements included in our
Annual Report on Form 10-K for the years ended December 31, 2007 and December 31, 2006,
respectively.
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(4)
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Included in All Other Compensation is the aggregate incremental cost to the Company of
providing various perquisites, the incremental cost to the Company of providing subsidized
benefits, miscellaneous cash payments, matching contributions for plan year 2007 and 2006
(paid in January 2008 and 2007) under the Companys 401(k) plan, group term life insurance
premiums and the 2007 and 2006 (credited in 2008 and 2007) annual discretionary award pursuant
to the Philadelphia Insurance Companies Key Employee Deferred Compensation Plan, as well as
the amount of non-accountable expense allowances.
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(a)
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For 2007, perquisites for Mr. James J. Maguire, Jr. included one automobile lease
payment; personal travel expenses relating to participation in a Company sponsored Ironman
event and marketing contest; and Company provided automobile insurance. The only perquisite exceeding
the greater of $25,000 or 10% of total perquisites provided to Mr Maguire, Jr. was a non
accountable expense allowance ($75,200). The 2007 (credited in 2008) annual discretionary
award pursuant to the Philadelphia Insurance Companies Key Employee Deferred Compensation
Plan for Mr. Maguire, Jr. was $80,750.
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For 2006, perquisites for Mr. James J. Maguire, Jr. included club membership dues;
reimbursement of medical expenses not covered by the Companys health plan; personal travel
expenses relating to participation in a Company sponsored Ironman event, tax preparation
expenses, payment of health insurance premiums in excess of the Company provided benefit,
and Company provided automobile insurance. The only perquisite exceeding the greater of
$25,000 or 10% of total perquisites provided to Mr. Maguire, Jr. was automobile lease
payments ($28,106). The 2006 (credited in 2007) annual discretionary award pursuant to
the Philadelphia Insurance Companies Key Employee Deferred Compensation Plan for Mr.
Maguire, Jr. was $68,000.
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(b)
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For 2007, perquisites for Mr. Craig P. Keller included matching contributions for
plan year 2007 (paid in 2008) under the Companys 401(k) plan and Company provided
automobile insurance. The only perquisite exceeding the greater of $25,000 or 10% of
total perquisites provided to Mr. Keller was a non-accountable expense allowance
($43,200). The 2007 (credited in 2008) annual discretionary award pursuant to the
Philadelphia Insurance Companies Key Employee Deferred Compensation Plan for Mr. Keller
was $63,900.
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For 2006, perquisites for Mr. Craig P. Keller included an automobile allowance; club
membership dues; health insurance premiums in excess of the Company provided benefit;
matching contributions for plan year 2006 (paid in 2007) under the Companys 401(k) plan;
reimbursement of medical expenses not covered by the Companys health plan and Company
provided automobile insurance. The 2006 (credited in 2007) annual discretionary award
pursuant to the Philadelphia Insurance Companies Key Employee Deferred Compensation Plan
for Mr. Keller was $43,125.
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(c)
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For 2007, perquisites for Mr. James J. Maguire included reimbursements of personal
auto expenses; matching contributions for plan year 2007 (paid in 2008) under the
Companys 401(k) plan; and Company provided automobile insurance. The only perquisites
exceeding the greater of $25,000 or 10% of total perquisites provided to Mr. Maguire was a
non-accountable expense allowance ($38,699) and personal use of Company owned automobiles
($36,029).
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For 2006, perquisites for Mr. James J. Maguire included personal use of Company owned
automobiles; club membership dues and related personal expenses; estate planning services;
matching contributions for plan year 2006 (paid in 2007) under the Companys 401(k) plan;
tax preparation expenses, payment of health insurance premiums in excess of the Company
provided benefit, and Company provided automobile insurance.
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(d)
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|
For 2007, perquisites for Mr. Sean S. Sweeney included payment of personal travel
expenses related to participation in a Company sponsored marketing contest; matching
contributions for plan year 2007 (paid in 2008) under the Companys 401(k) plan; and
Company provided automobile insurance. The only perquisite exceeding the greater of
$25,000 or 10% of total perquisites provided to Mr. Sweeney was a non-accountable expense
allowance ($43,200). The 2007 (credited in 2008) annual discretionary award pursuant to
the Philadelphia Insurance Companies Key Employee Deferred Compensation Plan for Mr.
Sweeney was $63,900.
|
|
|
|
|
For 2006, perquisites for Mr. Sean S. Sweeney included an automobile allowance; club
membership dues; payment of personal travel expenses related to participation in a Company
sponsored Ironman event and marketing contest; matching contributions for plan year 2006
(paid in 2007) under the Companys 401(k) plan; payment of health insurance premiums in
excess of the Company provided benefit, reimbursement of medical expenses not covered by
the Companys health plan and Company provided automobile insurance. The 2006 (credited
in 2007) annual discretionary award pursuant to the Philadelphia Insurance Companies Key
Employee Deferred Compensation Plan for Mr. Sweeney was $46,875.
|
|
|
(e)
|
|
For 2007, perquisites for Mr. Christopher J. Maguire included matching contributions
for plan year 2007 (paid in 2008) under the Companys 401(k) plan and Company provided
automobile insurance. The only perquisite exceeding the greater of $25,000 or 10% of
total perquisites provided to Mr. Christopher J. Maguire was a non-accountable expense
allowance ($43,200). The 2007 (credited in 2008) annual discretionary award pursuant to
the Philadelphia Insurance Companies Key Employee Deferred Compensation Plan for Mr.
Christopher J. Maguire was $63,900.
|
|
|
|
|
For 2006, perquisites for Mr. Christopher J. Maguire included an automobile allowance;
health insurance premiums in excess of the Company provided benefit; matching contributions
for plan year 2006 (paid in
|
24
|
|
|
2007) under the Companys 401(k) plan; club membership dues and
Company provided automobile insurance. The 2006 (credited in 2007) annual discretionary
award pursuant to the Philadelphia Insurance Companies Key Employee Deferred Compensation
Plan for Mr. Christopher J. Maguire was $46,875.
|
Certain of the NEOs have purchased the Companys stock at a discount under the terms of the
Companys Employee Stock Purchase Plans. All salaried employees of the Company are eligible to
purchase Company stock at a discount under such Plans. For further information concerning such
Plans and such purchases, see the portion of the Compensation Discussion and Analysis section above
captioned Long-Term Equity Incentive Compensation and the section of this Proxy Statement
captioned Related Party Transactions.
The Summary Compensation Table includes direct, equity and additional compensation. Employment
Agreements for the Companys Named Executive Officers are described in this Proxy Statement under
Employment Agreements of the NEOs.
A portion of the total cash compensation which is non-equity incentive plan compensation is
based on the Companys performance, as well as the performance of the Named Executive Officers and
certain other factors as described in the section entitled Compensation Discussion and Analysis.
For the Named Executive Officers, total cash compensation as a percentage of total compensation
during 2007 and 2006 was as follows: Mr. Maguire, Jr. 51% and 48%; Mr. Keller 57% and 53%,
Mr. James J. Maguire 100% and 100%; Mr. Sweeney 61% and 52%; Mr. Christopher J. Maguire
53% and 47%. Other than for Mr. James J. Maguire, who did not receive any equity based awards in
2007 or 2006, the percentage of total cash compensation to total compensation for the Named
Executive Officers indicates the emphasis that is placed on equity-based compensation.
The vesting of stock options and stock appreciation rights generally occurs on a five-year
cliff basis. The Companys stock-based compensation plans provide for accelerated vesting only in
cases of death or a change-in-control.
There were no material modifications to the Companys stock-based compensation plans, programs
or practices during 2007 or 2006 except for the grant of SARs and performance share awards instead
of stock options, which stock options had been granted prior to 2006. There were no repricings,
extensions of exercise periods or change of vesting or forfeiture conditions. No Named Executive
Officer had any equity forfeitures.
Grants of Plan-Based Awards
The following table provides information concerning grants of equity and non-equity plan-based
awards to the Named Executive Officers for 2007.
25
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
Securities
|
|
Exercise or
|
|
Grant Date
|
|
|
|
|
|
|
Date of
|
|
Estimated Possible
|
|
Stock
|
|
Underlying
|
|
Base Price of
|
|
Fair Value of
|
|
|
|
|
|
|
Compensation
|
|
Payouts Under Non-Equity
|
|
Awards:
|
|
Stock
|
|
Stock
|
|
Stock
|
|
|
|
|
|
|
Committee Meeting
|
|
Incentive Plan Awards (1)
|
|
Number of
|
|
Appreciation
|
|
Appreciation
|
|
Appreciation
|
|
|
|
|
|
|
at which Grant Was
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units (2)
|
|
Rights (3)
|
|
Rights
|
|
Rights (4) (5)
|
Name
|
|
Grant Date
|
|
Approved
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
($/Sh)
|
|
($)
|
James J. Maguire, Jr.
