PHILADELPHIA CONSOLIDATED HOLDING CORP.
AMENDED AND RESTATED EMPLOYEES’ STOCK INCENTIVE AND
PERFORMANCE BASED COMPENSATION PLAN
Effective as of March 30, 2005
1. PURPOSE
AND SHAREHOLDER APPROVAL
(a) The
Philadelphia Consolidated Holding Corp. Amended and Restated
Employees’ Stock Incentive and Performance Based Compensation
Plan (the “Plan”) is being adopted as an amendment and
restatement of the stock option plan (formerly known as the
Philadelphia Consolidated Holding Corp. Stock Option Plan)
previously maintained by Philadelphia Consolidated Holding Corp., a
Pennsylvania corporation (referred to herein, along with its
Subsidiaries, as appropriate, as the “Company”), as a
means for the provision of incentives and awards to those employees
and members of the Board largely responsible for the long term
success of the Company.
(b) The
adoption of this amendment and restatement of the Plan is subject
to its approval by the Company’s shareholders. Any grants or
awards made under the Plan shall be null and void if the Plan is
not so approved at the next regularly scheduled meeting of the
Company’s shareholders. The Plan is intended to meet certain
requirements of the Code relating to the payment of compensation
that qualifies as “performance based compensation”
which is exempt from certain limitations on deduction imposed under
Code Section 162(m).
(c) The
purpose of the Plan is to secure for the Company the benefits of
the additional incentive inherent in the ownership of its Common
Stock by and through the grant of equity based compensation to
selected employees of the Company, and to help the Company secure
and retain the services of such employees.
2. GENERAL
PROVISIONS
(a)
Definitions . As used in the Plan:
(i) “Act”
means the Securities Exchange Act of 1934, as amended.
(ii) “Award”
means a restricted stock award or restricted stock unit granted
pursuant to Section 5 of the Plan.
(iii) “Award
Agreement” means a written agreement between the Company and
the Participant as described in Section 5(f).
(iv) “Board
of Directors” or “Board” means the Board of
Directors of the Company.
(v) “Change
in Control” means the date on which individuals who are
Continuing Directors cease to constitute a majority of the members
of the Board. For these purposes Continuing Directors are the
members of the Board on the date this Plan is adopted, provided
that any person becoming a member of the Board subsequent to such
date whose
election or nomination for
election was supported by two thirds of those directors who were
Continuing Directors at that time of the election or nomination
shall be deemed to be a Continuing Director. In addition, a Change
in Control shall be deemed to occur on the first to occur of any of
the following:
(A) approval
by the Company’s shareholders (or by the Board, if
shareholder action is not required) of a plan or other arrangement
pursuant to which the Company will be dissolved or
liquidated;
(B) approval
by the shareholders of the Company (or by the Board, if shareholder
action is not required) of a definitive agreement to sell or
otherwise dispose of substantially all of the assets of the
Company;
(C) approval
of a merger or consolidation transaction by the shareholders of the
Company (or the Board, if shareholder action is not required) and
of any other parties whose approval is required for consummation of
the particular transaction pursuant to which the Company will be
merged or consolidated with another entity, other than a merger or
consolidation which results in the Company’s shareholders
(determined immediately prior to the consummation of the
transaction) having at least a majority of the voting power of the
surviving entity’s voting securities immediately after the
consummation of the transaction and held by such shareholders in
the same proportion as such shareholders’ stock in the
Company was held immediately before consummation of the merger or
consolidation; or
(D) acquisition
by any entity, person or group, within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Act (other
than (A) the Company or any of its subsidiaries or any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any of its subsidiaries or (B) any person who,
on the Effective Date, shall have been the beneficial owner of or
have voting control over shares of common stock of the Company
possessing more than fifteen percent (15%) of the aggregate voting
power of the Company’s outstanding stock) shall have become
the beneficial owner of, or shall have obtained voting control over
shares having more than fifty percent (50%) of the voting power of
the Company’s outstanding stock.
(vi) “Code”
means the Internal Revenue Code of 1986, as amended.
