<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transaction period from ________to_________.
Commission file number 1-11983
FPIC Insurance Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3359111
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation of organization) Identification No.)
1000 Riverside Avenue, Suite 800, Jacksonville, FL 32204
(Address of principal executive offices) (Zip Code)
(904) 354-5910
------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of April 29, 1999 there were 9,863,797 shares of the registrant's common
stock outstanding.
<PAGE> 2
Table of Contents
<TABLE>
<S> <C>
Part I - Financial Information
Item 1. Consolidated Financial Statements (unaudited)
of FPIC Insurance Group, Inc. and Subsidiaries:
Consolidated Balance Sheets............................. 3
Consolidated Statements of Income....................... 4
Consolidated Statements of Comprehensive Income......... 5
Consolidated Statements of Cash Flows................... 6
Notes to the Consolidated Financial Statements.......... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 13
Part II - Other Information
Item 1. Legal Proceedings....................................... 21
Item 2. Changes in Securities................................... 21
Item 3. Defaults Upon Senior Securities......................... 21
Item 4. Submission of Matters to a Vote of Security Holders..... 21
Item 5. Other Information....................................... 21
Item 6. Exhibits and Reports on Form 8=K........................ 21
Signatures............................................................. 22
</TABLE>
<PAGE> 3
FPIC Insurance Group, Inc.
Consolidated Balance Sheets
as of March 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
3/31/99 12/31/98
-------------- --------------
<S> <C> <C>
ASSETS
Bonds and U.S. Government securities:
Available-for-sale, at fair value $325,039,262 $325,922,559
Other invested assets 4,484,872 4,171,771
Equity securities 10,122,966 10,327,990
Cash and cash equivalents 17,365,896 7,062,695
Real estate investments 4,910,059 4,581,671
-------------- --------------
TOTAL CASH AND INVESTMENTS 361,923,055 352,066,686
Premiums receivable, net 52,489,345 40,296,590
Accrued investment income 5,678,762 4,981,612
Reinsurance recoverable on paid losses 1,983,780 3,190,042
Due from reinsurers on unpaid losses and advance premiums 53,863,636 41,438,356
Deposits with reinsurers 555,349 662,496
Property and equipment, net of accumulated depreciation 2,965,098 2,614,686
Deferred policy acquisition costs 2,685,038 2,001,248
Deferred income taxes 15,326,836 9,348,494
Finance charge receivable 461,446 370,875
Prepaid expenses 571,330 644,336
Intangible assets 76,584,909 16,586,261
Federal income taxes receivable 0 271,029
Other assets 9,107,894 4,905,757
-------------- --------------
TOTAL ASSETS $584,196,478 $479,378,468
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Loss and loss adjustment expenses $278,756,000 $242,377,000
Unearned premiums 57,617,881 44,309,691
Paid in advance and unprocessed 1,653,964 5,767,080
Short term debt 58,177,797 27,165,000
Federal income taxes payable 2,416,843 0
Accrued expenses and other liabilities 15,872,776 8,829,169
-------------- --------------
TOTAL LIABILITIES 414,495,261 328,447,940
-------------- --------------
SHAREHOLDERS' EQUITY
Common stock, $.10 par value: 25,000,000 shares authorized;
9,842,197 and 9,518,679 shares issued and outstanding
in 1999 and 1998, respectively 984,220 951,868
Additional paid-in capital 46,772,156 34,297,994
Unearned compensation (325,070) (356,528)
Accumulated other comprehensive income 4,619,816 5,621,533
Retained earnings 117,650,095 110,415,661
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 169,701,217 150,930,528
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $584,196,478 $479,378,468
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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FPIC Insurance Group, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1999 1998
----------- ------------
<S> <C> <C>
REVENUES
Net premiums earned $27,583,589 $17,855,299
Net investment income 4,451,748 4,339,754
Net realized investment gains (losses) 304,058 (14,722)
Claims administration and management fees 6,234,315 2,589,999
Commission income 746,753 226,104
Finance charge and other income 687,914 490,246
----------- ------------
TOTAL REVENUES 40,008,377 25,486,680
----------- ------------
EXPENSES
Net losses and loss adjustment expenses 18,649,122 14,517,950
Other underwriting expenses 4,002,711 1,751,856
Claims administration and management expenses 5,918,670 2,291,740
Interest expense 843,041 33,151
Other expenses 1,089,277 188,566
----------- ------------
TOTAL EXPENSES 30,502,821 18,783,263
----------- ------------
Income before income taxes 9,505,556 6,703,417
Income taxes 2,271,122 1,918,309
----------- ------------
NET INCOME $7,234,434 $4,785,108
=========== ============
BASIC EARNINGS PER COMMON SHARE $0.74 $0.52
=========== ============
DILUTED EARNINGS PER COMMON SHARE $0.70 $0.50
=========== ============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 10,398,147 9,646,467
=========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
FPIC Insurance Group,
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1999 1998
----------- ----------
<S> <C> <C>
Net Income $7,234,434 $4,785,108
----------- ----------
Other comprehensive (loss) income:
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during period (1,845,161) 51,862
Less: reclassification adjustment for gains (losses)
included in net income 304,058 (14,722)
Income tax benefit (expense) related to unrealized gains
and losses on securities 539,386 (12,999)
----------- ----------
Other comprehensive (loss) income (1,001,717) 24,141
----------- ----------
Comprehensive Income $6,232,717 $4,809,249
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
FPIC Insurance Group, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $7,234,434 $4,785,108
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expense 1,243,190 442,860
Realized (gains) losses on investments (304,058) 14,722
Realized loss on sale of equipment 8,150 0
Noncash compensation 31,458 0
Net loss (earnings) in equity investment 79,026 (24,612)
Deferred income taxes (336,504) (137,106)
Changes in assets and liabilities net of effects from
purchases of subsidiaries:
Premiums receivable (8,762,806) (4,356,684)
Accrued investment income (277,763) (1,275,238)
Reinsurance recoverable on paid losses 1,206,262 (137,034)
Due from reinsurers on unpaid losses
and advance premiums 817,611 448,956
Deposits with reinsurers 107,147 17,667,252
Deferred policy acquisition costs (421,602) (440,638)
Other assets (1,774,264) (2,102)
Prepaid expenses and finance charge receivable 400,811 (129,994)
Loss and loss adjustment expense reserves (371,302) 2,404,000
Unearned premiums 3,933,137 8,729,762
Paid in advance and unprocessed (4,113,116) (3,712,149)
Federal income tax payable 2,687,872 123,285
Accrued expenses and other liabilities (1,439,068) (2,766,951)
------------- -------------
Net cash provided by operating activities (51,385) 21,633,437
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale or maturity of securities available-for-sale 30,238,906 14,941,748
Purchase of securities available-for-sale (900,000) (39,741,183)
Purchase of intangible assets (49,180,320) 0
Proceeds from sale of real estate investments 0 (251,378)
Purchase of real estate investments (390,539) 0
Purchase of other invested assets (313,101) 0
Purchase of subsidiary's net other assets and stock (919,303) 0
Purchase of property and equipment, net (69,998) (375,868)
------------- -------------
Net cash used in investing activities (21,534,355) (25,426,681)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt of short term debt 31,012,797 0
Issuance of common stock, net 876,144 278,741
------------- -------------
Net cash provided by financing activities 31,888,941 278,741
------------- -------------
Net increase (decrease) in cash and cash equivalents 10,303,201 (3,514,503)
Cash and cash equivalents, beginning of period 7,062,695 7,679,822
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $17,365,896 $4,165,319
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Continued.
