-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PzZFxyfPHJp0ARCvECwMrwgBElp2kVSNKbm3ei5Rfwcl5PmwYFPh32z8GScFaZ7Y uoRuKyWkrHL5yDEDcpShNA== 0000893220-99-000559.txt : 19990511 0000893220-99-000559.hdr.sgml : 19990511 ACCESSION NUMBER: 0000893220-99-000559 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHILADELPHIA CONSOLIDATED HOLDING CORP CENTRAL INDEX KEY: 0000909109 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 232202671 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-78127 FILM NUMBER: 99614813 BUSINESS ADDRESS: STREET 1: ONE BALA PLAZA STREET 2: SUITE 100 CITY: WYNNEWOOD STATE: PA ZIP: 19004 BUSINESS PHONE: 6106428400 MAIL ADDRESS: STREET 1: ONE BALA PLAZA STREET 2: SUITE 100 CITY: BALA CYNWYD STATE: PA ZIP: 19004 FORMER COMPANY: FORMER CONFORMED NAME: MAGUIRE HOLDING CORP DATE OF NAME CHANGE: 19930714 S-3 1 FORM S-3 1 As filed with the Securities and Exchange Commission on May 10, 1999 Registration No. 333-_______ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PHILADELPHIA CONSOLIDATED HOLDING CORP. (Exact name of Registrant as specified in its charter) PENNSYLVANIA 23-2202671 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation) ONE BALA PLAZA, SUITE 100 BALA CYNWYD, PA 19004 (610) 617-7900 FAX: (610) 617-7600 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) MR. JAMES J. MAGUIRE, PRESIDENT OR MR. CRAIG P. KELLER, SECRETARY ONE BALA PLAZA, SUITE 100 BALA CYNWYD, PENNSYLVANIA 19004 (610) 617-7900 FAX: (610) 617-7600 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: MICHAEL M. SHERMAN, ESQUIRE WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP TWELFTH FLOOR, PACKARD BUILDING 111 SOUTH 15TH STREET PHILADELPHIA, PENNSYLVANIA 19102-2678 (215) 977-2236 FAX: (215) 977-2334 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time to time after the effective date of this registration statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] 2 If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] Calculation of Registration Fee
Proposed Maximum Proposed Maximum Title of Shares Amount to be Aggregate Price Aggregate Offering Amount of to be Registered Registered Per Share(1) Price(1) Registration Fee - ---------------- ---------- ------------ -------- ---------------- Common Stock, 200,000 $25.04 $5,008,000 $1,392.23 no par value
(1) Estimated solely for the purpose of calculating the aggregate offering price and the registration fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as amended, and computed on the basis of $25.04, which price is the average of the high and low sales prices of the common stock as reported on the Nasdaq National Market of the Nasdaq Stock Market Inc. on May 5, 1999. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 3 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. Subject to Completion, Dated May 10, 1999 PROSPECTUS 200,000 SHARES PHILADELPHIA CONSOLIDATED HOLDING CORP. COMMON STOCK, NO PAR VALUE We may offer from time to time to our eligible preferred agents shares of the common stock, no par value, of Philadelphia Consolidated Holding Corp. at a discount under The Philadelphia Insurance Companies Stock Purchase Plan for Preferred Agents. An eligible preferred agent is an agent who is a party to an agency agreement with us and who is designated as a preferred agent by our Executive Vice President-Director of Marketing. The purchase price for the common stock will be 85% of the market value of the common stock on the first day of the offering period or the last day of the offering period, whichever is lower. This prospectus relates to shares of common stock available for purchase under the plan. An eligible preferred agent may purchase common stock through the plan by electing to have amounts deducted for that purpose from his or her commissions or other compensation during the offering period or by making a voluntary cash payment by the last day of the offering period. The plan restricts the ability of a plan participant to transfer, encumber or otherwise dispose of his or her shares of common stock for a period of two years after the first day of the offering period in which they are purchased. During this two-year restricted period, we have the right to repurchase the shares of common stock if (1) a plan participant attempts to transfer, encumber or otherwise dispose of the shares, or (2) a plan participant's status as a preferred agent terminates other than due to death or disability. If we exercise our right to repurchase shares, the purchase price will be equal to the lesser of the purchase price paid by the plan participant for the shares or the market value of the shares at the time of repurchase. The common stock is listed on the Nasdaq National Market of the Nasdaq Stock Market Inc. under the symbol PHLY. On May 7, 1999, the last reported sale price of the common stock on the Nasdaq National Market was $24.00 per share. We will receive all of the proceeds of the sale of the common stock offered in this prospectus net of expenses which are estimated at $40,000. INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE 3 OF THIS PROSPECTUS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Our principal executive offices are located at One Bala Plaza, Suite 100, Bala Cynwyd, Pennsylvania, 19004 (telephone number: (610) 617-7900). The date of this prospectus is , 1999. 4 TABLE OF CONTENTS Page Risk Factors...................................................................3 The Company....................................................................9 The Plan......................................................................12 Certain Federal Income Tax Effects of Plan Participation......................16 Use of Proceeds...............................................................18 Where You Can Find More Information -- Incorporation of Certain Information by Reference.......................18 Special Note on Forward-looking Statements....................................20 Legal Opinions................................................................20 Experts.......................................................................21 2 5 RISK FACTORS WE HAVE THE RIGHT TO REPURCHASE SHARES FOR A PURCHASE PRICE THAT MAY BE LESS THAN THE PURCHASE PRICE PAID BY THE PLAN PARTICIPANT FOR THE SHARES IF A PLAN PARTICIPANT ATTEMPTS TO TRANSFER, ENCUMBER OR OTHERWISE DISPOSE OF SHARES OR CEASES TO BE A PREFERRED AGENT DURING THE TWO-YEAR RESTRICTED PERIOD The plan restricts transfers of shares purchased by plan participants for a period of two years after the first day of the offering period in which the shares were purchased. Plan participants may not sell, transfer, encumber or otherwise dispose of these shares during the two-year restricted period. If a plan participant purchases shares under the plan, he or she will bear the economic risk of his or her investment in the common stock for the entire two-year restricted period described above. If a plan participant attempts to sell, transfer, encumber or otherwise dispose of shares during the two-year restricted period, (1) the attempted transfer will be null and void and (2) we will have the right, but not the obligation, to repurchase the shares for the lower of the market value of the shares on the date of repurchase or the actual purchase price paid for the shares. In addition, if a plan participant is no longer a preferred agent, we have the right, but not the obligation, to repurchase any shares held by the plan participant that are subject to the two-year restricted period for the lesser of the market value of the shares at the time of repurchase or the actual purchase price paid by the plan participant for the shares. However, we will not have this repurchase right if the plan participant is no longer a preferred agent because of death or disability. Plan participants whose shares are repurchased as described above will forfeit all rights to the shares. In addition, if the market value of the shares on the day of repurchase is less than the amount that the plan participant paid for the shares, the plan participant will suffer an economic loss at the time of repurchase. OUR HOLDING COMPANY STRUCTURE AND THE GOVERNMENT REGULATIONS THAT APPLY TO OUR INSURANCE COMPANY SUBSIDIARIES LIMIT OUR ABILITY TO RECEIVE FUNDS FROM OUR SUBSIDIARIES We are a holding company. Our principal assets currently consist of all or substantially all of the equity interests of our subsidiaries, (1) Philadelphia Indemnity Insurance Company; (2) Philadelphia Insurance Company; (3) Maguire Insurance Agency, Inc.; (4) PCHC Investment Corp., a Delaware investment corporation; and (5) PCHC Financing I, a Delaware business trust. Philadelphia Indemnity Insurance Company and Philadelphia Insurance Company are both insurance companies. Maguire Insurance Agency, Inc. is an underwriting manager. Our primary sources of funds are dividends and payments we receive under tax allocation agreements from our subsidiaries. Our insurance company subsidiaries are subject to significant government regulation. Our ability to receive dividends and loans from the subsidiaries is 3 6 restricted by these regulations. Accumulated profits of our insurance company subsidiaries from which dividends may be paid totaled $80.5 million at December 31, 1998. Of this amount, our insurance company subsidiaries are entitled to pay a total of approximately $17.7 million of dividends in 1999 without obtaining prior approval from the Pennsylvania Department of Insurance. Further, our right to receive any distribution of assets from a subsidiary if it liquidates its assets or undergoes a reorganization or other similar transaction is subject to the prior claims of creditors of that subsidiary, except to the extent, if any, that we are recognized as a creditor of the subsidiary. In that event, the ability of a holder of our common stock to benefit indirectly from the distribution would be similarly restricted. At December 31, 1998, our subsidiaries had total liabilities (excluding liabilities owed to us) of approximately $231.6 million. EXTENSIVE REGULATION OF OUR INSURANCE COMPANY SUBSIDIARIES MAY ADVERSELY AFFECT OUR PROFITABILITY Our insurance company subsidiaries are subject to a substantial degree of regulatory oversight, which generally is designed to protect the interests of policyholders as opposed to the interests of investors, such as the holders of our common stock. Such regulation relates to: - authorized lines of business; - capital and surplus requirements; - investment parameters; - underwriting limitations; - required participation in shared property-casualty insurance markets or pooling arrangements; - transactions with affiliates; - dividend limitations; - changes in control; and - a variety of other financial and non-financial components of an insurance company's business. New regulations and legislation have been, and are being, proposed from time to time to (1) limit damage awards; (2) bring the industry under regulation by the federal government; (3) control premiums, policy terminations and other policy terms; and (4) impose new taxes and assessments. It is not possible to determine whether any of these proposals will be adopted in any jurisdictions and, if so, in what form or in what jurisdictions. Accordingly, the impact of these initiatives on us is impossible to determine. 