<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FPIC INSURANCE GROUP, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
3) Per unit price of other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the
<PAGE> 2
previous filing by registration statement number, or the Form or Schedule and
the date of its filing.
1) Amount Previously Paid:
-------------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------------
3) Filing Party:
-------------------------------------------
4) Dated Filed:
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<PAGE> 3
FPIC INSURANCE GROUP, INC.
1000 RIVERSIDE AVENUE, SUITE 800
JACKSONVILLE, FLORIDA 32204
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 1998
TO THE SHAREHOLDERS OF FPIC INSURANCE GROUP, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of FPIC Insurance Group, Inc., a Florida corporation
(the "Company"), will be held at the executive offices of the Company, 1000
Riverside Avenue, Suite 800, Jacksonville, Florida 32204, on June 10, 1998, at
10:00 a.m., local time, for the following purposes:
1. To elect four Directors to serve until their terms expire.
2. To approve amendments to the Director Stock Option Plan.
3. To approve amendments to the Omnibus Incentive Plan.
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The close of business on April 17, 1998, has been fixed by the Board
of Directors of the Company as the record date for determining the shareholders
entitled to notice of, and to vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or
not you plan to attend the Annual Meeting, you may insure your representation
by completing, signing, dating and promptly returning the enclosed proxy card.
A return envelope, which requires no postage if mailed in the United States,
has been provided for your use. If you attend the Annual Meeting and inform
the Secretary of the Company in writing that you wish to vote your shares in
person, your proxy will not be used.
By Order of the Board of Directors
/s/ Charles W. Emanuel
Charles W. Emanuel
Vice President and Secretary
May 8, 1998
<PAGE> 4
FPIC INSURANCE GROUP, INC.
1000 RIVERSIDE AVENUE, SUITE 800
JACKSONVILLE, FLORIDA 32204
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1998
GENERAL INFORMATION
The Board of Directors of FPIC Insurance Group, Inc. (the "Company")
solicits your proxy for use at the 1998 Annual Meeting of Shareholders to be
held on Wednesday, June 10, 1998 at 10:00 a.m., local time, and any
adjournments thereof, at the Company's principal offices, 1000 Riverside
Avenue, Suite 800, Jacksonville, Florida 32204. A form of proxy is enclosed.
The Annual Report of the Company to its shareholders for the 1997
fiscal year and this proxy statement are being distributed on or about May 8,
1998 to shareholders entitled to vote.
Shareholders may receive without charge a copy of FPIC Insurance
Group, Inc.'s Annual Report to the Securities and Exchange Commission (the
"SEC") on Form 10-K including the financial statements and the financial
statement schedules by writing to Steven M. Rosenbloom at FPIC Insurance
Group, Inc., 1000 Riverside Avenue, Suite 800, Jacksonville, Florida 32204.
VOTING PROCEDURES
Record Date. Only holders of record of the Company's issued and
outstanding shares of common stock at the close of business on April 17, 1998
(the "Record Date") are entitled to vote at the Annual Meeting. Each
shareholder is entitled to one vote, in person or by proxy, for each share held
on the Record Date. At the close of business on the Record Date, there were
9,209,031 shares of common stock of the Company outstanding.
Voting of Proxies. All properly executed proxies delivered pursuant to
this solicitation and not revoked will be voted at the Annual Meeting in
accordance with the directions given. Regarding the election of Directors to
serve until the 2001 Annual Meeting of Shareholders, in voting by proxy,
shareholders may vote in favor of all nominees or withhold their votes as to
all nominees or withhold their votes as to specific nominees. With regard to
the amendments to the Director Stock Option Plan and the Omnibus Incentive
Plan, shareholders may vote for, against or abstain from voting on such
proposals. Shareholders should specify their choices on the enclosed form of
proxy. If no specific instructions are given with respect to the matters to be
acted upon, the shares represented by a signed proxy will be voted FOR the
election of all nominees, FOR the amendments to the Director Stock Option Plan
and FOR the amendments to the Omnibus Incentive Plan.
2
<PAGE> 5
Revocation of Proxies. Any shareholder who executes and delivers a
proxy may revoke the authority granted thereunder at any time prior to its use
by giving written notice of such revocation to the Secretary of the Company, or
by executing and delivering a proxy bearing a later date. A shareholder may
also revoke a proxy by attending and voting in person at the Annual Meeting.
Voting Required for Approval. Directors will be elected by a
plurality of the votes cast by the shareholders voting in person or by proxy at
the Annual Meeting. A majority of the votes cast by the shareholders voting in
person or by proxy at the Annual Meeting will be necessary to approve the
amendments to the Director Stock Option Plan and the Omnibus Incentive Plan.
Abstentions and broker non-votes will have no effect on the outcome of such
votes. A broker non-vote generally occurs when a broker who holds shares in
street-name for a customer does not have authority to vote on certain
non-routine matters because its customer has not provided any voting
instructions on the matter. With respect to any further business of a routine
nature which is properly presented, abstentions and broker non-votes will have
no effect.
ELECTION OF DIRECTORS
The Company has a staggered Board of Directors with three classes of
directors that serve for terms of three years. The Board of Directors
currently consists of 13 persons. The Company's articles of incorporation
provide that the number of directors may be determined from time to time by
resolution adopted by the affirmative vote of at least 75% of the entire Board
of Directors. This number and its determination is exclusive of directors to
be elected by the holders of any one or more series of Preferred Stock voting
separately as a class or classes. No such Preferred Stock is outstanding. The
Company's bylaws provide that the Company's President will always be nominated
by the Board of Directors for election to the Board of Directors whenever the
President's term as a director expires or whenever the President is not a
director.
Members of the Board of Directors are required to be between 18 and 70
years of age; provided that (i) any director who is elected prior to becoming
70 years of age may complete his then current term as a director and (ii) any
director serving as of January 10, 1998 who as of such date is older than 70
years of age or who will become older than 70 years of age during his then
current term as a director will be eligible to serve one additional term as a
director for the term commencing upon the termination of his then current term.
At the Annual Meeting, four directors are to be elected to hold office
until the 2001 Annual Meeting of Shareholders or until their successors are
elected and qualified. The persons designated as nominees for election as
directors are James W. Bridges, M.D., J. Stewart Hagen, M.D., D.L. Van Eldik,
M.D., and Henry M. Yonge, M.D. Each of such nominees is currently a director
of the Company.
If, for any reason, any of the nominees is not a candidate when the
election occurs, the enclosed Proxy may be voted for a substitute nominee. The
Board of Directors does not anticipate that any nominee will not be a
candidate. Further information regarding the nominees and the other directors
is set forth below.
3
<PAGE> 6
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES.
BOARD OF DIRECTORS OF FPIC INSURANCE GROUP, INC.
NOMINEES FOR TERMS EXPIRING IN 2001
JAMES W. BRIDGES, M.D., 63, is engaged in the private practice of
obstetrics and gynecology in Miami, Florida. Dr. Bridges has practiced
medicine since 1967. Dr. Bridges has served as a director of the Company since
its formation in 1996 and as a director of its subsidiary, Florida Physicians
Insurance Company, Inc. ("FPIC"), since 1985.
J. STEWART HAGEN, M.D., 66, is a retired general surgeon who formerly
practiced in Ft. Myers, Florida. Dr. Hagen practiced medicine from 1965 to
1996. Dr. Hagen has served as a director of the Company since its formation in
1996 and as a director of FPIC since 1988.
D. L. VAN ELDIK, M.D., 69, is a family physician in Lake Worth,
Florida. Dr. Van Eldik has practiced medicine since 1957. Dr. Van Eldik is a
Past-President of the FMA and has served as a director of the Company since its
formation in 1996 and as a director of FPIC since 1988.
HENRY M. YONGE, M.D., 77, is engaged in the private practice of
medicine specializing in internal medicine in Pensacola, Florida. Dr. Yonge
has practiced medicine since 1952. Dr. Yonge has served as a director of the
Company since its formation in 1996 and as a director of FPIC since 1985. Dr.
Yonge served as Chairman of FPIC's Board of Directors from 1988 to 1991.
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE IN 1999
GASTON J. ACOSTA-RUA, M.D., 60, is a neurosurgeon engaged in private
practice in Jacksonville, Florida. Dr. Acosta-Rua has practiced medicine since
1971. Dr. Acosta-Rua has served as a director of the Company since its
formation in 1996 and as Chairman of the Board from 1996 to 1997. Dr.
Acosta-Rua has served as director of FPIC since 1986 and served as Chairman of
FPIC's Board of Directors from 1994 to 1997.
CURTIS E. GAUSE, D.D.S., 73, is a retired dentist who is
President-Emeritus and a consultant for a dental center in St. Petersburg,
Florida. Dr. Gause practiced dentistry from 1954 to 1992. Dr. Gause, a
Past-President of the Florida Dental Association (the "FDA"), has served as a
director of the Company since its formation in 1996 and as a director of FPIC
since 1993.
GUY T. SELANDER, M.D., 62, is a family physician engaged in private
practice in Jacksonville, Florida. Dr. Selander has practiced medicine since
1964. Dr. Selander is a Past-President of the FMA and has served as a director
of the Company since its formation in 1996 and as a director of FPIC since
1989. Dr. Selander is currently Vice-Chairman of the Board of Directors for
both the Company and FPIC.
4
<PAGE> 7
DAVID M. SHAPIRO, M.D., 44, is engaged in the private practice of
anesthesiology in Ft. Myers, Florida. Dr. Shapiro has practiced medicine since
1986. Dr. Shapiro has served as a director of the Company and FPIC since 1996.
JAMES G. WHITE, M.D., 65, is engaged in the private practice of
pediatric medicine in Ormond Beach, Florida. Dr. White has practiced medicine
since 1966. Dr. White is a Past-President of the FMA and has served as a
director of the Company since its formation in 1996 and as a director of FPIC
since 1986. Dr. White is currently Chairman of the Board of Directors for both
the Company and FPIC.
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE IN 2000
RICHARD J. BAGBY, M.D., 57, is engaged in the private practice of
diagnostic radiology in Orlando, Florida. Dr. Bagby has practiced medicine
since 1972. Dr. Bagby is a Past-President of the FMA and has served as a
director of the Company since its formation in 1996 and as a director of FPIC
since 1993.
ROBERT O. BARATTA, M.D., 57, is engaged in the private practice of
ophthalmology in Stuart, Florida. Dr. Baratta has practiced medicine since
1973. He has served as a director of the Company since its formation in 1996
and as a director of FPIC since 1993.
LOUIS C. MURRAY, M.D., 73, is a family physician engaged in private
practice in Orlando, Florida. Dr. Murray has practiced medicine since 1954.
Dr. Murray is a Past-President of the FMA and has served as a director of the
Company since its formation in 1996 and as a director of FPIC since 1988.
WILLIAM R. RUSSELL, 51, is the President and Chief Executive Officer
of the Company. Mr. Russell has served as President, Chief Executive Officer
and as a director of the Company since its formation in 1996. He has served as
a director and Chief Executive Officer of FPIC since 1990. Mr. Russell also
served as President of FPIC from 1990 to 1998.
PRINCIPAL SHAREHOLDERS AND SECURITIES OWNERSHIP
OF MANAGEMENT
According to the Company's stock transfer records, as of March 17,
1998, no shareholder owns five percent (5%) or more of the Company's
outstanding shares of common stock.
The following table sets forth the beneficial ownership of the
Company's common stock, including stock options that have vested, but which
have not been exercised, by each of the directors and nominees, each of the
executive officers named in the Summary Compensation Table and all of the
Company's directors and executive officers as a group as of March 31, 1998.
5
<PAGE> 8
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNERSHIP(1)
- ------------------------ ------------------ ---------
<S> <C> <C>
Gaston J. Acosta-Rua, M.D. 25,000(2) *
Richard J. Bagby, M.D. 43,250(3) *
Robert O. Baratta, M.D. 31,000 *
James W. Bridges, M.D. 19,000 *
Robert B. Finch 158,897(4) 1.6
Curtis E. Gause, D.D.S. 12,000 *
J. Stewart Hagen, M.D. 23,500 *
William T. McCreary 20,653 *
Louis C. Murray, M.D. 22,500 *
Steven M. Rosenbloom 107,013(5) 1.1
William R. Russell 142,931(6) 1.5
Guy T. Selander, M.D. 18,500 *
David M. Shapiro, M.D. 19,167 *
Steven R. Smith 121,763(7) 1.2
D.L. Van Eldik, M.D. 12,000 *
James G. White, M.D. 17,050 *
Henry M. Yonge, M.D. 15,000 *
Directors and Executive 879,270(8) 8.9%
Officers as a Group (23
Persons)
</TABLE>
* Less than 1.0% of the Company's outstanding common stock.
(1) Based on an aggregate of (i) the number of shares of the Company's
common stock outstanding at March 16, 1998 and (ii) options vested
as of June 30, 1998.
(2) Dr. Acosta-Rua disclaims beneficial ownership of 1,000 of these
shares, which are owned by his wife.
(3) Includes 23,250 shares owned by Morgan, Hiatt, Hines, Culbert and
March P.A., of which Dr. Bagby is a member.
(4) Includes 87,662 shares held by all employees in the Company's
401(k) plan, which are voted by Mr. Finch as a trustee of the plan
and of which 16,300 shares are held in the plan in Mr. Finch's
name.
(5) Includes 4,400 shares held in the Company's 401(k) plan, which are
voted by the trustees of the plan. Mr. Rosenbloom also disclaims
beneficial ownership of 4,855 of these shares, which are owned by
his wife.
(6) Includes 21,236 shares held in the Company's 401(k) plan, which are
voted by the trustees of the plan.
(7) Includes 22,327 shares held in the Company's 401(k) plan, which are
voted by the trustees. Mr. Smith disclaims beneficial ownership of
600 of these shares, which are owned by his wife.
(8) Includes 87,662 shares held by all employees in the Company's
401(k) plan, which are voted by the trustees of the plan and of
which an aggregate of 76,801 shares are held in the plan in the
name of certain of the Company's executive officers. Also includes
disclaimed beneficial ownership of 6,781 of these shares, which are
owned by relatives of directors and executive officers.