6
<PAGE> 7
FPIC Insurance Group, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended March 31
1999 1998
------------ ----------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Federal income taxes paid $0 $1,975,000
Cash paid for interest $59,776 $53,654
Supplemental schedule of noncash investing and financing activities:
The Company purchased all of the capital stock of AFP for $53,830,370 and a
70% equity interest in a limited liability company for $2,500,000. In
conjunction with the acquisitions, common stock was issued as follows:
Fair value of assets acquired $56,330,370 $0
Cash paid for the capital stock (44,700,000) 0
------------ ----------
Common stock issued and related additional
paid in capital $11,630,370 $0
============ ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE> 8
FPIC INSURANCE GROUP, INC.
Notes to the Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
FPIC Insurance Group, Inc. (the Company) is an insurance holding company.
The Company's principal subsidiaries are Florida Physicians Insurance
Company, Inc. (FPIC), Anesthesiologists' Professional Assurance Company, Inc.
(APAC), Administrators For The Professions, Inc. (AFP), McCreary Corporation
(MCC) and its subsidiary, Employer's Mutual, Inc. (EMI), The Tenere Group,
Inc. (Tenere) and its subsidiaries Intermed Insurance Company (Intermed) and
Interlex Insurance Company (Interlex).
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries, and have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. These consolidated financial statements and notes should be
read in conjunction with the financial statements and notes included in the
audited consolidated financial statements of the Company for the year ended
December 31, 1998, which were filed with the Securities and Exchange Commission
on Form 10-K on March 31, 1999.
2. LOSS AND LOSS ADJUSTMENT EXPENSE LIABILITY
The liability for loss and loss adjustment expenses represents management's best
estimate of the ultimate cost of all losses incurred but unpaid. The estimated
liability is continually reviewed and any adjustments that become necessary are
included in current income. Incurred losses and loss adjustment expenses for the
three-month periods ended March 31, 1999 and 1998 were principally determined by
considering prior loss experience, loss trends, the Company's loss retention
levels, and changes in frequency and severity of claims.
3. INCOME TAXES
Income taxes were accounted for under the asset and liability method. Income tax
expense differs from the normal relationship to financial statement income
principally because of tax exempt interest income.
8
<PAGE> 9
4. INVESTMENTS
Proceeds from sales of investments available-for-sale were $30,238,906 and
$14,941,748 during the three months ended March 31, 1999 and 1998, respectively.
Gross realized gains and (losses) from sales of debt securities based on
specific identification were $334,662 and $(30,604) and $81 and $(14,803) for
the three months ended March 31, 1999 and 1998, respectively.
The amortized cost of investments in securities available-for-sale was
$317,936,059 and $327,602,037 as of March 31, 1999 and December 31, 1998,
respectively.
5. BUSINESS ACQUISITIONS
The acquisition agreement for MCC specifies additional payments, based upon
earnings, to be made to the seller from the acquisition date through 2000, and
the acquisition agreement for EMI specifies additional payments, based upon
earnings, to be made to the sellers from the acquisition date through 2001. The
remaining contingent payments and the year of payment for these two acquisitions
are as follows:
<TABLE>
<CAPTION>
MCC EMI
-------- --------
<S> <C> <C>
1999 $700,000 $250,000
2000 600,000 250,000
2001 0 250,000
</TABLE>
The agreements allow for additional final payments based on the aggregate
earnings compared to the aggregate projected earnings during the earnout
periods. The effect of these subsequent payments is to increase the original
purchase price and the recorded goodwill provided MCC and EMI meet their
earnings targets.
On July 1, 1997, the Company purchased 20% of the common stock of APS Insurance
Services, Inc. (APS), a Texas insurance service corporation, for $2,000,000. The
purchase agreement provides an option to purchase an additional 35% of the
common stock of APS in 1999, allowing the Company 55% ownership. This investment
is accounted for under the equity method. The market value of APS approximated
its book value at March 31, 1999.
On July 1, 1998, the Company purchased all of the outstanding common stock of
APAC, a medical professional liability insurance company, for $18,000,000.
Additionally, $3,500,000 was paid in non-compete agreements and other fees to
affiliated parties. APAC insures over 700 anesthesiologists in over 30 states.
Concurrent with the purchase of APAC on July 1, 1998, the Company purchased a
9.9% interest in American Professional Assurance Ltd. (APAL), a Cayman Islands
captive reinsurer, for $5,500,000. The purchase of such interest is accounted
for under the cost method.
9
<PAGE> 10
On January 6, 1999, the Company purchased all of the outstanding common stock of
AFP for aggregate consideration equal to $54,000,000, paid in cash of
$44,000,000 and Company common stock. AFP is the manager and attorney-in-fact
for Physicians' Reciprocal Insurers, the second largest medical professional
liability insurer for physicians in the state of New York.
On March 17, 1999, the Company's subsidiary, FPIC, acquired all of the
outstanding common stock of Tenere for $19,608,000 in cash. Tenere,
headquartered in Springfield, Missouri, is a stock holding company, with two
primary insurance subsidiaries, Intermed and Interlex, which provide medical and
legal professional liability insurance.
6. REINSURANCE
The Company's insurance subsidiaries presently have excess of loss reinsurance
contracts that serve to limit the Company's maximum loss to $500,000 per
occurrence. To the extent that any reinsurer is unable to meet its obligations,
the Company would be liable for such defaulted amounts not covered by letters of
credit. The Company obtains letters of credit from reinsurers that are not
designated as authorized reinsurers by the Departments of Insurance in the
states where it conducts business.
7. COMMITMENTS AND CONTINGENCIES
The Company's insurance subsidiaries are involved in numerous legal actions
arising primarily from insurance policies. The legal actions arising from
insurance policies have been considered by the Company's insurance subsidiaries
in establishing their reserves. While the outcomes of all legal actions are not
presently determinable, the Company's management is of the opinion that the
settlement of these actions will not have a material adverse effect on the
Company's financial position or results of operations.
8. BORROWING ARRANGEMENTS
The Company maintains a $75,000,000 revolving credit facility, in which five
banks participate, to meet certain non-operating cash needs as they may arise.
The credit facility terminates January 4, 2002. The Company is not required to
maintain compensating balances in connection with this credit facility but is
charged a fee on the unused portion, which ranges from 20 to 30 basis points. As
of March 31, 1999, the Company had borrowed $58,200,000 against the credit
facility for non-operating purposes.