4 7 ADVERSE CONDITIONS IN PROPERTY AND CASUALTY INSURANCE MARKET COULD HAVE AN ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our insurance company subsidiaries write: - specialized commercial property and casualty insurance products for - non-profit and social services organizations, - the auto rental and leasing industries, - homeowners associations, - the health fitness and wellness industry, and - private schools; - select classes of specialty property risks and inland marine insurance; and - select classes of professional liability insurance. Historically, the financial performance of the commercial property and casualty insurance industry has tended to fluctuate in cyclical patterns of soft markets, in which pricing is relatively low, followed by hard markets, in which pricing levels are higher. Although an individual company's financial performance is dependent on its own specific business characteristics, the profitability of most commercial property and casualty insurance companies tends to follow this cyclical market pattern. At present, the property and casualty insurance industry is experiencing a prolonged soft market. Further deterioration of the market could have an adverse effect on our financial condition and operations. There can be no assurance that a hard market will emerge or that the current market will not worsen. IF OUR INSURANCE COMPANY SUBSIDIARIES' RATINGS ARE DOWNGRADED, OUR COMPETITIVE POSITION, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD BE ADVERSELY AFFECTED Our insurance company subsidiaries are rated "A+" (Superior) by A.M. Best Company. According to A.M. Best Company, the "A+" (Superior) rating is assigned to companies that have, on balance, superior financial strength, operating performance and market profile, when compared to the standards established by the A.M. Best Company, and have a very strong ability to meet their ongoing obligations to policyholders. A.M. Best Company ratings are based upon factors relevant to policyholders and are not directed toward the protection of investors, such as holders of our common stock. Our insurance company subsidiaries also possess an "A" claims paying ability rating by Standard & Poor's. According to Standard & Poor's, insurers rated "A" offer good financial security for policyholders. We believe that the ratings assigned by A.M. Best Company and Standard & Poor's are important factors in marketing our products. If these 5 8 ratings were to be downgraded in the future, it is likely that our competitive position and, as a result, our financial condition and results of operations, would be adversely affected. IF THE RESERVES WE HAVE ESTABLISHED FOR LOSSES AND LOSS ADJUSTMENT EXPENSES ARE NOT ADEQUATE, WE MAY BE REQUIRED TO INCREASE OUR RESERVES WHICH COULD RESULT IN REDUCTIONS IN NET INCOME AND POLICYHOLDER'S SURPLUS, DOWNGRADING OF RATINGS OF OUR INSURANCE COMPANY SUBSIDIARIES AND ADVERSE REGULATORY CONSEQUENCES We establish reserves for losses and loss adjustment expenses representing our best estimate of the losses and loss adjustment expenses we will incur on existing insurance policies. We obtain annual statements of actuarial opinions on loss and loss adjustment expense reserves by independent actuaries. While we believe that our reserves for losses and loss adjustment expenses are adequate, loss and loss adjustment expenses reserves necessarily are based on assumptions as to future events. Accordingly, actual losses and loss adjustment expenses may vary from established reserves. If our reserves are later determined to be understated, we will be required to increase reserves with a corresponding reduction in net income in the period in which the deficiency is identified. Furthermore, changes in inflation, claim settlement patterns, legislative activity and litigation trends may have a substantial impact on our future loss experience. Accordingly, there can be no assurance that our reserves will be adequate to cover actual losses. If we are required to strengthen reserves, such action could result in a reduction in policyholders' surplus, a downgrading of our insurance company subsidiaries' A.M. Best pooled rating and/or adverse regulatory consequences. CONTINUED AVAILABILITY OF REINSURANCE TO INSURE AGAINST A PORTION OF OUR RISK IS IMPORTANT TO OUR FINANCIAL CONDITION AND OPERATIONS We purchase reinsurance coverage to insure against a portion of our risk on policies we write directly. Limiting our insurance risks through reinsurance will continue to be important to us. Reinsurance does not affect our direct liability to our policyholders on the business we write. Although our reinsurance is currently maintained with reinsurers rated "A" (Excellent) or better by A.M. Best, a reinsurer's insolvency or inability to make payments under the terms of its reinsurance treaty with us could have a material adverse effect on us. In addition, there can be no assurance that reinsurance will remain continuously available to us to the same extent and on the same terms as are currently available. IF WE ARE NOT ABLE TO COMPETE SUCCESSFULLY WITH OUR COMPETITORS, SOME OF WHOM ARE LARGER AND HAVE GREATER RESOURCES, OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED The commercial property and casualty insurance industry is highly competitive. Many of our existing and potential competitors are larger, have considerably greater financial and other resources, have greater experience in the insurance industry and offer a broader line of insurance products than we. Not only do we compete with other insurers, we also compete with other forms of insurance organizations such as self-insurance mechanisms. 6 9 THE SUCCESS OF OUR BUSINESS IS DEPENDENT ON KEY PERSONNEL The success of our business is dependent on the efforts and abilities of our principal executive officers, particularly James J. Maguire, Philadelphia Consolidated's founder, principal shareholder, Chairman of the Board, President and Chief Executive Officer. We maintain $3.6 million of "key man" insurance on Mr. Maguire's life. However, Mr. Maguire does not have an employment contract with us and there can be no assurance that he will remain in his present positions for any period of time. If we were to lose the services of Mr. Maguire or other principal executive officers, there could be a material adverse effect on our business. WE HAVE CONTROLLING SHAREHOLDERS WHO HAVE THE PRACTICAL ABILITY TO ELECT ALL OF OUR DIRECTORS AND TO PREVENT A CHANGE OF CONTROL CONTRARY TO THE INTERESTS OF OTHER SHAREHOLDERS James J. Maguire and his wife, Frances Maguire, beneficially own 38.4% of our common stock. Therefore, Mr. and Mrs. Maguire have a substantial level of control over us and over matters submitted to our shareholders. Mr. James J. and Mrs. Frances Maguire are likely to have the practical ability to elect all of our directors and to prevent a potential change of control (even if such change of control would be advantageous to the public investors). YEAR 2000 READINESS DISCLOSURE: DUE TO YEAR 2000 ISSUES, THERE IS A RISK OF FAILURE OF OUR SYSTEMS AND INCREASED CLAIMS ON POLICIES WE WRITE THAT COULD AFFECT OUR OPERATIONS, LIQUIDITY OR FINANCIAL POSITION Many existing computer programs use only two digits, instead of four, to identify a year in the date field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create incorrect results on or after the Year 2000. The Year 2000 issue affects computer and information technology systems, as well as non-information technology systems which include embedded technology such as micro-processors and micro-controllers (or micro-chips) that have date sensitive programs that may not properly recognize the year 2000 or beyond. If the systems and products we use are not properly equipped to identify and recognize the year 2000, our information technology systems and non-information technology systems could fail or create erroneous results. We have completed a Year 2000 readiness assessment of our information technology systems and non-information technology systems and have repaired or replaced systems or components of systems that we have identified as Year 2000 non-compliant. We are not aware of any remaining Year 2000 issues with respect to our systems that could have a material adverse effect on our operations or financial condition. We are engaged in an ongoing effort to assess the impact on us of the failure of any of the third parties with whom we maintain significant business relationships to become Year 2000 compliant. We anticipate that this assessment of material third parties will be completed by June 30, 1999. 7 10 We use computer systems in virtually all aspects of our business. We also maintain relationships with a number of vendors, suppliers and customers whose own state of readiness with regard to the Year 2000 issue could potentially impact us. These parties include software, hardware, and telecommunication providers, banks and investment brokers, reinsurers and reinsurance intermediaries, certain agents and utilities. The failure to correct a material Year 2000 issue by us or a material third party could materially and adversely impact our operations, liquidity and financial position. Due to the uncertainty inherent in the Year 2000 issue, we are unable to determine whether the consequences of Year 2000 failures will have a material impact on our statement of operations, liquidity or financial position. However, we believe that with the completion of our Year 2000 project the risk of significant interruptions of operations should be reduced. Additionally, we issue professional liability coverage, including directors and officers liability, and commercial multi-peril insurance policies. Coverage under certain of these policies may cover losses suffered by insureds as a result of the Year 2000 issues. Our professional liability policies are written on a "claim made and reported" basis. Since early 1997 approximately 50% of these policies have included a Year 2000 exclusion endorsement. We are including a Year 2000 exclusion endorsement on virtually all new or renewing professional liability policies providing coverage effective January 1, 1999 and thereafter. On occasion, for qualifying accounts, our underwriters may remove the exclusion after receipt and review of a satisfactory supplemental application (which includes a warranty statement) and other underwriting information. With respect to our commercial multi-peril policies, we believe that we should not be held liable for claims arising from the Year 2000 issue under our comprehensive general liability policies. However, we cannot determine whether or to what extent courts may find us liable for such claims. Additionally, we could incur expense to contest Year 2000 issue coverage claims, even if we prevail in our position. As a result, we cannot determine what, if any, exposure we may ultimately have for Year 2000 issue claims. 8 11 THE COMPANY You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus, as well as information we previously filed with the Securities and Exchange Commission and incorporated by reference, is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. All reference to "we" or "us" or "Philadelphia Consolidated" in this prospectus and any accompanying prospectus supplement mean Philadelphia Consolidated Holding Corp., except where it is made clear that the term means Philadelphia Consolidated Holding Corp. and its consolidated subsidiaries. Philadelphia Consolidated Holding Corp. was incorporated in Pennsylvania in 1984 to serve as a holding company for its subsidiaries. We design property and casualty insurance products incorporating value-added coverages and services for select target industries or niches. We use a "mixed" marketing strategy in which our production underwriting organization markets our insurance products to the insured, directly or through our preferred agents, and also accepts business from independent insurance brokers. Our production underwriting organization operates from proprietary field offices located across the United States and includes telemarketing staffs at its regional offices and our Philadelphia home office. We offer the following product lines: COMMERCIAL AUTOMOBILE AND EXCESS LIABILITY. We have provided Commercial Automobile Products to the leasing and rent-a-car industries for over 35 years. Products offered to the rent-a-car industry include coverage for the business owner's property, dual interest liability, and physical damage on the rental vehicle. Additionally, through arrangements with a number of the largest rent-a-car companies, we offer our excess liability product at the rental car counter to rent-a-car customers. This coverage protects renters against liability for bodily injury and property damage, which is in excess of the statutory coverage provided with the rental vehicle, and is primary over the renter's personal automobile insurance coverage. We also offer a full range of liability and physical damage coverages to automobile leasing companies and their customers. For the driver (the lessee), we offer both primary liability coverage and physical damage coverage on the vehicle. For the owner (the lessor), we offer contingent and excess liability coverage over the primary liability coverage layer which protects lessors in the event of a loss when the primary coverage is absent or inadequate and provides 9 12 contingent physical damage coverage. Additional products offered to leasing companies include: - interim primary liability and physical damage coverage, which protects the lessor of the vehicle before and after it is delivered to the lessee; - residual value coverage which guarantees the value of the leased vehicle at the termination of the lease; and - guaranteed asset protection coverage which protects the lessor and lessee for the difference between the leased vehicle's actual cash value and the lease or loan net value in instances where the vehicle is stolen or damaged beyond repair. COMMERCIAL PACKAGE. We have been providing Commercial Multi Peril Package Policies ("Package Programs") to specific targeted niche markets for over 10 years. Among the organizations to which we offer our specialty niche Package Programs are non-profit social service agencies, health and fitness organizations, private and specialty training schools, condominium/homeowner association facilities and home health care operations and day care facilities. The Package Programs policies are tailored to include special value-added features addressing the unique aspects of each of the above niche markets differentiating our product offerings from those of our competitors. SPECIALTY LINES. We have been providing specialty professional liability products for approximately 10 years, initially offering Directors & Officers Liability coverage to Nonprofit 501(c)(3) tax exempt organizations. In 1996, we introduced a proprietary package of coverages in our Executive Safeguard(sm) policy offered to public and private companies. The coverages offered in the Executive Safeguard(sm) policy include directors and officers liability, employment practices liability, fiduciary liability and kidnap ransom insurance. Our recent efforts have been focused on broadening the target market for our specialty lines product offerings through the expansion of our field production underwriting staff and the introduction of new products. During 1998 we introduced a variety of coverage enhancements to several of our policies, including Executive Safeguard(sm), miscellaneous professional and non-profit directors and officers and two new products, accountants and dentists professional liability. 