6
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of the Company's common stock, to file
reports of ownership and changes in ownership with the SEC and the NASDAQ
National Market. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of
such forms received by it and written representations from certain reporting
persons that no Forms 5 were required for them, the Company believes that
during the Company's most recently completed fiscal year, all filing
requirements applicable to its officers and directors were complied with.
MEETINGS OF THE BOARD OF DIRECTORS
During 1997, the Board of Directors held seven meetings. All current
Directors attended at least 75% of the meetings of the Board of Directors and
of the committees on which they served.
The Executive Committee of the Board of Directors is composed of Mr.
Russell and Drs. Bagby, Murray, Selander and White. This committee may
exercise the powers of the Board of Directors. The Executive Committee met two
times during 1997.
The Nominating Committee of the Board of Directors is composed of Drs.
Acosta-Rua, Selander, Murray, White and Yonge. This committee recommends
qualified candidates to fill vacancies on the Board of Directors. The
Nominating Committee met one time during 1997.
The Compensation Committee of the Board of Directors is composed of
Drs. Selander, Bagby, Hagen, Shapiro and White. This committee determines and
reviews the compensation of the Company's executive officers and directors and
administers the Company's stock option and benefit plans. The Compensation
Committee met two times during 1997.
The Audit Committee of the Board of Directors is composed of Drs.
Bagby, Bridges, Hagen, Selander and Van Eldik. This committee recommends
selection of the Company's independent accountants to audit the Company's
consolidated financial statements and to perform professional services related
to the audit. The committee reviews the scope and results of such audit and
reviews the scope of internal audits, systems of internal controls and
accounting policies and procedures. The Audit Committee met one time during
1997.
7
<PAGE> 10
DIRECTORS' COMPENSATION
Members of the Board of Directors received annual compensation in 1997
in two components - a quarterly fee, and a fee for each meeting attended. The
Chairman received a quarterly fee of $7,500, the Vice Chairman a quarterly fee
of $6,000, and the other members a quarterly fee of $4,500. Each director
received a fee of $800 for each day they attended Committee and Board meetings.
Mr. Russell, an employee of the Company, received no directors' fees. In
addition to the above fees, each director was reimbursed for his reasonable
expenses incurred for attendance at meetings.
The Company has a Director Stock Option Plan that provides each member
of the Board of Directors who is not an employee of the Company with an option
to purchase 5,000 shares of the Company's Common Stock. Such option is granted
on the date the person first becomes a director of the Company and has an
exercise price equal to the fair market value of such shares on the date of
grant. If the proposed amendments to the Director Stock Option Plan are
approved by the Company's shareholders, the Board of Directors will have
discretion to make additional grants to members of the Board of Directors from
time to time.
The Company also offers directors a nonqualified deferred compensation
plan. Under this plan, directors may defer into the plan all or a portion of
their directors' fees. Deferred fees generally will be paid, as adjusted for
investment gains or losses, following termination of service as a director.
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
of the principal Executive Officer and the four other most highly compensated
executive officers during 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS
-----
Other Securities Long-
Annual Restricted Under- Term
All Other
Name and Fiscal Salary(1) Compen- Stock lying Incentive Compensa-
Principal Position Year ($) Bonus($) sation($) Award($) Options(#) Plan tion($)
---- ---------- -------- --------- -------- ---------- Payouts($) -------
---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William R. Russell, 1997 245,050 110,272 -- 0 60,000 0 29,629(2)
President and Chief
Executive Officer 1996 235,625 106,031 -- 0 120,000 0 29,868
1995 218,171 37,500 -- 0 0 0 24,125
Steven R. Smith, 1997 191,948 71,980 -- 0 50,000 0 27,410(3)
Executive Vice
President and Chief 1996 184,565 69,212 -- 0 100,000 0 28,068
Operating Officer
1995 170,894 27,500 -- -- 0 0 24,486
Steven M. Rosenbloom, 1997 174,174 52,252 -- 0 40,000 0 26,615(4)
Senior Vice
President and 1996 167,475 50,243 -- 0 80,000 0 24,904
Chief Investment
Officer 1995 152,250 88,960(6) -- 0 0 0 16,903
Robert B. Finch, 1997 150,000 45,000 -- 0 40,000 0 23,587(5)
Senior Vice
President and Chief 1996 118,631 39,000 -- 0 60,000 0 15,945
Financial Officer
1995 99,317 8,939 -- 0 0 0 13,449
William T. McCreary, 1997 157,500 0 -- 0 0 0 2,985(8)
President of
McCreary 1996 150,000 0 -- 0 0 0 3,618
Corporation(7)
1995 75,000 0 -- -- 0 0 377
</TABLE>
- ----------------------
(1) Includes compensation amounts earned during the fiscal year but
deferred under the Company's 401(k) plan and benefits set aside
pursuant to the Company's nonqualified deferred compensation plan (Mr.
Russell $1,825, Mr. Smith $40,000, Mr. Rosenbloom $1,610 and Mr.
Finch $725.
(2) Includes the Company's contributions to the profit sharing plan of
$16,000, the Company's matching contributions for the 401(k) plan of
$4,000, contributions from the Company pursuant to the Company's
nonqualified deferred compensation plan of $4,125, and $5,504 for the
cost of an excess disability insurance policy.
(3) Includes the Company's contributions to the profit sharing plan of
$16,000, the Company's matching contributions for the 401(k) plan of
$4,000, contributions from the Company pursuant to the Company's
nonqualified deferred compensation plan of $4,125, and $3,285 for the
cost of an excess disability insurance policy.
(4) Includes the Company's contributions to the profit sharing plan of
$16,000, the Company's matching contributions for the 401(k) plan of
$4,000, contributions from the Company pursuant to the Company's
nonqualified deferred compensation plan of $4,390, and $2,225 for the
cost of an excess disability insurance policy.
(5) Includes the Company's contributions to the profit sharing plan of
$16,000, the Company's matching contributions for the 401(k) plan of
$3,962 and contributions from the Company pursuant to the Company's
nonqualified deferred compensation plan of $3,625.
(6) Includes a one-time signing bonus in the amount of $75,000.
9
<PAGE> 12
(7) Mr. McCreary began employment with McCreary Corporation on July 1,
1995.
(8) Represents the McCreary Corporation's contribution to the McCreary
Corporation 401(k) plan.
10
<PAGE> 13
Option Grants in the Last Fiscal Year. The following table sets forth
information concerning stock options granted during 1997 to those individuals
described in the Summary Compensation Table.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual
Individual Grants Rates of Stock
Price
Appreciation for
Option
Term(1)
Number of % of Total
Securities Options/SARs Market
Underlying Granted to Exercise or Price on
Options/SARs Employees in Base Price Date of
Expiration
Name Granted(#) Fiscal year ($/Sh) Grant($) Date 5% ($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C>
William R. Russell 60,000 24.0 23.63 23.63 9/12/07 891,458 2,259,130
Steven R. Smith 50,000 20.0 23.63 23.63 9/12/07 742,882 1,882,608
Steven M. Rosenbloom 40,000 16.0 23.63 23.63 9/12/07 594,305 1,506,087
Robert B. Finch 40,000 16.0 23.63 23.63 9/12/07 594,305 1,506,087
William T. McCreary 0 0 -- -- -- -- --
</TABLE>
- ------------------------
(1) The Potential Realizable Values are calculated based on the fair market
value on the date of grant, which is equal to the exercise price of
options granted in fiscal 1997, assuming that the stock appreciates in
value from the date of grant until the end of the option term at the
annual rate specified (5% and 10%). Potential Realizable Values are net
of the option exercise price. The assumed rates of appreciation are
specified in rules of the Securities and Exchange Commission, and do not
represent the Company's estimate or projection of its future stock price.
Actual gains, if any, resulting from stock option exercises and common
stock holdings are dependent on the future performance of the Company's
common stock, overall stock market conditions, and the option holder's
continued employment through the exercise/vesting period. There can be
no assurance that the amounts reflected in this table will be achieved.
11
<PAGE> 14
Options Exercised. The following table shows stock options exercised by
the named executive officers during fiscal 1997, including the aggregate net
value realized upon exercise of an option. In addition, this table includes
the number of shares covered by unexercised stock options (both exercisable and
unexercisable) as of fiscal year-end, and the value of unexercised in-the-money
options (both exercisable and unexercisable) based on the year-end price of the
Company's common stock.
12
<PAGE> 15
Aggregated Option Exercises in Fiscal 1997 and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money
Options at 12/31/97 Options at 12/31/97(1)
Shares
Acquired
Name Upon Exercise Value Realized Exercisable Unexercisable Exerciseable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
William R. Russell 0 0 40,000 140,000 $800,800 $1,931,900
Steven R. Smith 5,000 $93,900 28,333 116,667 $562,783 $1,609,917
Steven M. Rosenbloom 0 0 26,667 93,333 $533,867 $1,287,933
Robert B. Finch 0 0 20,000 80,000 $400,400 $1,021,000
William T. McCreary 0 0 0 0 0 0
</TABLE>
- -----------------------
(1) The amounts in this column represent the difference between the
exercise price and the closing market price of $29.13 on December 31,
1997, for the Company's common stock. The actual value of unexercised
options fluctuates with market activity.
RETIREMENT PLANS
PENSION PLAN TABLE
<TABLE>
<CAPTION>
-------------------------------------------
Years of Service
- -------------------------------------------------------------------------
Average Compensation 5 10 15
<S> <C> <C> <C>
$150,000 $ 8,453 $16,905 $25,358
200,000 11,953 23,905 35,858
250,000 15,453 30,905 46,358
300,000 18,953 37,905 56,858
350,000 22,453 44,905 67,358
400,000 25,953 51,905 77,858
450,000 29,453 58,905 88,358
- -------------------------------------------------------------------------
</TABLE>
The above table sets forth the maximum annual benefits payable in the
form of a straight life annuity under the Company's qualified defined benefit
plan (the "Retirement Plan") and, if eligible, the Company's Excess Benefit
Plan (the "Excess Benefit Plan") to an officer or employee retiring at age 65
with the specified combination of final average compensation (the average of
the five consecutive years of compensation which give the highest average out
of the ten latest years) and years of credited service. The benefit accrual
rate is higher for compensation in excess of the compensation covered by Social
Security than for compensation covered by Social
13
<PAGE> 16
Security. The amounts shown on the Pension Plan Table attributable to the
Retirement Plan and Excess Benefit Plan, if applicable, were calculated using
Social Security covered compensation levels based upon the average age of 4
executives and have been calculated without reflection of the current limit of
$160,000 on includible compensation. Messrs. Russell and Smith are covered by
the Retirement Plan and Messrs. Finch and Rosenbloom are covered by both the
Retirement Plan and the Excess Benefit Plan. As of December 31, 1997, the
credited full Years of Service under the Retirement Plan and, if applicable,
the Excess Benefit Plan of the following officers were as follows: Mr. Russell
- -- nine years; Mr. Smith -- fifteen years; Mr. Rosenbloom -- three years; and
Mr. Finch -- ten years. Mr. McCreary is covered by a separate retirement plan
for McCreary Corporation's employees which is described below. Generally,
compensation for purposes of the Retirement Plan and the Excess Benefit Plan
includes salary and annual bonus, as reported in the Summary Compensation
Table, as well as compensation which is contributed by the Company pursuant to
a salary reduction agreement and which is not currently includible in the
individual's gross income by reason of the application of certain provisions of
the Internal Revenue Code. Benefits listed on the Pension Plan Table
attributable to the Retirement Plan and the Excess Benefit Plan are reduced by
the amount of any accrued benefits an individual has under the Physicians
Insurance Company of Ohio Defined Benefit Plan and/or the Professional
Insurance Management Company Pension Plan.
The Retirement Plan is a funded, tax-qualified, non-contributory plan
that covers substantially all of the Company's employees including executive
officers. For the year ending December 31, 1998, the annual retirement benefit
payable under the Retirement Plan is limited by Federal Law to $130,000 and the
maximum covered compensation is limited to $160,000. The total number of years
of service which may be taken into consideration under the Retirement Plan is
limited to 15. Optional forms of payment available under the Retirement Plan
or a benefit commencement date prior to age 65 may result in substantially
reduced payments to any employee electing such an option.
The Excess Benefit Plan provides a means of equalizing the benefits of
those employees participating in the Retirement Plan, other than those
individuals covered under the Company's Supplemental Executive Retirement Plan
(the "SERP"), whose funded benefits under that Retirement Plan are or will be
limited by the application of ERISA, the Code, or any applicable law or
regulation. The Excess Benefit Plan is a nonqualified plan and benefits
payable under the Excess Benefit plan are not funded and are payable out of the
Company's general funds.
The SERP is an unfunded nonqualified plan. The SERP provides Messrs.
Russell and Smith, who have been selected by the Compensation Committee, with
income at retirement. A participant in the SERP is eligible to retire and
receive a retirement benefit beginning on the earlier of such participant's (i)
early retirement date, (ii) disability retirement date or (iii) normal
retirement date. The retirement benefit at the normal retirement date equals
60% of pre-retirement compensation (averaged over the highest three consecutive
years of service), less Retirement Plan and all predecessor
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<PAGE> 17
plans' benefits and Social Security benefits. Compensation for purposes of the
SERP includes the salary of a participant as reported in the Summary
Compensation Table, but does not include bonuses. The early retirement benefit
equals the retirement benefit at the normal retirement date times the
percentage of benefits vested, reduced by an early retirement factor for each
month a participant's early retirement date occurs prior to such participant's
normal retirement date. A participant terminating employment due to a
permanent and total disability will be eligible for a disability retirement
benefit equal to 60% of pre-retirement compensation, less Retirement Plan and
all predecessor plans' benefits and Social Security benefits. In the event of
the participant's death prior to retirement, such participant's surviving
spouse will be eligible to receive a death benefit equal to 50% of the
retirement benefit the participant would otherwise have been eligible to
receive. Benefits attributable to the SERP are subject to reduction for Social
Security benefits received by participants. The estimated annual retirement
benefits for Messrs. Russell and Smith were calculated using 1997 base salary,
Social Security benefits were based on the maximum benefits payable for an
individual retiring at age 65 in 1997, and Retirement Plan benefits were based
on 1997 base salary, including bonuses, assuming 15 years of service. The
estimated annual retirement benefit from the SERP on December 31, 1997 is
$35,440 for Mr. Russell and $33,884 for Mr. Smith.