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
400,000
|
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,577
|
|
|
|
47.52
|
|
|
|
956,576
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,260
|
|
|
|
|
|
|
|
|
|
|
|
249,955
|
|
|
Craig P. Keller
|
|
|
|
|
|
|
|
|
|
|
68,750
|
|
|
|
275,000
|
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,319
|
|
|
|
47.52
|
|
|
|
498,745
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,498
|
|
|
|
|
|
|
|
|
|
|
|
166,225
|
|
|
James J. Maguire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean S. Sweeney
|
|
|
|
|
|
|
|
|
|
|
68,750
|
|
|
|
275,000
|
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,319
|
|
|
|
47.52
|
|
|
|
498,745
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,498
|
|
|
|
|
|
|
|
|
|
|
|
166,225
|
|
|
Christopher J.
Maguire
|
|
|
|
|
|
|
|
|
|
|
68,750
|
|
|
|
275,000
|
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,319
|
|
|
|
47.52
|
|
|
|
636,130
|
|
|
|
|
2/21/2007
|
|
|
|
2/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,498
|
|
|
|
|
|
|
|
|
|
|
|
166,225
|
|
|
|
|
(1)
|
|
The actual bonus incentive amounts paid for 2007 performance (which amounts were paid in
February 2008) are reported in the Non-Equity Incentive Plan Compensation Column in the
Summary Compensation Table above. See the section of the Compensation Discussion and
Analysis above captioned Annual Incentive Compensation for additional information
concerning these bonuses.
|
|
(2)
|
|
Performance based shares were granted to the Named Executive Officers in 2007 under the
Amended and Restated Employees Stock Incentive and Performance Based Compensation Plan (the
Plan). No performance based shares were awarded to Mr. James J. Maguire. The performance
based shares granted to the Named Executive Officers in 2007 cliff vest on the date, if any,
in 2010 on which the Compensation Committee certifies that the performance goals, for such
vesting have been met, and any such vesting will occur only if the holder is still an employee
of the Company as of such date (unless they vest earlier as a result of a change in control).
Such goals are described above under the section captioned Long-Term Equity Compensation.
|
|
(3)
|
|
Stock appreciation rights were granted to the Named Executive Officers in 2007 under the
Amended and Restated Employees Stock Incentive and Performance Based Compensation Plan (the
Plan). No stock appreciation rights were awarded to Mr. James J. Maguire. The stock
appreciation rights granted to the Named Executive Officers in 2007 are exercisable after the
fifth anniversary from date of grant (unless exercisable earlier as a result of a change of
control or the death of the holder of such rights) and only, if the holder is still an
employee of the Company as of such date, unless termination of employment occurred because of
the holders death.
|
|
(4)
|
|
The Black-Scholes option pricing model was used to estimate the grant date fair value for the
stock appreciation rights awards in this column. The assumptions used to arrive at the
Black-Scholes values are disclosed in Note
|
26
|
|
|
|
|
11 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2007. For stock
appreciation rights granted to the Named Executive Officers in 2007, the Black-Scholes value
was $24.17 for each stock appreciation right granted to Messrs. James J. Maguire, Jr. and
Christopher J. Maguire and $18.95 for each stock appreciation right granted to Messrs. Craig
P. Keller and Sean S. Sweeney.
|
|
(5)
|
|
The amounts in this column for performance based shares are calculated based on SFAS 123R
(excluding estimate of forfeiture) and equal the aggregate dollar amount of compensation
expense related to awards of performance based shares to each of the Named Executive Officers
that was recognized in our 2007 Consolidated Statements of Operation and Comprehensive Income.
No such shares were issued during 2006. Under SFAS 123R, a pro-rata portion of the total
expense at time of grant is recognized over the vesting schedule of the grant. The initial
expense is based on the fair value of such shares as of the date of grant.
|
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information about outstanding stock options, stock appreciation
rights, and restricted stock held by the Named Executive Officers at December 31, 2007.
27
Outstanding Equity Awards at Fiscal Year-End (1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option/SAR Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Awards:
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market or
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
Payout Value
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
|
|
Shares That
|
|
of Unearned
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Shares That
|
|
|
Options
|
|
Options (#)
|
|
Unearned Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Have Not
|
Name
|
|
(#) Exercisable
|
|
Unexercisable (3)
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
Vested ($) (4)
|
James J. Maguire, Jr
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,260
|
|
|
|
206,981
|
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
4.63
|
|
|
|
10/19/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
7.60
|
|
|
|
11/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
8.67
|
|
|
|
1/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
13.40
|
|
|
|
6/4/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
9.94
|
|
|
|
10/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
12.79
|
|
|
|
8/6/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
17.74
|
|
|
|
2/11/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
22.62
|
|
|
|
2/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
33.00
|
|
|
|
2/7/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,577
|
|
|
|
|
|
|
|
47.52
|
|
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig P. Keller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,498
|
|
|
|
137,646
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
13.40
|
|
|
|
6/4/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
10.30
|
|
|
|
3/4/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
10.45
|
|
|
|
3/7/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
12.79
|
|
|
|
8/6/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
17.74
|
|
|
|
2/11/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
22.62
|
|
|
|
2/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
33.00
|
|
|
|
2/7/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,319
|
|
|
|
|
|
|
|
47.52
|
|
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Maguire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean S. Sweeney
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,498
|
|
|
|
137,646
|
|
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
|
|
12.83
|
|
|
|
1/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
13.40
|
|
|
|
6/4/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
12.79
|
|
|
|
8/6/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
17.74
|
|
|
|
2/11/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
22.62
|
|
|
|
2/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
33.00
|
|
|
|
2/7/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,319
|
|
|
|
|
|
|
|
47.52
|
|
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Maguire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,498
|
|
|
|
137,646
|
|
|
|
|
71,448
|
|
|
|
|
|
|
|
|
|
|
|
4.79
|
|
|
|
1/3/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
7.60
|
|
|
|
11/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
8.67
|
|
|
|
1/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
9.93
|
|
|
|
8/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
|
|
12.83
|
|
|
|
1/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
13.40
|
|
|
|
6/4/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
9.94
|
|
|
|
10/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
10.30
|
|
|
|
3/4/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
10.45
|
|
|
|
3/7/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
12.79
|
|
|
|
8/6/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
17.74
|
|
|
|
2/11/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
22.62
|
|
|
|
2/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
33.00
|
|
|
|
2/7/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,319
|
|
|
|
|
|
|
|
47.52
|
|
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
All share and per share amounts with respect to options granted prior to March 1, 2006 were
restated to reflect a two-for-one split of the Companys common stock distributed in November
1997, and a three-for-one split of the Companys common stock distributed in March 2006.
|
28
|
|
|
(2)
|
|
All awards made prior to 2006 were stock options. All awards made in 2007 and 2006 were stock
appreciation rights and performance based shares.
|
|
(3)
|
|
Vesting dates of unvested awards are as follows:
|
|
|
|
|
|
|
(a)
|
|
Mr. James J. Maguire, Jr. 60,000 awards vest on August 6, 2008; 150,000 awards vest
on February 11, 2009; 150,000 awards vest on February 10, 2010; 5,260 awards vest on the
date in 2010 on which the Compensation Committee certifies that the performance goals for
such vesting have been met; 90,000 awards vest on February 7, 2011; 39,577 awards vest on
February 21, 2012.
|
|
|
(b)
|
|
Mr. Craig P. Keller 60,000 awards vest on March 4, 2008; 90,000 awards vest on March
7, 2008; 45,000 awards vest on August 6, 2008; 90,000 awards vest on February 11, 2009;
90,000 awards vest on February 10, 2010; 3,498 awards vest on the date in 2010 on which the
Compensation Committee certifies that the performance goals for such vesting have been met;
60,000 awards vest on February 7, 2011; 26,319 awards vest on February 21, 2012.
|
|
|
(c)
|
|
Mr. Sean S. Sweeney 45,000 awards vest on August 6, 2008; 90,000 awards vest on
February 11, 2009; 90,000 awards vest on February 10, 2010; 3,498 awards vest on the date
in 2010 on which the Compensation Committee certifies that the performance goals for such
vesting have been met; 60,000 awards vest on February 7, 2011; 26,319 awards vest on
February 21, 2012.
|
|
|
(d)
|
|
Mr. Christopher J. Maguire 60,000 awards vest on March 4, 2008; 90,000 awards vest
on March 7, 2008; 45,000 awards vest on August 6, 2008; 90,000 awards vest on February 11,
2009; 90,000 awards vest on February 10, 2010; 3,498 awards vest on the date in 2010 on
which the Compensation Committee certifies that the performance goals for such vesting have
been met; 60,000 awards vest on February 7, 2011; 26,319 awards vest on February 21, 2012.