10
<PAGE> 11
9. RECONCILIATION OF BASIC AND DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
3/31/99 3/31/98
---------- ----------
<S> <C> <C>
Net income $7,234,434 $4,785,108
========== ==========
Basic weighted average shares
outstanding 9,750,749 9,199,975
Common stock equivalents 647,398 446,492
======= =======
Diluted weighted average
shares outstanding 10,398,147 9,646,467
========== =========
Basic earnings per share $0.74 $0.52
===== =====
Diluted earnings per share $0.70 $0.50
===== =====
</TABLE>
10. SEGMENT INFORMATION
Under the provisions of SFAS 131, the Company determined it has two reportable
operating segments, which are insurance and third party administration and
management (TPA). The insurance segment provides a variety of insurance products
for participants in the healthcare industry including MPL insurance for medical
professionals, managed care liability insurance, professional and comprehensive
general liability insurance for healthcare facilities, provider stop loss
insurance, workers compensation insurance, and group accident and health
coverage. The TPA segment provides management services and third party
administration services such as the administration of self-insurance plans for
large employers.
The Company evaluates a segment's performance based on net income or loss.
Intersegment revenues for transactions between the two segments are based on
actual costs incurred and are similar to services that may have been obtained
from an unrelated third party. All segments are managed separately because each
business requires different technology and marketing strategies.
11
<PAGE> 12
Information by industry segment follows (in thousands):
<TABLE>
<CAPTION>
Three months ended
----------------------
3/31/99 3/31/98
-------- --------
<S> <C> <C>
REVENUES:
---------
External customers:
Insurance $32,587 $21,544
TPA 7,421 2,943
-------- --------
40,008 24,487
Intersegment:
Insurance 404 295
TPA 181 0
-------- --------
$ 40,593 $ 24,782
======== ========
NET INCOME (LOSS):
- ------------------
Insurance $6,906 $4,472
TPA 328 313
------- -------
$ 7,234 $ 4,785
======= =======
IDENTIFIABLE ASSETS: At 3/31/99 At 12/31/98
- -------------------- ---------- -----------
Insurance $635,637 $511,246
TPA 67,219 10,801
--------- ---------
$ 702,856 $ 522,047
========= =========
</TABLE>
The following table provides reconciliations of net income and assets to the
Company's consolidated totals:
<TABLE>
<CAPTION>
Three months ended
----------------------
3/31/99 3/31/98
------- -------
<S> <C> <C>
NET INCOME:
- -----------
Total income for reportable segments $ 7,234 $ 4,785
Other 0 0
------- -------
Total consolidated net income $ 7,234 $ 4,785
======= =======
ASSETS: At 3/31/99 At 12/31/98
- ------- ---------- -----------
Total assets for reportable segments $702,856 $522,047
Investments in equity method investees (117,123) (42,670)
Intercompany receivables (1,537) (999)
----------- ----------
Total consolidated assets $ 584,196 $ 478,378
=========== ==========
</TABLE>
12
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FPIC INSURANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of the following discussion and analysis, "Company" refers to FPIC
Insurance Group, Inc., the holding company, and its consolidated subsidiaries;
"FPIC" refers to Florida Physicians Insurance Company, Inc.; "McCreary" refers
to McCreary Corporation and its subsidiaries; "APAC" refers to
Anesthesiologists' Professional Assurance Company; "AFP" refers to
Administrators For The Professions, Inc.; "Tenere" refers to The Tenere Group,
Inc. and its subsidiaries; "Intermed" refers to Intermed Insurance Company and
"Interlex" refers to Interlex Insurance Company. The results of operations for
the three months ended March 31, 1999 include the results of AFP from January
6, 1999 and Tenere from March 17, 1999. All amounts in this management
discussion and analysis have been rounded to the nearest $100,000.
Important Considerations Related to Forward Looking Statements
The statements contained in this report that are not historical facts are
forward-looking statements that involve certain risks and uncertainties. These
forward-looking statements include the plans and objectives of management for
future operations relating to the products and future economic performance of
the Company. These forward-looking statements also address the current views of
management regarding the Company's future acquisitions.
The forward-looking statements are based on assumptions that the Company will
continue to: (i) price and market its insurance products competitively; (ii)
reserve appropriately for losses and LAE; (iii) maintain its successful handling
of claims; and (iv) retain existing agents and key management personnel. The
forward-looking statements are also based upon assumptions that (i) competitive
conditions within the MPL insurance business will not change materially or
adversely; (ii) demand for MPL insurance will remain strong; (iii) the market
will accept the Company's new products and services; and (iv) the Company's
reinsurers will remain solvent. In addition, if the Company does acquire one or
more businesses, management's ability to identify suitable businesses to acquire
and to effectively integrate the combined operations of such businesses with the
Company may cause the Company's actual results to differ materially from the
results anticipated in these forward-looking statements. Assumptions relating to
the foregoing are difficult or impossible to predict accurately and many are
beyond the control of the Company. In light of the significant uncertainties
inherent in the forward-looking information included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
General
The Company's primary source of revenues is dividends from its subsidiaries. The
primary sources of revenues for these dividends are premiums earned and
investment income derived from the insurance operations of FPIC, APAC, Intermed
and Interlex, and fee and commission income from McCreary, AFP, and FPIC
Insurance Agency Inc. The Company concentrates on
13
<PAGE> 14
liability insurance products for the healthcare community, with medical
professional liability (MPL) insurance for physicians and dentists as its
primary product. The Company, through FPIC, APAC and Intermed, writes MPL
insurance, substantially of which is written on a claims-made basis, which
provides protection to the insured against only those claims that arise out of
incidents occurring and of which notice to the insurer is given while coverage
is effective. The Company recently supplemented its line of insurance products
by adding coverage for small employer group health plans.
On July 1, 1997, the Company completed the purchase of a 20 percent interest in
APS Insurance Services, Inc. (APS) for $2,000,000 with the option to purchase an
additional 35 percent in 1999. The primary source of revenue for APS is fee
income from its subsidiary that manages the business of a medical professional
liability company domiciled in Texas. This interest will allow FPIC an
opportunity to expand its market potential in Texas. The Company is currently
evaluating its option to purchase the additional 35 percent.
On July 1, 1998, the Company purchased all of the outstanding common stock of
APAC, an MPL insurance company, for $18,000,000. In addition, $3,500,000 was
paid in non-compete agreements and other fees to affiliated parties. APAC
insures over 700 anesthesiologists in over 30 states.
Concurrent with the purchase of APAC on July 1, 1998, the Company purchased a
9.9% interest in American Professional Assurance Ltd. (APAL), a Cayman Islands
captive reinsurer, for $5,500,000. The acquisition of such interest is accounted
for under the cost method.
On January 6, 1999, the Company purchased all of the outstanding common stock of
AFP, for aggregate consideration equal to $54,000,000, paid in cash of
$44,000,000 and Company common stock. AFP is the manager and attorney-in-fact
for Physicians' Reciprocal Insurers, the second largest MPL insurer for
physicians in the state of New York.