The Company's qualified defined contribution plan has two parts. In
the first part, the Company contributes 10% of each participant's compensation
for the plan year. In the second part, the Company allows employees to
contribute up to 2.5% of their compensation earned during the plan year. In
addition, the Company matches 100% of the employees' contributions.
The Company also offers certain key employees selected by the Board of
Directors a nonqualified deferred compensation plan. In this plan, key
employees may defer into the plan all or a portion of their compensation. In
addition, the Company, at the discretion of the Board of Directors, may match
the contributions made by key employees and may also make discretionary
incentive contributions for key employees. Participants' account balances
generally will be paid, as adjusted for investment gains or losses, following
termination of employment. Contributions amounted to $16,265 in 1997.
McCreary Corporation's qualified retirement plan, the McCreary
Corporation 401(k) Plan, permits employees, including Mr. McCreary, to defer
from 2.5% to 20% of compensation, and receive a discretionary matching
contribution of up to 100% of an employee's compensation which the employee
vests in after 5 years of service. In addition, employees may make voluntary
after-tax contributions to the plan.
EMPLOYMENT AGREEMENTS AND SEVERANCE AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with Messrs. Russell and Smith. The Employment Agreements provide
for a minimum annual salary and the opportunity for annual salary increases,
incentive compensation and other compensation and perquisites as approved by
the Board of Directors.
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<PAGE> 18
The Employment Agreements are for a term of three years and may be extended for
an additional year by the Board of Directors prior to the end of each year. If
the Board of Directors does not extend the Employment Agreements by the end of
any year, Mr. Russell and Mr. Smith may terminate their respective employment
by providing at least 90 days' written notice of such termination. Upon such
termination, Mr. Russell and Mr. Smith would continue to receive their
respective annual salary and benefits for the remaining term of their
respective Employment Agreements, or until commencing work for a competing
company. Under the Employment Agreements, Mr. Russell's minimum annual salary
for 1998 is $269,555 and Mr. Smith's minimum annual salary for 1998 is
$207,304. Mr. Russell or Mr. Smith may also terminate their respective
employment in the event of a constructive discharge and continue to receive
their respective annual salary and benefits for the remaining term of their
Employment Agreements. Payments under the Employment Agreements are not
limited to the maximum amount which would avoid the excise tax imposed by Code
Section 4999.
The McCreary Corporation, a subsidiary of the Company, has also
entered into an employment agreement with Mr. McCreary. Mr. McCreary's
employment agreement provides for a minimum annual salary and the opportunity
for annual salary increases as approved by the Board of Directors. Mr.
McCreary's employment agreement is for a term of five years, ending on June 30,
2000. Under his employment agreement, Mr. McCreary's minimum annual salary for
1998 is $150,000.
The Company has entered into severance agreements (the "Severance
Agreements") with Messrs. Russell, Smith, Rosenbloom and Finch. The Severance
Agreements, which apply in the case of a change of control of the Company,
provide that if at any time during the coverage period, as defined under the
Severance Agreements, the employment of an individual covered under the
Severance Agreements is terminated by the Company for any reason other than
cause, death or disability, or by such individual in the event of a
constructive discharge, the Company will pay severance pay in a lump sum cash
amount equal to three times the sum of such individual's (i) annual salary and
(ii) the greater of the target bonus opportunity for the current calendar year
or the average of the annual bonuses for the three prior calendar years.
Payments under the Severance Agreements are limited to the maximum amount that
would not trigger the excise tax imposed by Code Section 4999.
If Messrs. Russell and Smith are entitled to receive benefits under
both their Employment Agreements and their Severance Agreements, then each will
be permitted to select and receive benefits under either his Employment
Agreement or his Severance Agreement, but not benefits from both the Employment
Agreement and the Severance Agreement.
BUDGET COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1997, no executive officer of the Company has
served as a director of or as a member of the compensation or equivalent
committee of any other entity, one of whose executive officers served on the
Board of Directors' Compensation Committee or otherwise as a member of the
Board of Directors.
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<PAGE> 19
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that incorporated future filings,
including this Proxy Statement, in whole or in part, the following sections
titled "Report on Executive Compensation" and "Stock Performance" shall not be
incorporated by reference into any such filings.
REPORT ON EXECUTIVE COMPENSATION
General. The Board of Directors believes the Company has implemented
an executive compensation policy that serves to retain, motivate and reward
management while aligning management's interests closely with those of the
Company and its shareholders. The Company's compensation policies reflect the
advice of an independent executive compensation consultant who is retained from
time to time to review the Company's compensation practices.
The Company's executive compensation policy has the following
components: base salary, annual bonus, long-term compensation and retirement
and disability benefits. Each component is designed in relation with the other
components to offer management competitive remuneration and incentives to
enhance shareholder values.
Each year the Compensation Committee reviews executive compensation to
ensure that such compensation programs are aligned with the Company's long and
short-term performance goals and objectives. The Compensation Committee will
also consider, as part of this review, any changes in laws and regulations
governing compensation programs and will often seek advice from counsel and
other independent third parties.
The base salary for executives is established at a level that the
Compensation Committee believes is both appropriate and consistent within the
industry and relative to other peer companies. For 1997 the base salaries of
executive officers named in the Summary Compensation Table ranged from 69% to
100% of their total annual cash compensation (base salary plus bonus). There
are many criteria used in determining the appropriate executive salary level
including, but not limited to, contribution to performance, scope of
responsibility, productivity, expense and risk control, management development
and strategic planning.
The Company's bonus program provides for the establishment of a bonus
pool as a direct incentive for all employees to improve financial results of
the Company. This bonus program is assessed through a formal evaluation of
overall Company performance which includes, but is not limited to, meeting
specific targets for increases in 1) operating profit, 2) return on equity and,
3) premium growth, as well as a subjective evaluation of each employee in the
areas of, among others, quality of work, reliability, initiative and
creativity. The maximum formula bonus for all employees was determined as a
percentage, ranging from 45% to 6%, of base salary. For the President and
Chief Executive Officer, the maximum bonus award, as a percentage of base
salary, was 45%.
Long-term compensation for executives is designed to motivate and
reward the creation of long-term shareholder value by linking executive
compensation with gains realized by
17
<PAGE> 20
shareholders. Through the Company's Omnibus Incentive Plan, the Company grants
from time to time stock options to the Company's executives and other
employees. The Company also offers an Employee Stock Purchase Plan and an
option under its 401(k) plan for the Company's executives and other employees
to purchase the Company's common stock.
Also included in the Company's overall compensation package for its
executive officers are various employee benefits, including retirement and
disability benefits. Generally, the benefits offered to such persons serve a
different purpose than do the other components of compensation. In general,
these benefits provide protection against financial loss that can result from
illness, disability or death. Benefits offered to these employees are mainly
those that are offered to the Company's other employees, with some variation
primarily to promote tax efficiency and replacement of benefit opportunities
lost due to regulatory limits.
Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, limits the Company's ability to
deduct, for federal income tax purposes, certain compensation in excess of $1
million per year paid to individual officers named in the Summary Compensation
Table unless such compensation is "performance-based." The determination of
whether compensation is performance-based depends upon a number of factors,
including shareholder approval of the plan under which the compensation is
paid, the exercise price at which options or similar awards are granted, the
disclosure to and approval by the shareholders of applicable performance
standards, the composition of the Compensation Committee, and certification by
the Compensation Committee that performance standards were satisfied. The
amount of compensation paid to each of the named officers during fiscal 1997
was less than $1 million. It is possible for the Company to compensate or make
awards under the Omnibus Incentive Plan that may either qualify or not qualify
as performance-based compensation deductible under Section 162(m). The
Compensation Committee, in structuring compensation programs for its top
executive officers, intends to give strong consideration to the deductibility
of awards.
This report is submitted by the members of the Compensation Committee:
Dr. Selander, Chairman, and Drs. Bagby, Hagen, Shapiro and White.
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<PAGE> 21
STOCK PERFORMANCE
The following graph compares the cumulative total return for the
Company's common stock, the Russell 2000 index and a peer group comprised of
MMI Companies, Inc., Frontier Insurance Group, Inc., MAIC Holdings, Inc.,
Professionals Insurance Company Management Group and St. Paul Companies for the
period August 1, 1996 (first day of public trading of the Company's common
stock on the Nasdaq National Market) through December 31, 1997. The graph
assumes an investment on August 1, 1996 of $100 in each of the Company's common
stock, the stocks comprising the Russell 2000 index and the common stocks of
the peer group companies. The graph further assumes that all paid dividends
were reinvested.
[GRAPH]
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<PAGE> 22
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------
FPIC INSURANCE GROUP, INC. PEER GROUP RUSSELL 2000
----g---- ----t---- ----h----
- ------------------------------------------------------------------------
</TABLE>
Index as of December 31
<TABLE>
<CAPTION>
---------------------------------------------------------------------
8/1/96 12/31/96 12/31/97
---------------------------------------------------------------------
<S> <C> <C> <C>
FPIC Insurance Group, Inc. 100 135 291
---------------------------------------------------------------------
Russell 2000 100 116 141
---------------------------------------------------------------------
Peer Group 100 110 132
---------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MCCREARY
The Company's wholly owned subsidiary, McCreary Corporation, purchased
the assets of McCreary Enterprises, Inc. ("MEI"), formerly known as McCreary
Corporation, on July 1, 1995. In addition to assuming certain liabilities,
McCreary Corporation paid MEI $2,000,000 and agreed to pay an additional
$4,000,000 over a five year period subject to certain adjustments. William T.
McCreary, the principal shareholder of MEI, is now the President and Chief
Executive Officer of McCreary Corporation. McCreary Corporation pays MEI
$6,000 per month to pay for all of Mr. McCreary's business related travel
expenses such as transportation, meals, entertainment and lodging for so long
as Mr. McCreary is employed by McCreary Corporation. Management believes that
these expenses are justified by the frequent business related travel demands
upon Mr. McCreary. McCreary Corporation also leases its office building from
Mr. McCreary. McCreary Corporation paid Mr. McCreary rent of $229,497 in 1997.
FMA AND FDA
Pursuant to the bylaws of FPIC, a subsidiary of the Company, the FMA
recommends to FPIC's Board of Directors a nominee for FPIC's Board of Directors
each year. Current directors of the Company that were recommended for their
current terms on FPIC's Board of Directors by the FMA are Drs. Bagby and
Shapiro. Drs. Bagby and White are members of the FMA Board of Directors. Dr.
White is a non-voting member of the FMA's Board of Governors.
The FMA has endorsed FPIC and cooperates with FPIC's marketing
efforts. In recognition of the FMA's endorsement and marketing assistance,
FPIC pays the FMA each year 1% of FPIC's net premium earned from medical
professional liability insurance sold to physicians in Florida during that year
with a maximum cap of $500,000. This includes $50,000 to the FMA Foundation to
support the Physicians Recovery Network.
Pursuant to FPIC's bylaws, the FDA recommends to FPIC's Board of
Directors a nominee for FPIC's Board of Directors every three years. Dr. Gause
presently serves as the FDA's recommended nominee. The FDA has an insurance
agency that receives commissions from FPIC.
OTHER RELATIONSHIPS
All of the members of the Board of Directors other than Mr. Russell
are also policyholders of the Company and as such may experience claims from
time to time in the usual course of business that may require coverage under
their policies that the Company would provide to any policyholder.
PROPOSAL 2 - AMENDMENTS TO THE DIRECTOR STOCK OPTION PLAN
The Company's Director Stock Option Plan was adopted in 1996 to
provide the
21
<PAGE> 24
Company's non-employee directors an incentive to contribute materially to
expanding and improving the Company's profits, to aid in attracting and
retaining directors of outstanding ability, and to encourage ownership of
shares by directors.
The Director Stock Option Plan currently provides that a non-employee
director will receive an option for 5,000 shares when such director initially
joins the Company's Board of Directors. The exercise price of such options is
their fair market value on the date of grant. The options vest at the rate of
one-third of each grant at the end of each annual anniversary of the date of
grant.
Shareholders are being asked to approve three amendments to the
Director Stock Option Plan. The first amendment will increase the number of
shares of the Company's common stock issuable under the Director Stock Plan
from 165,000 shares to 300,000 shares. The second amendment will allow the
Board of Directors to grant additional options to directors from time to time
at the discretion of the Board of Directors. The third amendment will allow
the Board of Directors to grant options that may vest between six months and
ten years as determined at the discretion of the Board of Directors.
Shareholders who wish to review the Director Stock Option Plan and the proposed
amendments may request a copy of each by writing to Steven M. Rosenbloom at
FPIC Insurance Group, Inc., 1000 Riverside Avenue, Suite 800, Jacksonville,
Florida 32204.
The Board of Directors has granted each current director additional
options for 10,000 shares with a six month vesting period and an exercise price
of $23.63 per share based on the Company's closing price on the date of grant
on September 12, 1997. These option grants which aggregate 120,000 shares are
subject to the Company's shareholders approving the above amendments to the
Director Stock Option Plan.
The Board of Directors believes that it is desirable to continue
providing incentives to the Company's directors and therefore recommends that
the shareholders approve the amendments to the Director Stock Option Plan.
THE PLAN
Administration. The Director Stock Option Plan is administered by the
Director Stock Option Plan Committee (the "DSOP Committee") which is the
Compensation Committee of the Board of Directors.
Awards. Currently, directors only receive an option to purchase
shares on the date on which such individual first becomes a director. The
option granted at such time is for 5,000 shares with an option price equal to
the fair market value of such shares on the date of grant. If the shareholders
approve the proposed amendments to the Director Stock Option Plan, directors
may be granted additional options from time to time.