(vii) “Committee”
means the Company’s Compensation Committee, and/or any other
committee or committees as may be designated by the Board to act as
the administrative committee for the Plan, or the Board itself (any
such committee or committees and the Board of Directors in its
capacity as administrative committee for the Plan are referred to
herein as the “Committee”). The Committee shall, to the
extent possible and to the extent the Board determines it to be
appropriate, consist of two or more of its members who qualify as
“Non-employee Directors.” For these purposes, the term
“Non-employee Director” means a member of the
Company’s Board of Directors who qualifies as a
“non-employee” director as that term is defined in
paragraph (b)(3) of Rule 16b-3 promulgated under the Act, as
an “outside” director as that term is defined in
Treasury Regulation Section 1.162-27, and as an
“independent” director for purposes of any applicable
rules of the Securities Exchange Commission and/or the principal
exchange on which the Company’s Common Stock is
traded.
- 2 -
(viii) “Common
Stock” means the common stock, no par value, of the
Company.
(ix) “Covered
Employee” means each person who is either the chief executive
officer of the Company or whose total compensation is required to
be reported to shareholders of the Company under the Act by reason
of being among the four highest compensated officers of the
Company. The intent of this definition is to identify those persons
who are “covered employees” for purposes of the
applicable provisions of Code Section 162(m) and Treasury
Regulations promulgated thereunder and is to be interpreted
consistent with this intent.
(x) “Fair
Market Value” means, with respect to any date such a
determination is relevant, the closing price of the Common Stock on
the day of grant as reported on the National Market System of the
National Association of Securities Dealers, Inc. Automated
Quotation System, or as reported on such other stock exchange,
wherever the Common Stock 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 the Common Stock shall mean the
average between the closing bid and asked prices for the Common
Stock on such date as reported. If there are no sales reports or
bid or asked 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, as applicable and as the Committee
may determine.
(xi) “Hypothetical
Option” means a hypothetical grant of a Stock Option used for
purposes of determining the terms, conditions and value of an SAR
granted under the Plan, as described in
Section 3(i).
(xii) “Incentive
Stock Option” means an option granted under the Plan, which
is intended to qualify as an incentive stock option under
Section 422 of the Code.
(xiii) “Non
Qualified Stock Option” means an option granted under the
Plan which is not an Incentive Stock Option.
(xiv) “Option
Agreement” means a written agreement between the Company and
a Participant to whom a Stock Option has been granted, as described
in Section 3(a).
(xv) “Participant”
means an employee of the Company or one or more of its Subsidiaries
and any member of the Board to whom a Stock Option, SAR, an Award
and/or a Performance Share Award has been granted under the
Plan.
(xvi) “Performance
Share” means a share of Common Stock subject to a Performance
Share Award.
(xvii) “Performance
Share Award” means an Award granted to a Participant in
accordance with the provisions of Section 4 of the
Plan.
- 3 -
(xviii) “Performance
Share Award Limitation” means the limitation on the Shares
that may be granted pursuant to Performance Share Awards to any one
Participant, as set forth in Section 4 of the Plan.
(xix) “Performance
Period” means any period designated as a Performance Period
by the Committee.
(xx) “Performance
Target” means the performance target fixed by the Committee
for a particular Performance Period.
(xxi) “Rule 16b-3”
means Rule 16b-3 promulgated under the Act or any successor
Rule.
(xxii) “SAR
Agreement” means a written agreement between the Company and
a Participant to whom an SAR has been granted, consistent with the
terms that would be in an Option Agreement, but providing for
settlement of the SAR by means of transfer of shares of Common
Stock as set forth in Section 3(i).
(xxiii) “Stock
Appreciation Right” or “SAR” means a grant that
has all of the economic rights and benefits of a Stock Option, but
which provides the Participant on exercise with shares of Common
Stock having a Fair Market Value equal to the excess of the value
of the Common Stock hypothetically subject to such Stock Option
over the purchase price that would be required to be paid on the
exercise of such Stock Option.
(xxiv) “Stock
Option” means an Incentive Stock Option or Non Qualified
Stock Option granted under the Plan.
(xxv) “Subsidiary”
means any corporation whose outstanding voting securities having
ordinary voting power to elect directors (other than securities
having such power only by reason of the happening of a contingency)
shall at the time be 50% or more owned, directly or indirectly, by
the Company, and any other entity that would be a Subsidiary but
for the fact that such entity is not a corporation.