10 13 SPECIALTY PROPERTY AND INLAND MARINE LINE. In September 1998, we introduced a Specialty Property and Inland Marine underwriting organization which brings a new line of business to Philadelphia Consolidated. This underwriting organization specializes in: - insuring large property risks for a wide range of businesses, from shopping malls to hotels; and - underwriting and providing marketing for all classes of inland marine insurance (concentrating on the larger segments of inland marine), including builder's risk, contractor's equipment and motor truck cargo. In addition, we now have the expertise to create insurance coverage for the unusual, one-of-a-kind account. 11 14 THE PLAN The following is a summary of the terms and conditions of the Philadelphia Insurance Companies Stock Purchase Plan for Preferred Agents (the "Plan"): PURPOSE We established the Plan in order to provide our Preferred Agents, as defined below, with an opportunity to acquire our common stock at a discounted purchase price. This is intended to encourage our Preferred Agents to own our common stock and to align their interests with those of our other shareholders. PLAN ADMINISTRATION The Plan will be administered by the Board of Directors of Philadelphia Consolidated Holding Corp. (the "Board") or by any committee designated by the Board at its discretion from time to time. The committee designated to administer the Plan by the Board, or the Board itself in its capacity as administrator of the Plan, are referred to in this prospectus as the "Committee." The Committee may engage an agent to perform custodial and record-keeping functions for the Plan, such as holding record title to Share certificates of Plan participants ("Participants"), maintaining an individual investment account for each Participant and providing annual status reports to Participants regarding their investment accounts. The Committee will have full discretionary authority to interpret the Plan, to issue rules for administering the Plan and to make all other determinations necessary or appropriate for the administration of the Plan, including, but not limited to, the manner in which Participants must complete subscription agreements in order to participate in the Plan and limitations on numbers of shares of common stock available for purchase in any Offering Period, as hereinafter defined. Additional information concerning the Plan and/or its administration may be obtained from: Craig P. Keller Vice President, Secretary, Treasurer and Chief Financial Officer Philadelphia Consolidated Holding Corp. One Bala Plaza, Suite 100 Bala Cynwyd, PA 19004 (610) 617-7900 SECURITIES TO BE OFFERED Under the Plan, our common stock will be offered for sale to eligible Preferred Agents. The maximum number of shares of common stock available for purchase under the Plan is 200,000, subject to adjustment in the event of certain events affecting the common stock, such as a stock split or stock dividend. 12 15 PREFERRED AGENTS WHO MAY PARTICIPATE IN THE PLAN All Preferred Agents will be eligible to participate in the Plan, other than any Preferred Agent who is serving, or who has been elected to serve, as (1) a Board member, (2) Chairman or Vice Chairman of the Board, (3) President, Vice President, Secretary or Treasurer of Philadelphia Consolidated, or (4) in any other position, regardless of title, that obligates the individual to file reports under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A "Preferred Agent" is any agent of ours who is both: - party to an agency agreement with us and - designated as a "Preferred Agent" by the Executive Vice President-Director of Marketing of Philadelphia Consolidated. A person's status as a Preferred Agent for any particular Offering Period, as defined below, will be based on whether the person is a Preferred Agent as of the first day of the Offering Period. PURCHASE OF COMMON STOCK PURSUANT TO THE PLAN AND PAYMENT FOR COMMON STOCK OFFERED ELECTION TO PARTICIPATE IN THE PLAN. The Committee may establish one or more offering periods under the Plan (each, an "Offering Period") at any time and for any length of time the Committee determines is appropriate. The Committee will provide eligible Preferred Agents with notice of the dates of each Offering Period, the enrollment period for the Offering Period and any other terms or conditions that must be met in order for an eligible Preferred Agent to participate in the Plan for that Offering Period. Such notice will be delivered to each eligible Preferred Agent as soon as practicable on or after the first day of the Offering Period. Any eligible Preferred Agent may elect to participate in the Plan and purchase common stock during an Offering Period by filing with the Committee during the enrollment period a subscription agreement specifying either the number of shares of common stock or the dollar amount of common stock to be purchased for that Offering Period. While we intend to provide each eligible Preferred Agent with the notice described above in this paragraph, we have no obligation or liability to any otherwise eligible Preferred Agent who does not receive a notice for any Offering Period including, but not limited to, any obligation to allow that Preferred Agent to participate in the offering for that Offering Period. PURCHASE OF SHARES. Except as described below in "Revocation of Election to Participate in the Plan," each Participant who has properly submitted a subscription agreement for an Offering Period will be deemed, without further action, to have purchased on the last business day of the Offering Period the number of shares of common stock specified in his or her subscription agreement. The Committee will hold the shares in a special investment account (an "Investment Account") for the Participant until the two-year Restricted Period, as defined below, has passed. If we pay cash dividends on our common stock, we will distribute to Participants the 13 16 cash dividends that are paid with respect to the shares held in the Participant's Investment Account. We will retain in the investment account any distributions that are in the nature of a stock split or distribution of stock until the shares to which the stock split or distribution is attributable are themselves distributed to the Participant in accordance with the Plan. Shares delivered to Participants under the Plan will be shares that currently are held in treasury or are authorized but unissued. PURCHASE PRICE OF COMMON STOCK PURCHASED UNDER THE PLAN. The purchase price of shares of common stock purchased under the Plan for any Offering Period will be an amount that is equal to the lesser of 85% of the Market Value, as defined below, of the shares (1) on the first day of the Offering Period and (2) on the last day of the Offering Period. "Market Value" on any date means the last reported sale price of the shares reported on the Nasdaq National Market, or the closing price of the shares on such other stock exchange as the common stock may be listed, on the date in question as reported in the Wall Street Journal. If there is no closing price reported, then the "Market Value" will mean the average between the closing bid and asked prices for shares on the date in question as reported. If there are no sales reports or bid or asked quotations, as the case may be, for the date in question, the closest preceding date on which there were sales reports or bid or asked quotations will be used. If the Committee determines, in its discretion, that the valuation as described above in this paragraph does not accurately reflect the value of the shares or if the shares are not then publicly traded, the Market Value of a share will be determined by the Committee. PAYMENT OF PURCHASE PRICE. Each Participant purchasing shares of common stock under the Plan will elect in his or her subscription agreement to pay for the shares to be purchased under the subscription agreement either by (1) paying in cash on or before the last day of the Offering Period, or (2) having amounts specified by the Participant withheld from commissions or other compensation that would otherwise have been paid to the Participant during the Offering Period. There is no provision in the Plan for changing the manner in which payments for common stock are to be made. CASH ACCOUNTS. Any cash contributed by a Participant for the purpose of making purchases of shares of common stock under the Plan, whether through direct payment by the Participant or through withholding from commissions otherwise payable to the Participant, will be accumulated in a non-interest bearing account for the Participant until used to purchase shares. We will maintain records of the cash contributed by each Participant (a "Participant's Cash Account"). We have no obligation to hold these funds in a separate account for a Participant, and no interest will be payable with respect to any amounts allocated to a Cash Account. If a Participant revokes his or her election to participate in the Plan for an Offering Period, we will pay to the Participant any amounts accumulated in his or her Cash Account for that Offering Period, without interest, as soon as practicable following the date of revocation. If the amount accumulated in a Participant's Cash Account for an Offering Period is more than the amount required to purchase the number of shares for which the Participant has subscribed, we will pay to the Participant the excess in the Participant's Cash Account over the amount used to purchase the common stock on the last day of the Offering Period, without interest, as soon as practicable 14 17 following the last day of the Offering Period. Other than as described above, the Plan does not provide a mechanism for a Participant to withdraw contributions that have been made under the plan. PARTICIPANT CONTRIBUTIONS. Participants do not contribute to the Plan except as they may elect in their subscription agreements. See "Payment of Purchase Price" above. PURCHASE LIMITATIONS. No Participant may purchase under the Plan during any three consecutive calendar years shares of common stock having an aggregate value in excess of $100,000. For purposes of this limitation, the value of shares of common stock purchased under the Plan will be equal to their Market Value as of the first day of the Offering Period in which they are purchased. REPORTS TO BE MADE TO PARTICIPANTS. The Committee will cause reports on the status of Participants' Investment Accounts to be prepared and delivered to Participants annually. REVOCATION OF ELECTION TO PARTICIPATE IN THE PLAN A Participant may revoke his or her participation in the Plan for any Offering Period at any time up to and including the last day of the Offering Period by providing written notice of the revocation according to any revocation notice provisions that are established by the Committee. In addition, if a Participant fails to pay the purchase price of shares of common stock for which he or she has subscribed in full on or before the last day of the Offering Period, he or she will be deemed to have revoked his or her participation for that Offering Period and will have no further rights to purchase shares for that Offering Period. If a Participant revokes his or her participation for an Offering Period, any cash that has been accumulated