Transferability, Term and Vesting. Options granted pursuant to the
Director Stock Option Plan may not be transferred except by will or the laws of
descent and distribution.
In general, an option will terminate upon the earlier of:
22
<PAGE> 25
(i) the exercise of the option;
(ii) the expiration date of the option by its terms; or
(iii) no more than one year following the date of termination of
service as a director.
In addition, no option may be granted ten years after the effective
date of the Plan.
Currently, one-third of each grant under the Director Stock Option
Plan vests at the end of each annual anniversary of the date of grant. Grants
fully vest upon the death of a recipient director. If the shareholders approve
the proposed amendments to the Director Stock Option Plan, grants under the
Director Stock Option Plan may vest anywhere between six months and ten years
as determined by the DSOP Committee at the time of grant.
Amendment and Termination. The Board of Directors may amend the
Director Stock Option Plan, without shareholder approval, at any time in any
respect, unless shareholder approval of the amendment in question is required
under Florida law, the Code, any exemption from Section 16 of the Exchange Act,
any national securities exchange system on which the shares are then listed or
reported, by any regulatory body having jurisdiction with respect to the
Director Stock Option Plan, or any other applicable laws, rules or regulations.
No amendment to the Director Stock Option Plan may alter or impair any option
granted under the Plan without the consent of the holders thereof.
The Director Stock Option Plan may be terminated at any time by the
Board of Directors.
Number of Shares. A total of 165,000 shares have previously been
authorized for issuance pursuant to the Director Stock Option Plan. Of such
165,000 shares, options for 115,000 shares have been previously granted. If
the shareholders approve the proposed amendments to the Director Stock Option
Plan, a total of 300,000 shares will be authorized for issuance and options for
235,000 shares will have been deemed granted. The exercise prices for options
granted under the Director Stock Option Plan range from $8.22 to $23.63 per
share and with expiration dates ranging from January 13, 2006 to September 14,
2007. On March 31, 1998, the closing market price for a share of the Company's
common stock was $32.25.
The maximum number of shares that may be sold pursuant to the Director
Stock Option Plan, as well as the number of shares that may be purchased
pursuant to the exercise of any option outstanding thereunder, may be equitably
adjusted by the DSOP Committee in the event of a stock split, stock dividend,
recapitalization, merger, consolidation, combination or such similar events.
Federal Income Tax Consequences. The stock options granted under the
Director Stock Option Plan will be nonqualified stock options. Non-employee
directors recognize no taxable income at the time of grant. Upon the exercise
of nonqualified stock options, non-employee directors recognize ordinary income
and the Company is entitled to a deduction equal to the difference between the
exercise price and the fair market value of the shares on the date of
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<PAGE> 26
exercise. Non-employee directors recognize as capital gain or loss on any
subsequent profit or loss realized on the sale or exchange of any shares
disposed of or sold.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE AMENDMENTS TO THE DIRECTOR STOCK OPTION PLAN.
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<PAGE> 27
PROPOSAL 3 - AMENDMENT TO THE OMNIBUS INCENTIVE PLAN
The Company's Omnibus Incentive Plan was adopted in 1996 to provide
incentives to employees whose performance, contributions and skills add to the
value of the Company.
Shareholders are being asked to approve an amendment to the Omnibus
Incentive Plan that will increase the number of shares of the Company's stock
issuable under the Omnibus Incentive Plan from 915,000 shares to 1,165,000
shares. Shareholders who wish to review the Omnibus Incentive Plan and the
proposed amendment may request a copy of each by writing to Steven M.
Rosenbloom at FPIC Insurance Group, Inc., 1000 Riverside Avenue, Suite 800,
Jacksonville, Florida 32204.
The Board of Directors believes that the Omnibus Incentive Plan has
provided appropriate incentives to the plan's participants, which have resulted
in the successful performance of the Company. The Board of Directors believes
that it is desirable to continue providing incentives to the Company's
employees and therefore recommends that the shareholders approve the amendment
to the Omnibus Incentive Plan.
THE PLAN
Administration. The Omnibus Incentive Plan is administered by the
Omnibus Incentive Plan Committee (the "OIP Committee") which is the
Compensation Committee of the Board of Directors. The OIP Committee will
determine, from time to time, the individuals to whom awards shall be made, the
type of awards, and the amount, size and terms of each award. Each of these
types of awards are described below. The OIP Committee will make all other
determinations necessary or advisable for the administration of the Omnibus
Incentive Plan.
Types of Awards. Awards under the Omnibus Incentive Plan may be in
the form of options (both nonqualified stock options and incentive stock
options), contingent stock, restricted stock, and stock appreciation rights, or
such other forms as the OIP Committee in its discretion may deem appropriate.
Number of Shares. A total of 915,000 shares have previously been
authorized for issuance pursuant to the Omnibus Incentive Plan. As of December
31, 1997, options for 790,000 shares have been granted under the Omnibus
Incentive Plan. If the Shareholders approve the proposed amendment to the
Omnibus Incentive Plan, a total of 1,165,000 shares will be authorized for
issuance. The exercise prices for options granted under the Omnibus Incentive
Plan range from $8.22 to $23.63 per share and with expiration dates ranging
from January 13, 2006 to September 14, 2007. On March 31, 1998, the closing
market price for a share of the Company's common stock was $32.25.
The maximum number of shares that may be issued pursuant to options
granted to any one individual during the life of the Omnibus Incentive Plan is
300,000 shares of the Company's common stock.
Information about options granted in 1997 under the Omnibus Incentive
Plan to the
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<PAGE> 28
President and Chief Executive Officer and the four other most highly
compensated officers can be found in the table under the heading "Options/SAR
Grants in Last Fiscal Year" on page 9 of this Proxy Statement. In 1997,
options totaling 265,000 shares were granted to current executive officers as a
group under the Omnibus Incentive Plan, and options totaling 265,000 shares
were granted under the Omnibus Incentive Plan to all employees (including
executive officers) as a group.
No information can be provided with respect to awards that may be made
in the future under the Omnibus Incentive Plan. Such awards are within the
discretion of the OIP Committee. The OIP Committee has not decided future
awards or who might receive them.
The maximum number of shares that may be granted pursuant to options
under the Omnibus Incentive Plan, as well as the number of shares that may be
purchased pursuant to the exercise of any option outstanding thereunder, may be
equitably adjusted by the OIP Committee in the event of a stock split, stock
dividend, recapitalization, merger, consolidation, combination or such similar
events.
Amendment and Termination. The Board of Directors may amend the
Omnibus Incentive Plan, without shareholder approval, at any time in any
respect, unless shareholder approval of the amendment in question is required
under Florida law, the Code, any exemption from Section 16 of the Exchange Act,
any national securities exchange system on which the shares are then listed or
reported, by any regulatory body having jurisdiction with respect to the
Omnibus Incentive Plan, or any other applicable laws, rules or regulations.
No amendment to the Omnibus Incentive Plan may alter or impair any
option granted under such Plan without the consent of the holders thereof.
The Omnibus Incentive Plan may be terminated at any time by the Board
of Directors.
Stock Options. The OIP Committee may grant both an incentive stock
option and a nonqualified stock option to the same individual. When both an
incentive stock option and a nonqualified stock option are awarded at one time,
such options are deemed to have been awarded in separate grants, and in no
event will the exercise of one such option affect the right to exercise the
other such option except to the extent the OIP Committee determines in writing
otherwise.
The option price of an incentive stock option shall not be less than
100% of the fair market value of such share on the day the option is granted,
as determined by the OIP Committee. The option price of a nonqualified stock
option issued prior to an initial public offering shall not be less than 100%
of the book value of such share on the day the option is granted, as determined
by the OIP Committee. The option price of a nonqualified stock option issued
on or after an initial public offering shall not be less than 50% of the fair
market value of such share on the day the option is granted, as determined by
the OIP Committee.
Each option may be exercised by a participant, in whole or in part,
provided such exercise shall not occur earlier than six months after the grant
of the option and not later than
26
<PAGE> 29
ten years after the grant of the option.
Any option designated by the OIP Committee as an incentive stock
option will be subject to the general provisions applicable to all options
granted under the Omnibus Incentive Plan and will be subject to the following
specific provisions:
(a) At the time the incentive stock option is granted, if a
recipient employee owns, directly or indirectly, stock
representing more than 10% of the total combined voting power
of all classes of the Company's stock then: (i) the option
price must equal at least 110% of the fair market value on the
effective date of grant of the shares subject to the option;
and (ii) the term of the option shall not be greater than five
years from the date such option is granted.
(b) The aggregate fair market value of shares (determined at the
date of grant) with respect to which incentive stock options
granted by the Company, that can be exercised by a participant
employee for the first time in any one calendar year shall not
exceed $100,000.
If any option is not granted, exercised, or held pursuant to the
provisions applicable to an incentive stock option, it will be considered to be
a nonqualified stock option to the extent that any or all of the grant is in
conflict with these restrictions.
In general, options granted pursuant to the Omnibus Incentive Plan
terminate upon the earlier of: (i) the full exercise of the option; (ii) the
expiration of the option by its terms; or (iii) no more than three years (three
months for incentive stock options) following termination of the option
holder's employment with the Company.
Stock Appreciation Rights. A stock appreciation right ("SAR") may be
granted in connection with an option and entitles the grantee, subject to the
terms and conditions determined by the OIP Committee to receive, upon surrender
of the option, all or a portion of the excess of (i) the fair market value of a
specified number of shares at the time of the surrender, as determined by the
OIP Committee, over (ii) 100% of the fair market value of such shares at the
time the option was granted plus any dividends paid while the option was
outstanding but unexercised.
SARs may be granted for a period of not less than six months nor more
than ten years, and shall be exercisable in whole or in part, at such time or
times and subject to such other terms and conditions as shall be prescribed by
the OIP Committee at the time of the grant.
SARs will be exercisable only during a grantee's employment by the
Company, except that in the discretion of the OIP Committee an SAR may be made
exercisable for up to three months after a grantee's employment is terminated
for any reason other than death, retirement or disability.
In the event that a grantee's employment is terminated as a result of
death, retirement
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<PAGE> 30
or disability without having fully exercised such grantee's SARs, the grantee,
or grantee's beneficiary following the grantee's death, may have the right to
exercise the SARs during their term within a period of 24 months after the date
of such termination to the extent that the right was exercisable at the date of
such termination, or such other period and subject to such terms as may be
determined by the OIP Committee.
Contingent Stock Awards. The OIP Committee will determine the amount
of a contingent stock award to be granted to an employee based on the expected
impact the employee can have on the financial well-being of the Company and
other factors determined by the OIP Committee to be appropriate. Contingent
stock awards under the Omnibus Incentive Plan shall be subject to such terms,
conditions, and restrictions, if any, including without limitation, substantial
risks of forfeiture and/or attainment of performance objectives, and for such
period or periods (in excess of six months) as will be determined by the OIP
Committee at the time of grant. The OIP Committee in its discretion may permit
an acceleration of the expiration of the applicable restriction period, so long
as the minimum six-month period is retained, with respect to any part or all of
the award to any participant.
In the event of a participant's termination of employment for any
reason prior to lapse of restrictions applicable to a contingent stock award
paid to such participant and unless otherwise provided for by the Omnibus
Incentive Plan or as provided in a contingent stock agreement, all rights to
shares as to which there still remain unlapsed restrictions will be forfeited
by such participant to the Company without payment of any consideration by the
Company.
Restricted Stock Award. The OIP Committee will determine the amount
of a restricted stock award to be granted to an employee based on the past or
expected impact the employee has had or can have on the financial well-being of
the Company and other factors deemed by the OIP Committee to be appropriate.
Restricted stock awards made pursuant to the Omnibus Incentive Plan shall be
subject to such terms, conditions, and restrictions, including attainment of
performance objectives, and for such period or periods (in excess of six
months) as will be determined by the OIP Committee at the time of grant. The
OIP Committee in its discretion may permit an acceleration of the expiration of
the applicable restriction period, so long as the minimum six-month period is
retained, with respect to any part or all of the award to any participant.
In the event of a participant's termination of employment for any
reason prior to the lapse of restrictions applicable to a restricted stock
award made to such participant and unless otherwise provided for by the Omnibus
Incentive Plan or as provided in a restricted stock agreement, all rights to
shares as to which there still remain unlapsed restrictions will be forfeited
by such participant to the Company without payment of any consideration by the
Company.
Change in Control. Upon a change in control, all options, contingent
stock awards, restricted stock awards and stock appreciation rights will
automatically vest as of that date of the change in control and all
restrictions or contingencies will be deemed to have been satisfied.
28
<PAGE> 31
FEDERAL INCOME TAX CONSEQUENCES
General. The rules governing the tax treatment of stock options,
contingent stock, restricted stock, and stock appreciation rights are very
technical. Therefore, the description of the federal income tax consequences
set forth below is necessarily general in nature and does not purport to be
complete. Moreover, statutory provisions are subject to change, as are their
interpretations, and their applications may vary in individual circumstances.
Finally, the tax consequences under applicable state and local income tax laws
may not be the same as under the federal income tax laws.
Incentive Stock Options. The participant recognizes no gain or loss
when an incentive stock option is granted. In general, an employee exercising
an incentive stock option will not be taxed at the time of exercise if the
stock purchased is held for at least one year after the exercise date and at
least two years after the date of grant (the "Holding Period"); provided,
however, the bargain element of exercised incentive stock options is treated as
a tax preference item under the alternative minimum tax rules. If the Holding
Period is satisfied, the difference between the exercise price and the amount
realized upon subsequent disposition of the stock will constitute long-term
capital gain or loss. Gains resulting from the sale of stock held at least 18
months following the date of exercise of the incentive stock option will be
taxed as "adjusted net capital gain" pursuant to Section 1(h) of the Code.