|
|
|
|
|
(4)
|
|
The number of shares reported is the target number of performance based shares granted in
February 2007. The market value of these shares reflects the Companys common stock price on
the NASDAQ Global Select Market of $39.35 on December 31, 2007.
|
Option Exercises in 2007
The following table provides information about stock options exercised by each Named Executive
Officer during 2007:
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of Shares
|
|
|
|
|
Acquired on
|
|
Value Realized on
|
|
|
Exercise
|
|
Exercise (1)
|
Name
|
|
(#)
|
|
($)
|
James J. Maguire, Jr.
|
|
|
|
|
|
|
|
|
Craig P. Keller
|
|
|
105,000
|
|
|
|
3,710,687
|
|
James J. Maguire
|
|
|
|
|
|
|
|
|
Sean S. Sweeney
|
|
|
156,000
|
|
|
|
5,813,661
|
|
Christopher J. Maguire
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Upon exercise of an option, an individual does not receive cash equal to the amount contained
in the Value Realized on Exercise column of this table until the shares received upon exercise
of an option are sold. The amount contained in such column reflects the difference between
the market price of the Companys Common Stock at the option exercise date and the exercise
price of the options.
|
Nonqualified Deferred Compensation
Under the Philadelphia Insurance Companies Key Employee Deferred Compensation Plan, a select
group of our management, including all of our Named Executive Officers, may choose to defer all or
part of their cash compensation and the Company may also make annual discretionary deferral awards
for the benefit of the plan participants. Each plan participant is permitted to specify one or
more investments from among permissible deemed investment options to be the basis for determining
the gain or loss adjustment applicable to his or her plan deferral
29
account. The portion of a participants plan deferral account attributable to employer
contributions generally will vest over the course of a five year period beginning on the last day
of the first year after the plan year for which the employer contribution was made. A
participants interest in the portion of his or her plan deferral account that is attributable to
employee deferrals is fully vested at all times. A participant may elect to have his or her
elective deferrals allocated to a retirement distribution option or an in-service distribution
option, and once a distribution option is selected, deferrals may not be redirected to another
distribution option. Plan participants may elect to have his or her in-service and retirement
distributions paid in a lump sum or in installment payments. Company incentive awards are always
allocated to the retirement distribution option. Retirement eligibility begins at age 62.
Under the Philadelphia Insurance Companies Executive Deferred Compensation Plan, NEOs and
highly compensated executives designated by our Board of Directors may choose to defer all or part
of their cash compensation. Currently, Mr. James J. Maguire is the sole participant in the Plan.
Each participant is permitted to specify an investment or investments from among permissible
investments to be the basis for determining the gain or loss adjustment applicable to each
participants plan deferral account. The deferred compensation will be paid to the participant or
the participants designated beneficiary in a lump sum on the earlier of the participants
termination of employment with the Company, termination of the Plan, or at such time as the
participant specifies in his or her participation agreement.
The following table provides information about nonqualified deferred compensation for each
Named Executive Officer during 2007:
Nonqualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
|
|
|
|
Aggregate
|
|
|
|
|
Contributions in
|
|
Contributions in
|
|
Aggregate Earnings
|
|
Withdrawals/
|
|
Aggregate Balance
|
|
|
Last FY
|
|
Last FY (2) (3)
|
|
in Last FY
|
|
Distributions
|
|
at Last FYE (1)
|
Name (1)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
James J. Maguire, Jr.
|
|
|
|
|
|
|
68,000
|
|
|
|
181
|
|
|
|
|
|
|
|
413,419
|
|
Craig P. Keller
|
|
|
|
|
|
|
43,125
|
|
|
|
38,732
|
|
|
|
55,189
|
|
|
|
422,403
|
|
James J. Maguire
|
|
|
|
|
|
|
|
|
|
|
(132,946
|
)
|
|
|
437,847
|
|
|
|
1,180,597
|
|
Sean S. Sweeney
|
|
|
|
|
|
|
46,875
|
|
|
|
48,886
|
|
|
|
|
|
|
|
594,031
|
|
Christopher J. Maguire
|
|
|
|
|
|
|
46,875
|
|
|
|
(161
|
)
|
|
|
|
|
|
|
232,237
|
|
|
|
|
(1)
|
|
Aggregate balances at last FYE are calculated pursuant to the Philadelphia Insurance
Companies Key Employee Deferred Compensation Plan, except for Mr. James J. Maguire whose
balance is calculated pursuant to the Philadelphia Insurance Companies Executive Deferred
Compensation Plan.
|
|
(2)
|
|
The amounts in this column vest ratably over five years; any unvested amounts vest in full
upon retirement at age 62 or thereafter.
|
|
(3)
|
|
These amounts were earned in 2006 and credited to the respective NEOs participant account in
2007. The amounts earned in 2007 and credited to the NEOs participant account in 2008 are as
follows: Mr. Maguire, Jr. $80,750, Mr. Keller $63,900, Mr. James J. Maguire $0, Mr.
Sweeney $63,900 and Mr. Christopher J. Maguire $63,900. These amounts are also included
in the All Other Compensation column in the Summary Compensation Table for each NEO.
|
Potential Payments upon Termination or Change in Control
The Company has entered into employment agreements described below under Employment
Agreements of the NEOs with its Named Executive Officers (the NEOs). The employment agreements
require the Company to provide compensation to the NEOs in the event of a termination of employment
without cause, a resignation by the NEO for good reason or a Hostile Change in Control (as
those terms are defined in the employment agreements). The Companys Amended and Restated
Employees Stock Incentive and Performance Based Compensation Plan provides for accelerated vesting
of awards made under such Plan if there is a Change of Control, as that term is
defined in the Plan. Compensation will also be provided to the NEOs as a result of any
transactions which would result in parachute payments under Section 280G of the Internal Revenue
Code of 1986, as
30
amended. Under the terms of each NEOs current employment agreement, and using for this
purpose the 2008 base compensation and target bonuses established for the NEOs, the following table
shows various payments which would be due to the NEOs, assuming their employment was terminated as
of December 31, 2007.
Potential Payments Upon Termination or Change in Control Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Resignation for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
without Cause
|
|
|
Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following a
|
|
|
Following a
|
|
|
|
Termination
|
|
|
Resignation for
|
|
|
Change In
|
|
|
Hostile Change
|
|
|
Hostile Change In
|
|
|
|
without Cause
(1)
|
|
|
Good Reason
(1)
|
|
|
Control
(2)
|
|
|
In Control
(3)
|
|
|
Control
(3)
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Maguire, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
$
|
2,079,000
|
|
|
$
|
2,079,000
|
|
|
|
|
|
|
$
|
3,119,000
|
|
|
$
|
3,119,000
|
|
Benefits Continuation
|
|
|
21,000
|
|
|
|
21,000
|
|
|
|
|
|
|
|
21,000
|
|
|
|
21,000
|
|
Stock Options / SARs /
Performance Shares
(unvested and accelerated)
|
|
|
|
|
|
|
|
|
|
$
|
8,175,000
|
|
|
|
8,175,000
|
|
|
|
8,175,000
|
|
280G Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Mr. Maguire, Jr.