On March 17, 1999, the Company's subsidiary, FPIC, acquired all of the
outstanding common stock of Tenere for $19,608,000 in cash. Tenere,
headquartered in Springfield, Missouri, is a stock holding company, with two
primary insurance subsidiaries, Intermed and Interlex, which provide medical and
legal professional liability insurance.
The Company's financial position and results of operations are subject to
fluctuations due to a variety of factors. Unexpectedly high frequency or
severity of losses in any period, particularly in the Company's prior three
policy years, would have a material adverse effect on the Company. Additionally,
reevaluations of the Company's loss and loss adjustment expense (LAE) reserves
could result in an increase or decrease in reserves and a corresponding
adjustment to earnings. The Company's historical results of operations are not
necessarily indicative of future results.
14
<PAGE> 15
Stock Repurchase Plan
On July 13, 1998, the Company's Board of Directors approved a stock repurchase
plan pursuant to which the Company is authorized to repurchase, at management's
discretion, up to 500,000 of its shares on the open market over a twelve month
period. As of March 31, 1999, 71,000 shares had been repurchased by the Company
pursuant to this plan at a cost of approximately $1,840,000.
Selected Balance Sheet Items - March 31, 1999 compared to December 31, 1998
As noted above, the Company completed two significant acquisitions in the first
quarter of 1999, AFP and Tenere, both of which were accounted for under the
purchase method. These acquisitions had an impact on certain balance sheet
accounts and the effects are described below.
Due From Reinsurers on Unpaid Losses and Advance Premiums
The acquisition of Tenere accounted for the $12.5 million increase, from $41.4
million at December 31, 1998 to $53.9 million at March 31, 1999.
Intangible Assets
Intangible assets increased $60.0 million, from $16.6 million at December 31,
1998 to $76.6 million at March 31, 1999. The increase is primarily due to the
increase in goodwill in connection with the acquisition of AFP, which added
$53.8 million, and the acquisition of Tenere, which added $4.0 million.
Loss and Loss Adjustment Expenses Liability
The liability for loss and loss adjustment expenses increased $36.4 million,
from $242.4 million at December 31, 1998 to $278.8 million at March 31, 1999.
The increase is primarily due to the acquisition of Tenere and the inclusion of
its reserves.
Short Term Debt
Short term debt increased $31.0 million, from $27.2 million at December 31, 1998
to $58.2 million at March 31, 1999 and was primarily due to additional
borrowings from the credit facility to complete the acquisition of AFP.
Additional Paid-In Capital
Additional paid-in capital increased $12.5 million, from $34.3 million at
December 31, 1998 to $46.8 million at March 31, 1999. This increase was
primarily due to shares issued in connection with the purchase of AFP.
15
<PAGE> 16
Results of Operations - Three Months Ended March 31, 1999 Compared to Three
Months Ended March 31, 1998.
Premiums
Direct premiums written and assumed increased $7.6 million, or 25%, from $29.9
million for the three months ended March 31, 1998 to $37.5 million for the three
months ended March 31, 1999. Net premiums earned increased $10.2 million, or
57%, from $17.9 million for the three months ended March 31, 1998 to $28.1
million for the three months ended March 31, 1999. The increase in premiums was
primarily due to an increase of $2.0 million in premiums written in Texas and
additional health premiums written of approximately $2.5 million. The health
premium was primarily generated by a program set up for the members of the
Florida Dental Association. In addition, the acquisition of APAC on July 1, 1998
added $2.9 million in direct premiums written and $1.2 million in net premiums
earned in the first quarter of 1999. The Company, which began assuming MPL
premium in 1998, also assumed MPL premium of $5.5 million in 1999 and earned
$7.2 million on its assumed premium in the first quarter of 1999.
Net Investment Income
Net investment income increased $0.2 million, or 5%, from $4.3 million for the
three months ended March 31, 1998 to $4.5 million for the three months ended
March 31, 1999. The increase was due to the inclusion of APAC, which was
acquired July 1, 1998. There was no significant change in the yield or duration
in the Company's fixed-income portfolio in the first quarter of 1999.
Claims Administration and Management Fees and Commission Income
Claims administration and management fees and commission income combined
increased $4.1 million, from $2.8 million for the three months ended March 31,
1998 to $7.0 million for the three months ended March 31, 1999. This increase
was attributable to the purchase of AFP on January 6, 1999, which added $4.0
million in management fees and commissions.
Net Losses and Loss Adjustment Expenses (LAE)
Net losses and LAE increased $4.1 million, or 28%, from $14.5 million for the
three months ended March 31, 1998 to $18.6 million for the three months ended
March 31, 1999, reflecting primarily an increase in insured exposures. The loss
and LAE ratios were 81.3% for the three months ended March 31, 1998 and 67.6%
for the three months ended March 31, 1999. The lower loss ratio in 1999 reflects
a change in the mix of business, assumed reinsurance premium and a decline in
the Company's frequency of reported claims, which permitted the Company to
record reserves in the current year at a loss ratio that was lower than the loss
ratio in the prior year. The liability for losses and LAE represents
management's best estimates of the ultimate cost of all losses incurred but
unpaid and considers prior loss experience, loss trends, the Company's loss
retention levels and changes in frequency and severity of claims. The estimated
liability is continually reviewed and any adjustments that become necessary are
included in current operations.
16
<PAGE> 17
Other Underwriting Expenses
Other underwriting expenses increased $2.2 million, from $1.8 million, for the
three months ended March 31, 1998 to $4.0 million for the three months ended
March 31, 1999. This increase was primarily attributable to an increase in
acquisition expenses ($0.7 million), general and administrative expenses ($0.8
million) and the inclusion of APAC and Tenere, which, combined, added $0.6
million. In addition, the health insurance products have a higher expense factor
than the Company's core MPL products.
Claims Administration Expenses
Claims administration expenses increased $3.6 million, or 157%, from $2.3
million for the three months ended March 31, 1998 to $5.9 million for the three
months ended March 31, 1999. This increase was primarily attributable to the
purchase of AFP, which added $3.4 million in 1999.
Other Expenses
Other expenses increased $0.9 million, from $0.2 million for the three months
ended March 31, 1998 to $1.1 million for the three months ended March 31, 1999.
This increase was primarily attributable to amortization expense on intangible
assets, recorded in connection with the purchases of APAC and AFP.
Net Income
For the reasons stated above, net income increased $2.4 million, or 50%, from
$4.8 million for the three months ended March 31, 1998 to $7.2 million for the
three months March 31, 1999. Diluted earnings increased $0.20 per share, or 40%,
from $0.50 per share for the three months ended March 31, 1998 to $0.70 per
share for the three months ended March 31, 1999.
Liquidity and Capital Resources
The payment of losses, LAE, and operating expenses in the ordinary course of
business is the principal need for the Company's liquid funds. Cash used to pay
these items has been provided by operating activities. Operating cash flows for
the three months ended March 31, 1999 were a negative $51,385 due to the timing
of cash receipts for premium assumed. On April 1, 1999, approximately $6.0
million in cash was received by the Company for reinsurance premium assumed.