in a Cash Account for the Participant for that Offering Period will be refunded to the Participant, without interest, as soon as practicable following our receipt of notice of revocation. TRANSFER RESTRICTIONS ON SHARES OF COMMON STOCK PURCHASED UNDER THE PLAN Participants will not be permitted to transfer shares of common stock purchased under the Plan for a period of two years, measured from the first day of the Offering Period of the purchase (the "Restricted Period"). If a Participant attempts to sell, transfer, make subject to any lien, or otherwise dispose of shares prior to the end of the Restricted Period, the attempted transfer, lien or other disposition will be null and void and we will have the right, but not the obligation, to repurchase the shares for the lesser of the Market Value of the shares at the time of forfeiture or the actual purchase price paid by the Participant for the shares. The Participant will forfeit all rights to those shares upon receipt of payment from us of the repurchase price. If a Participant's status as a Preferred Agent terminates, for any reason other than due to his or her death or disability, the Participant will be entitled to his or her shares of common stock that have been held beyond the Restricted Period. We have the right, but not the obligation, within 90 days after we receive notice of the termination of a Participant's Preferred Agent status, to repurchase from the Participant any shares for which the Restricted Period has not passed for 15 18 the lesser of the Market Value of the shares at the time of repurchase or the actual purchase price paid by the Participant for the shares. VOTING OF SHARES HELD IN INVESTMENT ACCOUNT The Agent or, if there is no Agent, the Committee will vote all of a Participant's shares that are held in an Investment Account in accordance with the Participant's instructions. OFFERING AND PLAN ADMINISTRATION EXPENSES Philadelphia Consolidated will pay all of the expenses associated with the offering of shares of common stock under the Plan and the administration of the Plan. TRANSFER OF STOCK CERTIFICATES We will distribute to Participants certificates for the shares of common stock purchased under the Plan once the shares are no longer subject to the two year Restricted Period, provided the Participant has paid in full the purchase price of the shares. AMENDMENT AND TERMINATION OF THE PLAN The Board may amend the Plan as it deems appropriate, from time to time, and may terminate the Plan at any time, at its discretion. CERTAIN FEDERAL INCOME TAX EFFECTS OF PLAN PARTICIPATION The following discussion summarizes, as of the date of this prospectus, general principles of federal income tax law applicable to the Plan and the shares of common stock acquired under the Plan. Participants should consult their own tax advisors concerning the tax consequences of participation in the Plan and the disposition of shares acquired under the Plan, since federal tax laws are subject to change, individual tax situations differ and the effect of state and local taxation may be material. GENERAL. The Plan is not intended to qualify as a "stock purchase plan" under the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code") nor are contributions by Participants in the Plan tax deductible. As a consequence, any Preferred Agent who participates in the Plan will be subject to tax on the amount of his or her income that is used to purchase shares under the Plan (even if such income is withheld by Philadelphia Consolidated) as ordinary compensation income, and will be subject to additional amounts of ordinary compensation income attributable to the purchase of shares under the Plan at a discount. In general, whenever property is purchased by an individual at a discount in connection with arrangements related to compensation for services provided by that individual, the excess of the Market Value over the purchase price of the property is treated as taxable compensation income (that is taxed as additional ordinary income, and not as a capital gain). This additional compensation income will generally be recognized at the time of the purchase or at the time the 16 19 property purchased ceases to be subject to a substantial risk of forfeiture, whichever is later. Because the shares of common stock purchased under the Plan are subject to a Restricted Period, and are subject to repurchase at the lesser of the purchase price or then Market Value if a Participant's status as a Preferred Agent terminates during the Restricted Period, the shares should be viewed for federal income tax purposes as being subject to a substantial risk of forfeiture. As a consequence, a Participant will recognize as additional compensation income the excess of the Market Value of the shares purchased as of the date the Restricted Period ends over the amount paid for the shares. For example, if a Participant purchases $1,000 worth of shares under the Plan with respect to an Offering Period that commenced on July 1, 1999, and remains as a Preferred Agent through July 1, 2001, the following tax treatment would generally be applicable. If the Participant paid $850 through withholding from his or her commissions during 1999, his or her income for 1999 will include the $850, even though this amount was never paid to the Participant in cash. No additional income would be recognized in 1999, absent a special "83(b) election" (described below), as a result of the purchase. If the Market Value of the shares purchased rises to $1,500 as of July 1, 2001, the Participant will recognize additional compensation income for the taxable year 2001 equal to $650 (that is, the $1,500 Market Value of the shares reduced by the $850 paid for them). On a subsequent sale of the shares, the Participant will be treated for federal income tax purposes as though he or she had purchased the shares for their Market Value (i.e., $1,500) on July 1, 2001. This will determine the amount of gain or loss recognized on the sale, and will also establish the beginning of the holding period applicable for purposes of determining the maximum federal capital gains rate with respect to the gain realized on a sale of the shares. ELECTION UNDER SECTION 83(B) OF THE CODE. A Participant may make an election under Section 83(b) of the Code (an "83(b) Election") which will cause the Participant to recognize immediately as of the date the purchase of shares occurs an additional amount of ordinary income equal to the excess of the Market Value of the shares as of that date over the price paid for them. If this election is made, the Market Value of the shares purchased is determined by disregarding the restrictions in the Plan that otherwise cause the shares to be subject to a substantial risk of forfeiture. In addition, if the shares are repurchased, the Participant will only be able to claim a loss if the repurchase is at a price below the price actually paid (that is, if the repurchase price is based on a Market Value for the shares that has dropped below the original discounted purchase price). If the repurchase is at the original purchase price, the Participant will not be allowed any tax loss, even though income will have been recognized as a result of the 83(b) Election. In order to make an 83(b) Election, a Participant must file the election no later than 30 days after the date the shares were purchased (that is, the last day of the Offering Period), by filing a written statement with the IRS office where the Participant files his or her returns, and a copy with Philadelphia Consolidated. A copy of the filing must also be included in the Participant's tax return for the year of the purchase. The statement must contain: the name, address and taxpayer identification number of the taxpayer, a description of the shares purchased, the date of the purchase and the taxable year for which the election is made, the nature of the restrictions on the shares, the Market Value of the shares at the time of purchase, the purchase 17 20 price paid for the shares and a statement indicating that copies of the election have been furnished to other persons as required. The statement must be signed and must indicate that it is made under Section 83(b) of the Code. PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE ADVISABILITY OF AND PROCEDURE INVOLVED IN MAKING AN 83(B) ELECTION. The effect of an 83(b) Election may be illustrated as follows: Assume, as above, that a Participant purchases $1,000 worth of shares under the Plan with respect to an Offering Period that commenced on July 1, 1999. Assume that the Offering Period ended on December 31, 1999 (the purchase date) and the Participant files an 83(b) Election within thirty days following the purchase date. Assume also that the shares were worth $1,000 as of July 1, 1999 (fixing the purchase price at $850), but rose in value to $1,100 as of December 31, 1999. The $850 which the Participant paid for the shares through withholding from his commissions between July 1 and December 31, 1999 will still be included in his or her income for 1999 even though this amount was never paid to the Participant in cash. In addition, as a consequence of electing to include the bargain purchase amount in income for 1999, the Participant's taxable income will be increased by $250 (the excess of the $1,100 Market Value of the shares purchased, over the $850 purchase price paid). If the Participant continues to be a Preferred Agent until July 1, 2001 and then sells the shares for $1,500 on July 2, 2001, the Participant will recognize a capital gain of $400 (the excess of the $1,500 realized on the sale over the $1,100 basis in the shares). This will be treated as a sale of property held from December 31, 1999 through July 2, 2001, and would be treated as a long-term capital gain in determining the maximum applicable federal tax rate. If, however, the Participant ceases to be a Preferred Agent prior to July 1, 2001 and Philadelphia Consolidated repurchases the shares for $850 (the original purchase price), the Participant will not be permitted to recognize a loss as no loss is permitted to be recognized under applicable tax rules for such a forfeiture. USE OF PROCEEDS Unless otherwise set forth in a Prospectus Supplement, we will use the net proceeds of the offering for general corporate purposes. WHERE YOU CAN FIND MORE INFORMATION -- INCORPORATION OF CERTAIN INFORMATION BY REFERENCE Philadelphia Consolidated files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). You may read and copy any document we file at the following public reference rooms maintained by the SEC at: 18 21 Judiciary Plaza 7 World Trade Center 450 Fifth Street, N.W. 13th Floor Washington, D.C. 20549 New York, New York 10048 You may obtain information on the operation of the SEC's public reference rooms by calling the SEC at 1-800-SEC-0330. Philadelphia Consolidated's SEC filings also are available to the public from the SEC's website at http.//www.sec.gov. Philadelphia Consolidated has filed a registration statement on Form S-3 with the SEC to register the shares offered by this prospectus. This prospectus is part of the registration statement but, as permitted by SEC rules and regulations, this prospectus does not contain all the information that you can find in the registration statement or the exhibits to the registration statement. You should refer to the registration statement and to the exhibits filed with the registration statement for further information about Philadelphia Consolidated, our consolidated subsidiaries and the shares. The SEC allows us to "incorporate by reference" the information we file with them. This means that we are permitted to disclose certain information to you by referring you to other documents we have filed with the SEC. The information incorporated by reference is considered to be part of this prospectus, and information that we file with the SEC after the date of this prospectus will automatically update and supersede this information. We incorporate by reference in this prospectus all the documents listed below and any filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and before all the shares of shares offered by this prospectus have been sold or de-registered: - Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "Form 10-K"); - the Current Report on Form 8-K dated May 10, 1999; and - description of our common stock, no par value, that is contained in Philadelphia Consolidated's registration statement on Form 8-A/A, dated September 13, 1993, including any amendments or reports filed for the purpose of updating the description of the shares. We will deliver, without charge, to anyone receiving this prospectus, upon written or oral request, a copy of any document incorporated by reference in this prospectus but not delivered to you with this prospectus, excluding all exhibits to those documents except any exhibit that has been specifically incorporated by reference. You may request a copy of these documents by telephoning or writing to: 19 22 Craig P. Keller Vice President, Secretary, Treasurer and Chief Financial Officer Philadelphia Consolidated Holding Corp. One Bala Plaza, Suite 100 Bala Cynwyd, PA 19004 (610) 617-7900 SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS Some of the information in this prospectus may contain forward-looking statements. These statements can be identified by the use of forward-looking phrases such as "will likely result," "may," "are expected to, "is anticipated," "estimate," "projected," "intends to," or other similar words. