exv10w3






Exhibit 10.3


EXECUTION
COPY


ADDENDUM TO EMPLOYMENT AGREEMENT




     This ADDENDUM TO EMPLOYMENT AGREEMENT (this “Addendum”), dated as of July 23, 2008, is by and
among Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), Maguire
Insurance Agency, Inc., a Pennsylvania Corporation (the “Employer”), Tokio Marine Holdings, Inc. a
Japanese corporation (“Parent”), and Craig P. Keller (“Employee”).



     WHEREAS, Employee has served the Company and its subsidiaries pursuant to an Employment
Agreement dated as of January 1, 2007 (as it exists on the date of this Addendum, the “Unamended
Employment Agreement”);



     WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as of the date of
this Addendum (the “Merger Agreement”), with Parent and Merger Sub (as defined in the Merger
Agreement) whereby, at the “Effective Time” (as defined in the Merger Agreement) (i) Merger Sub
will be merged with and into the Company (the “Merger”), (ii) the separate corporate existence of
Merger Sub will thereupon cease, and the Company will be the surviving corporation in the Merger,
and (iii) the Company and the Employer will become direct or indirect wholly owned subsidiaries of
Parent;



     WHEREAS, Employee is an integral part of the management of the Employer, and is a key
participant in the decision-making process relative to short-term and long-term planning and policy
of the Employer and the Company, and the parties hereto believe that it is critical to the
continued success of the Company, and to the ultimate success of the Merger, that Employee continue
to be employed by the Employer after the Merger; and



     WHEREAS, the parties agree that is in their best interests to enter into this Addendum, with
effect as described in Section 1 of this Addendum, on the terms set forth in this Addendum.



     NOW, THEREFORE, in consideration of the promises and mutual covenants herein and for other
good and valuable consideration, the parties hereby agree as follows:



          1. Effectiveness.





     (a) This Addendum shall be effective immediately as of the Effective Time
(other than with respect to the covenants set forth in the immediately following
sentence, which shall be effective immediately); in the event that the Merger does
not occur for any reason or the Merger Agreement terminates prior to the occurrence
of the Merger, this Addendum shall terminate, and shall be of no further force or
effect. From and after the date of this Addendum and continuing until the Effective
Time, the parties hereto acknowledge and agree that (i) Employee’s employment shall
continue to be subject to the terms and conditions of the Unamended Employment
Agreement, (ii) Employee agrees not to terminate his employment with the Company for
any reason (including, without limitation, for “Good Reason” (as defined in the Unamended Employment



 









 






Agreement)) on or prior to the Effective Time, and (iii) the Company agrees not to
take any actions that would constitute “Good Reason” for Employee to terminate his
employment, and not to otherwise terminate the employment of Employee for any
reason, on or prior to the Effective Time, other than for unlawful activity related
to employment, demonstrable fraud or material malfeasance against the Company after
a two thirds majority vote of the Board with prompt and reasonable prior written
notice to Parent, and an opportunity for Parent to investigate and respond prior to
the effectiveness of such termination.




     (b) As of the Effective Time, Employee shall continue Employee’s employment
with the Company in an uninterrupted manner under the terms of the Unamended
Employment Agreement as amended by this Addendum (the “Amended Employment
Agreement”) for the Term of Employment set forth herein. Employee acknowledges and
agrees that he shall not terminate his employment pursuant to either the Unamended
Employment Agreement or the Amended Employment Agreement for “Good Reason” due to
any consequences arising from (i) the occurrence of the Merger, (ii) the Company no
longer being a publicly traded company (which may result in a change in Employee’s
duties), (iii) the Company becoming a subsidiary of Parent (which may result in a
change in Employee’s duties), and/or (iv) Employee no longer participating in equity
compensation plans, except that, notwithstanding the foregoing, (x) any reduction in
or failure to timely pay Employee’s base salary, or (y) the assignment to Employee
of duties that are not of a senior executive level or are not consistent with
Employee’s training or experience (other than incidental de minimis office tasks),
or (z) any failure to pay the Retention Bonus or any installment thereof described
below when due, shall constitute Good Reason. The parties represent, acknowledge
and agree that the Merger shall not constitute a Hostile Change in Control. For
purposes of clarity, notwithstanding any of the foregoing, it shall not be a breach
of the Unamended Employment Agreement or of the Amended Employment Agreement if the
Employee resigns from his or her employment with or without Good Reason after the
Effective Time (it being acknowledged that if Employee resigns without Good Reason,
he shall not receive any severance compensation of any kind under the Unamended
Employment Agreement or the Amended Employment Agreement nor will he receive any
unpaid Retention Bonus).




