THE PHILADELPHIA INSURANCE
COMPANIES
2007 CASH BONUS PLAN
Effective as of January 1, 2007
1. PURPOSE
The purpose of the Plan,
as adopted by the Board, subject to shareholder approval, is to
provide performance-based cash bonus compensation for key
executives based on the attainment of one or more performance goals
or targets that are related to the financial success of the
Company, and that are established from time to time by the
Committee, as part of an integrated compensation program which is
intended to assist the Company in motivating and retaining
employees of superior ability, industry and loyalty.
2. DEFINITIONS
The following words and
phrases as used herein shall have the following meanings, unless a
different meaning is plainly required by the context:
(a)
“Board” or “Board of
Directors” shall mean the board of directors of the
Company.
(b)
“Bonus Base” shall mean a percentage of a
Participant’s base salary in effect for the Plan Year that
may be any percentage between zero percent (0%) and one hundred
percent (100%). For these purposes, the Participant’s base
salary for the Plan Year shall be the Participant’s actual
annual base salary, unless otherwise specified by the Committee
when establishing the Maximum Percentage Schedule for the Plan
Year.
(c)
“Code” shall mean the Internal Revenue Code of
1986, as amended, or any successor thereto.
(d)
“Committee” shall mean the Compensation
Committee of the Board of Directors, or such other committee
established by the Board, in any case consisting exclusively of two
or more Outside Directors, to act as the Committee with respect to
the Plan, or such other committee as may be appointed by the Board
of Directors to act as the Committee with respect to the
Plan.
(e)
“Company” shall mean Philadelphia Consolidated
Holding Corp., a Pennsylvania corporation, and any successor
thereto, and shall also, except as otherwise required by the
context, include any other affiliated employer whose employees are
designated by the Committee as a Participant in the
Plan.
(f)
“Covered Employee” means an employee who is a
“covered employee” as that term is defined in Code
Section 162(m) and regulations promulgated
thereunder.
(g)
“Designated Beneficiary” shall mean the person,
if any, specified in writing by the Participant to receive any
payments due to the Participant in the event of the
Participant’s death. In the event no person is specified by
the Participant, the Participant’s estate shall be deemed to
be the Designated Beneficiary.
(h)
“Effective Date” shall mean January 1,
2007.
(i)
“Outside Director” shall mean a member of the
Board of Directors who is treated as an “outside
director” for purposes of Code
Section 162(m).
(j)
“Maximum Percentage” shall mean the percentage
determined by reference to the Maximum Percentage Schedule
established for each Plan Year by the Committee, which percentage
may not exceed two hundred percent (200%).
(k)
“Maximum Percentage Schedule” shall mean the
schedule pursuant to which a determination of the
Participant’s Maximum Percentage is determined, based on the
extent to which the performance goal or goals set forth therein
have been achieved during the Plan Year, which schedule can be
varied on a Participant by Participant basis, all as established at
the discretion of the Committee.
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(l)
“Participant” shall mean those executives the
Committee determines are or are reasonably likely to be Covered
Employees and who are designated by the Committee to participate in
the Plan from time to time.
(m)
“Performance-Based Bonus” shall mean the cash
bonus payable to a Participant under Section 6(a).
(n)
“Performance Based Compensation Rules” shall
mean those provisions of Code Section 162(m) and regulations
promulgated thereunder that provide the rules pursuant to which
compensation that is paid to executives on the basis of performance
is exempt from the limitations on deductibility applicable to
certain compensation paid to executives in excess of
$1,000,000.
(o)
“Plan” shall mean The Philadelphia Insurance
Companies 2007 Cash Bonus Plan.
(p) “Plan
Year” shall mean the taxable year of the
Company.
3. PARTICIPATION
Those key executives as
may be designated by the Committee to participate in the Plan from
time to time are the participants in the Plan. Participants under
the Plan for each Plan Year shall be specified no later than the
time the Maximum Percentage Schedule (as described in
Section 6(a) below) is established by the Committee, and may
be set forth as part of that Schedule.
4. TERM OF
PLAN
Subject to approval of
the Plan by the shareholders of the Company, the Plan shall be in
effect as of the Effective Date, and shall continue until
terminated by the Board of Directors.
Notwithstanding the
foregoing, the Plan shall only continue in effect to the extent
bonus payments may be characterized as “performance-based
compensation” under the Performance Based Compensation Rules.
Such Rules require, among other things, that material features of
the Plan be periodically disclosed to the Company’s
shareholders, and that the continuation of the Plan be subject to
the approval of the Company’s shareholders.
5. BONUS
ENTITLEMENT
A Participant shall be
entitled to receive a bonus with respect to a Plan Year in
accordance with the provisions of Section 6 of the Plan only
after certification in writing by the Committee that the
performance goals, consistent with the provisions of
Section 6, and as set forth in the Maximum Percentage Schedule
applicable for such Plan Year, have been satisfied. The bonus
payment with respect to a Plan Year shall be payable to the
Participant in the next Plan Year on or before
March 15th of such next Plan Year; provided, however,
that no bonus payment shall be made to any Participant who is not
employed by the Company as of the date of such payment.
Notwithstanding anything to the contrary contained herein, no bonus
shall be payable under the Plan without the prior disclosure of the
terms of the Plan to the shareholders of the Company and the
approval of the Plan by such shareholders.
6. DETERMINATION OF
PERFORMANCE-BASED COMPENSATION BONUS
(a)
Performance-Based Bonus . Each
Participant, or the Designated Beneficiary of a deceased
Participant, may be entitled to a bonus with respect to such Plan
Years as are determined by the Committee that is equal to the
“Maximum Percentage” of the Bonus Base, determined by
reference to the Maximum Percentage Schedule in effect for the Plan
Year; provided, however, that any bonus payment may be reduced or
eliminated at the discretion of the Committee, as provided in
Section 6(d) below.
(b)
Performance Goals . The Maximum
Percentage is the percentage derived from the Maximum Percentage
Schedule established for each Plan Year by the Committee and set
forth on that Plan Year’s Maximum Percentage Schedule, which
shall be based on one or more of the following business criteria
(which may be determined for these purposes either by reference to
the Company as a whole or by reference to any one or more of its
subsidiaries, operating divisions or other operating units): stock
price, market share, gross sales, gross revenue, net revenues,
pretax income, operating income, cash flow,
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