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, as described below. Significant risks and uncertainties include: - changes in the business environment in which we operate; - inflation and changes in interest rates; - changes in taxes, laws and governmental regulations; - competitive product and pricing activity; - difficulties of managing growth profitably; and - the impact of Year 2000 issues. Additional risks that may affect our future performance are included elsewhere in this prospectus and in our other filings with the SEC. When considering forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this prospectus. You should not place undue reliance on any forward-looking statement that speaks only as of the date made. LEGAL OPINIONS The validity of the shares of common stock offered hereby will be passed on for Philadelphia Consolidated by Wolf, Block, Schorr and Solis-Cohen LLP. 20 23 EXPERTS The consolidated financial statements of Philadelphia Consolidated and its subsidiaries as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998 incorporated by reference in this prospectus have been incorporated herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. 21 24 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Securities and Exchange Commission Registration Fee................................................... $1,393 *Accounting Fees and Expenses...................................... 4,500 *Legal Fees and Expenses........................................... 30,000 *Printing.......................................................... 2,000 *Miscellaneous..................................................... 2,107 Total Expenses..................................................... $ 40,000 ====== - ---------- * Estimated for purposes of completing the information required pursuant to this Item 14. Philadelphia Consolidated will pay all fees and expenses associated with filing the Registration Statement. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Subchapter D (Sections 1741 through 1750) of Chapter 17 the Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"), contains provisions for mandatory and discretionary indemnification of a corporation's directors, officers, employees and agents (collectively "Representatives"), and related matters. Under Section 1741, subject to certain limitations, a corporation has the power to indemnify Representatives under certain prescribed circumstances against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative, to which any of them is a party or threatened to be made a party by reason of his or her being a Representative of the corporation or serving at the request of the corporation as a Representative of another corporation, partnership, joint venture, trust or other enterprise, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. Section 1742 provides for indemnification with respect to derivative and corporate actions similar to that provided by Section 1741. However, indemnification is not provided under Section 1742 in respect of any claim, issue or matter as to which a Representative has been adjudged to be liable to the corporation unless and only to the extent that the proper court determines upon application that, despite the adjudication of liability but in view of all the II-1 25 circumstances of the case, a Representative is fairly and reasonably entitled to indemnity for the expenses that the court deems proper. Section 1743 provides that indemnification against expenses is mandatory to the extent that a Representative has been successful on the merits or otherwise in defense of any such action or proceeding referred to in Section 1741 or 1742. Section 1744 provides that, unless ordered by a court, any indemnification under Section 1741 or 1742 shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of a Representative is proper because the Representative met the applicable standard of conduct. Section 1744 further provides that such determination will be made by the board of directors by a majority vote of a quorum consisting of directors not parties to the action or proceeding; if a quorum is not obtainable or if obtainable and a majority vote of a quorum of disinterested directors so directs, by independent legal counsel; or by the shareholders. Section 1745 provides that expenses incurred by a Representative in defending any action or proceeding referred to in Subchapter D of Chapter 17 of the BCL may be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the Representative to repay such amount if it shall ultimately be determined that such Representative is not entitled to be indemnified by the corporation. Section 1746 provides generally that except in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness, the indemnification and advancement of expenses provided by Subchapter D of Chapter 17 of the BCL shall not be deemed exclusive of any other rights to which a Representative seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in such Representative's official capacity and as to action in another capacity while holding that office. Section 1747 grants a corporation the power to purchase and maintain insurance on behalf of any Representative against any liability incurred by such Representative in his or her capacity as a Representative, whether or not the corporation would have the power to indemnify such Representative against that liability under Subchapter D of Chapter 17 of the BCL. Sections 1748 and 1749 apply the indemnification and advancement of expenses provisions contained in Subchapter D of Chapter 17 of the BCL to all constituent corporations absorbed in a consolidation, merger or division, as well as the surviving or new corporations surviving or resulting therefrom, and to service as a representative of a corporation or an employee benefit plan. Section 1750 provides that the indemnification and advancement of expenses provided by, or granted pursuant to, Subchapter D of Chapter 17 of the BCL shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Representative and shall inure to the benefit of the heirs and personal representative of such person. II-2 26 Section 9 of Article IV of Philadelphia Consolidated's By-Laws provides indemnification to directors for all actions taken by them and for all failures to take action to the fullest extent permitted by Pennsylvania law against all expense, liability and loss reasonably incurred or suffered by them in connection with any threatened, pending or completed action, suit or proceeding (including, without limitation, an action, suit or proceeding by or in the right of Philadelphia Consolidated), whether civil, criminal, administrative, investigative or through arbitration. Section 9 of Article IV of the By-Laws also permits Philadelphia Consolidated, by action of its board of directors, to indemnify officers, employees and other persons to the same extent as directors. The provisions of Section 9 of Article IV of the By-Laws relating to the limitation of directors' liability, to indemnification and to the advancement of expenses constitute a contract between Philadelphia Consolidated and each of its directors which may be modified as to any director only with that director's consent or as otherwise specifically provided in Section 9. Any repeal or amendment of Section 9 of Article IV of the By-Laws which is adverse to any director will apply to such director only on a prospective basis, and will not reduce any limitation on the personal liability of a director of Philadelphia Consolidated, or limit the rights of an indemnitee to indemnification or to the advancement of expenses with respect to any action or failure to act occurring prior to the time of such repeal or amendment. No repeal or amendment of the By-Laws will affect any or all of Section 9 of Article IV so as either to reduce the limitation of directors' liability or limit indemnification or the advancement of expenses in any manner unless adopted by the unanimous vote of the directors of Philadelphia Consolidated then serving or the affirmative vote of shareholders entitled to cast not less than a majority of the votes that all shareholders are entitled to cast in the election of directors. Section 9 of Article IV further permits Philadelphia Consolidated to maintain insurance, at its expense, for the benefit of any person on behalf of whom insurance is permitted to be purchased by Pennsylvania law against any such expenses, liability or loss, whether or not Philadelphia Consolidated would have the power to indemnify such person against such expense, liability or loss under Pennsylvania or other law. Philadelphia Consolidated has purchased directors' and officers' liability insurance. Section 3c of the Plan provides that service on the Committee constitutes, for purposes of rights to indemnification by Philadelphia Consolidated, service as a member of Board. Committee members are entitled, under Section 3c, to indemnity from Philadelphia Consolidated and limitation of liability to the fullest extent provided by applicable law, Philadelphia Consolidated's Articles of Incorporation and/or Philadelphia Consolidated's By-Laws in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan in which a Committee member is involved by reason of being or having been a member of the Committee, whether or not the Committee member continues to be a member of the Committee at the time of the action, suit or proceeding. II-3 27 ITEM 17. UNDERTAKINGS. (a) The Undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in such post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report II-4 28 pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, such Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits Exhibit No. Description ----------- ----------- 3.1 Articles of Incorporation of Philadelphia Consolidated, as amended (incorporated by reference to Exhibit 3.1 filed with Philadelphia Consolidated's Form S-1 Registration Statement under the Securities Act of 1933 (Registration No. 33-65958)). 4.1 Philadelphia Insurance Companies Stock Purchase Plan for Preferred Agents.* 4.2 Form of Subscription Agreement* 5.1 Opinion of Wolf, Block Schorr and Solis-Cohen LLP regarding the legality of the securities being registered by Philadelphia Consolidated hereby.* 23.1 Consent of PricewaterhouseCoopers LLP related to the financial statements of Philadelphia Consolidated Holding Corp.* 23.2 Consent of Wolf, Block Schorr and Solis-Cohen LLP (included in Exhibit 5.1).* 24.1 Powers of attorney (included on signature pages of this Registration Statement). - ---------- * Filed electronically herewith. II-5 29 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Philadelphia Consolidated Holding Corp. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement, to be signed on its behalf by the undersigned, thereunto duly authorized, in the Bala Cynwyd, Pennsylvania on May 7, 1999. PHILADELPHIA CONSOLIDATED HOLDING CORP. By: /s/ James J. Maguire ------------------------- James J. Maguire Chairman of the Board of Directors, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James J. Maguire and Craig P. Keller, and each of them, the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement (including, without limitation, post-effective amendments to this Registration Statement), and to file the same, with all exhibits thereto, and other documents in connection therewith (including, without limitation, any related registration statement or amendment thereto filed in accordance with Rule 462 under the Securities Act of 1933, as amended), with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on May 7, 1999. Signature Title --------- ----- /s/ James J. Maguire Chairman of the Board of Directors, - --------------------- President, Chief Executive Officer James J. Maguire and Director (Principal Executive Officer) /s/ Craig P. Keller Vice President, Secretary, Treasurer and - --------------------- Chief Financial Officer (Principal Craig P. Keller Financial and Accounting Officer) /s/ Sean P. Sweeney Executive Vice President and Director - --------------------- Sean P. Sweeney II-6 30 /s/ James J. Maguire, Jr. Executive President, Chief Operating Officer - --------------------------- and Director James J. Maguire, Jr. /s/ William J. Henrich, Jr. Director - --------------------------- William J. Henrich, Jr. /s/ Roger R. Larson Director - --------------------------- Roger R. Larson /s/ Paul R. Hertel, Jr. Director - --------------------------- Paul R. Hertel, Jr. /s/ Thomas J. McHugh Director - --------------------------- Thomas J. McHugh /s/ Michael J. Morris Director - --------------------------- Michael J. Morris /s/ J. Eustace Wolfington Director - --------------------------- J. Eustace Wolfington II-7 31 EXHIBIT INDEX Exhibit No. Description Method of Filing ----------- ----------- ---------------- 3.1 Articles of Incorporation of Philadelphia Consolidated, as amended (incorporated by reference to Exhibit 3.1 filed with Philadelphia Consolidated's Form S-1 Registration Statement under the Securities Act of 1933 (Registration No. 33-65958)). 