|
|
$
|
2,100,000
|
|
|
$
|
2,100,000
|
|
|
$
|
8,175,000
|
|
|
$
|
11,315,000
|
|
|
$
|
11,315,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig P. Keller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
$
|
1,530,000
|
|
|
$
|
1,530,000
|
|
|
|
|
|
|
$
|
2,295,000
|
|
|
$
|
2,295,000
|
|
Benefits Continuation
|
|
|
21,000
|
|
|
|
21,000
|
|
|
|
|
|
|
|
21,000
|
|
|
|
21,000
|
|
Stock Options / SARs /
Performance Shares
(unvested and accelerated)
|
|
|
|
|
|
|
|
|
|
$
|
9,539,000
|
|
|
|
9,539,000
|
|
|
|
9,539,000
|
|
280G Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,565,000
|
|
|
|
1,565,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Mr. Keller
|
|
$
|
1,551,000
|
|
|
$
|
1,551,000
|
|
|
$
|
9,539,000
|
|
|
$
|
13,420,000
|
|
|
$
|
13,420,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Maguire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
|
|
|
|
$
|
4,000,000
|
|
|
$
|
4,000,000
|
|
Benefits Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options / SARs /
Performance Shares
(unvested and accelerated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Mr. Maguire
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
|
|
|
|
$
|
4,000,000
|
|
|
$
|
4,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean S. Sweeney
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
$
|
1,530,000
|
|
|
$
|
1,530,000
|
|
|
|
|
|
|
$
|
2,295,000
|
|
|
$
|
2,295,000
|
|
Benefits Continuation
|
|
|
21,000
|
|
|
|
21,000
|
|
|
|
|
|
|
|
21,000
|
|
|
|
21,000
|
|
Stock Options / SARs /
Performance Shares
(unvested and accelerated)
|
|
|
|
|
|
|
|
|
|
$
|
5,195,000
|
|
|
|
5,195,000
|
|
|
|
5,195,000
|
|
280G Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Mr. Sweeney
|
|
$
|
1,551,000
|
|
|
$
|
1,551,000
|
|
|
$
|
5,195,000
|
|
|
$
|
7,511,000
|
|
|
$
|
7,511,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Maguire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Compensation
|
|
$
|
1,530,000
|
|
|
$
|
1,530,000
|
|
|
|
|
|
|
$
|
2,295,000
|
|
|
$
|
2,295,000
|
|
Benefits Continuation
|
|
|
21,000
|
|
|
|
21,000
|
|
|
|
|
|
|
|
21,000
|
|
|
|
21,000
|
|
Stock Options / SARs /
Performance Shares
(unvested and accelerated)
|
|
|
|
|
|
|
|
|
|
$
|
9,539,000
|
|
|
|
9,539,000
|
|
|
|
9,539,000
|
|
280G Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,458,000
|
|
|
|
1,458,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Mr. C Maguire
|
|
$
|
1,551,000
|
|
|
$
|
1,551,000
|
|
|
$
|
9,539,000
|
|
|
$
|
13,313,000
|
|
|
$
|
13,313,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Amount of
Payments referred to
above
|
|
$
|
7,753,000
|
|
|
$
|
7,753,000
|
|
|
$
|
32,448,000
|
|
|
$
|
49,559,000
|
|
|
$
|
49,559,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
(1)
|
|
The terms cause and good reason are as defined in the employment agreements of the NEOs
described below under Employment Agreements of the NEOs.
|
|
(2)
|
|
Change in Control is defined under the Companys Amended and Restated Employees Stock
Incentive and Performance Based Compensation Plan. It means the date on which individuals who
are Continuing Directors cease to constitute a majority of the members of the Board of
Directors of the Company. For these purposes Continuing Directors are the members of the
Board on the date such Plan was adopted, provided that any person becoming a member of the
Board subsequent to such date whose election or nomination for election was supported by two
thirds of those directors who were Continuing Directors at that time of the election or
nomination shall be deemed to be a Continuing Director. In addition, a Change in Control shall
be deemed to occur on the first to occur of (a) approval by the Companys shareholders (or by
the Board, if shareholder action is not required) of any arrangement as a result of which the
Company will be dissolved or liquidated, a definitive agreement to sell or otherwise dispose
of substantially all of the assets of the Company or the approval of certain mergers or
consolidations; or (b) acquisition by any entity, person or group (other than Company or any
employee benefit plan sponsored or maintained by the Company or any person who, on the date of
the Plan adoption, was the beneficial owner of, or had voting control over, shares of common
stock of the Company possessing more than 15% of the aggregate voting power of the Companys
outstanding stock) shall have become the beneficial owner of, or shall have obtained voting
control over, shares having more than 50% of the voting power of the Companys outstanding
stock.
|
|
(3)
|
|
The term Hostile Change in Control is defined in the employment agreements of the NEOs, and
means a situation in which individuals who are Continuing Directors cease to constitute a
majority of the members of the Board of Directors of the Company. For this purpose,
Continuing Directors are members of the Board on the date of the employment agreement,
provided that any person becoming a member of the Board subsequent to such date whose election
or nomination for election was supported by two-thirds of those directors who were Continuing
Directors at the time of the election or nomination shall be deemed to be a Continuing
Director.
|
Cash Compensation
The following annual base salary and target bonuses are currently in effect and were used for
the purposes of preparing the table shown above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
Target Bonus
|
|
|
|
James J. Maguire, Jr.
|
|
$
|
577,000
|
|
|
$
|
462,000
|
|
|
|
|
Craig P. Keller
|
|
$
|
456,750
|
|
|
$
|
308,300
|
|
|
|
|
James J. Maguire
|
|
$
|
1,000,000
|
|
|
None
|
|
|
|
|
Sean S. Sweeney
|
|
$
|
456,750
|
|
|
$
|
308,300
|
|
|
|
|
Christopher J. Maguire
|
|
$
|
456,750
|
|
|
$
|
308,300
|
|
The amounts set forth in the table also assume that the payments required to be made to the
NEO following a termination without cause or a resignation for good reason, as set forth in
Employment Agreements of the NEOs above, are paid in a lump sum.
Benefits Continuation
In the event the NEO is terminated either (i) by the Company for any reason other than Cause,
or (ii) by the NEO for Good Reason, the Company shall continue to provide employer-paid group
health and dental insurance coverage for the NEO for eighteen (18) months, with the exception of
Mr. James J. Maguire. The annual amount of this coverage for each NEO is approximately $14,000.
Vesting of Stock Options, SARs and Performance Shares
The Companys plans under which outstanding stock options, SARs and performance shares were
granted provide that, in the event of a Change in Control, all unvested stock options, SARs and
performance shares that are outstanding shall become vested. Amounts listed in the table represent
the intrinsic value of unvested and accelerated stock options, SARs and performance shares as of
December 31, 2007.
32
280G Tax Gross-Up
In the event of a discharge or resignation following a Change in Control and pursuant to
Section 4999 of the Code, payments made to the NEOs may be subject to certain excise taxes.
|
|
|
The Company will reimburse Mr. James J. Maguire for all excise taxes that are imposed
by Section 4999, as well as any income and excise taxes that are payable as a result of
such reimbursement.
|
|
|
|
|
The Company will reimburse each of the other NEOs for such excise taxes and any income
taxes resulting from the reimbursement, only if the aggregate present value of such NEOs
parachute payments exceeds 110% of 2.99 times the NEOs base amount determined under
Section 280G of the Code. If the aggregate present value of the parachute payments is in
excess of three times the base amount, but not in excess of 110% of 2.99 times the base
amount, the cash severance will be reduced so that the aggregate present value does not
exceed 2.99 times the base amount.
|
The parachute values relating to the unvested and accelerated stock options and SARs were
calculated using the intrinsic value as of December 31, 2007.
The calculation of the 280G tax gross-up amount is based on a Section 280G excise tax rate of
20%, federal income tax rate of 35%, state income tax rate of 3.07% and Medicare tax rate of 1.45%.
For purposes of the 280G calculation, it is assumed that cash severance amounts are paid as a lump
sum and no amounts will be deemed to be attributable to the NEOs restrictive covenants.
Employment Agreements of the NEOs
James J. Maguire, Jr., Sean S. Sweeney, Craig P. Keller and Christopher J. Maguire each have
employment agreements which include the following terms, as well as various confidentiality,
non-competition and restrictive covenant provisions:
Annual Base Salary
. Mr. Maguire Jr. is entitled to annual base salary of $550,000. Each of
Messrs. Sweeney, Keller and Christopher J. Maguire is entitled to annual base salary of $435,000.
The Company may review annual base salary periodically and may increase it, in the sole discretion
of the Company.
Benefits
. Mr. Maguire Jr. is entitled to group health, disability, life insurance and any
other perquisites determined by the Compensation Committee and/or Board of Directors of the
Company. Messrs. Sweeney, Keller and Christopher J. Maguire are entitled to all group health,
disability, life insurance, 401(k) and other perquisites that are available to similarly situated
employees.
Term
. The term of each agreement is five years, but will be extended an additional three
years in the event of a hostile change in control. Under the agreements, a hostile change of
control occurs when continuing directors no longer constitute a majority of the members of the
Board of Directors of the Company. For this purpose, a continuing director is an individual who
was a director on February 20, 2007 and any person who becomes a director after that date whose
election or nomination for election is supported by two-thirds of the directors who are continuing
directors at the time of the election or nomination.
Termination of Employment.