Gains from the sale of stock held more than one year but less than 18 months
will be taxed as "mid-term gain" pursuant to Section 1(h) of the Code. If the
Holding Period is not satisfied, the employee will recognize ordinary income to
the extent of the lesser of the gain realized or the excess of the fair market
value of the stock on the exercise date over the exercise price. Any gain
realized in excess of the amount recognized as ordinary income by the employee
will be capital gain. The Company will not recognize income, gain or loss upon
that granting or exercise of an incentive stock option, nor will it be entitled
to any deduction upon the disposition of an incentive stock option if the
Holding Period is satisfied. If the Holding Period is not satisfied, the
Company will be entitled to a deduction equal to the amount of the ordinary
income recognized by the employee.
Nonqualified Stock Options. The participant recognizes no taxable
income and the Company receives no deduction when a nonqualified stock option
is granted. Upon exercise of a nonqualified stock option, the participant
recognizes ordinary income and the Company is entitled to a deduction equal to
the difference between the exercise price and the fair market value of the
shares on the date of exercise. The participant recognizes as a capital gain
or loss any subsequent profit or loss realized on the sale or exchange of any
shares disposed of or sold.
Restricted Stock. A participant granted restricted stock is not
required to include the value of such shares in income until the first time
such participant's rights in the shares are transferable or are not subject to
substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Code Section 83(b) to be taxed on
the receipt of the shares. In either case, the amount of such ordinary income
will be equal to the excess of the fair market value of the shares at the time
the income is recognized over the amount (if any) paid for the shares. The
Company is entitled to a deduction, in the amount of the ordinary income
recognized by the participant, for the Company's taxable year in which the
29
<PAGE> 32
participant recognizes such income.
Contingent Stock. A participant granted contingent stock is not
required to include the value of such shares in income until the first time
such participant's rights in the shares are transferable or are not subject to
a substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Code Section 83(b) to be taxed on
the receipt of the shares. In either case, the amount of such ordinary income
will be equal to the excess of the fair market value of the shares at the time
the income is recognized over the amount (if any) paid for the shares. The
Company is entitled to a deduction, in the amount of the ordinary income
recognized by the participant, for the Company's taxable year in which the
participant recognizes such income.
Stock Appreciation Rights. Upon the grant of an SAR, the participant
recognizes no taxable income and the Company receives no deduction. The
participant recognizes ordinary income and the Company is entitled to a
deduction at the time of exercise equal to the cash and fair market value of
the shares payable upon such exercise.
Parachute Payments. Under certain circumstances, an accelerated
vesting or cash out of stock options, or accelerated lapse of restrictions on
other awards, in connection with a change in control of the Company might be
deemed an "excess parachute payment" for purposes of the golden parachute tax
provisions of Code Sections 280G and 4999. To the extent it is so considered,
the participant may be subject to a 20% excise tax and the Company may be
denied a tax deduction.
Section 162(m). Code Section 162(m) limits to $1,000,000 per year the
federal income tax deduction available to a public company for compensation
paid to any of its chief executive officer and four other highest paid
executive officers. However Code Section 162(m) provides an exception from its
limitation for certain "performance based" compensation if various requirements
are satisfied. The Omnibus Incentive Plan contains provisions which are
intended to satisfy these requirements for awards which are "performance based"
compensation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE OMNIBUS INCENTIVE PLAN.
INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP as the
Company's independent auditors for the 1998 fiscal year. KPMG Peat Marwick
LLP, a certified public accounting firm, has served as the Company's
independent auditors since its formation in 1996 and as FPIC's independent
auditors since 1989.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals by the Company's shareholders intended to be presented at
the Company's 1999 Annual Meeting of Shareholders must be received by the
Company at its principal
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<PAGE> 33
executive offices on or before January 7, 1999, in order to be included in the
Company's Notice of Meeting, Proxy Statement and Proxy relating to such
Meeting.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company,
including expenses in connection with the preparation and mailing of this proxy
statement. The Company may retain a proxy solicitation firm to assist in the
solicitation of proxies at a cost that will be borne by the Company. In
addition, the Company will reimburse banks, brokers and nominees their
reasonable expenses for sending proxy material to principals and obtaining
their proxies. In addition to solicitation by mail, proxies may be solicited
in person or by telephone by directors, officers and other employees of the
Company.
31
<PAGE> 34
OTHER BUSINESS
The Board of Directors is not aware of any other matters that will be
presented for action at the meeting. However, if any other matters come before
the meeting, the persons named in the enclosed form of proxy or their
substitutes will vote such proxy in respect of any such matters in accordance
with their best judgment pursuant to the discretionary authority conferred
thereby.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles W. Emanuel
May 8, 1998 -------------------------------
Charles W. Emanuel
Vice President and Secretary
PLEASE RETURN THE ENCLOSED FORM OF PROXY,
DATED AND SIGNED, IN THE ENCLOSED ADDRESSED
ENVELOPE, WHICH REQUIRES NO POSTAGE
32
<PAGE> 35
PROXY/VOTING INSTRUCTION CARD THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
FPIC INSURANCE GROUP, INC. ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder hereby appoints Charles W. Emanuel, Steven R. Smith
and Steven M. Rosenbloom or any of them, as proxies, with full power of
substitution, to vote all shares of Common Stock which the undersigned would be
entitled to vote if personally present, at the Annual Meeting of Shareholders of
the Company on June 10, 1998, and at any adjournment thereof, upon all subjects
that may properly come before the meeting, including the matters described in
the proxy statement furnished herewith, subject to any directions indicated on
the other side of this card.
If no directions are given, the proxies will vote for (1) the election of all
nominees listed below, (2) the approval of amendments to the Director Stock
Option Plan as described in the proxy statement furnished herewith, (3) the
approval of amendments to the Omnibus Incentive Plan as described in the proxy
statement furnished herewith and (4) at their discretion, on any other matters
that may properly come before the meeting. The undersigned hereby revokes any
proxy heretofore given to any person or persons whomsoever (other than the
proxies named above) to vote such Common Stock and ratifies and confirms all
that said proxies may or shall do by virtue hereof.
Your vote is important! Please sign and date on the reverse and return promptly
in the enclosed postage-paid envelope or otherwise to the Company's Secretary,
Charles W. Emanuel, so that your shares can be represented at the meeting.
(Continued and to be dated and signed on reverse side.)
<PAGE> 36
(continued from other side)
Please mark votes [X]
as in this example:
This Proxy will be voted as directed. If no direction is made, it
will be voted "FOR" the proposals set forth below. The Board of
Directors recommends a vote "FOR" all nominees, a vote "FOR"
amending the Director Stock Option Plan and a vote "FOR" amending
the Omnibus Incentive Plan.
<TABLE>
<CAPTION>
1. Election of Directors: James W. Bridges, M.D., J. Stewart Hagen, M.D., D.
L. VanEldik, M.D., Henry M. Yonge, M.D.
<S> <C>
[ ] FOR all nominees listed above. [ ] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary) all nominees listed above.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
out that nominee's name on the list above)
2. Approval of Amendments to Director Stock Option Plan.
[ ] FOR Approval [ ] AGAINST Approval [ ] ABSTAIN
3. Approval of Amendments to Omnibus Incentive Plan.
[ ] FOR Approval [ ] AGAINST Approval [ ] ABSTAIN
- ------------------------------------------------------------------------------
Account No.
Date: , 1998
-------------------------
-------------------------------------
PLEASE DATE THIS PROXY AND SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON.
WHERE MORE THAN ONE OWNER IS SHOWN, EACH SHOULD SIGN. WHEN SIGNING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE GIVE FULL TITLE. IF ANY PROXY IS
SUBMITTED BY A CORPORATION, IT SHOULD BE EXECUTED IN FULL CORPORATE NAME BY A
DULY AUTHORIZED OFFICER. IF ANY PROXY IS SUBMITTED BY A PARTNERSHIP, IT SHOULD
BE EXECUTED IN THE PARTNERSHIP NAME BY AN AUTHORIZED PERSON.
<PAGE> 37
APPENDIX A-1
(EDGAR FILING ONLY)
FLORIDA PHYSICIANS INSURANCE COMPANY
DIRECTOR STOCK OPTION PLAN
<PAGE> 38
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
3. ADMINISTRATION . . . . . . . . . . . . . . . . . . . 4
4. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . 4
5. STOCK AND AWARDS . . . . . . . . . . . . . . . . . . 4
6. TERMS AND CONDITIONS . . . . . . . . . . . . . . . . 5
7. TERMINATION OF OPTIONS . . . . . . . . . . . . . . . 6
8. AMENDMENT OR DISCONTINUANCE OF THE PLAN . . . . . . . 7
9. NO OBLIGATION TO EXERCISE OPTION . . . . . . . . . . 7
10. EFFECTIVE DATE; DURATION OF THE PLAN . . . . . . . . . 8
11. EFFECT OF PLAN . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
-i-
<PAGE> 39
FLORIDA PHYSICIANS INSURANCE COMPANY
DIRECTOR STOCK OPTION PLAN
1. PURPOSE
1.1 The purpose of the Florida Physicians Insurance Company Director
Stock Option Plan is to provide an incentive to Directors of the Company who
are in a position to contribute materially to expanding and improving the
Company's profits, to aid in attracting and retaining Directors of outstanding
ability, and to encourage ownership of Shares by Directors.
2. DEFINITIONS
2.1 For purposes of the Plan the following terms shall have the
definition which is attributed to them, unless another definition is clearly
indicated by a particular usage and context.
(a) "Board" means the Company's Board of Directors.
(b) "Book Value" means the value per Share determined for
statutory book purposes by dividing the total equity of the Company on a
given date by all Shares of stock outstanding on such date.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Director Stock Option Committee
appointed by the Company's Board of Directors pursuant to Section 3.1
hereof.
(e) "Company" means Florida Physicians Insurance Company until
the Restructure and on and after the Restructure, FPIC Insurance Group,
Inc.
(f) "Directors" means the members of the Board who are not
employees either of the Company or an affiliate thereof.
(g) "Effective Date of Exercise" means the later of (i) the date
on which the Company has received a written notice of exercise of an
Option and full payment of the purchase price from the Optionee, or (ii)
the effective date of exercise set forth in the written notice.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE> 40
(i) "Fair Market Value" means on, or with respect to, any given
date:
(i) If determined on the date of the IPO, the initial
offering price to the public.
(ii) If not on the date of the IPO and the Shares are
listed on a national stock exchange, the closing market price of such
Shares as reported on the composite tape for issues listed on such
exchange on such date or, if no trades shall have been reported for such
date, on the next preceding date on which there were trades reported;
provided, that if no such quotations shall have been made within the ten
business days preceding such date, Fair Market Value shall be determined
under (iv) below.
(iii) If not on the date of the IPO and the Shares are not
listed on a national stock exchange but is traded on the
over-the-counter market, the mean between the closing dealer bid and
asked price of such Shares of Common Stock as reported by the National
Association of Securities Dealers through their Automated Quotation
System for such date, or if no quotations shall have been made on such
date, on the next preceding date on which there were quotations;
provided, that, if no such quotations shall have been made within the
ten business days preceding such date, Fair Market Value shall be
determined under (iv) below.
(iv) If (i), (ii), and (iii) do not apply, the Fair Market
Value of a Share without regard to any control premium or discount for
lack of control as determined by the Committee in good faith consistent
with the valuation by the Company as provided by a third party appraiser
for other corporate purposes before adjustments or any discounts applied
due to lack of marketability. The Committee may rely upon the most
recent valuation and there shall be no requirement to cause a more
recent valuation to be made.
(j) "IPO" means the initial public offering of the Company's
common stock pursuant to a registration statement on Form S-1 filed by
the Company with the U.S. Securities and Exchange Commission.
(k) "Option" means the right to purchase from the Company Shares
at a specified price and subject to the terms of the Plan, and such
other conditions and restrictions as the Committee deems appropriate.
(l) "Option Price" means the purchase price per Share subject to
an Option.
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<PAGE> 41
(m) "Optionee" means a Director who has been awarded an Option
under the Plan.
(n) "Optioned Shares" means Shares subject to outstanding
Options.
(o) "Parent" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, at the
time of a granting of an Option, each of the corporations (other than
the Company) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain within the meaning of Section 424(e) of the Code and any
regulations or rulings promulgated thereunder.
(p) "Permanent and Total Disability" shall have the same meaning
as given to that term by Section 22(e)(3) of the Code and any
regulations or rulings promulgated thereunder.
(q) "Plan" means Florida Physicians Insurance Company Director
Stock Option Plan, as evidenced herein and as amended from time to time.
(r) "Plan Effective Date" means January 13, 1996.
(s) "Restructure" means the corporate reorganization pursuant to
which Florida Physicians Insurance Company shall become the wholly owned
subsidiary of FPIC Insurance Group, Inc.
(t) "SEC Rule 16b-3" means Rule 16b-3 of the Securities and
Exchange Commission promulgated under the Exchange Act.
(u) "Section 16 Person" means a person subject to Section 16(b)
of the Exchange Act with respect to transactions involving equity
securities of the Company.
(v) "Share" means one share of the $1.00 par value common stock
of the Company. On and after the Restructure, "Share" means one share of
$0.10 par value common stock of FPIC Insurance Group, Inc.
(w) "Subsidiary" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if, at the time of the
granting of the Option, each of the corporations (other than the last
corporation) in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the
other corporations in such chain, within the meaning of Section
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<PAGE> 42
424(f) of the Code and any regulations or rulings promulgated
thereunder.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee. The Committee
shall be comprised of not less than two of the then members of the Board. The
Plan is intended to be a formula plan meeting the conditions of Rule
16b-3(c)(2)(ii). The members of the Committee shall be appointed by the Board.
The Board may from time to time remove members from or add members to the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by
the Board.
3.2 The action of a majority of the Committee at which a quorum is
present, or acts reduced to or so approved in writing by a majority of the
Committee, shall be the valid acts of the Committee.
3.3 The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under it and all actions of the
Committee shall be final and binding on all parties hereto. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted under it.