4.1 Philadelphia Insurance Companies Stock * Purchase Plan for Preferred Agents. 4.2 Form of Subscription Agreement * 5.1 Opinion of Wolf, Block Schorr and Solis-Cohen * LLP regarding the legality of the securities being registered by Philadelphia Consolidated hereby. 23.1 Consent of PricewaterhouseCoopers LLP related * to the financial statements of Philadelphia Consolidated Holding Corp. 23.2 Consent of Wolf, Block Schorr and Solis-Cohen * LLP (included in Exhibit 5.1). 24.1 Powers of attorney (included on signature pages of this Registration Statement). - ---------- * Filed electronically herewith. EX-4.1 2 PHILADELPHIA INSURANCE COMPANIES STOCK PURCHASE 1 EXHIBIT 4.1 PHILADELPHIA INSURANCE COMPANIES STOCK PURCHASE PLAN FOR PREFERRED AGENTS 1. Purpose. a. The purpose of the Philadelphia Insurance Companies Stock Purchase Plan for Preferred Agents (the "Plan") is to assist the Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the "Company"), and its Subsidiaries in retaining its Preferred Agents in a continuing relationship with the Company by offering them a greater stake in the Company's success and a closer identity with it. This is to be accomplished by providing Preferred Agents a continuing opportunity to purchase Shares (as hereinafter defined) from the Company through periodic offerings. b. The Plan is not intended to comply with the provisions of Section 423 of the Code (as hereinafter defined). 2. Definitions. For purposes of the Plan: a. "Agent" means the person or persons appointed by the Board in accordance with Section 3.d. b. "Board" means the Board of Directors of the Company. c. "Code" means the Internal Revenue Code of 1986, as amended. d. "Committee" means the committee described in Section 3. e. "Company" means Philadelphia Consolidated Holding Corp., a Pennsylvania corporation. f. "Disability" means a condition such that a Participant ceases to be a Preferred Agent for the Company on account of his or her "disability" as determined by the Committee. g. "Fair Market Value" on any date means the last reported sale price for Shares as reported on the NASDAQ National Market, or the closing price reported on such other stock exchange as the Shares may be listed, on such date as reported in the Wall Street Journal, or if there is no closing price reported, then Fair Market Value of a Share shall mean the average between the closing bid and asked prices for Shares on such date as reported. If there are no sales reports or bid or asked 2 quotations, as the case may be, for a given date, the closest preceding date on which there were sales reports or bid or asked quotations shall be used. If the Committee determines, in its discretion, that such valuation does not accurately reflect the value of the Shares or if Shares are not publicly traded, the Fair Market Value of a Share shall be determined by the Committee. h. "Investment Account" means the account established for a Participant pursuant to Section 8.b to hold Shares acquired for a Participant pursuant to the Plan. i. "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotations System. j. "Offering Period" means each any period or periods as may be designated at the discretion of the Committee as an Offering Period. k. "Participant" means a Preferred Agent who is eligible to participate in the Plan and who makes an election to participate in the Plan in accordance with Section 5 as well as any former Participant to the extent such former Participant has any Shares held for his or her benefit in an Investment Account. l. "Plan" means the Philadelphia Insurance Companies Stock Purchase Plan for Preferred Agents as set forth in this document, and as may be amended from time to time. m. "Plan Year" means the 12 month period commencing each September 1 and ending on the subsequent August 31. The first Plan Year shall be the period commencing May 15, 1999 and ending August 31, 1999. n. "Preferred Agent" shall be those agents of the Company who are parties to an agency agreement with the Company and designated as a "Preferred Agent" by the Executive Vice President - Director of Marketing. A person's status as a Preferred Agent as of any particular Offering Period shall be based on whether such person is party to a Preferred Agent Agreement as of the first day of the Offering Period. o. "Purchase Date" means the last business day of each Offering Period. p. "Purchase Price" means the lesser of 85% of the Fair Market Value of a Share on i. the first business day of the Offering Period or ii. the Purchase Date. 2 3 q. "Restricted Period" means the two year period described in Section 6.d. r. "Share" or "Shares" means a share or shares of the Company's common stock, no par value, of the Company. s. "Subscription Agreement" means the agreement, in a form established by the Committee, between the Participant and the Company pursuant to which the Participant agrees to purchase Shares pursuant to the Plan. 3. Administration of the Plan. The Plan shall be administered by the Board or by such committee as may be designated by the Board, as determined from time to time at the discretion of the Board. The committee designated to administer the Plan by the Board, or the Board itself in its capacity as administrator of the Plan are referred to herein as the "Committee." Subject to the express provisions of the Plan, the Committee shall have full discretionary authority to interpret the Plan, to issue rules for administering the Plan, to change, alter, amend or rescind such rules, and to make all other determinations necessary or appropriate for the administration of the Plan. All determinations, interpretations and constructions made by the Committee with respect to the Plan shall be final and conclusive. a. Meetings. The Committee shall hold meetings at such times and places as it may determine, shall keep minutes of its meetings, and shall adopt, amend and revoke such rules or procedures as it may deem proper; provided, however, that it may take action only upon the agreement of a majority of the whole Committee. Any action which the Committee shall take through a written instrument signed by a majority of its members shall be as effective as though it had been taken at a meeting duly called and held. The Committee shall report all actions taken by it to the Board of Directors. b. Exculpation. No member of the Committee shall be personally liable for monetary damages as such for any action taken or any failure to take any action in connection with the administration of the Plan unless i. the member of the Committee has breached or failed to perform the duties of his office under Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law of 1988, as amended, and ii. the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness; provided, however, that the provisions of this Section 3.b shall not apply to the responsibility or liability of a member of the Committee pursuant to any criminal statute or to the liability of a 3 4 member of the Committee for the payment of taxes pursuant to local, state or federal law. c. Indemnification. Service on the Committee shall constitute, for purposes of rights to indemnification from the Company, service as a member of the Board of Directors of the Company. Each member of the Committee shall be entitled, without further act on his part, to indemnity from the Company and limitation of liability to the fullest extent provided by applicable law and by the Company's Articles of Incorporation and/or bylaws in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan in which he or she may be involved by reason of his or her being or having been a member of the Committee, whether or not he or she continues to be such member of the Committee at the time of the action, suit or proceeding. d. Agent. The Committee may engage an Agent to perform custodial and record-keeping functions for the Plan, such as holding record title to the Participants' Share certificates, maintaining an individual Investment Account for each such Participant and providing annual status reports to such Participants. e. Delegation. The Committee shall have full discretionary authority to delegate ministerial functions to management of the Company. 4. Eligibility. All Preferred Agents of the Company shall be eligible to participate in the Plan as of the first day of an Offering Period. Notwithstanding the foregoing, no person shall be eligible to participate in the Plan if such person is an Excluded Individual. For purposes of this Section 4, an "Excluded Individual" means, as of the date of determination, any individual who is then serving, or who has been elected, nominated or appointed by the Board or by the Company's shareholders to serve, in any of the following capacities: (i) as a member of the Board, (ii) as Chairman of the Board, Vice Chairman of the Board, President, a Vice President, Secretary or Treasurer of the Company, or (iii) in any other position (regardless of title) obligating such individual to file reports pursuant to Section 16(a) of the Securities Exchange Act of 1934. 5. Election to Participate. a. Notice of Offering Period. Notice shall be provided to each Preferred Agent who is eligible to participate in the Plan setting forth the dates of the Offering Period and any other terms or conditions which must be met in order for an eligible Preferred Agent to become a Participant in the Plan. Such notice shall be delivered to each eligible Preferred Agent as soon as practicable on or after the first day of the Offering Period. Notwithstanding the foregoing, the Company shall have no obligation or liability to any otherwise eligible Preferred Agent who does not receive a notice for any Offering Period including, but not limited to, 4 5 any obligation to allow that Preferred Agent to participate in the offering for the Offering Period. b. Initial Subscription Agreements. Each Preferred Agent may become a Participant by filing with the Committee a Subscription Agreement electing to purchase Shares during an Offering Period. c. Subsequent Subscription Agreements. In order to participate in the Plan for any subsequent Offering Period, a Preferred Agent must file with the Committee a new Subscription Agreement electing to purchase Shares during such Offering Period. 6. Conditions and Terms of Purchases of Shares. a. The number of Shares that are to be purchased under a Subscription Agreement shall not exceed the limitations set forth in Section 7. b. Any Preferred Agent purchasing Shares under the Plan shall complete a Subscription Agreement, on a form provided by the Committee, with respect to an Offering Period. To become a Participant with respect to a particular Offering, an eligible Preferred Agent must submit his or her Subscription Agreement during the enrollment period established by the Committee with respect to such Offering Period. Under the Subscription Agreement, the Participant may elect either to have a specified dollar amount or a portion of amounts otherwise payable to the Participant as commissions or other compensation withheld by the Company for the purpose of purchasing Shares under the terms of the Plan, or to make a payment in cash on or before the last day of the Offering Period equal to a amount agreed to be paid by the Participant for the purchase of Shares under the terms of the Plan. i. If a Preferred Agent elects to have amounts withheld from amounts otherwise payable to him or her as commissions or other compensation, such withheld amounts shall be held by the Company until used for the purchase of Shares under the terms of the Plan on the last day of the Offering Period. ii. No interest or other earnings shall be paid with respect to amounts withheld for the purchase of Shares under the Plan. iii. The Company shall maintain a bookkeeping account for the purpose of accounting for amounts withheld under the Plan; provided, however, that the Company shall be under no obligation to segregate or to hold any withheld amounts in a separate account for any Participant. 