The Compensation Committee approved the severance provisions
described below for Messrs. Maguire, Jr., Sweeney, Keller and Christopher J. Maguire based on
recommendations from Hay Group as to what is competitive in the marketplace.
|
|
Discharge Without Cause or Resignation for Good Reason
. If the NEOs employment is
terminated by the Company without cause, or by the NEOs resignation for good reason, as those
terms are defined in the employment agreements, the NEO is entitled to receive his base
compensation and any target bonus for 24 months, if the termination occurs other than after a
hostile change in control, and for 36 months if the termination occurs following a hostile change
in control. The Company also will pay any
earned but unpaid deferred compensation and bonus for services during the prior year,
according to the relevant plan. In addition, the Company will pay a portion of the premiums for
the NEOs group health and dental plans pursuant to COBRA for 18 months.
|
33
As a condition of
receiving these benefits, the NEO must execute an agreement providing for the general release of
the Company of all claims arising out of the NEOs employment, other than claims for payment of
salary or benefits, unless the Company waives this requirement or termination of employment follows
a hostile change in control.
|
|
Discharge
with Cause or Resignation Without Good Reason
. The Company is not obligated to
pay any amounts or provide any benefits for the period after the Company discharges an NEO for
cause or the NEO resigns without good reason.
|
Excess Parachute Payment Provisions
. The employment agreements for Messrs. Maguire, Jr.,
Sweeney, Keller and Christopher J. Maguire generally provide for a reduction, also referred to as a
cutback, in the payments that would otherwise be treated as excess parachute payments for
purposes of Section 280G of the Internal Revenue Code. The cutback is an amount sufficient to
reduce the total of the NEOs parachute payments, as determined under Section 280G of the Internal
Revenue Code, so that they will not exceed 2.99 times the NEOs base amount. The base amount
is generally equal to the NEOs average annual taxable compensation from the Company for the five
years before the year in which the change of control transaction occurs. The cutback does not,
however, apply if the amount of the NEOs parachute payments would exceed 110% of 2.99 times the
NEOs base amount, and in that situation the NEO is entitled to receive an additional payment
designed to reimburse the NEO on a net, after-tax basis, for the excise taxes imposed on the NEOs
excess parachute payments under Section 4999 of the Internal Revenue Code.
James J. Maguires employment agreement includes the following terms, as well as various
confidentiality, non-competition and restrictive covenant provisions:
Annual Base Salary.
Mr. Maguire receives annual base compensation of $1,000,000. The Company
may reduce his annual base compensation to an amount not less than $600,000 during any extended
term of the agreement. The Compensation Committee set Mr. Maguires current annual base
compensation at a level significantly higher than the other NEOs for the following reasons: Mr.
Maguire founded the Company and was the Companys President and CEO until October 2002.
Consequently, Mr. Maguire has had significantly more experience with the Company and the insurance
industry than any other NEO, and continues to take an active role in the determination of various
Company policies. He also advised the Company during the course of the negotiation of his
Employment Agreement that he did not expect to receive equity awards from the Company in the
future. In addition, the Company was advised by an independent executive compensation consulting
firm that, in such firms view, the terms of Mr. Maguires employment agreement were within normal
market practice and appropriate.
Bonus
. The Agreement provides that the Company will pay Mr. Maguire a bonus of $2,000,000 if
the closing price of the Companys common stock on any five consecutive trading days is equal to or
greater than $80 per share, adjusted for any stock splits, and if Mr. Maguire is still an employee
of the Company at that time. These conditions were met as of May 17, 2005. The bonus is payable
by the Company six months and one day after Mr. Maguires employment is terminated.
Benefits
. Mr. Maguire and his wife are entitled to all group health, disability, life
insurance and pension benefits as are available to employees of the Company generally. Mr. Maguire
also is entitled to the use of three automobiles, at the Companys expense, and to reimbursement of
his country club dues and monthly expenses. Mr. Maguire is also entitled to a non-accountable
expense allowance of no less than $52,650 per year.
Term
. The term of the Agreement expires December 31, 2008, during which Mr. Maguire will
serve as Chairman of the Companys Board of Directors. The Company has the option, exercisable
during 2008, to extend the term by up to five additional years. The term will extend for an
additional three years in the event of a hostile change of control. During any extended term, Mr.
Maguire may elect to perform his duties as a non-employee Chairman.
34
Termination of Employment
.
|
|
|
|
|
Discharge Without Cause or Resignation for Good Reason
. If Mr. Maguires employment is
terminated by the Company without cause and for reasons unrelated to his death or disability, or by
Mr. Maguires resignation for good reason within 12 weeks of the occurrence of the event on which
Mr. Maguire relies in claiming his resignation is for good reason, as those terms are defined in
the agreement, then Mr. Maguire is entitled to receive his base compensation for the lesser of (1)
36 months, or 48 months in the event of a hostile change in control, or (2) the remainder of the
term of his employment agreement, but in no event less than six months. The Company will pay these
benefits in accordance with its regular payroll practices then in effect. As a condition of
receiving these benefits, Mr. Maguire must execute a general release, unless the Company waives the
release requirement or termination of employment follows a hostile change in control. The 36/48
period referred to above is longer than the 24/36 month period during which the other NEOs could be
entitled to receive severance compensation, in part because Mr. Maguires employment agreement does
not provide for any annual bonus. As noted above, an independent compensation consulting firm
advised the Company that, in such firms view, the terms of Mr. Maguires employment agreement were
within normal market practice and appropriate.
|
|
|
|
Discharge
with Cause or Resignation Without Good Reason
. The Company is not obligated to
pay any amounts or provide any benefits for the period after the Company discharges Mr. Maguire for
cause, Mr. Maguire resigns without good reason or more than 12 weeks after the event on which he
relies for claiming resignation was for good reason.
|
Excess Parachute Payment Provisions.
Mr. Maguires employment agreement provides that if he
becomes entitled to payments or benefits that are considered to be excess parachute payments, as
described above, the Company will make additional payments to him to provide him with a gross up
for his excess parachute excise taxes. Mr. Maguires entitlement to this payment applies without
regard to any termination of his employment agreement.
Directors Compensation
For 2007, non-employee directors received annual compensation of $36,000, plus $2,000 for each
Board meeting attended and $1,500 for each Committee meeting attended, except for the Chairpersons
of the Nominating, Compensation and Investment Committee, who each received $2,000 for each
Committee meeting attended, and the Chairperson of the Audit Committee, who received $2,250, for
each Committee meeting attended. Non-employee directors may designate a portion of their fees to
be used for the purchase of shares of the Companys common stock under the terms of the
Philadelphia Insurance Companies Directors Stock Purchase Plan. Each non-employee director also
received, as part of the directors compensation, an annual grant of restricted shares of common
stock of the Company having three-year cliff vesting and a valuation equal to $20,000.
The following table provides information about compensation paid to the Companys directors
for 2007:
Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
Stock
|
|
All other
|
|
|
|
|
Paid in Cash (3)
|
|
Awards (4)
|
|
Compensation (5)
|
|
Total
|
Name (1)(2)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Aminta Hawkins Breaux
|
|
|
61,492
|
|
|
|
6,385
|
|
|
|
4,700
|
|
|
|
72,577
|
|
Michael J. Cascio
|
|
|
73,986
|
|
|
|
6,385
|
|
|
|
13,483
|
|
|
|
93,854
|
|
Elizabeth H. Gemmill
|
|
|
78,626
|
|
|
|
6,385
|
|
|
|
14,349
|
|
|
|
99,360
|
|
Paul R. Hertel, Jr.
|
|
|
14,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,000
|
|
Michael J. Morris
|
|
|
59,500
|
|
|
|
6,385
|
|
|
|
0
|
|
|
|
65,885
|
|
Shaun F. OMalley
|
|
|
66,200
|
|
|
|
6,385
|
|
|
|
8,686
|
|
|
|
81,271
|
|
Donald A. Pizer
|
|
|
65,575
|
|
|
|
6,385
|
|
|
|
3,897
|
|
|
|
75,857
|
|
Ronald R. Rock
|
|
|
65,004
|
|
|
|
6,385
|
|
|
|
11,755
|
|
|
|
83,144
|
|
35
|
|
|
(1)
|
|
Messrs. Maguire, Jr., Maguire and Sweeney are not included in this table, because they were
employees of the Company during 2007 and thus received no compensation for their services as
director. The compensation they received as employees of the Company is shown in the Summary
Compensation Table.
|
|
(2)
|
|
The aggregate number of stock awards outstanding at fiscal year end amounted to: 1,068 stock
awards for each of Ms. Breaux, Ms. Gemmill, and Messrs. Cascio and Pizer; 1,015 stock awards for
Mr. Rock; and 882 stock awards for Messrs. Morris and OMalley. Mr. Hertel, Jr. did not have any
outstanding stock awards at fiscal year. There are no option awards outstanding at fiscal year end
for any director.
|
|
(3)
|
|
Includes fees paid in cash and amounts which were not received in cash but were used for
purchases under the Companys Director Stock Purchase Plan.
|
|
(4)
|
|
The amounts in this column are calculated based on SFAS 123R (excluding estimate of
forfeiture) and equal the financial statement compensation expense as reported in our 2007
Consolidated Statements of Operations and Comprehensive Income for the Companys fiscal year ended
December 31, 2007. Each director received a restricted stock unit grant in 2007 of 450 units, with
an SFAS 123R full grant value of $19,989, except for Mr. Hertel, Jr. who did not receive a
restricted stock grant in 2007.