Management believes these sources will be sufficient to meet the Company's cash
needs for operating purposes for at least the next twelve months. However, a
number of factors could cause increases in the dollar amount of losses and LAE
paid and may, therefore, adversely affect future reserve development and cash
flow needs. Management believes these factors include, among others, inflation,
changes in medical procedures, increasing influence of managed care and adverse
legislative changes.
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<PAGE> 18
The Company maintains a $75 million revolving credit facility with five banks to
meet certain non-operating cash needs as they may arise. The credit facility
terminates January 4, 2002. The Company is not required to maintain compensating
balances in connection with this credit facility but is charged a fee on the
unused portion, which ranges from 20 to 30 basis points. As of March 31, 1999,
the Company had borrowed $58,200,000 against the credit facility for
non-operating purposes.
Dividends payable by the Company's insurance subsidiaries are subject to certain
statutory limitations imposed by the laws in the states in which they operate.
In 1999, insurance subsidiaries are permitted, within insurance regulatory
guidelines, to pay dividends to the Company of approximately $18,300,000 without
regulatory approval.
On January 21, 1999 the Company filed a Form 8-K with respect to the acquisition
of Administrators For the Professions, Inc. In Item 7 of that Form 8-K, the
Company stated that financial information would be filed by amendment no later
than March 23, 1999. The Company subsequently determined that such financial
information was not required to be filed. Consequently, no amendment to such
Form 8-K was filed.
Accounting Pronouncements
No accounting pronouncements were issued or effective during the quarter ending
March 31, 1999 that would affect the Company.
Guaranty Fund Assessments
The Company is subject to assessment by the Florida Insurance Guaranty
Association, Inc. (FIGA) as well as similar associations in other states where
it is licensed, for the provision of funds necessary for the settlement of
covered claims under certain policies of insolvent insurers. In addition to the
standard FIGA assessments, the Florida Legislature may levy special assessments
to settle claims caused by certain catastrophic losses. The Company would be
assessed on a basis of premium written. No provision for special assessments was
made in the 1998 financial statements. However, damages caused by future
catastrophes, such as hurricanes, could subject the Company to additional
assessments.
Item 7A. Disclosure About Market Risk
The following discussion about the Company's risk-management activities
includes "forward-looking statements" that involve various risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements.
Market risk is the risk of loss arising from adverse changes in market rates and
conditions, such as interest rates, foreign currency exchange rates, and other
relevant market rate or price changes. Market risk is directly influenced by the
volatility and liquidity in the markets in which the related underlying assets
are traded. The following is a discussion of the Company's primary market risk
exposures and how those exposures are currently managed as of March 31, 1999.
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<PAGE> 19
The Company's market risk sensitive instruments are entered into for purposes
other than trading.
The fair value of the Company's debt and equity investment portfolio as of March
31, 1999 was $335,162. Approximately 97% of the portfolio was invested in fixed
maturity securities. The primary market risk to the investment portfolio is
interest rate risk associated with investments in fixed maturity securities. The
Company's exposure to equity risk is not significant.
The Company does not believe it has any foreign currency exposure. The Company
does not conduct any operations outside of the United States nor does the
Company own any non-U.S. dollar denominated securities.
Generally, the Company does not invest in derivatives and does not currently use
any hedging strategies in its investment portfolio. However, the Company has
invested in one interest rate swap contract to fix the interest rate in
connection with its revolving credit facility. As of March 31, 1999, the
Company's investments in Collateral Mortgage Obligations and Asset Backed
Securities represented approximately one percent of its investment portfolio.
The Company's investment portfolio is predominately fixed-income with
approximately 56% allocated to the municipal sector. The balance is diversified
through investments in Treasuries, agencies, corporates and mortgage-backed
securities. The three market risks that can most directly affect the investment
portfolio are changes in US interest rates, credit risks and legislative changes
impacting the tax-exempt status of municipal securities.
Adverse impacts to the Company resulting from changes in interest rates is
primarily controlled through limiting the duration, or average maturity, of the
overall portfolio. The Company manages the duration of its portfolio relative to
the duration of the anticipated liabilities of the Company. Credit risks are
controlled through investing in securities with above average credit ratings.
Approximately 70% of the portfolio is AAA, 14% is AA, 4% is A and 10% is BBB
rated. From time to time discussion arises in the United States Congress
relative to changing or modifying the tax=exempt status of municipal securities.
While the Company is diligent in its efforts to stay current on legislative acts
that could adversely impact the tax exempt status of municipal securities, and
while it is uncertain as to whether these changes would ultimately affect
valuation of municipal securities currently held in the portfolio, at present
there are no hedging or other strategies being specifically used to minimize
this risk. If interest rates were to rise 100 basis points, the fair value of
the Company's fixed maturity securities would decrease approximately
$15,940,000.
There have been no significant changes to the Company's exposure to financial
market risks during the year nor does the Company anticipate any significant
changes in future reporting periods.
Year 2000
The Year 2000 poses significant issues for organizations across the country and
requires consideration of converting or replacing millions of lines of computer
code. The Year 2000 ("Y2K") issue exists due to program developers creating
databases and programs to store and process a year as a two-digit field.
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<PAGE> 20
The Company's Information Systems ("IS") management staff has performed a
thorough review of the Company's operations and the operations of each of its
subsidiaries. These reviews considered the readiness of software systems written
internally and those provided by third parties to process data and perform date
calculations correctly using dates beginning January 1, 2000 and beyond.
Hardware, including servers, PC workstations, network routers, and
communications equipment were reviewed to determine that firmware and operating
system software were Y2K compliant.
An action plan was created to resolve all known Y2K issues by July 1, 1999. The
Company fully expects its mission critical software and hardware systems to be
fully functional on January 1, 2000 and beyond. Third parties who provide
software and/or hardware to the Company have been requested to provide
statements of Y2K compliance. Any problems that may occur regarding Y2K are
expected to be minor in nature and not have an impact on the Company's ability
to provide services and products to customers. With respect to contingency plans
for mission critical systems, the Company believes that there are viable
alternatives if these systems are non-compliant. However, the Company has a
targeted completion of mission critical systems by June 30, 1999. The Company
will continue to reassess the need for formal contingency plans, based on
progress of Year 2000 efforts by the Company and third parties.
A reasonably possible worst case scenario involving Y2K issues would be if one
or more of the Company's policyholder systems was found to be non=compliant. In
such event, the Company could experience an interruption in services, although
no loss of current data is anticipated. In addition, if a third party system is
not Y2K compliant, the Company could experience an interruption in services.
Should the worst case scenario occur, it could, depending on its duration, have
a material impact on the Company's results of operations and financial position.
The cost to convert the Company to Y2K compliance is not expected to exceed
$150,000. The Company estimates that it has expended $111,000 through March 31,
1999 on Y2K compliance. Regarding future acquisitions, the Company, as a part of
its due diligence, will determine Y2K compliance and its impact on the dynamics
of the acquisition.