5 6 c. The purchase of Shares by a Participant shall be made at the Purchase Price set with respect to the particular Purchase Date on which the Shares are purchased. d. Any Shares purchased pursuant to the Plan shall be restricted for a period of two years, measured from the first day of the relevant Offering Period (the "Restricted Period"). Any attempt to sell, transfer, make subject to any lien, or otherwise dispose of such Shares prior to the end of the Restricted Period shall be null and void, and the Preferred Agent shall forfeit all rights to such Shares on receipt of payment from the Company of the lesser of Fair Market Value or the Purchase Price of such Shares. All certificates for Shares shall be legended so as to indicate the restrictions on sales of such Shares under the Plan in the manner and to the extent required by law. e. The Committee shall have complete discretion to establish rules and procedures in connection with the election by Participants to participate in the Plan, which rules and procedures may govern all aspects of the participation election, including, but not limited to the manner in which a Subscription Agreement is to be completed, and the limits, if any, on purchases permitted with respect to a particular Offering Period that may be made applicable in addition to such limits as are imposed under the terms of the Plan. 7. Limit on Purchase of Shares. No Participant shall be permitted to purchase Shares under the Plan during any three consecutive calendar years having an aggregate value in excess of $100,000. For purposes of the preceding sentence, the value of Shares purchased shall be equal to their Fair Market Value as of the first day of the Offering Period in which they are purchased. 8. Method of Purchase, Cash Accounts and Investment Accounts. a. Method of Purchase of Shares. Except as otherwise provided in the Plan, each Participant who has elected to participate in the Plan under the provisions of Section 5 shall be deemed, without any further action, to have purchased on the Purchase Date applicable to such Subscription Agreement, the number of Shares specified in the Subscription Agreement consistent with the terms for such purchase set forth in the Plan. Each Participant who has elected to participate in the Plan by making a cash payment under the provisions of Section 5 shall be required to make such payment on or before the last day of the Offering Period. If no such payment is made, the Participant shall be deemed to have revoked his or her participation for the Offering Period, and shall have no further rights to purchase Shares for such Offering Period. 6 7 b. Cash Accounts. Any cash contributed by a Participant for the purpose of making purchases of Shares under the Plan, whether by direct payment by the Participant or through withholding from commissions otherwise payable to the Participant, shall be accumulated in a non-interest bearing bookkeeping account ("Cash Account") for the Participant until used to purchase Shares. The Company shall be under no obligation to hold any funds in a separate account for a Participant, and no interest shall be payable with respect to any amounts allocated to such a Cash Account. c. Investment Accounts. All Shares purchased under the Plan shall, until the Restricted Period applicable to such Shares has passed, be held in a separate Investment Account established for each Participant. d. Dividends or Other Distributions on Shares Held in Investment Accounts. All cash dividends paid with respect to Shares which are held in an Investment Account of a Participant shall be paid to the Participant. Any distribution that is in the nature of a stock split shall be retained in the Investment Account until such time as the Share or Shares with respect to which such distribution was made are distributed from the Investment Account to the Participant. e. Adjustment of Shares on Application of Aggregate Limits. If the total number of Shares that would be purchased pursuant to properly filed Subscription Agreements for a particular Offering Period exceeds the number of Shares then available for purchase under the Plan, then the number of available Shares shall be allocated among the Participants filing Subscription Agreements for such Offering Period pro-rata on the basis of the number of Shares set forth in each such Subscription Agreement. The payment obligation for each such Subscription Agreement shall be deemed modified to take into account the purchase of a number of Shares that is less than the number specified in the Subscription Agreement, and any amounts withheld in excess of the amount needed to make the pro-rata purchase shall be distributed to the Participant as soon as practicable following the Purchase Date. f. Revocation of Participation. A Participant shall have the right to revoke his or her election to participate in the Plan with respect to an Offering Period at any time on or before the last day of the Offering Period, subject to such reasonable notification requirements as may be imposed by the Committee on such revocation rights, by filing with the Committee a written notice indicating his or her intention to revoke his or her election to participate. In addition, if a Participant fails to pay the Purchase Price of Shares for which he or she has subscribed in full on or before the Purchase Date, he or she shall be deemed to have revoked his or her participation for that Offering Period and will have no further rights to purchase Shares for that Offering Period. If any amounts have 7 8 been accumulated in a cash account for a Participant with respect to an Offering Period and such Participant revokes or is deemed to have revoked his or her election to participate in the Plan for such Offering Period, the Company shall distribute to the Participant the amount accumulated in his or her cash account for such Offering Period as soon as practicable following the date of revocation. g. Repayment of Amounts in Cash Accounts. In the event there has been accumulated in a Cash Account with respect to an Offering Period an amount in excess of the amount required to purchase the number of shares for which the Participant has subscribed with respect to such Offering Period, the excess in the Cash Account over the amount used to purchase the Shares on the last day of the Offering Period shall be returned to the Participant, without interest, as soon as practicable following the last day of the Offering Period. 9. Shares Subject to Plan. The aggregate maximum number of Shares that may be issued pursuant to the Plan is two hundred thousand (200,000), subject to adjustment as provided in Section 17 of the Plan. The Shares delivered pursuant to the Plan shall be Shares held in treasury or Shares authorized but previously unissued. 10. Distribution of Certificates. Each Participant shall receive a certificate or certificates for those Shares held in an Investment Account for the benefit of such Participant as soon as practicable following the end of the Restricted Period applicable to such Shares, provided the payment obligation with respect to such Shares has been fully satisfied. 11. Registration of Certificates. Each certificate withdrawn by a Participant may be registered only in the name of the Participant, or, if the Participant so indicated on the Participant's Subscription Agreement, in the Participant's name jointly with a member of the Participant's family, with right of survivorship. A Participant who is a resident of a jurisdiction which does not recognize such a joint tenancy may have certificates registered in the Participant's name as tenant in common or as community property with a member of the Participant's family without right of survivorship. 12. Voting. The Agent or, if there is no Agent, the Committee, shall vote all Shares held in an Investment Account in accordance with the Participant's instructions. 13. Death or Other Termination of Status as Preferred Agent. a. In the event of a Participant's termination of his or her status as a Preferred Agent on account of death or Disability, the Participant, or the Participant's beneficiary, if one has been designated, or the Participant's estate, as the case may be, shall be entitled to the Shares held in the Participant's Investment Account. The Restricted Period shall cease to be applicable to the Shares of a Participant whose termination is described in this Section 13.a. The Participant, or the Participant's 8 9 beneficiary or estate, as the case may be, shall be issued a certificate or certificates for such Shares as soon as practicable after the payment obligation is satisfied. b. In the event a Participant's status as a Preferred Agent terminates for any reason other than a termination described in Section 13.a, the Participant shall be entitled to the Shares which have been held beyond the Restricted Period applicable to such Shares. With respect to those Shares for which the Restricted Period has not passed, the Company shall have the right, but not the obligation, to repurchase any such Shares for the lesser of Fair Market Value or the Purchase Price of such Shares. If the Company does not so elect to repurchase such Shares, the Participant shall be entitled to such Shares. The Participant shall be issued a certificate or certificates for any Shares to which the Participant is entitled as soon as practicable after termination of his or her status as a Preferred Agent. The Company may exercise its right to repurchase by giving written notice thereof to the Participant at such address for Participant as the Company has on its books and records within ninety days after the Company receives notice of a Participant's termination which would give the Company the right to repurchase shares pursuant to this Section 13.b. Closing of the repurchase shall be held within thirty days after the Company gives such written notice at such time and place as the Company shall designate to the Participant. As part of the Closing, the Participant shall execute such stock powers and other documents as the Company determines are necessary or appropriate to be signed by the Participant in connection with the repurchase of the shares, and in addition the Participant shall grant in the Participation Agreement executed by the Participant in connection with the granting of the right to purchase shares under the Plan an irrevocable power of attorney designating the Company and each of its officers as Participant's attorney-in-fact to execute and deliver on behalf of the Participant, and in the Participant's name, place and stead, such stock powers and other documents. 14. Rights Not Transferable. Except as permitted under Section 13, rights under the Plan are not transferable by a Participant and are exercisable during the Participant's lifetime only by the Participant. 15. No Right to Continued Preferred Agent Status. Neither the Plan nor any right granted under the Plan shall confer upon any Participant any right to continuance of his or her status as a Preferred Agent with the Company, or interfere in any way with the right of the Company to terminate the Preferred Agent status of such Participant. 16. Application of Funds. All funds received or held by the Company under this Plan may be used for any corporate purpose. 9 10 17. Adjustments in Case of Changes Affecting Shares. In the event of a subdivision or split of outstanding Shares, or the payment of a stock dividend, the Share limit set forth in Section 9 shall be adjusted proportionately, and such other adjustments shall be made as may be deemed equitable by the Committee. 18. Amendment of the Plan. The Board of Directors of the Company may at any time, or from time to time, amend the Plan in such manner as it may deem advisable. 19. Termination of the Plan. The Plan and all rights of Preferred Agents under any offering hereunder shall terminate at such time as the Board of Directors, at its discretion, determines to terminate the Plan. Upon termination of this Plan, any Shares held in Investment Accounts for Participants shall be carried forward into the Participant's Investment Account under a successor plan, if any, or, if there is no successor plan, certificates for such Shares shall be forwarded to the Participant upon satisfaction of all requirements for distribution of such Shares. 