|
|
(5)
|
|
Non-employee directors may elect to have any portion of his or her fees used to acquire shares
of the Companys common stock under the terms of the Philadelphia Insurance Companies Directors
Stock Purchase Plan each calendar month at the lesser of 85% of the fair market value of a share of
the Companys common stock on the first business day of the calendar month or the purchase date
(last business day of the calendar month). The amounts in this column represent the compensation
cost of these purchase rights in 2007 computed in accordance with SFAS 123R.
|
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
|
|
remaining available for
|
|
|
|
|
|
|
|
|
|
|
|
future issuance under
|
|
|
|
Number of securities to
|
|
|
Weighted-average
|
|
|
equity compensation
|
|
|
|
be issued upon exercise
|
|
|
exercise price of
|
|
|
plans (excluding
|
|
|
|
of outstanding options,
|
|
|
outstanding options,
|
|
|
securities reflected in
|
|
|
|
warrants and rights
(1)
|
|
|
warrants and rights
(1)
|
|
|
column (a))
(1)
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans approved by
security holders
|
|
|
7,787,187
|
|
|
$
|
18.85
|
|
|
|
7,950,873
|
(2)
|
Equity compensation
plans not approved
by security holders
|
|
|
|
|
|
|
|
|
|
|
381,861
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,787,187
|
|
|
$
|
18.85
|
|
|
|
8,332,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Restated to reflect a three-for-one split of the Companys common stock distributed on
March 1, 2007.
|
|
(2)
|
|
Includes 2,835,061, 592,899, 4,467,018 and 55,895 shares of the Companys common stock
available for future issuance under the Companys Non-Qualified Employee Stock Purchase Plan,
Employee Stock Purchase Plan, Amended and Restated Employees Stock Incentive and Performance
Based Compensation Plan and Directors Stock Purchase Plan, respectively.
|
|
(3)
|
|
These shares of the Companys common stock are available for future issuance under a stock
purchase plan for the Companys eligible Preferred Agents approved by the Companys Board of
Directors. Under this Plan the Companys eligible Preferred Agents may purchase shares of
the Companys common stock during 30 day offering periods as designated by the Companys
Preferred Agent Committee at a per share price equal to 85% of the lesser of the fair market
value of a share of the Companys common stock on the first business
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day of the offering
period or the last day of the offering period. Any shares purchased pursuant to the Plan are
restricted for a period of two-years, measured from the first day of the relevant offering
period, and no eligible Preferred Agent is permitted to purchase shares under the plan during
any three consecutive calendar years having an aggregate value in excess of $100,000.
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37
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the Audit Committee) is comprised of the three
directors named below. Each member of the Audit Committee is an independent director, as defined
under the listing standard Rule 4200(a)(14) of the Nasdaq Stock Market Inc. Marketplace rules. The
Audit Committee has adopted a written charter which has been approved by the Board of Directors.
The Audit Committee has reviewed and discussed the Companys audited financial statements with
management, which has primary responsibility for the financial statements. PricewaterhouseCoopers
LLP, the Companys independent registered public accounting firm for 2007, is responsible for
expressing an opinion on the conformity of the Companys audited financial statements with
generally accepted accounting principles. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the matters that are required to be discussed by Statement on Auditing
Standards No. 61, as amended (AICPA Professional Standards Vol 1). PricewaterhouseCoopers LLP has
provided to the Audit Committee the written disclosures and the letter required by Independence
Standards Board Standard No. 1 (
Independence Discussions with Audit Committees
), and the Audit
Committee has discussed with PricewaterhouseCoopers LLP such accounting firms independence. The
Audit Committee also considered whether PricewaterhouseCoopers LLPs provisions of non-audit
services are compatible with PricewaterhouseCoopers LLPs independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board
of Directors that the audited financial statements be included in the Companys Annual Report on
Form 10-K for 2007.
The foregoing report is provided by the following independent directors, who constitute the Audit
Committee:
Donald A. Pizer, Chairperson
Michael J. Morris
Shaun F. OMalley
Principal Accountant Fees and Services
Pre-Approval Policy for Services of Independent Registered Public Accounting Firm
The Committee is required to preapprove all audit and non-audit services provided by the
independent registered public accounting firm, both as to the permissibility of the independent
registered public accounting firm performing such services and to the amount of fees to be paid in
connection therewith, subject to certain de minimis exceptions for which the Committees approval
is required prior to completion of the audit. The Committee may delegate preapproval authority to
one or more of its members when appropriate, provided that the decisions of such members to grant
preapprovals shall be presented to the full Committee at its next scheduled meeting. Policies and
procedures for the pre-approval of audit and permissible non-audit services must be detailed as to
the particular service. The Committee must be informed of each service rendered pursuant to any
such policies or procedures.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
Fees for all services provided by PricewaterhouseCoopers LLP, the Companys independent registered
public accounting firm, for fiscal years 2007 and 2006 are as follows:
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Audit Fees
: Audit fees billed for fiscal years 2007 and 2006 were $705,000 and $582,805,
respectively, and were for audits of financial statements, review of quarterly financial
statements and reviews of certain periodic reports filed with the SEC.
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Audit Related Fees
: Audit related fees billed for fiscal years 2007 and 2006 were $0 and
$21,500, respectively, and were for miscellaneous workpaper and due diligence reviews.
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Tax Fees
: Tax fees billed for fiscal years 2007 and 2006 were $35,250 and $25,000,
respectively, and were principally for tax compliance and planning services and tax
examination assistance.
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All Other Fees
: All other fees billed for fiscal years 2007 and 2006 were $24,290 and
$40,700, respectively, and were principally for compensation consulting services and audit
review services.
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38
All of the services referred to in the last three paragraphs were preapproved by the Audit
Committee.
The Audit Committee has considered whether the provision of other services by the independent
registered public accounting firm is compatible with maintaining such firms independence.
PROPOSAL 2 APPROVAL OF AN AMENDMENT TO THE COMPANYS ARTICLES OF INCORPORATION TO ADOPT A MAJORITY
VOTE STANDARD FOR UNCONTESTED ELECTIONS OF DIRECTORS AND ELIMINATE CUMULATIVE VOTING IN ELECTIONS
OF DIRECTORS
The Board has determined that it would be in the best interests of the Company and its
shareholders to require that a nominee for director in an uncontested election receive a majority
of the votes cast at a shareholders meeting in order to be elected to the Board. An uncontested
election is one in which the number of nominees for director do not exceed the number of directors
to be elected. The Board believes that cumulative voting is incompatible with a majority vote
standard, and therefore recommends that the Companys Articles of Incorporation, as amended (the
Articles) be amended to add a provision eliminating cumulative voting.
Under the applicable provisions of the Pennsylvania Business Corporation Law (the PABCL), a
corporations shareholders have the right to vote their shares on a cumulative basis in the
election of directors, unless the corporations Articles of Incorporation contain a provision
eliminating that right. The Companys Articles do not include such a provision. As a result,
currently each holder of the Companys common stock may cast a number of votes equal to the number
of shares of common stock held, multiplied by the number of directors to be elected. A shareholder
may cast all of such votes for one candidate or may distribute such votes among as many candidates
as the shareholder chooses.
This proposal would eliminate cumulative voting in order to facilitate adoption of the
majority vote standard for the election of directors, as described below. The Board has set the
current number of directors at eleven. The proposal would not change the present number of
directors, and the Board would retain the authority to change that number and to fill any vacancies
or newly created directorships without shareholder approval.
Background of Proposal
The Board is seeking to eliminate cumulative voting because it believes that a change to a
majority vote standard in uncontested elections would be in the best interests of shareholders at
this time, and it views cumulative voting as incompatible with a majority vote standard for
directors.
Currently, the directors are elected by plurality vote. Under a plurality voting standard,
the nominees for director receiving the most for votes are elected, regardless of how many for
votes such nominees receive. For example, if the owners of 99% of the shares withhold authority
to vote for a director nominee, a vote for such nominee by the remaining 1% of shares would
result in such nominees election or re-election to the Board. Under a majority voting standard,
the number of for votes cast in favor of a nominee must be greater than the number of votes cast
against such nominee in order for such nominees to be elected. In the event of a contested
election, a plurality voting standard will still apply. This is because in a contested election
the number of nominees receiving a majority of for votes could be less than the number of
nominees, and it is possible that in such an election no nominee would receive such a majority.