4. ELIGIBILITY
4.1 Each Optionee shall be a Director of the Company.
5. STOCK AND AWARDS
5.1 Prior to the Restructure, the aggregate number of Shares which
may be issued under Options granted pursuant to the Plan shall not exceed
33,000 Shares and on or after the Restructure the aggregate number of Shares
which may be issued under Options granted pursuant to the Plan shall not exceed
165,000 Shares.
5.2 Each eligible individual who is a Director on the Plan Effective
Date, except those Directors who on the Plan Effective Date have not been
nominated for additional service on the Board and whose terms expire in 1996,
shall receive an Option to purchase 1,000 Shares with an Option Price equal to
Book Value of such Shares on the Plan Effective Date. In addition, such
individual who is also a Director on the date of the IPO shall receive an
Option to purchase 1,000 additional Shares with an Option Price equal to Fair
Market Value of such Shares on the date of the IPO.
4
<PAGE> 43
5.3 Each eligible individual who is not a Director on the Plan
Effective Date shall receive an Option to purchase 1,000 Shares with an Option
Price equal to the Fair Market Value of such Shares on the date of grant which
shall be the later of (i) the date of the IPO, or (ii) the date on which such
individual first becomes a Director.
5.4 In the event that any outstanding Option under the Plan expires
or is terminated for any reason, the Optioned Shares subject to that option may
again be subjected to an Option under the Plan.
5.5 For Options issued prior to the Restructure, any Option still
unexercised and outstanding on the effective date of the Restructure shall be
deemed to be an Option to purchase FPIC Insurance Group, Inc. shares as
adjusted purusant to Section 6.1(f).
6. TERMS AND CONDITIONS
6.1 Options granted pursuant to the Plan shall be evidenced by
agreements in such form as the Committee shall from time to time approve, which
agreements shall contain or shall be subject to the following terms and
conditions, whether or not such terms and conditions are specifically included
therein:
(a) Number of Shares. Each Option shall state the number of
Shares to which it pertains.
(b) Date. Each Option shall state the effective date of grant
of the Option.
(c) Option Price. Each Option shall state the Option Price.
(d) Method and Time of Payment. The Option Price shall be
payable on the exercise of the Option and shall be paid in cash, in
Shares, including Shares acquired pursuant to the Plan, or part in cash
and part in Shares. Shares transferred in payment of the Option Price
shall be valued as of date of transfer based on the Fair Market Value.
(e) Transfer of Option. No Option shall be transferable by the
Optionee, except by will or the laws of descent and distribution upon
the Optionee's death and subject to any other limitations of the Plan.
(f) Recapitalization. The number of Optioned Shares and the
Option Price shall be correspondingly adjusted in order to give effect
to changes made in the number of outstanding Shares as a result of a
merger, consolidation,
5
<PAGE> 44
recapitalization, reclassification, combination, stock dividend, stock
split, or other relevant change.
(g) Rights as a Shareholder. An Optionee shall have no rights
as a shareholder with respect to any Optioned Shares until the date of
the issuance of a stock certificate to him for such Shares. No
adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other
rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 6.1(f).
(i) Duration of Option. Each Option shall be for a term of ten
years from the effective date of grant, except as provided in Section
7.1(b).
(j) Vesting. One-third (rounded up to a whole number) of each
grant under this Plan shall vest on the one year anniversary of the date
of grant, with an additional one-third vesting on each of the next two
anniversaries of the date of grant. A Director shall forfeit the
unvested Options upon termination of service as a Director.
(k) Other Provisions. Options authorized under the Plan may
contain any other provisions or restrictions as the Committee in its
sole and absolute discretion shall deem advisable including but not
limited to offering Options in tandem with or reduced by other options
or benefits and reducing one award by the exercise of another option or
benefit. The Company may place such restriction legends on stock
certificates representing the Shares as the Company, in its sole
discretion, deems necessary or appropriate to reflect restrictions under
the securities laws or this Plan.
6.2 Options granted pursuant to the Plan shall not be exercisable
until such Options are vested as provided in Section 6.1(j). Any person
entitled to exercise an Option may do so in whole or in part by delivering to
the Company, attention Corporate Secretary, at its principal office a written
notice of exercise. The written notice shall specify the number of Shares for
which an Option is being exercised and shall be accompanied by full payment of
the Option Price for the Shares being purchased. During the Optionee's
lifetime, an Option may be exercised only by the Optionee, or on his behalf by
the Optionee's guardian or legal representative.
7. TERMINATION OF OPTIONS
7.1 An Option may be terminated as follows:
6
<PAGE> 45
(a) During the period of continuous service as a Director of
the Company or Subsidiary, an Option will be terminated only if it has
been fully exercised or it has expired by its terms.
(b) Upon termination of service as a Director for any reason,
the Option will terminate upon the earlier of (i) the full exercise of
the Option, (ii) the expiration of the Option by its terms, or (iii) one
year following the date of termination of service as a Director.
(c) If an Optionee shall die or becomes subject to a Permanent
and Total Disability prior to the termination of an Option, such Option
may be exercised to the extent that the Optionee shall have been
entitled to exercise it at the time of death or disability, as the case
may be, by the Optionee, the estate of the Optionee or the person or
persons to whom the Option may have been transferred by will or by the
laws of descent and distribution, provided, however, such right must be
exercised, if at all, within one year after the date of such death or
disability.
7.2 Except as otherwise expressly provided in the written agreement
with the Optionee referred to in Section 6 hereof, and except as provided in
this Section, in no event will the continuation of the term of an Option beyond
the date of termination of service allow the Director, or his beneficiaries or
heirs, to accrue additional rights under the Plan, or to purchase more Shares
through the exercise of an Option than could have been purchased on the day
that service as a Director was terminated.
8. AMENDMENT OR DISCONTINUANCE OF PLAN
8.1 The Plan may be amended by the Board, without Shareholder
approval, at any time in any respect unless Shareholder approval of the
amendment in question is required under Florida law, the Code, any exemption
from Section 16 of the Exchange Act (including without limitation SEC Rule
16b-3) for which the Company intends Section 16 persons to qualify, any
national securities exchange system on which the shares are then listed or
reported, by any regulatory body having jurisdiction with respect to the Plan,
or any other applicable laws, rules or regulations.
8.2 The Plan provisions that determine the amount, price and timing
of the option grants to Section 16 persons may not be amended more than once
every six months, other than to comport with changes in the Code, the
Employment Income Retirement Security act of 1974, or rules thereunder, unless
the Company's legal counsel determines that such restriction on amendments is
not necessary to secure or maintain any exemptions from Section 16 of the
Exchange Act for which the Company intends Section 16 persons to qualify.
7
<PAGE> 46
8.3 The Plan may be terminated at any time by the Board of
Directors.
8.4 No amendment to the Plan will alter or impair any Option granted
under the Plan without the consent of the holders thereof.
9. NO OBLIGATION TO EXERCISE OPTION
9.1 The granting of an option shall impose no obligation upon the
Optionee to exercise such option.
10. EFFECTIVE DATE; DURATION OF THE PLAN
10.1 The Plan shall be effective as of January 13, 1996.
10.2 No Option may be granted after the tenth anniversary of the
earlier of the date the Plan is adopted or the date the Plan is approved by
shareholders.
11. EFFECT OF PLAN
11.1 The granting of an option pursuant to the Plan shall not give
the Optionee any right to similar grants in future years or any right to be
retained in the employ of the Company, the Parent or a Subsidiary, but an
Optionee shall remain subject to discharge to the same extent as if the Plan
were not in effect.
This Plan is adopted effective as of January 13, 1996.
8
<PAGE> 47
FIRST AMENDMENT TO THE
FLORIDA PHYSICIANS INSURANCE COMPANY
DIRECTOR STOCK OPTION PLAN
This First Amendment to the Florida Physicians Insurance
Company Director Stock Option Plan (the "Plan") is made
effective as of March 16, 1996.
1. Section 2.1(q) of the Plan shall be amended to read
as follows:
"(q) 'Plan' means the Director Stock
Option Plan, as evidenced herein and as
amended from time to time."
2. Section 6.1(j) of the Plan shall be amended to read
as follows:
"(j) Vesting. One-third (rounded up to a
whole number) of the number of shares set
forth in paragraph 2 shall vest on the one
year anniversary of this Agreement, with
an additional one-third vesting on each of
the next two anniversaries of this
Agreement. Unvested options shall vest on
the death or Permanent and Total
Disability of the Director. The Director
shall forfeit any unvested Options upon
termination of service as a Director for
any reason other than death or Permanent
and Total Disability of the Director."
All provisions of the Plan not specifically mentioned in
this First Amendment shall be considered modified to the
extent necessary to be consistent with the changes made in
this First Amendment.
<PAGE> 48
SECOND AMENDMENT TO THE
FLORIDA PHYSICIANS INSURANCE COMPANY
DIRECTOR STOCK OPTION PLAN
This Second Amendment to the Florida Physicians Insurance
Company Director Stock Option Plan (the "Plan") is made
effective as of September 14, 1997, subject to shareholder
approval at the 1998 Annual Meeting of Shareholders.
1. Section 5.1 of the Plan shall be amended to read as
follows:
"5.1 The aggregate number of Shares which
may be issued under Options granted
pursuant to the Plan shall not exceed
300,000 Shares."
2. Section 5.6 shall be added to the Plan to read as
follows:
"5.6 In addition to the Option grants
provided for above, the Board may, in its
sole discretion, grant from time to time
additional Options to eligible Directors."
3. Section 6.1(j) of the Plan shall be amended to read
as follows:
"6.1(j) Vesting. The vesting schedule of
an Option granted under this Plan shall be
determined by the Board, in its sole
discretion, upon granting of the Option;
provided, however, that no Option shall
vest prior to the expiration of 6 months
from the effective date of the Option
grant or after the tenth anniversary of
the effective date of the Option grant.
A director shall forfeit any unvested
Options upon termination of service as a
Director."
All provisions of the Plan not specifically mentioned in
this Second Amendment shall be considered modified to the
<PAGE> 49
extent necessary to be consistent with the changes made in
this Second Amendment.
<PAGE> 50
APPENDIX A-2
(EDGAR FILING ONLY)
FLORIDA PHYSICIANS INSURANCE COMPANY
OMNIBUS INCENTIVE PLAN
<PAGE> 51
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
1. PURPOSE ................................................ 1
2. DEFINITIONS............................................. 1
3. ADMINISTRATION.......................................... 6
4. SHARES SUBJECT TO PLAN.................................. 7
5. PARTICIPANTS............................................ 7
6. AWARDS UNDER THE PLAN................................... 7
7. STOCK OPTIONS........................................... 8
8. STOCK APPRECIATION RIGHTS...............................11
9. CONTINGENT STOCK AWARDS.................................12
10. RESTRICTED STOCK AWARDS.................................13
11. OTHER PROVISIONS RELATING TO CONTINENT AND
RESTRICTED STOCK AWARDS AND STOCK OPTIONS...............14
12. GENERAL RESTRICTIONS....................................14
13. RIGHTS OF A SHAREHOLDER.................................15
14. RIGHTS TO TERMINATE EMPLOYMENT..........................15
15. WITHHOLDING OF TAXES....................................15
16. NONASSIGNABILITY........................................15
17. NON-UNIFORM DETERMINATIONS..............................16
18. ADJUSTMENTS.............................................16
19. AMENDMENT...............................................16
20. EFFECT ON OTHER PLAN....................................16
21. DURATION OF PLAN........................................17
22. FUNDING OF THE PLAN.....................................17
23. GOVERNING LAW...........................................17
</TABLE>
- i -
<PAGE> 52
FLORIDA PHYSICIANS INSURANCE COMPANY
OMNIBUS INCENTIVE PLAN
1. PURPOSE
1.1 The purpose of the Florida Physicians Insurance Company Omnibus
Incentive Plan is to provide incentives to specified individuals whose
performance, contributions and skills add to the value of Florida Physicians
Insurance Company. The Company also believes that the Plan will facilitate
attracting, retaining and motivating Employees of high caliber and potential.
1.2 Plan participants shall include those officers and key
employees of the Company and subsidiaries who, in the opinion of the Committee,
are making or are in a position to make substantial contributions to the
Company by their ability and efforts.
2. DEFINITIONS
2.1 For purposes of the Plan, the following terms shall have the
definition which is attributed to them, unless the context clearly indicates to
the contrary.
(a) "Award" shall mean a grant of Restricted Stock,
Contingent Stock, an Option, or an SAR.
(b) "Board" means the Company's Board of Directors.
(c) "Book Value" means the value per Share determined
for statutory book purposes by dividing the total
equity of the Company on a given date by all Shares
of stock outstanding on such date.
(d) "Change in Control" shall not mean the Restructure
but shall mean the earlier of the following events
which are not connected to the Restructure:
(i) either (A) receipt by the Company of a
report on Schedule 13D, or an amendment to
such a report, filed with the SEC pursuant
to Section 13(d) of the Exchange Act,
disclosing that any person (as such term is
used in Section 13(d) of the Exchange Act)
("Person"), is the beneficial owner,
directly or indirectly, of twenty (20)
percent or more of the outstanding stock of
the Company, or (B) actual knowledge by the
Company of facts on the basis of which
<PAGE> 53
any Person is required to file such a
report on Schedule 13D, or to file an
amendment to such a report, with the SEC
(or would be required to file such a report
or amendment upon the lapse of the
applicable period of time specified in
Section 13(d) of the Exchange Act)
disclosing that such Person is the
beneficial owner, directly or indirectly,
of twenty (20) percent or more of the
outstanding stock of the Company;
(ii) purchase by any Person, other than the
Company or a wholly owned subsidiary of the
Company, of shares pursuant to a tender or
exchange offer to acquire any stock of the
Company (or securities convertible into
stock) for cash, securities or any other
consideration provided that, after
consummation of the offer, such Person is
the beneficial owner (as defined in Rule
13d-3 under the Exchange Act regardless of
whether the Company or such Person would
otherwise be subject to the Exchange Act),
directly or indirectly, of twenty (20)
percent or more of the outstanding stock of
the Company (calculated as provided in
paragraph (d) of Rule 13d-3 under the
Exchange Act in the case of rights to
acquire stock regardless of whether the
Company or such Person would otherwise be
subject to the Exchange Act);
(iii) either (A) the filing by any Person
acquiring, directly or indirectly, twenty
percent (20%) or more of the outstanding
stock of the Company of a statement with
the Florida Department of Insurance
pursuant toSection628.461 of the Florida
Statutes, or (B) actual knowledge by the
Company of facts on the basis of which any
Person acquiring, directly or indirectly,
twenty percent (20%) or more of the
outstanding stock of the Company or a
controlling company is required to file
such a statement pursuant to Section
628.461.