     (c) As of the Effective Time, under the Amended Employment Agreement, the
following sentence shall be added to the end of Section 3(b): “Employee’s
responsibilities under this Agreement will include, without limiting the breadth of
the provisions contained in this Section 3, using Employee’s best efforts to
maximize the shareholder value of the Employer and its Affiliates, and to increase
the growth, financially and otherwise, of the Employer and its Affiliates.”



          2. Term of Employment. Notwithstanding the first sentence of Section 4 of the
Unamended Employment Agreement, the Term of Employment shall be extended under the




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Amended Employment Agreement, and will expire on the fifth anniversary of the Effective Time.




          3. Retention Bonus. If Employee remains continuously employed by the Employer through
the first, second, and third anniversaries, respectively, after the Effective Time, then the
Employer shall pay to Employee an amount equal to an aggregate of $1,500,000 (the “Retention
Bonus”), to be paid in equal installments as follows: one third (1/3) of the Retention Bonus on
each of such first, second, and third anniversary dates after the Effective Time, in lump sums
within five (5) business days after each such date, conditioned in each case on the continued
employment of Employee on such anniversary dates. If, during the three-year period after the
Effective Time, Employee’s employment is terminated by Employee (other than under the circumstances
described in (x)-(z) below), by the Company or the Employer for Cause, or due to Employee’s death
or disability (other than in the case of Employee’s death or disability after any such anniversary
date but prior to the installment payment date with respect to such anniversary date, in which case
such installment shall be paid to Employee or his estate, as the case may be), then any unpaid
installments of the Retention Bonus will not be paid (and will not be payable) from and after the
date of such termination of employment. If, during such period, the Employer or the Company
terminates Employee without Cause, then the full amount of the unpaid portion of the Retention
Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5)
business days after such termination of employment. In addition, during such period, in the event
of (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to
Employee of duties that are not of a senior executive level or are not consistent with Employee’s
training or experience (other than incidental de minimis office tasks), or (z) any failure to pay
an installment of Retention Bonus described below when due, then the full amount of the unpaid
portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one
lump sum within five (5) business days after Employee’s subsequent resignation from employment.
All Retention Bonus payments shall be paid by the Parent if the Employer and/or the Company fail to
make payment when due. The parties hereto agree and acknowledge that the amount of the Retention
Bonus shall not be taken into account for any purposes (other than for tax witholding purposes)
under the Amended Employment Agreement or under any plan, program, agreement or arrangement,
including without limitation for purposes of calculating Employee’s Base Compensation, Target
Bonus, severance, or other compensation whatsoever (including under any qualified or non-qualified
plans).




          4. Restrictive Covenants and Confidentiality. Section 7 of the Unamended Employment
Agreement is amended to delete the provisions therein in their entirety, and to insert the
following in its place:





     (a) Non-Compete. During Employee’s employment with the Employer, and for a
two-year period after the date Employee’s employment is terminated for any reason
(the “Restricted Period”), Employee shall not directly or indirectly:




     i. hold a 5% or greater equity (including stock options whether or not
exercisable), voting or profit participation interest in a Competitive
Enterprise, or



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ii. associate (including as a director, officer, employee, partner,
consultant, agent or advisor) with a Competitive Enterprise, or




iii. engage, or directly or indirectly manage or supervise personnel
engaged, in any activity on behalf of any Competitive Enterprise:




(A) that is substantially related to any activity that
Employee was engaged in with the Employer during the
12 months prior to Employee’s termination date;




(B) that is substantially related to any activity for
which Employee had direct or indirect managerial or
supervisory responsibility with the Employer during the
12 months prior to Employee’s termination date; or




(C) that calls for the application of specialized knowledge
or skills substantially related to those used by Employee in
his activities with the Employer during the 12 months prior
to Employee’s termination date.