20. Governmental Regulations. a. Anything contained in this Plan to the contrary notwithstanding, the Company shall not be obligated to sell or deliver any Shares certificates under this Plan unless and until the Company is satisfied that such sale or delivery complies with (i) all applicable requirements of the governing body of the principal market in which such Shares are traded, (ii) all applicable provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder and (iii) all other laws or regulations by which the Company is bound or to which the Company is subject. b. The Company may make such provisions as it may deem appropriate for the withholding of any taxes or payment of any taxes which it determines it may be required to withhold or pay in connection with any Shares. The obligation of the Company to deliver certificates under this Plan is conditioned upon the satisfaction of the provisions set forth in the preceding sentence. 21. Repurchase of Shares. The Company shall not be required to repurchase from any Participant any Shares which such Participant acquires under the Plan. 10 EX-4.2 3 FORM OF SUBSCRIPTION AGREEMENT 1 EXHIBIT 4.2 PHILADELPHIA INSURANCE COMPANIES STOCK PURCHASE PLAN FOR PREFERRED AGENTS SUBSCRIPTION AGREEMENT FOR OFFERING PERIOD COMMENCING AS OF __________ AND ENDING ON ______________ 1. I hereby elect to participate in the Philadelphia Insurance Companies Stock Purchase Plan for Preferred Agents (the "Stock Purchase Plan") for the purpose of purchasing shares of the common stock of Philadelphia Consolidated Holding Corp., a Pennsylvania Corporation (the "Company"), no par value ("Common Stock"), in accordance with this Subscription Agreement and the Stock Purchase Plan. 2. By means of filing this subscription I am hereby electing, subject to any applicable limitations under the Stock Purchase Plan, to purchase shares of Common Stock on the terms set forth herein and in the Stock Purchase Plan. I am hereby also authorizing, to the extent indicated herein, regular deductions from my commissions in connection with my purchase election under the terms of the Stock Purchase Plan. I understand that the amount of my purchases may be limited as set forth in the Stock Purchase Plan. I also (a) understand that in no event shall the Company be obligated to accept this subscription agreement if my principal residence is in a jurisdiction in which any action must be taken by the Company to comply with securities laws of such jurisdiction, and (b) represent that my principal residence is at the address shown on the signature page hereof. 3. I understand that the regular deductions, if any, from my commissions made pursuant to this subscription to purchase shares under the Stock Purchase Plan shall be accumulated for the purpose of paying the purchase price of the shares of Common Stock as determined in accordance with the Stock Purchase Plan, and that the purchase shall take place automatically as of the last day of the Offering Period to which this election applies. 4. I understand that whole shares of Common Stock will be purchased on my behalf in accordance with this subscription agreement and the terms of the Stock Purchase Plan using the accumulated amount of the authorized deductions, if any, from my commissions along with the amount or amounts I pay in cash in connection with this election prior to the last day of the Offering Period to which this election applies; provided, however, that no purchase shall be made on my behalf under the Stock Purchase Plan unless I sign and deliver to the Company a stock power, endorsed in blank, that may be used in the event the Company repurchases my shares under the terms of the Stock Purchase Plan. I understand that my election to purchase shares of Common Stock as set forth in this election is only applicable to the Offering Period to which this election applies, and that any election to participate in the Stock Purchase Plan with 2 respect to a subsequent Offering Period must be made by filing a new Subscription Agreement. 5. I understand that the shares of Common Stock purchased under the Stock Purchase Plan, the associated stock power executed by me and this Subscription Agreement will be kept in an investment account until the expiration of two years (measured from the first day of the Offering Period to which this Subscription Agreement relates (the "Restricted Period")). I understand further than any certificates representing such shares of Common Stock may be legended to indicate the restrictions applicable during the Restricted Period. 6. I understand that, except as otherwise specifically provided in the Stock Purchase Plan, I have no right to sell or otherwise dispose of the shares of Common Stock purchased under the Stock Purchase Plan until after the end of the Restricted Period, and that any attempt to sell or otherwise dispose of such shares before the end of the Restricted Period may result in a forfeiture of such shares upon my receipt of the lesser of the original purchase price of such shares or their then Fair Market Value, as defined in the Stock Purchase Plan. I also understand that, in the event my status as a Preferred Agent for the Company terminates prior to the end of the Restricted Period for any reason other than my death or Disability (as defined in the Stock Purchase Plan), the Company has the right, but not the obligation, to purchase my interest in the shares of Common Stock purchased under this Subscription Agreement for the lesser of the purchase price paid for such shares, or the then fair market value of such shares. 7. I have received a copy of the Company's most recent prospectus which describes the Stock Purchase Plan and a copy of the Stock Purchase Plan itself. I understand that my participation in the Stock Purchase Plan is in all respects subject to the terms of the Stock Purchase Plan. 8. I understand that, under current federal tax laws, my participation in the Stock Purchase Plan may result in my recognizing compensation income. I also understand that the timing of this compensation income may be affected by the filing of an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"). In the event I decide to file such an election, I will also provide notice of such election to the Company as required under applicable federal tax rules. In the event there are any federal, state or local tax withholding obligations of the Company that arise out of my participation in the Stock Purchase Plan, I agree that the obligation of the Company to permit my purchase of shares and/or to transfer certificates for such shares to me is contingent on my taking such actions or making amounts available as may be required to satisfy such withholding obligations, as determined by the Company. 2 3 9. I hereby agree to be bound by the terms of the Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Stock Purchase Plan. 10. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Stock Purchase Plan: Number of Shares or Dollar Amount of Purchase: Authorized Withholding from Commissions (Describe below the amount or percentage to be withheld from each commission payment made during the Offering Period): I acknowledge and agree that my election to participate in the Stock Purchase Plan for the Offering Period is dictated by the number of shares or the dollar amount I specify in this Subscription Agreement. If the amount I authorize in this Subscription Agreement to be withheld from my commissions is not sufficient to pay the purchase price for the shares I have elected to purchase, I agree to pay the difference in cash prior to the end of the Offering Period. I further agree that if I authorize an amount to be withheld from my commissions, and make no indication of a number of shares or a dollar amount of purchase, the amount withheld from my commissions shall be accumulated and used to purchase shares as of the last day of the Offering Period and the number of shares so purchased shall be determined by the Purchase Price as determined under the provisions of the Stock Purchase Plan. I hereby grant an irrevocable power of attorney to the Company and to each of its officers to act as my attorney-in-fact for the purpose of executing and delivering on my behalf and in my name, place and stead, any and all stock powers and other documents as may be necessary or appropriate for the repurchase by the Company, at its election, of shares purchased under the Stock Purchase Plan as permitted under the terms of the Stock Purchase Plan. Preferred Agent's Signature:___________________________ Date:____________ Preferred Agent's Name: ___________________________ Principal Residence: 3 EX-5.1 4 OPINION OF WOLF BLOCK SCHORR & SOLIS-COHEN LLP 1 EXHIBIT 5.1 [Wolf, Block, Schorr and Solis-Cohen LLP Letterhead] May 7, 1999 Philadelphia Consolidated Holding Corp. One Bala Plaza, Suite 100 Bala Cynwyd, Pennsylvania 19004 Re: Registration Statement on Form S-3 Gentlemen: As counsel to Philadelphia Consolidated Holding Corp. (the "Company"), we have assisted in the preparation of a Registration Statement on Form S-3 (together with all exhibits thereto and documents incorporated by reference therein, the "Registration Statement") in the form proposed to be filed with the Securities and Exchange Commission (the "Commission"). The Registration Statement relates to the issuance and sale from time to time, pursuant to Rule 415 of the General Rules and Regulations promulgated under the Securities Act of 1933, as amended (the "Securities Act"), of up to 200,000 shares of Common Stock, no par value ("Common Shares"), of the Company. This opinion is being delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K promulgated under the Securities Act. In connection with the opinions expressed herein, we have examined the originals or copies, certified or otherwise identified to our satisfaction, of such records, instruments, documents and matters of law as we have deemed necessary or appropriate for the purpose of rendering this opinion. In our examination, we have assumed without independent verification (i) the legal capacity of all natural persons, (ii) the genuineness of all signatures, (iii) the authenticity of all documents submitted to us as originals, (iv) the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such documents, and (v) the power and authority of all persons other than the Company signing such documents to execute, deliver and perform such documents, and the valid authorization, execution and delivery of such documents by such other persons. As to any facts material to the opinions expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers or other representatives of the Company. 2 May 7, 1999 Page 2 We also have assumed that (i) the Registration Statement, and any amendments thereto (including post-effective amendments), including the form of prospectus included therein (as supplemented, the "Prospectus"), will have become effective under the Securities Act, and the Common Shares issued will be issued and sold in compliance with applicable federal and state securities laws and solely in the manner stated in the Registration Statement and the Prospectus. We are admitted to practice in the Commonwealth of Pennsylvania and we do not express any opinion as to the laws of any other jurisdiction other than the federal laws of the United States of America to the extent referred to specifically herein. The Common Shares may be issued from time to time on a delayed or continuous basis, and this opinion is limited to the laws, including applicable rules and regulations, in effect on the date hereof, and to the facts in existence on the date hereof. We assume no obligation to update such opinion. Based upon and subject to the foregoing, and our examination of law and such other matters as we have deemed relevant under the circumstances, it is our opinion that the Common Shares, when duly issued and sold in the manner and for the consideration contemplated by the Registration Statement and the Prospectus, will be legally issued, fully paid and non-assessable. We hereby consent to the reference to our firm in the Registration Statement under the Prospectus caption "Legal Opinions" and to the filing of this opinion with the Commission as an exhibit to the Registration Statement. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules or regulations of the Commission. Very truly yours, WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP EX-23.1 5 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-3 of our report dated February 5, 1999, on our audits of the financial statements and financial statement schedules of Philadelphia Consolidated Holding Corp. and Subsidiaries. We also consent to the references to our firm under the captions "Experts." PricewaterhouseCoopers LLP Philadelphia, Pennsylvania May 7, 1999 -----END PRIVACY-ENHANCED MESSAGE-----