(b)
Administration of the Plan . The Plan shall be administered
by the Committee, which shall have the full discretionary power,
subject to and within the express limits of the Plan, to interpret
and administer the Plan and Stock Options, SARs, Awards, and
Performance Share Awards granted under it, to make and interpret
rules and regulations for the administration of the Plan, and to
make changes in and revoke such rules and regulations. The
Committee, in the exercise of these powers, shall generally (and
not by way of limitation):
(i) determine
all questions of policy and expediency that may arise and may
correct any defect, omission, or inconsistency in the Plan or any
agreement evidencing the grant of any Stock Option, SAR, Award, or
Performance Share Award in a manner and to the extent it shall deem
necessary to make the Plan fully effective;
(ii) determine
those individuals who are eligible to be Participants in the Plan
to whom Stock Options, SARs, Awards, and/or Performance Share Award
may be
- 4 -
granted and the number of any
thereof to be granted to any Participant, consistent with the
provisions of the Plan;
(iii) determine
the terms of Stock Options, SARs, Awards, and Performance Share
Awards granted, consistent with and subject to the limitations
contained in the Plan, which authority includes, without
limitation, the power to modify or amend any documentation provided
to a Participant to clarify or amend any applicable terms and
conditions applicable to any outstanding Stock Option, SAR, Award
or Performance Share Award to the extent such amendment or
modification is consistent with the express provisions of the Plan
and is not, absent the Participant’s consent, detrimental to
the rights of the Participant; and
(iv) exercise
such powers and perform such acts in connection with the Plan as
are deemed necessary or expedient to promote the best interests of
the Company.
(c)
Effective Date . The Plan shall be effective as of
March 30, 2005 (the “Effective Date”), provided
that the Plan is approved and ratified by the Company’s
shareholders at the next regularly scheduled meeting of the
Company’s shareholders. If the Plan is not so approved by the
Company’s shareholders, the Plan (as herein amended and
restated) and all grants previously made hereunder (except to the
extent such grants were permissible under the Plan as in effect
without regard to its amendment and restatement herein) become null
and void.
(d)
Duration . If approved by the shareholders of the Company,
as provided in Section 2(c), unless sooner terminated by the Board
of Directors, the Plan shall remain in effect until
December 31, 2014.
(e)
Shares Subject to the Plan . The maximum number of shares of
Common Stock which may be subject to Stock Options, SARs and Awards
granted under the Plan shall be 6,250,000 (including all shares
previously available for grants under the Plan prior to the
adoption of this Amended and Restated plan document), subject to
adjustment in accordance with Section 6(a), which shares may
be either authorized and unissued shares of Common Stock or
authorized and issued shares of Common Stock purchased or acquired
by the Company for any purpose. If a Stock Option or portion
thereof shall expire or be terminated, canceled, or surrendered for
any reason without being exercised in full, the unpurchased shares
of Common Stock which were subject to such Stock Option or portion
thereof shall be available for future grants of Stock Options, SARs
or Awards under the Plan. Upon the grant of an SAR, the number of
shares of Common Stock that would be subject to the Hypothetical
Option shall be treated as reducing the shares available for grants
under the Plan as though the Hypothetical Option were an
outstanding Stock Option; provided, however, that, if the SAR, or
portion thereof, shall expire or be terminated, canceled, or
surrendered for any reason without being exercised in full, the
shares of Common Stock which were treated as though they were
subject to a Stock Option corresponding to the Hypothetical Option
(or portion thereof) shall be available for future grants of Stock
Options, SARs or Awards under the Plan, and provided, further, that
upon the exercise of the SAR, the excess of the number of shares of
Common Stock subject to the Hypothetical Option over the number of
shares of Common Stock actually issued on the exercise of such SAR
shall also be again available for future grants of Stock Options,
SARs or Awards under the Plan. In the event any Award is forfeited,
any shares of Common Stock
- 5 -
subject to such forfeited Award
shall again be available for future grants of Stock Options, SARs,
or Awards.