For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that either
(i) engages in any activity in the insurance business or industry, or in insurance related
services, such as the insurance agent and broker businesses, or (ii) holds a 5% or greater equity,
voting or profit participation interest in any enterprise that engages in the insurance business or
industry, or in insurance related services, such as the insurance agent and broker businesses.





     (b) Non-Solicit. During the Restricted Period, Employee shall not, in any
manner, directly or indirectly (without the prior written consent of the Employer):
(i) Solicit any Client to transact business with a Competitive Enterprise or to
reduce or refrain from doing any business with the Employer, (ii) transact business
with any Client that would cause Employee to be a Competitive Enterprise,
(iii) interfere with or damage any relationship between the Employer and a Client or
(iv) Solicit anyone who is then an employee or consultant of the Employer (or who
was an employee of the Employer within the prior 12 months) to resign from the
Employer or to apply for or accept employment or engagement with any other business
or enterprise.


For purposes of this Agreement, a “Client” means any client or prospective client of the Employer
to whom Employee provided services, or for whom Employee transacted business, or whose identity
became known to Employee in connection with his relationship with or employment by the Employer,
and “Solicit” means any direct or indirect communication of any kind, regardless of who initiates
it, that in any way invites, advises, encourages or requests any person to take or refrain from
taking any action.





     (c) Confidential Information. Employee hereby acknowledges that, as an
employee of the Employer, he will be making use of, acquiring and adding to
confidential information of a special and unique nature and value relating to the



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Employer and its strategic plan and financial operations. Employee further
recognizes and acknowledges that all confidential information is the exclusive
property of the Employer, is material and confidential, and is critical to the
successful conduct of the business of the Employer. Accordingly, Employee hereby
covenants and agrees that he will use confidential information for the benefit of
the Employer only and shall not at any time, directly or indirectly, during the Term
of Employment and thereafter divulge, reveal or communicate any confidential
information to any person, firm, corporation or entity whatsoever, or use any
confidential information for his own benefit or for the benefit of others.
Notwithstanding the foregoing, Employee shall be authorized to disclose confidential
information (i) as may be required by law or legal process after providing the
Employer with prior written notice and an opportunity to respond to such disclosure
(unless such notice is prohibited by law), (ii) in any criminal proceeding against
him after providing the Employer with prior written notice and an opportunity to
seek protection for such confidential information and (iii) with the prior written
consent of the Employer.




     (d) Survival. Any termination of Employee’s employment shall have no effect on
the continuing operation of this Section 7.




     (e) Validity. The terms and provisions of this Section 7 are intended to be
separate and divisible provisions and if, for any reason, any one or more of them is
held to be invalid or unenforceable, neither the validity nor the enforceability of
any other provision of the Amended Employment Agreement shall thereby be affected.
The parties hereto acknowledge that the potential restrictions on Employee’s future
employment imposed by this Section 7 are reasonable in both duration and geographic
scope and in all other respects. If for any reason any court of competent
jurisdiction shall find any provisions of this Section 7 unreasonable in duration or
geographic scope or otherwise, Employee and the Employer agree that the restrictions
and prohibitions contained herein shall be effective to the fullest extent allowed
under applicable law in such jurisdiction.




     (f) Adequate Consideration. The parties acknowledge that this Addendum would
not have been entered into, and the Retention Bonus would not have been promised, in
the absence of Employee’s covenants under this Section 7.




     (g) Remedies. Employee agrees that if Employee breaches or threatens to breach
any of the provisions of this Section 7 or Section 11 of the Amended Employment
Agreement, the Employer will have available, in additional to any other right or
remedy available, the right to obtain injunctive and equitable relief of any type
from a court of competent jurisdiction, including but not limited to restraining
such breach or threatened breach and to specific performance any such provision of
the Amended Employment Agreement. Employee further agrees that no bond or other
security shall be required in obtaining such equitable relief and Employee hereby
consents to the issuance of such injunction and to the ordering of specific
performance.



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     (h) Definition of Employer. The term “Employer”, as used in this Section 7,
and in Sections 2(b), the last paragraph of 6(a), and Section 11 of the Amended
Employment Agreement, shall include the Company, the Employer, Parent and all of
their respective Affiliates.