(iv) approval by the shareholders of the Company
of (A) any consolidation or merger of the
Company in which the Company is not the
continuing or surviving corporation or
pursuant to which shares of stock of the
Company would be converted into cash,
securities or other property, other than a
consolidation or merger of the Company in
which holders of its stock
2
<PAGE> 54
immediately prior to the consolidation or
merger have substantially the same
proportionate ownership of common stock of
the surviving corporation immediately after
the consolidation or merger as immediately
before, or (B) any consolidation or merger
in which the Company is the continuing or
surviving corporation but in which the
common shareholders of the Company
immediately prior to the consolidation or
merger do not hold at least a majority of
the outstanding common stock of the
continuing or surviving corporation (except
where such holders of common stock hold at
least a majority of the common stock of the
corporation that owns all of the common
stock of the Company), or (C) any sale,
lease, exchange or other transfer (in one
transaction or a series of related
transactions) of all or substantially all
the assets of the Company, or (D) any
merger or consolidation of the Company
where, after the merger or consolidation,
one Person owns 100% of the shares of stock
of the Company (except where the holders of
the Company's common stock immediately
prior to such merger or consolidation own
at least 90% of the outstanding stock of
such Person immediately after such merger
or consolidation); or
(v) a change in the majority of the members of
the Board within a 24-month period unless
the election or nomination for election by
the Company's shareholders of each new
director was approved by the vote of at
least two-thirds of the directors then
still in office who were in office at the
beginning of the 24-month period.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the members of the Compensation
Committee of the Board who are "outside directors"
(within the meaning of Code Section 162(m)) and
"disinterested persons" (within the meaning of Rule
16b-3 of the Exchange Act).
(g) "Company" means Florida Physicians Insurance Company
until the Restructure and on and after the
Restructure, FPIC Insurance Group, Inc.
3
<PAGE> 55
(h) "Contingent Stock" means stock issued, subject to
certain conditions, to a Grantee pursuant to Section
9 hereof.
(i) "Directors" means the members of the Board.
(j) "Effective Date" means January 13, 1996.
(k) "Employee" means any individual who performs
services for the Company, a Parent or Subsidiary,
and is included on the regular payroll of the
Company, a parent or subsidiary.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means on, or with respect to,
any given date:
(i) If determined on the date of the IPO, the
initial offering price to the public.
(ii) If not on the date of the IPO and the
Shares are listed on a national stock
exchange, the closing market price of such
Shares as reported on the composite tape
for issues listed on such exchange on such
date or, if no trade shall have been
reported for such date, on the next
preceding date on which there were trades
reported; provided, that if no such
quotation shall have been made within the
ten business days preceding such date, Fair
Market Value shall be determined under (iv)
below.
(iii) If not on the date of the IPO and the
Shares are not listed on a national stock
exchange but are traded on the
over-the-counter market, the mean between
the closing dealer bid and asked price of
such Shares as reported by the National
Association of Securities Dealers through
their Automated Quotation System for such
date, or if no quotations shall have been
made on such date, on the next preceding
date on which there were quotations;
provided, that, if such quotations shall
have been made within the ten business days
preceding such date, Fair Market Value
shall be determined under (iv) below.
(iv) If (i), (ii), and (iii) do not apply, the
Fair Market Value of a Share without regard
to any
4
<PAGE> 56
control premium or discount for lack of
control (except as otherwise required by
Section 422 of the Code) as determined by
the Committee in good faith consistent with
the valuation of the Company as provided by
a third party appraiser for other corporate
purposes before adjustments or any
discounts applied due to lack of
marketability. The Committee may rely upon
the most recent valuation and there shall
be no requirement to cause a more recent
valuation to be made.
(n) "Grantee" means an Employee who is an Optionee or an
Employee who has received an Award.
(o) "Incentive Stock Option" shall have the same meaning
as given to the term by Section 422 of the Code and
any regulations or rulings promulgated thereunder.
(p) "IPO" means the initial public offering of the
Company's common stock pursuant to a registration
statement on Form S-1 filed by the Company with the
U.S. Securities and Exchange Commission.
(q) "Nonqualified Stock Option" means any option granted
under the Plan which is not considered an Incentive
Stock Option.
(r) "Option" means the right to purchase from the
Company a stated number of Shares at a specified
price. The Option may be granted to an Employee
subject to the terms of this Plan, and such other
conditions and restrictions as the Committee deems
appropriate. Each Option shall be designated by the
Committee to be either an Incentive Stock Option or
a Nonqualified Stock Option.
(s) "Option Price" means the purchase price per Share
subject to an Option, as described in Section
7.2(a).
(t) "Optionee" means an Employee who has been awarded an
Option under the Plan.
(u) "Parent" shall mean any corporation (other than the
Company) in an unbroken chain of corporations ending
with the Company if, at the time of a granting of an
Option, each of the corporations (other than the
Company) owns stock possessing 50% or more of the
total combined voting power of all
5
<PAGE> 57
classes of stock in one of the other corporations in
such chain within the meaning of Section 424(e) of
the Code and any regulations or rulings promulgated
thereunder.
(v) "Plan" means Florida Physicians Insurance Company
Omnibus Incentive Plan, as evidenced herein and as
amended from time to time.
(w) "Restricted Stock" shall mean stock issued, subject
to restrictions, to a Grantee pursuant to Section 10
hereof.
(x) "Restructure" means the corporate reorganization
pursuant to which Florida Physicians Insurance
Company shall become the wholly owned subsidiary of
FPIC Insurance Group, Inc.
(y) "SAR" means a stock appreciation right.
(z) "SEC" means the U.S. Securities and Exchange
Commission.
(aa) "Section 16 Person" means a person subject to
Section 16(b) of the Exchange Act with respect to
transactions involving equity securities of the
Company.
(bb) "Share" means one share of the $1.00 par value
common stock of the Company. On and after the
Restructure, "Share" means one share of $.10 par
value common stock of FPIC Insurance Group, Inc.
(cc) "Subsidiary" means any corporation in an unbroken
chain of corporations beginning with the Company if,
at the time of the granting of the Option, each of
the corporations (other than the last corporation)
in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all
classes of stock in one of the other corporations in
such chain, within the meaning of Section 424(f) of
the Code and any regulations or rulings promulgated
thereunder.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee. As applied to
Employees, the Committee shall have full and final authority in its discretion
to:
6
<PAGE> 58
(a) conclusively interpret the provisions of the Plan
and to decide all questions of fact arising in its
application;
(b) determine the individuals to whom awards shall be
made under the Plan;
(c) determine the type of award to be made to such
Employees and the amount, size and terms of each
award;
(d) determine the time when awards will be granted to
Employees; and
(e) make all other determinations necessary or advisable
for the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN
4.1 Prior to the Restructure the Shares subject to Awards under
the Plan shall not exceed in the aggregate 183,000 Shares and on and after the
Restructure the Shares subject to Awards under the Plan shall not exceed in the
aggregate 915,000 Shares.
4.2 Shares may be authorized and unissued Shares or treasury
Shares.
4.3 The maximum number of Shares that may be awarded pursuant to
the Contingent or Restricted Stock Award provisions of Sections 9 and 10 shall
be 25% of the total Shares authorized for issuance under the Plan.
4.4 Except as provided herein, any Shares subject to an Option or
right for which any reason expires or is terminated unexercised as to such
Shares shall again be available under the Plan.
5. PARTICIPANTS
5.1 Awards permitted pursuant to the Plan may only be made to
Employees.
6. AWARDS UNDER THE PLAN
6.1 Awards under the Plan may be in the form of Options (both
Nonqualified Stock Options and Incentive Stock Options), Contingent Stock,
Restricted Stock, and SARs, or such other forms as the Committee may in its
discretion deem appropriate but in any event which are consistent with the
Plan's purpose, including any combination of the above.
7
<PAGE> 59
6.2 Prior to the Restructure the maximum number of Awards that
may be awarded to any one person during the life of the Plan shall be 60,000
Shares and on and after the Restructure the maximum number of Awards that may
be awarded to any one person during the life of the Plan shall be 300,000
Shares. Prior to the Restructure the maximum number of Shares with respect to
which Options or rights may be granted during a calendar year to any Employee
is 60,000 Shares and on and after the Restructure the maximum number of Shares
with respect to which Options or rights may be granted during a calendar year
to any Employee is 300,000 Shares.
7. STOCK OPTIONS
7.1 The Committee in its sole discretion may designate whether an
Option is to be considered an Incentive Stock Option or a Nonqualified Stock
Option. The Committee may grant both an Incentive Stock Option and a
Nonqualified Stock Option to the same individual. However, where both an
Incentive Stock Option and a Nonqualified Stock Option are awarded at one time,
such Options shall be deemed to have been awarded in separate grants, shall be
clearly identified, and in no event will the exercise of one such Option affect
the right to exercise the other such Option except to the extent the Committee
determines in writing otherwise.
7.2 Options granted pursuant to the Plan shall be authorized by
the Committee under terms and conditions approved by the Committee, not
inconsistent with this Plan or Exchange Act Rule 16b-3(c), and shall be
evidenced by agreements in such form as the Committee shall from time to time
approve, which agreements shall contain or shall be subject to the following
terms and conditions, whether or not such terms and conditions are specifically
included therein:
(a) The Option Price of an Incentive Stock Option shall
not be less than 100% of the Fair Market Value of
such Share on the day the Option is granted, as
determined by the Committee. The Option Price of a
Nonqualified Stock Option issued prior to the IPO
shall not be less than 100% of Book Value of such
Share on the day the Option is granted, as
determined by the Committee. The Option Price of a
Nonqualified Stock Option issued on or after the IPO
shall not be less than 50% of the Fair Market Value
of such Share on the day the Option is granted, as
determined by the Committee. The option agreement
for a Nonqualified Stock Option at the Committee's
sole discretion, may, but need not, provide for a
reduction of the purchase price by dividends paid on
a Share as long as the Option is outstanding and not
exercised, but in no event
8
<PAGE> 60
shall this price be less than the par value of such
Share.
(b) Each option agreement shall state the period or
periods of time, as may be determined by the
Committee, within which the Option may be exercised
by the participant, in whole or in part, provided
such period shall not commence earlier than six
months after the date of grant of the Option and not
later than ten years after the date of the grant of
the Option. The Committee shall have the power to
permit in its discretion an acceleration of
previously determined exercise terms, subject to the
terms of this Plan, to the extent permitted by
Exchange Act Rule 16b-3(c), and under such
circumstances and upon such terms and conditions as
deemed appropriate and which are not inconsistent
with Exchange Act Rule 16b-3(c)(1).
(c) Shares purchased pursuant to an option agreement
shall be paid for in full at the time of purchase,
either in the form of cash, common stock of the
Company at Fair Market Value, or a combination
thereof, as the Committee may determine.
(d) Notwithstanding anything herein to the contrary, the
aggregate Fair Market Value (determined as of the
time the Option is granted) of Incentive Stock
Options for any Employee which may become first
exercisable in any calendar year shall not exceed
$100,000.
(e) Notwithstanding anything herein to the contrary, no
Incentive Stock Option shall be granted to any
individual if, at the time the Option is to be
granted, the individual owns stock possessing more
than 10% of the total combined voting power of all
classes of stock of the Company unless at the time
such Option is granted the Option Price is at least
110% of the Fair Market Value of the stock subject
to Option and such Option by its terms is not
exercisable after the expiration of five years from
the date such Option is granted.
(f) Each Incentive Stock Option agreement shall contain
such other terms, conditions and provisions as the
Committee may determine to be necessary or desirable
in order to qualify such Option as a tax- favored
option within the meaning of Section 422 of the
Code, or any amendment thereof, substitute therefor,
or regulation thereunder. Subject to the
9
<PAGE> 61
limitations of Section 19, and without limiting any
provisions hereof, the Committee shall have the
power without further approval to amend the terms of
any Option for Employees.
7.3 If any Option is not granted, exercised, or held pursuant to
the provisions applicable to an Incentive Stock Option, it will be considered
to be a Nonqualified Stock Option to the extent that any or all of the grant is
in conflict with such provisions.
7.4 An Option may be terminated (subject to any shorter periods
set forth in an individual option agreement by the Committee, in its sole
discretion) as follows:
(a) During the period of continuous employment with the
Company or Subsidiary, an Option will be terminated
only if it has been fully exercised or it has
expired by its terms.
(b) In the event of termination of employment for any
reason, the Option will terminate upon the earlier
of (i) the full exercise of the Option, (ii) the
expiration of the Option by its terms, or (iii)
except as provided in 7.4(c), no more than three
years (three months for Incentive Stock Options)
following the date of employment termination. For
purposes of the Plan, a leave of absence approved by
the Company shall not be deemed to be termination of
employment except with respect to an Incentive Stock
Option as required to comply with Code Section 422
and the regulations issued thereunder.
(c) If an Optionee's employment terminates by reason of
death or Permanent and Total Disability prior to the
termination of an Option, such Option may be
exercised to the extent that the Optionee shall have
been entitled to exercise it at the time of death or
disability, as the case may be, by the Optionee, the
estate of the Optionee or the person or persons to
whom the Option may have been transferred by will or
by the laws of descent and distribution for the
period set forth in the Option, but no more than
three years following the date of such death or
disability, provided, however, with respect to an
Incentive Stock Option, such right must be
exercised, if at all, within one year after the date
of such death or disability.