(f)
Amendments . The Plan may be suspended, terminated, or
reinstated, in whole or in part, at any time by the Board of
Directors. The Board of Directors may from time to time make such
amendments to the Plan as it may deem advisable; provided, however,
that, without the approval of the Company’s shareholders, no
amendment shall be made which:
(i) Increases
the number of shares of Common Stock which may be subject to Stock
Options, SARs, or Awards granted under the Plan (other than as
provided in Section 6(a)); or
(ii) Extends
the term of the Plan; or
(iii) Increases
the period during which a Stock Option or SAR may be exercised
beyond ten (10) years from the date of grant; or
(iv) Otherwise
materially increases the benefits accruing to Participants under
the Plan; or
(v) Materially
modifies the requirements as to eligibility for participation in
the Plan; or
(vi) Changes
the business criteria which may be used in establishing Performance
Targets pursuant to the provisions of Section 4 of the Plan or
increase the Performance Share Award Limitation.
Termination or amendment of the
Plan shall not, without the consent of the Participant, negatively
affect such Participant’s rights under any Stock Option, SAR,
or Award that has previously been granted to such
Participant.
(g)
Participants and Grants . The Committee shall have full
discretionary authority with respect to Stock Options, SARs,
Awards, and Performance Share Awards granted under the Plan to vary
the terms, numbers of shares and maximum benefits with respect to
each Participant, subject only to the limitations and express rules
of the Plan, and to include such other terms and conditions as may
be established at the Committee’s discretion to the extent
such other terms and conditions are not in conflict with applicable
terms of the Plan.
- 6 -
3. STOCK
OPTIONS AND SARS
(a)
General . All Stock Options granted under the Plan shall be
granted by the Committee solely at the discretion of the Committee,
and shall be evidenced by an Option Agreement executed by the
Company and the Participant to whom granted which agreement shall
state the number of shares of Common Stock which may be purchased
upon the exercise thereof and shall contain such investment
representations and other terms and conditions as the Committee may
from time to time determine, or, in the case of Incentive Stock
Options, as may be required by Section 422 of the Code, or any
other applicable law. Notwithstanding anything herein to the
contrary, no employee shall be granted during any one calendar year
Stock Options entitling such employee to purchase more than one
hundred thousand (100,000) shares of Common Stock, as such number
may be adjusted pursuant to Section 6(a). For purposes of the
preceding sentence, a grant of an SAR shall be treated as though
such grant were a grant of a Stock Option corresponding to the
Hypothetical Option.
(b)
Price . Subject to the provisions of Sections 3(f)(iv)
and 6(a), the purchase price per share of Common Stock subject to a
Stock Option shall, in no case, be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the
date the Stock Option is granted.
(c)
Period . The duration or term of each Stock Option granted
under the Plan shall be for such period as the Committee shall
determine but in no event more than ten (10) years from the
date of grant thereof.
(d)
Exercise . Subject to Section 6(b), no Stock Option
shall be exercisable prior to the expiration of six (6) months
from the date it is granted. Once exercisable, a Stock Option shall
be exercisable, in whole or in part, by delivery of notice of
exercise to the Secretary of the Company at the principal office of
the Company specifying the number of shares of Common Stock as to
which the Stock Option is then being exercised together with
payment of the full purchase price for the shares being purchased
upon such exercise. Until the shares of Common Stock as to which a
Stock Option is exercised are paid for in full and issued, the
Participant shall have none of the rights of a shareholder of the
Company with respect to such Common Stock.
(e)
Payment . The purchase price for shares of Common Stock as
to which a Stock Option has been exercised may be paid:
(i) In
United States dollars in cash, or by check, bank draft, or money
order payable in United States dollars to the order of the Company;
or
(ii) In
the discretion of the Committee by promissory note in such form as
the Committee deems appropriate, executed by the Participant;
provided, however, that in no event shall such payment be permitted
to the extent such an arrangement constitutes a violation of the
Sarbanes-Oxley Act of 2002, or any other applicable law;
or
(iii) In
the discretion of the Committee, by the delivery by the Participant
to the Company of whole shares of Common Stock having an aggregate
Fair Market Value on the date of payment equal to the aggregate of
the purchase price of Common Stock as
- 7 -