          5. Compensation. As of the Effective Time, Employer shall provide Employee with
compensation opportunities comparable in the aggregate to those provided to Employee immediately
prior to the Merger, including an increase in base salary from his current level (as disclosed to
Parent and its agents and representatives).




          6. Gross up Under Section 280G. Employee will be entitled to receive an amount in
cash, within ten (10) business days of the Effective Time, equal to the Gross Up Payment (as
defined below), if any. The term “Gross-Up Payment” will mean a payment to Employee that is
sufficient to pay in full Employee’s excise tax under Section 4999 of the Code and any similar
excise tax under applicable state and local tax Laws relating to “excess parachute payments”
(including any excise tax or federal, state or local tax payable in respect of the Gross-Up
Payment), if any, arising only from the acceleration of vesting of Employee’s Options, SARs,
Performance Awards, Restricted Shares and Stock Purchase Plan Awards as defined and described in
Sections 4.3(a), (b), (c), (d) and (e), respectively, of the Merger Agreement (the “Acceleration”).
The manner of making the computation of the amount provided in this paragraph will be as mutually
agreed between Parent and the Company between the date of this Addendum and the Effective Time.
Notwithstanding anything in this Agreement to the contrary, if it is determined by Parent that
Employee would otherwise be entitled to a Gross-Up Payment, but that the payments to Employee in
respect of the Acceleration would not be subject to the Excise Tax if such payments in respect of
the Acceleration were reduced by an amount that is equal to or less than 10% of 2.99 times
Employee’s “base amount” (as defined under Section 280G of the Code), then Employee will not
receive the Gross-Up Payment, and such payments in respect of the Acceleration will be reduced to
the maximum amount that would not result in the imposition of the Excise Tax on Employee. The
payments in respect of the Acceleration to be reduced, if any, will be reduced in the inverse order
of when such payments would have otherwise been made to, or the benefits would have otherwise been
received by, Employee, until the reduction specified this Section 7 is achieved. For the avoidance
of doubt, the payments described in this paragraph are in lieu of, and no payments will be made to
Employee under, Section 8(c) of the Unamended Employment Agreement and the Amended Employment
Agreement, in connection with, or with respect to any transactions associated with, the Merger.




          7. Release Requirement Clarification. The first paragraph of Section 6(a) of the
Employment Agreement is amended to delete the words “as described in Subsection 2(b) above” and to
add at the end of that sentence (after the word “Control)” and before the colon) the words “which
shall be provided to Employee within ten (10) days of the cessation of Employee’s employment”.




          8. General. Capitalized terms not otherwise defined in this Addendum have the
meanings ascribed to such terms in the Unamended Employment Agreement. All terms of the Unamended
Employment Agreement that have not been amended by this Addendum shall continue in full force and
effect under the Amended Employment Agreement from and after the Effective Time. References to
“Executive Committee” shall mean the Board of Directors of the



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Company after the Effective Time. Parent shall be a party to the Amended Employment Agreement
from and after the Effective Time, and shall be considered a party for all relevant purposes,
including, for clarity, for provisions relating to Affiliates, amendments, notices to the parties,
release of the Employer, Notice of Termination (at the address for Parent set forth in the Merger
Agreement), restrictive covenants, and protection of Employer property and information, but, for
clarity, not for purposes of employment, compensation, benefits, position, authority, title or
duties.




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     IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the date first above
written.



	 	 	 	 	 
	 	PHILADELPHIA CONSOLIDATED

HOLDING CORP.

 	 
	 	By:  	/s/
James J. Maguire, Jr.	 
	 	 	Name:  	James J. Maguire, Jr.	 
	 	 	Title:  	CEO	 
	 



	 	 	 	 	 
	 	MAGUIRE INSURANCE AGENCY, INC.

 	 
	 	By:  	/s/
James J. Maguire, Jr.	 

	 	 	Name:  	James J. Maguire, Jr.	 
	 	 	Title: 	CEO	 



	 	 	 	 	 
	 	TOKIO MARINE HOLDINGS, INC.

 	 
	 	By:  	/s/
Shuzo Sumi	 
	 	 	Name:  	Shuzo Sumi 	 
	 	 	Title:  	President 	 
	 



	 	 	 	 	 
	 	CRAIG P. KELLER

 	 
	 	By:  	/s/
Craig P. Keller