The Board believes that the proposed majority vote standard for uncontested elections is
appropriate at this time. The Board also believes that cumulative voting is not compatible with a
majority voting standard and, therefore, that elimination of cumulative voting is desirable in
connection with the adoption of the majority vote standard. Cumulative voting enables one or more
shareholders owning less than a majority of the outstanding shares to cumulate their votes and
elect one or more directors, if they own enough shares. For example, a shareholder owning
approximately 9.2% of the outstanding shares could elect one director if eleven directors are to be
elected if all of the outstanding shares are voted in the election of directors. The directors so
elected could seek to support the interests of the shareholder or shareholders that elected them.
This could create division among Board members and reduce the Boards ability to operate
effectively as a governing body in the interests of all of the Companys shareholders.
39
The Board believes that each nominee should be elected by the shareholders in an uncontested
election only if such nominee receives a majority of the votes cast. The elimination of cumulative
voting for directors and adoption of a majority vote standard is consistent with the Companys
desire to more closely align shareholder interests and Board accountability. Accordingly, the
Board determined that the adoption of a majority vote standard for uncontested elections and the
elimination of cumulative voting for directors is appropriate.
Based on the foregoing, the Board of Directors adopted a resolution proposing an amendment to
the Articles to adopt a majority vote standard for uncontested elections of directors and to
eliminate cumulative voting in elections of directors. This amendment would add to the Articles
the following Article 7:
7. The shareholders of the Corporation shall not have the right to cumulate their votes in
the election of directors of the Corporation. At each election of directors of the Corporation by
the shareholders, a nominee for election as director shall be elected to the Board of Directors if
the number of votes cast for such nominees election exceeds the number of votes cast against such
nominees election; provided, however, that if at any election of directors the number of nominees
for election as directors exceeds the number of directors to be elected, the candidates for
election as directors receiving the highest number of votes from the shareholders (or, if
applicable, from each class or group of classes entitled to elect directors separately), up to the
number of directors to be elected by the shareholders (or, if applicable, such class or group of
classes) shall be elected.
Because under the PABCL a director is elected for a term to continue until the directors
successor is duly elected and qualified, if this proposal to amend the Companys Articles is
approved, the Board will adopt a bylaw requiring an incumbent director who has received more
against than for votes in an uncontested election to submit such directors resignation to the
Board. Such resignation would be considered by the Companys Governance and Nominating Committee
and the Board, without the participation of such incumbent director. If the Committee recommends
that the Board accept the tendered resignation, the Committee would also recommend to the Board
whether to fill the vacancy resulting from the resignation or to reduce the size of the Board.
In considering a tendered resignation, the Committee would be authorized to consider all
factors it deems relevant to the best interests of the Company. These could include:
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what the Committee believes to be the underlying reasons for the failure of the
incumbent director to be re-elected; including whether these reasons relate to the
incumbent directors performance as a director, whether these reasons relate to the Company
or another company, and/or whether these reasons are curable;
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the directors past and expected future contributions to the Company; and
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the overall composition of the Board, including whether accepting the resignation could
cause the Company to fail to meet any applicable requirements of the Securities and
Exchange Commission or NASDAQ.
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The Board would be required to act on the recommendation of the Committee within ninety 90
days following certification of the vote for the shareholders meeting at which the incumbent
director was not re-elected. In considering the Committees recommendation, the Board would be
authorized to consider the matters considered by the Committee and such additional matters as the
Board deems relevant to the best interests of the Company.
The Board of Directors recommends a vote FOR approval of the amendment to the Companys Articles
of Incorporation to adopt a majority vote standard for uncontested elections of directors and
eliminate cumulative voting in elections of directors
PROPOSAL 3 APPROVAL OF AN AMENDMENT TO THE COMPANYS ARTICLES OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON SHARES
The Articles currently authorize the issuance by the Company of 100,000,000 shares of common
stock (as well as 10,000,000 shares of preferred stock). As of March 7, 2007, the Company had
outstanding 72,024,555 shares of common stock and options to purchase additional 6,289,080 shares
of common stock. Upon review of the Companys current capital structure, the Board of Directors
adopted a resolution proposing an amendment to the Articles to increase the authorized number of shares of common stock to
125,000,000 shares.
Under this amendment, the first sentence of Article 5 of the Articles would be amended and
restated to read in its entirety as follows:
The aggregate number of shares which the corporation shall have authority to issue is
125,000,000 shares of Common Stock no par value, and 10,000,000 shares of Preferred Stock with a
par value of $.01 per share.
While there are no current plans to issue additional shares of common stock beyond the limits
currently authorized by the Articles, this proposal would permit the Company to maintain the
flexibility of having sufficient authorized common stock for possible stock and convertible debt or
equity offerings, acquisitions, stock splits, stock dividends and other corporate purposes.
The Board of Directors recommends a vote FOR approval of the amendment to the Companys Articles
of Incorporation to increase the authorized common shares
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PROPOSAL 4 APPROVAL OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Subject to the shareholders approval, the Board of Directors has appointed the firm of
PricewaterhouseCoopers LLP, which served as the Companys independent registered public accounting
firm for the year 2007, to serve as the Companys independent registered public accounting firm for
the year 2008. If the shareholders do not approve this appointment by the affirmative vote of a
majority of the votes cast at the meeting by the shareholders entitled to vote, other independent
registered public accounting firms will be considered by the Board.
A representative of PricewaterhouseCoopers LLP is expected to be present at the meeting and
will have the opportunity to make a statement if the representative desires to do so. The
representative is also expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR approval of the appointment of
PricewaterhouseCoopers LLP as the Companys Independent Registered Public Accounting Firm.
41
PROPOSALS OF SHAREHOLDERS
It is currently contemplated that the Companys 2009 Annual Meeting of Shareholders will be
held on May 1, 2009. Proposals of shareholders intended to be presented at the Annual Meeting of
Shareholders in 2009 must be received by December 19, 2008 in order to be considered for inclusion
in the Companys Proxy Statement and form of proxy related to that meeting. Shareholder proposals
should be directed to the President of the Company at the address of the Company set forth on the
first page of this Proxy Statement. A proposal that does not comply with the applicable
requirements of Rule 14a-8 under the 1934 Act will not be included in the Companys proxy
soliciting material for the 2009 Annual Meeting of Shareholders.
A shareholder of the Company may wish to have a proposal presented at the 2009 Annual Meeting
of Shareholders but not to have the proposal included in the Companys Proxy Statement and form of
proxy relating to that meeting. If notice of any such proposal (addressed to the President of the
Company at the address of the Company set forth on the first page of this Proxy Statement) is not
received by the Company by March 3, 2009, then such proposal shall be deemed untimely for
purposes of Rule 14a-4(c) promulgated under the 1934 Act and, therefore, the individuals named in
the proxies solicited on behalf of the Board of Directors of the Company for use at the Companys
2009 Annual Meeting of Shareholders will have the right to exercise discretionary voting authority
as to that proposal.
A shareholder may recommend a person as a nominee for director by writing to the President of
the Company at the address of the Company set forth on the first page of this Proxy Statement.
Recommendations must be received by February 14, 2009, but not before January 15, 2009, in order
for a candidate to be considered by the Companys Governance and Nominating Committee for election
at the 2009 Annual Meeting. As set forth in the Companys By-Laws, each notice of nomination
should contain the following information: (a) the name and address of the shareholder who intends
to make the nomination and of the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) the address and principal occupation for the past five years of each nominee;
and (d) the written consent of each nominee to serve as a director of the Company if so elected.
HOUSEHOLDING ISSUES
The SEC permits companies and intermediaries (such as brokers and banks) to satisfy delivery
requirements for proxy statements and annual reports with respect to two or more shareholders
sharing the same address by delivering a single proxy statement and annual report to those
shareholders. This process, which is commonly referred to as householding, is intended to reduce
the volume of duplicate information shareholders receive and also reduce expenses for companies.
While the Company does not utilize householding, we understand that one or more intermediaries will
be householding the Companys proxy materials and annual report. If you hold your shares of the
Companys stock through one of these intermediaries, a single proxy statement and annual report may
have been sent to multiple shareholders in your household. We will promptly deliver a separate
copy of each of these documents to you if you send a written request to us at the address appearing
on the first page of this Proxy Statement to the attention of our Secretary or if you telephone us
at (610) 617-7626. If you hold your shares of the Companys stock through an intermediary and you
want to receive separate copies of our proxy statement and annual report in the future, you should
contact your bank, broker or other nominee record holder. If you currently receive multiple copies
of the proxy statement and annual report and you would like to receive only one copy for your
household in the future, you should contact your broker, bank or other nominee record holder, or
you may write to us at the address appearing on the first page of this Proxy Statement to the
attention of our Secretary.
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Directions to Philadelphia City Line Hilton Hotel
From NY & NJ (Points North): Take NJ Turnpike South to Exit 6 (Pennsylvania Turnpike). Follow
to Exit 20, I-476 South (Mid County/Philadelphia/Chester). Please NOTE: Exit 20 Follows Fort
Washington Exit #339 (Exit #s do not follow in sequential order with other exits). Continue on
I-476 south to Exit 16, I-76 East (Philadelphia). Follow to Exit 339 (City Avenue) Hotel is on left
at 4th light.