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<PAGE> 21
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities
On January 6, 1999, the Company acquired all of the outstanding capital
stock of AFP for aggregate consideration consisting of $44,000,000 in cash
and 214,286 shares of the Company's common stock, par value $.10 per
share. Such shares of the Company's common stock were issued to the three
principal shareholders of AFP. The issuance of such shares was exempt from
registration under Section 4(2) of the Securities Act of 1933 as they were
issued to the three principal shareholders of AFP in a privately
negotiated transaction not involving any public offering.
On January 6, 1999, the Company acquired a 70% equity interest in
Professional Medical Administrators, LLC ("PMA") for aggregate
consideration consisting of $700,000 in cash and 57,785 shares of the
Company's common stock, par value $.10 per share. Such shares of the
Company's common stock were issued to the seller of the 70% equity
interest in PMA. The issuance of such shares was exempt from registration
under Section 4(2) of the Securities Act of 1933 as they were issued to
one individual in a privately negotiated transaction not involving any
public offering.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 10.1 - Form of Employment Agreements dated January 1, 1999
between FPIC Insurance Group, Inc. and Robert B. Finch, John R.
Byers, Donald J. Sabia and Charles W. Emanuel.
Exhibit 10.2 - Extension of Employment Agreements dated November 7,
1998 between FPIC Insurance Group, Inc. and William R. Russell and
Steven R. Smith.
Exhibit 10.3 - Form of Employment Agreement dated January 1, 1999
between Administrators For The Professions, Inc. and Anthony Bonomo.
Exhibit 10.4 - Form of Severance Agreement dated January 1, 1999
between FPIC Insurance Group, Inc. and John R. Byers.
Exhibit 10.5 - Supplemental Executive Retirement Plan, amended and
restated, dated January 1, 1999 and originally filed on November 14,
1996.
Exhibit 27 - Financial Data Schedule (for SEC use only).
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<PAGE> 22
b. Reports on Form 8-K
On January 21, 1999 the Company filed a Form 8-K with respect to the
acquisition of Administrators For the Professions, Inc. In Item 7 of
that Form 8-K, the Company stated that financial information would be
filed by amendment no later than March 23, 1999. The Company
subsequently determined that such financial information was not
required to be filed. Consequently, no amendment to such Form 8-K was
filed.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FPIC Insurance Group, Inc.
/s/ Robert B. Finch
-----------------------------------------
May 13, 1999 Robert B. Finch, Executive Vice President
and Chief Financial Officer (a duly
authorized officer and the principal
financial officer of the registrant)
22
<PAGE> 1
EXHIBIT 10.1
FPIC INSURANCE GROUP, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 1st day of
January, 1999 by and between FPIC Insurance Group, Inc., a Florida corporation,
with its principal place of business at 1000 Riverside Avenue, Jacksonville,
Florida 32204 (hereinafter referred to as "Employer"), and Robert B. Finch, an
individual presently residing at 10110 Bishop Lake Road, West, Jacksonville,
Florida 33356 (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, Employer desires to retain the services of Employee as the
Executive Vice President/Treasurer of Employer, and Employee desires to perform
such services for Employer on the terms and conditions set forth herein;
WHEREAS, Employee represents and Employer acknowledges that Employee is
fully qualified, without the benefit of any further training or experience, to
perform the responsibilities and duties, with commensurate authorities, of the
position of Executive Vice President/Treasurer of Employer; and
WHEREAS, Employee agrees to devote Employee's full time and business
effort, attention and energies to the diligent performance of Employee's duties
hereunder;
NOW, THEREFORE, Employer and Employee, intending to be legally bound,
covenant and agree as follows:
1. Terms of Employment.
(1) Employee's employment hereunder shall be for a term of
three (3) years beginning January 1, 1999, which term
shall be extended for an additional year at the end of
each calendar year upon Employer's Board of Directors
(from time to time herein referred to as the "Board"), or
a committee thereof, giving notice to Employee prior to
the end of any calendar year that it wishes to extend this
Employment Agreement for an additional year.
(2) In the event Employer does not give notice to Employee
prior to the end of any calendar year that it wishes to
extend this Employment Agreement as specified in
subparagraph (a) above, Employee may voluntarily terminate
Employee's employment under this Employment Agreement by
giving at least ninety (90) days written notice to
Employer. Following the effective date of such voluntary
termination, Employee shall continue to receive Employee's
annual salary, payable as immediately prior to
termination, plus all benefits to which Employee is then
entitled for the balance of the term of this Employment
Agreement. It is provided, however, if Employee directly
or indirectly engages in or acts as an executive of or
consultant for any trade
<PAGE> 2
or occupation that is in competition with Employer, such
salary and benefits shall thereupon terminate.
(3) The duties of Employee shall be as determined by the Board
in accordance with this Employment Agreement and the
By-Laws of Employer in effect form time to time. Employee
may not be reassigned to an inferior position, given a
change in classification or reclassified, or transferred,
nor shall Employee's responsibilities, duties, authority
or title change during the term of this Employment
Agreement, except as provided in subparagraph 1(b) above.
Without limiting the generality of the foregoing, Employee
shall report to and advise the Board regarding the
management and operation of Employer's business. Employee
agrees to devote Employee's full time business efforts,
attention and energies to the diligent performance of
Employee's duties hereunder and will not, during the term
hereof, accept employment, full or part-time, from any
other person, firm, corporation, governmental agency or
other entity that, in the reasonable opinion of the Board,
would conflict with or detract from Employee's capable
performance of such duties, provided, however, Employee
may devote reasonable amounts of time to activities of a
public service, civic, or not-for-profit nature.
2. Compensation and Expenses. Employer shall pay, or provide, and
Employee shall accept as full consideration for the services to be rendered
hereunder, and as a reimbursement or provision for expenses incurred by
Employee the following:
(1) An annual salary of $350,000 payable in twenty-four (24)
equal payments during each year of this Employment
Agreement; provided, however, that effective January 1 of
each year beginning in 2000, Employee's annual
compensation shall be increased in accordance with the
provision for salary increases set forth in paragraph (b)
below. Employee's minimum total compensation, which in no
event may be reduced in whole or in part, shall be the
annual salary at the rate of compensation received by
Employee for any given period of time or at the time of
Employee's termination.
(2) Annual performance reviews will determine annual salary
increases to which Employee becomes entitled, effective
January 1, 2000, based upon Employer's then current
Compensation Program.
(3) Incentive compensation payable each year beginning in 1999
based on Employee's individual performance and the
performance of Employer for the prior year pursuant to
Employer's then current Executive Incentive Compensation
Program.
(4) Any additional compensation payable by resolution of the
Board for outstanding performance.
2
<PAGE> 3
(5) Such benefits as may be made available from time to time
to senior management employees of Employer, but at no
time, less than: (i) a personal company automobile
including all the costs of operating, maintaining and
licensing the automobile and (ii) initiation fees, dues,
assessments and other expenses of membership in
appropriate clubs or organizations of Employee's choice,
as reasonably approved by Employer's Board or an
appropriate committee thereof.
3. Expenses. Employer agrees to reimburse Employee for ordinary and
necessary expenses incurred by Employee in performing services for Employer
pursuant to the terms of this Employment Agreement, in accordance with
established corporate policies.