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<PAGE> 62
8. STOCK APPRECIATION RIGHTS
8.1 SARs shall be evidenced by SAR agreements in such form, and not
inconsistent with this Plan or Exchange Act Rule 16b- 3(c)(1), as the Committee
shall approve from time to time, which agreements shall contain in substance
the following terms and conditions as discussed in Sections 8.2 through 8.4.
8.2 An SAR may be granted in connection with an Option and shall
entitle the Grantee, subject to such terms and conditions determined by the
Committee, to receive, upon surrender of the Option, all or a portion of the
excess of (i) the Fair Market Value of a specified number of Shares at the time
of the surrender, as determined by the Committee, over (ii) 100% of the Fair
Market Value of such Shares at the time the Option was granted less any
dividends paid while the Option was outstanding but unexercised.
8.3 SARs shall be granted for a period of not less than six
months nor more than ten years, and shall be exercisable in whole or in part,
at such time or times and subject to such other terms and conditions as shall
be prescribed by the Committee at the time of grant, subject to the following:
(a) No SAR shall be exercisable, in whole or in part,
during the six-month period starting with the date
of grant; and
(b) SARs will be exercisable only during a Grantee's
employment by the Company or a Subsidiary, except
that in the discretion of the Committee an SAR may
be made exercisable for up to three months after the
Grantee's employment is terminated for any reason
other than death, retirement or disability. In the
event that a Grantee's employment is terminated as a
result of death, retirement or disability without
having fully exercised such Grantee's SARs, the
Grantee or such Grantee's beneficiary may have the
right to exercise the SARs during their term within
a period of 24 months after the date of such
termination to the extent that the right was
exercisable at the date of such termination, or
during such other period and subject to such terms
as may be determined by the Committee. The
Committee in its sole discretion may reserve the
right to accelerate previously determined exercised
terms, within the terms of the Plan, under such
circumstances and upon such terms and conditions as
it deems appropriate.
(c) The Committee shall establish such additional terms
and conditions, without limiting the foregoing, as
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<PAGE> 63
it determines to be necessary or desirable to avoid
"short-swing" trading liability in connection with
an SAR within the meaning of Section 16(b) of the
Exchange Act.
8.4 Upon exercise of an SAR, payment shall be made in the form of
common stock of the Company (at Fair Market Value on the date of exercise),
cash, or a combination thereof, as the Committee may determine.
9. CONTINGENT STOCK AWARDS
9.1 Contingent Stock Awards under the Plan shall be evidenced by
Contingent Stock agreements in such form and not inconsistent with this Plan as
the Committee shall approve from time to time, which agreements shall contain
in substance the terms and conditions described in Sections 9.2 through 9.5.
9.2 The Committee shall determine the amount of Contingent Stock
Award to be granted to an Employee based on the expected impact the Employee
can have, or actually has had, on the financial well-being of the Company and
other factors deemed by the Committee to be appropriate.
9.3 Contingent Stock Awards made pursuant to this Plan shall be
subject to such terms, conditions, and restrictions, including without
limitation, substantial risks of forfeiture and/or attainment of performance
objectives, and for such period or periods (in excess of six months) as shall
be determined by the Committee at the time of grant. The Committee shall have
the power to permit, in its discretion, an acceleration of the expiration of
the applicable restriction period (so long as the minimum six-month period is
retained) with respect to any part or all of the Award to any participant. The
Committee shall have the power to make a Contingent Stock Award that is not
subject to vesting or any other contingencies in recognition of an Employee's
prior service and financial impact on the Company.
9.4 The agreement shall specify the terms and conditions upon
which any restrictions on the right to receive Shares representing Contingent
Stock Awards under the Plan shall lapse, as determined by the Committee. Upon
the lapse of such restrictions, Shares shall be issued to the participant or
such Participant's legal representative.
9.5 In the event of a participant's termination of employment for
any reason prior to the lapse of restrictions applicable to a Contingent Stock
Award made to such participant and unless otherwise provided for herein by this
Plan or as provided for in the Contingent Stock agreement, all rights to Shares
as to which there still remain unlapsed restrictions shall be forfeited by such
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<PAGE> 64
participant to the Company without payment or any consideration by the Company,
and neither the participant nor any successors, heirs, assigns or personal
representatives of such participants shall thereafter have any further rights
or interest in such Shares.
10. RESTRICTED STOCK AWARD
10.1 Restricted Stock Awards under the Plan shall be evidenced by
Restricted Stock agreements in such form, and not inconsistent with this Plan,
as the Committee shall approve from time to time, which agreements shall
contain in substance the terms and conditions described in Sections 10.2
through 10.6.
10.2 The Committee shall determine the amount of a Restricted
Stock Award to be granted to an Employee based on the past or expected impact
the Employee has had or can have on the financial well-being of the Company and
other factors deemed by the Committee to be appropriate.
10.3 Restricted Stock Awards made pursuant to this Plan shall be
subject to such terms, conditions, and restrictions, including without
limitation, substantial risks of forfeiture and/or attainment of performance
objectives, and for such period or periods (in excess of six months) as shall
be determined by the Committee at the time of grant. The Committee shall have
the power to permit, in its discretion, an acceleration of the expiration of
the applicable restriction period (so long as the minimum six-month period is
retained) with respect to any part or all of the Award to any participant.
Upon issuance of a Restricted Stock Award, Shares will be issued in the name of
the recipient. During the restriction period, recipient shall have the rights
of a shareholder for all such Shares of Restricted Stock, including the right
to vote and the right to receive dividends thereon as paid.
10.4 Each certificate evidencing stock subject to Restricted Stock
Awards shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award. Any attempt to dispose of stock in
contravention of such terms, conditions and restrictions shall be ineffective.
The Committee may adopt rules which provide that the certificates evidencing
such Shares may be held in custody by a bank or other institution, or that the
Company may itself hold such Shares in custody, until the restrictions thereon
shall have lapsed and may require as a condition of any Award that the
recipient shall have delivered a stock power endorsed in blank relating to the
stock covered by such Award.
10.5 The Restricted Stock agreement shall specify the terms and
conditions upon which any restrictions on the right to receive shares
representing Restricted Stock awarded under the Plan shall lapse as determined
by the Committee. Upon the lapse of such
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restrictions, Shares which have not been delivered to the recipient or such
recipient's legal representative shall be delivered to such participant or such
participant's legal representative.
10.6 In the event of a participant's termination of employment for
any reason prior to the lapse of restrictions applicable to a Restricted Stock
Award made to such participant and unless otherwise provided for herein by this
Plan or as provided for in the Restricted Stock agreement, all rights to Shares
as to which there remain unlapsed restrictions shall be forfeited by such
participant to the Company without payment or any consideration by the Company,
and neither the participant nor any successors, heirs, assigns or personal
representatives of such participant shall thereafter have any further rights or
interest in such Shares.
11. OTHER PROVISIONS RELATING TO CONTINGENT AND RESTRICTED STOCK
AWARDS AND STOCK OPTIONS
11.1 Notwithstanding any other provisions to the contrary in
Sections 7, 9, or 10 or elsewhere in this Plan, the additional provisions
described in Sections 11.1 and 11.2 shall apply to Contingent and Restricted
Stock Awards and to stock option Awards (except that Section 11.2 shall only
apply to Contingent and Restricted Stock Awards).
11.2 If a recipient of a Contingent or Restricted Stock Award has
his or her employment terminated and his or her salary continued through an
employment agreement, severance program or other comparable arrangement, then
any contingencies and restrictions which are satisfied or which would have been
satisfied during the period for which the recipient's salary is to be
continued, irrespective of form, will be deemed to have been satisfied, and
such Shares of Contingent and/or Restricted Stock shall be issued and delivered
to the recipient or such recipient's legal representative no later than the
expiration of the salaries continuation program.
11.3 Upon a Change in Control, all Options, Contingent Stock
Awards, Restricted Stock Awards, and SARs will automatically vest as of that
date and all restrictions or contingencies will be deemed to have been
satisfied.
11.4 The Committee may provide in any individual agreement in
connection with an Award that upon a Change in Control the Executive may have a
period of time to exercise such Award which period does not exceed its original
term.
12. GENERAL RESTRICTIONS
12.1 The Plan and each Award under the Plan shall be subject to
the requirement that, if at any time the Committee shall
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determine that (i) the listing, registration or qualification of the Shares
subject or related thereto upon any securities exchange or under any state or
federal law, (ii) the consent or approval of any government regulatory body, or
(iii) an agreement by the recipient of an Award with respect to the disposition
of Shares, is necessary or desirable as a condition of, or in connection with
the Plan or the granting of such Award or the issue or purchase of Shares of
common stock thereunder, the Plan will not be effective and/or the Award may
not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
13. RIGHTS OF A SHAREHOLDER
13.1 The recipient of any Award under the Plan shall have no
rights as a shareholder with respect thereto unless and until certificates for
Shares of common stock are issued to such recipient, except for the rights
provided in Section 11 of this Plan as it pertains to Restricted Stock Awards.
14. RIGHTS TO TERMINATE EMPLOYMENT
14.1 Nothing in the Plan or in any agreement entered into pursuant
to the Plan shall confer upon any participant the right to continue in the
employment of the Company or its subsidiary or affect any right which the
Company or its subsidiary may have to terminate the employment of such
participant.
15. WITHHOLDING OF TAXES
15.1 Whenever the Company proposes, or is required, to issue or
transfer Shares under the Plan, the Company shall have the right to require the
recipient to remit to the Company an amount, or a number of shares, sufficient
to satisfy any federal, state and/or local withholding tax requirements prior
to the delivery of any certificate or certificates for such Shares. Whenever
under the Plan payments are to be made in cash, such payments shall be net of
an amount sufficient to satisfy any federal, state and/or local withholding tax
requirements.
16. NONASSIGNABILITY
16.1 No Award or benefit under the Plan shall be assignable or
transferable by the recipient thereof except by will or by the laws of descent
and distribution. During the life of the recipient, such Award shall be
exercisable only by such person or by such person's guardian or legal
representative.
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17. NON-UNIFORM DETERMINATIONS
17.1 The Committee's determination under the Plan (including,
without limitation, determinations of the persons to receive Awards, the form,
amount and timing of such Awards, the terms and conditions of such Awards and
the agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made by the Committee selectively among
persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.
18. ADJUSTMENTS
18.1 In the event of any change in the outstanding common stock of
the Company by reason of the Restructure, a stock dividend, recapitalization,
merger, consolidation, split-up, combination, exchange of Shares or the like,
the Committee shall adjust the number of Shares of common stock which may be
issued under the Plan and shall provide for an equitable adjustment of any
outstanding Award or Shares issuable pursuant to an outstanding Award under
this Plan.
19. AMENDMENT
19.1 The Plan may be amended by the Board, without Shareholder
approval, at any time in any respect, unless Shareholder approval of the
amendment in question is required under Florida law, the Code, any exemption
from Section 16 of the Exchange Act (including without limitation SEC Rule
16b-3) for which the Company intends Section 16 Persons to qualify, any
national securities exchange system on which the Shares are then listed or
reported, by any regulatory body having jurisdiction with respect to the Plan,
or any other applicable laws, rules or regulations.
19.2 The termination or modification or amendment of the Plan
shall not, without the consent of a participant, affect a participant's rights
under an Award previously granted. Notwithstanding the foregoing, however, the
corporation reserves the right to terminate the Plan in whole or in part, at
any time and for any reason, provided that full and equitable compensation is
made to participants with respect to Awards previously granted.
20. EFFECT ON OTHER PLAN
20.1 Participation in this Plan shall not affect a participant's
eligibility to participate in any other benefit or incentive plan of the
Company, and any Awards made pursuant to this Plan shall not be used in
determining the benefits provided under any other plan of the Company unless
specifically provided.
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21. DURATION OF PLAN
21.1 The Plan shall remain in effect until all Awards under the
Plan have been satisfied by the issuance of Shares or the payment of cash, but
no Awards shall be granted more than ten years after the date the Plan is
adopted by the Company.
22. FUNDING OF THE PLAN
22.1 This Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Award under this Plan, and
payment of Awards shall be on the same basis as the claims of the Company's
general creditors. In no event shall interest be paid or accrued on any Award
including unpaid installments of Awards.
23. GOVERNING LAW
23.1 The laws of the State of Florida shall govern, control and
determine all questions arising with respect to the Plan and the interpretation
and validity of its respective provisions.
Approved by the Board of Directors
of Florida Physicians Insurance
Company at a meeting held on January
13, 1996
By
---------------------------------
Its President
ATTEST:
- --------------------
Its Secretary
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FIRST AMENDMENT TO THE
FLORIDA PHYSICIANS INSURANCE COMPANY
OMNIBUS INCENTIVE PLAN
This First Amendment to the Florida Physicians Insurance
Company Omnibus Incentive Plan (the "Plan") is made effective
as of March 16, 1996, subject to shareholder approval at the
1998 Annual Meeting of Shareholders.
1. Section 2.1(v) of the Plan shall be amended to read
as follows:
"(v) 'Plan' means Omnibus Incentive Plan,
as evidenced herein and as amended from
time to time."
All provisions of the Plan not specifically
mentioned in this First Amendment shall be considered modified
to the extent necessary to be consistent with the changes made
in this First Amendment.
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SECOND AMENDMENT TO THE
FLORIDA PHYSICIANS INSURANCE COMPANY
OMNIBUS INCENTIVE PLAN
This Second Amendment to the Florida Physicians Insurance
Company Omnibus Incentive Plan (the "Plan") is made effective
as of September 14, 1997, subject to shareholder approval at
the 1998 Annual Meeting of Shareholders.
1. Section 4.1 of the Plan shall be amended to read as
follows:
"4.1 The aggregate number of Shares which
may be issued under Options granted
pursuant to the Plan shall not exceed in
the aggregate 1,165,000 Shares."
All provisions of the Plan not specifically mentioned in
this Second Amendment shall be considered modified to the
extent necessary to be consistent with the changes made in
this Second Amendment.