From South Jersey/Atlantic City: Take NJ Turnpike to Exit 3 or Atlantic City Expressway;
follow signs for Philadelphia/Walt Whitman Bridge to I-76 West (Valley Forge). Follow to Exit 339
(City Avenue) hotel is on left at 4th light.
From Washington DC & Baltimore (Points South): Take I-95 North to Philadelphia. Follow to Exit
13, I-76 West (Valley Forge). Follow to Exit 339 (City Avenue) hotel is on left at 4th light.
From Harrisburg (Points West): Take Pennsylvania Turnpike East (I-76) to Exit 326 (Valley
Forge). Continue on I-76 East to Philadelphia. Follow to Exit 339 (City Avenue) hotel is on left
at 4th light.)
43
ANNUAL MEETING OF SHAREHOLDERS OF PHILADELPHIA CONSOLIDATED HOLDING CORP. May 16, 2008 Please date,
sign and mail your proxy card in the envelope provided as soon as possible. Please detach along
perforated line and mail in the envelope provided. 21130303000000000000 7 051608 THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2, 3 AND 4. PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK
AS SHOWN HERE x 1. Election of Directors: NOMINEES: FOR ALL NOMINEES O Aminta Hawkins Breaux O
Michael J. Cascio WITHHOLD AUTHORITY O Elizabeth H. Gemmill FOR ALL NOMINEES O Paul R. Hertel, Jr.
O James J. Maguire FOR ALL EXCEPT O James J. Maguire, Jr. (See instructions below) O Michael J.
Morris O Shaun F. OMalley O Donald A. Pizer O Ronald R. Rock O Sean S. Sweeney INSTRUCTIONS: To
withhold authority to vote for any individual nominee(s), mark FOR ALL )EXCEPT and fill in the
circle next to each nominee you wish to withhold, as shown here: ( To cumulate your vote for one or
more of the above nominee(s), write the manner in which such votes shall be cumulated in the space
to the right of the nominee(s) name(s). If you are cumulating your vote for a nominee, do not mark
the circle next to such nominees name. If you wish to cumulate your votes, you must vote by using
the proxy card rather than voting by telephone or the Internet. To change the address on your
account, please check the box at right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the account may not be submitted via this
method. FOR AGAINST ABSTAIN 2. Approval of an amendment to the Companys Articles of Incorporation
to adopt a majority voting standard for Directors in uncontested elections and eliminate cumulative
voting. 3. Approval of an amendment to the Companys Articles of Incorporation to increase the
number of authorized shares of common stock from 100,000,000 to 125,000,000. 4. Approval of
Appointment of Independent Registered Public Accounting Firm: Appointment of PricewaterhouseCoopers
LLP as independent registered public accounting firm for the fiscal year ending December 31, 2008.
Unless otherwise specified on this proxy card, this proxy card will
authorize the proxies listed to cumulate all votes that the undersigned is entitled to cast at
the Annual Meeting for, and to allocate such votes among, one or more of the nominees for
directors, as such proxies shall determine in their sole discretion. THE UNDERSIGNED HEREBY
ACKNOWLEDGES THAT THIS PROXY SHALL BE VALID AND MAY BE VOTED WHETHER OR NOT THE SHAREHOLDERS NAME
IS SET FORTH BELOW OR A SEAL IS AFFIXED OR THE DESCRIPTION, AUTHORITY OR CAPACITY OF THE PERSON
SIGNING IS GIVEN OR OTHER DEFECT OF SIGNATURE EXISTS. Signature of Shareholder Date: Signature of
Shareholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares
are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
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ANNUAL MEETING OF SHAREHOLDERS OF PHILADELPHIA CONSOLIDATED HOLDING CORP. May 16, 2008 PROXY VOTING
INSTRUCTIONS MAIL -Date, sign and mail your proxy card in the envelope provided as soon as
possible. -OR TELEPHONE -Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or
1-718921- 8500 from foreign countries and follow the instructions. Have your proxy card available
when you call. -OR INTERNET -Access www.voteproxy.com and follow the on-screen instructions. Have
your proxy card available when you access the web page. -OR IN PERSON -You may vote your shares in
person by attending the Annual Meeting. COMPANY NUMBER ACCOUNT NUMBER You may enter your voting
instructions at 1-800-PROXIES in the United States or 1-718-921-8500 from foreign countries or
www.voteproxy.com up until 11:59 PM Eastern Time the day before the cut-off or meeting date. Please
detach along perforated line and mail in the envelope provided IF you are not voting via telephone
or the Internet. 21130303000000000000 7 051608 THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS 2, 3 AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 1. Election of
Directors: O Aminta Hawkins Breaux O Michael J. Cascio O Elizabeth H. Gemmill O Paul R. Hertel, Jr.
O James J. Maguire O James J. Maguire, Jr. O Michael J. Morris O Shaun F. OMalley O Donald A.
Pizer O Ronald R. Rock O Sean S. Sweeney FOR ALL NOMINEES WITHHOLD AUTHORITY FOR ALL NOMINEES FOR
ALL EXCEPT (See instructions below) NOMINEES: INSTRUCTIONS: To withhold authority to vote for any
individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish
to withhold, as shown here: ( ) To cumulate your vote for one or more of the above nominee(s),
write the manner in which such votes shall be cumulated in the space to the right of the nominee(s)
name(s). If you are cumulating your vote for a nominee, do not mark the circle next to such
nominees name. If you wish to cumulate your votes, you must vote by using the proxy card rather
than voting by telephone or the Internet. 2. 3. 4. To change the address on your account, please
check the box at right and indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via this method. Signature of
Shareholder Date: FOR AGAINST ABSTAIN Approval of an amendment to the Companys Articles of
Incorporation to adopt a majority voting standard for Directors in uncontested elections and
eliminate cumulative voting. Approval of an amendment to the Companys Articles of Incorporation to
increase the number of authorized shares of common stock from 100,000,000 to 125,000,000. Approval
of Appointment of Independent Registered Public Accounting Firm: Appointment of
PricewaterhouseCoopers LLP as independent registered public accounting firm for the fiscal year
ending December 31, 2008. Unless otherwise
specified on this proxy card, this proxy card will authorize the proxies listed to cumulate all votes that the
undersigned is entitled to cast at the Annual Meeting for, and to allocate such votes among, one or
more of the nominees for directors, as such proxies shall determine in their sole discretion. THE
UNDERSIGNED HEREBY ACKNOWLEDGES THAT THIS PROXY SHALL BE VALID AND MAY BE VOTED WHETHER OR NOT THE
SHAREHOLDERS NAME IS SET FORTH BELOW OR A SEAL IS AFFIXED OR THE DESCRIPTION, AUTHORITY OR
CAPACITY OF THE PERSON SIGNING IS GIVEN OR OTHER DEFECT OF SIGNATURE EXISTS. Signature of
Shareholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares
are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign
full corpo
rate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
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0 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PHILADELPHIA CONSOLIDATED HOLDING CORP. The
undersigned shareholder hereby appoints James J. Maguire, Jr. and Craig P. Keller, or either one of
them, the proxies of the undersigned, with full power of substitution, to vote all the shares of
common stock of Philadelphia Consolidated Holding Corp. (the Company) which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Shareholders of the Company to
be held on Friday, May 16, 2008 at 10:00 a.m. EDT and at any and all adjournments thereof, with all
the powers the undersigned would possess if the undersigned were present. The undersigned
shareholder instructs the proxies to vote as specified on this proxy on the matters described in
the Companys Proxy Statement dated April 15, 2008. Proxies will be voted as instructed. If no
choice is specified, this proxy will be voted for the election of the Companys nominees as
Directors (including the election of any person to the Board of Directors where a nominee named in
the Proxy Statement is unable or will not serve); for the approval of an amendment to the Companys
Articles of Incorporation to adopt a majority voting standard for Directors in uncontested
elections and eliminate cumulative voting; for the approval of an amendment of the Companys
Articles of Incorporation to increase the number of authorized shares of common stock from
100,000,000 to 125,000,000; and for the appointment of PricewaterhouseCoopers LLP as the Companys
independent registered public accounting firm. By execution of this proxy, the undersigned
shareholder confers upon the above-appointed proxies the discretionary authority to vote upon any
other matters which may properly come before the meeting. The undersigned acknowledges receipt of
the Proxy Statement and Notice of said meeting, both dated April 15, 2008, and the Companys 2007
Annual Report to Shareholders. (Continued and to be signed on reverse side.) 14475
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