4. Termination. Unless the employment of Employee previously has
been terminated pursuant to subparagraph 1(b), this Employment Agreement may be
terminated in the manner set forth in subparagraphs (a) through (f) below.
(1) Voluntary Termination by Employee.
Employee may terminate this Employment Agreement at any
time by giving at least ninety (90) days written notice to
Employer, with no further obligation on Employer's part
after the effective date of such termination. It is agreed
that should Employee voluntarily terminate Employee's
employment prior to the end of the initial term of this
Employment Agreement, Employee shall forfeit all rights to
compensation and all benefits based upon compensation
occurring after the effective date of such termination.
(2) Voluntary Termination by Employer.
Employer may terminate this Employment Agreement at any
time for any reason sufficient to it, by act of its Board.
Such termination shall be immediately effective. Following
such voluntary termination, Employee shall continue to
receive Employee's annual salary, payable immediately
prior to termination, together with any benefits accrued
to the date of termination, plus all benefits to which
Employee is then entitled, for the balance of the then
current Employment Agreement, provided, however, if
Employee directly or indirectly engages in or acts as an
executive of or consultant for any trade or occupation
that is in competition with Employer, such salary and
benefits shall thereupon terminate.
3
<PAGE> 4
(3) Permanent Disability of Employee.
If Employee has been, for substantially all the normal
working days during three (3) consecutive months, unable
to perform Employee's responsibilities and duties and to
exercise Employee's authorities in a satisfactory manner
due to mental or physical disability, then Employee may be
deemed "permanently disabled," and Employee's employment
may be terminated at the election of the Board of
Employer. Any determination of permanent disability made
by Employer shall be final and conclusive. In the event
that Employer deems Employee "permanently disabled,"
Employee shall be entitled to receive the unpaid balance
of Employee's annual salary, together with other accrued
benefits to the date of the determination of being
permanently disabled, payable as immediately prior to
termination for the remaining term of this Employment
Agreement, less any amount received by Employee under any
Employer-provided long term disability coverage and/or
program; provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in
competition with Employer, such salary and benefits shall
thereupon terminate.
(4) Death of Employee.
This Employment Agreement shall terminate on the date of
Employee's death, and Employer shall pay, in a lump sum,
to the estate or personal representative of Employee the
unpaid balance of Employee's annual salary, together with
other accrued benefits, to the date of death.
(5) Termination for Cause.
Employer's Board may terminate this Agreement for cause,
but only after a written notice specifying the cause has
been submitted to Employee. Employee shall be granted a
reasonable opportunity to respond to the notice, in
writing, and in an appearance before the Board. A
determination by the Board to terminate this Agreement for
cause may be made at a meeting of the Board at which a
quorum is present and by a vote of at least a majority of
the entire then current membership of the Board. If
Employer terminates this Employment Agreement for cause
under this subparagraph, Employer shall not be obligated
to make any further payments under this Employment
Agreement other than amounts accrued at the time of such
termination. "Cause" for the purposes of this Agreement
consists of the following:
(1) Employee's commission of dishonest acts, fraud,
misappropriation, or embezzlement affecting Employer;
(2) Employee's commission of any felony under state or
federal law; or
4
<PAGE> 5
(3) the failure or refusal of Employee to comply with
any reasonable lawful policy, directive or instruction of
the Board, consistent with subparagraph l(c) hereof
(6) Constructive Discharge. Employee may terminate this
Employment Agreement in the event of Constructive
Discharge by providing written notice to Employer within
three months after the occurrence of such event,
specifying the event relied upon for a Constructive
Discharge. "Constructive Discharge" shall mean any (i)
material change by Employer of Employee's position,
functions, or duties to an inferior position, functions,
or duties from that in effect on the date of this
Agreement, (ii) assignment, reassignment, or relocation by
Employer of Employee without Employee's consent to another
place of employment more than 50 miles from Employee's
current place of employment, (iii) liquidation,
dissolution, consolidation or merger of Employer, or
transfer of all or substantially all of its assets, other
than a transaction or series of transactions in which the
resulting or surviving transferee entity has, in the
aggregate, a net worth at least equal to that of Employer
immediately before such transaction and expressly assumes
this Agreement and all obligations and undertakings of
Employer hereunder, or (iv) reduction in Employee's base
salary or target bonus opportunity (if greater than the
target bonus opportunity, the average of the annual
bonuses paid to Employee in the three calendar years prior
to the calendar year of the Constructive Discharge).
Following termination of Employee's employment in the
event of a Constructive Discharge, Employee shall continue
to receive Employee's annual salary, payable as
immediately prior to termination, plus all benefits to
which Employee is then entitled, for the balance of this
Agreement, provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in
competition with Employer, such salary and benefits shall
thereupon terminate. Employer and Employee, upon mutual
agreement, may waive any of the foregoing provisions that
would otherwise constitute a Constructive Discharge.
Within ten days of receiving such written notice from
Employee, Employer may cure the event that constitutes a
Constructive Discharge.
(7) Upon any termination of this Agreement, Employee shall
immediately turn over to Employer all of Employer's
property, both tangible and intangible. To the extent that
such Employer's property shall constitute a benefit to
Employee under this Agreement, Employee shall receive from
Employer the value of that benefit for the remaining term
of this Agreement.
(8) Upon any termination of this Agreement, regardless of the
reason for termination, it is agreed:
(1) Inducing Employees of Employer to Leave. Any
attempt on the part of Employee to induce others to leave
Employer's employ, or any efforts by
5
<PAGE> 6
Employee to interfere with Employer's relationships with
other employees, would be harmful and damaging to
Employer. Employee expressly agrees that during the term
of this employment and for a period of two (2) years
thereafter, Employee will not, in any way, directly or
indirectly: (A) induce or attempt to induce any employee
to terminate his or her employment with Employer; (B)
interfere with or disrupt Employer's relationship with
other employees; or (C) solicit, entice, take away or
employ any person employed by Employer.
(2) Confidentiality. Employee agrees not to, without
prior written consent of Employer, divulge to others, or
use, for Employee's own benefit or for the benefit of
others, any intellectual property, trade secrets or
confidential or proprietary information or data of
Employer, including without limitation, the contents of
advertising, customer lists, information regarding
customers or their customers, programming methods,
business plans, strategies, financial statements,
copyrights, correspondence or other records of Employer,
except to the extent to which such information is required
by law to be disclosed to others.
(3) Remedy. Employee acknowledges that Employee will be
conversant with Employer's affairs, operations, trade
secrets, customers, customers' customers and other
proprietary information data; that Employee's compliance
with the provisions of this subparagraph is necessary to
protect the goodwill and other proprietary rights of
Employer; and that Employee's failure to comply with the
provisions of this subparagraph will result in irreparable
and continuing damage to Employer for which there will be
no adequate remedy at law. If Employee shall fail to
comply with the provision of this subparagraph, Employer
(and its respective successors and assigns) shall be
entitled to injunctive relief and to such other and
further relief as may be proper and necessary to ensure
such compliance.
(4) Mitigation. In no event shall Employee be obligated
to seek other employment or to take other action by way of
mitigation of the amounts payable to Employee under any of
the provisions of this Agreement.
5. Employment Security.
(1) If Employer suffers from any natural or manmade disaster,
work stoppage, civil disobedience, act of war, or any
other emergency condition beyond Employee's control, the
term of this Employment Agreement shall remain in full
force and effect as if such event had not taken place.
(2) In the event of the merger, consolidation or acquisition
of Employer with or by any other corporation, corporations
or other business entities, the sale of Employer or a
major portion of its assets, or of its business or good
will or any other corporate reorganization involving
Employer, this Employment
6
<PAGE> 7
Agreement shall be assigned and transferred to the
successor in interest as an asset of Employer and the
assignee shall assume Employer's obligations hereunder,
and Employee agrees to continue to perform Employee's
duties and obligations hereunder. Failure to assign this
Employment Agreement prior to any of the events set forth
in this subparagraph 5(b) will obligate Employer to
fulfill the terms and conditions hereof prior to
consummating the applicable event.
6. Arbitration. In the case of any dispute or disagreement arising
out of or connected with this Agreement, the parties hereby agree to submit
such disputes or disagreements to the American Arbitration Association within
ninety (90) days of such dispute or disagreement for resolution by a panel of
three arbitrators designated by the American Arbitration Association. The panel
of arbitrators shall be instructed to render their decision within one hundred
twenty (120) days of the initial submission of the dispute or disagreement to
them. Any decision or award by such arbitration panel shall be final and
binding, and except in a case of gross fraud or misconduct by one or more of
the arbitrators, the decision or award rendered with respect to such dispute or
disagreement shall not be appealable.
7. Miscellaneous.
(1) All notices, requests, demands, or other communications
hereunder shall be in writing, and shall be deemed to be
duly given when delivered or sent by registered or
certified mail, postage prepaid, to Employee's last home
address as provided to and reflected on the records of
Employer and to Employer when personally delivered to
Employer's Secretary or when sent by registered or
certified mail, postage prepaid, to such officer.
(2) Employer hereby agrees that no request, demand or
requirement shall be made to or of Employee that would
violate any federal or state law or regulations.
(3) Should any valid federal or state law or final
determination of any administrative agency or court of
competent jurisdiction affect any provision of this
Employment Agreement, the provision so affected shall be
automatically conformed to the law or determination;
otherwise, this Employment Agreement shall continue in
full force and effect.
(4) This Employment Agreement is made and entered into in the
State of Florida and its validity and interpretation, and
the performance by the parties hereto of their respective
duties and obligations hereunder, shall be governed by the
laws of the State of Florida and of the United States of
America.
(5) This Employment Agreement constitutes the entire agreement
between the parties respecting the employment of Employee,
there being no representations, warranties or commitments
except as set forth herein.
7
<PAGE> 8
(6) This Employment Agreement may be amended only by an
instrument in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and date first set forth above.
<TABLE>
<S> <C>
Employee: FPIC Insurance Group, Inc.
By
- ---------------------------------- ----------------------------
Robert B. Finch William R. Russell
Chief Executive Officer
------------------------------
Attest Attest
</TABLE>
8
<PAGE> 9
FPIC INSURANCE GROUP, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 1st day of
January, 1999 by and between FPIC Insurance Group, Inc., a Florida corporation,
with its principal place of business at 1000 Riverside Avenue, Jacksonville,
Florida 32204 (hereinafter referred to as "Employer"), and John R. Byers, an
individual presently residing at 2795 Via Baya Lane, Jacksonville, Florida
33323 (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, Employer desires to retain the services of Employee as the
Executive Vice President - General Counsel of Employer, and Employee desires to
perform such services for Employer on the terms and conditions set forth
herein;
WHEREAS, Employee represents and Employer acknowledges that Employee is
fully qualified, without the benefit of any further training or experience, to
perform the responsibilities and duties, with commensurate authorities, of the
position of Executive Vice President - General Counsel of Employer; and
WHEREAS, Employee agrees to devote Employee's full time and business
effort, attention and energies to the diligent performance of Employee's duties
hereunder;
NOW, THEREFORE, Employer and Employee, intending to be legally bound,
covenant and agree as follows:
1. Terms of Employment.
(1) Employee's employment hereunder shall be for a term of three
(3) years beginning January 1, 1999, which term shall be
extended for an additional year at the end of each calendar
year upon Employer's Board of Directors (from time to time
herein referred to as the "Board"), or a committee thereof,
giving notice to Employee prior to the end of any calendar
year that it wishes to extend this Employment Agreement for
an additional year.
<PAGE> 10
(2) In the event Employer does not give notice to Employee prior
to the end of any calendar year that it wishes to extend this
Employment Agreement as specified in subparagraph (a) above,
Employee may voluntarily terminate Employee's employment
under this Employment Agreement by giving at least ninety
(90) days written notice to Employer. Following the effective
date of such voluntary termination, Employee shall continue
to receive Employee's annual salary, payable as immediately
prior to termination, plus all benefits to which Employee is
then entitled for the balance of the term of this Employment
Agreement. It is provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in competition
with Employer, such salary and benefits shall thereupon
terminate.
(3) The duties of Employee shall be as determined by the Board in
accordance with this Employment Agreement and the By-Laws of
Employer in effect form time to time. Employee may not be
reassigned to an inferior position, given a change in
classification or reclassified, or transferred, nor shall
Employee's responsibilities, duties, authority or title
change during the term of this Employment Agreement, except
as provided in subparagraph 1(b) above. Without limiting the
generality of the foregoing, Employee shall report to and
advise the Board regarding the management and operation of
Employer's business. Employee agrees to devote Employee's
full time business efforts, attention and energies to the
diligent performance of Employee's duties hereunder and will
not, during the term hereof, accept employment, full or
part-time, from any other person, firm, corporation,
governmental agency or other entity that, in the reasonable
opinion of the Board, would conflict with or detract from
Employee's capable performance of such duties, provided,
however, Employee may devote reasonable amounts of time to
activities of a public service, civic, or not-for-profit
nature.
2. Compensation and Expenses. Employer shall pay, or provide, and
Employee shall accept as full consideration for the services to be rendered
hereunder, and as a reimbursement or provision for expenses incurred by
Employee the following:
(1) An annual salary of $350,000 payable in twenty-four (24)
equal payments during each year of this Employment Agreement;
provided, however, that effective January 1 of each year
beginning in 2000, Employee's annual compensation shall be
increased in accordance with the provision for salary
increases set forth in paragraph (b) below. Employee's
minimum total compensation, which in no event may be reduced
in whole or in part, shall be the annual salary at the rate
of compensation received by Employee for any given period of
time or at the time of Employee's termination.
(2) Annual performance reviews will determine annual salary
increases to which Employee becomes entitled, effective
January 1, 2000, based upon Employer's then current
Compensation Program.
2
<PAGE> 11
(3) Incentive compensation payable each year beginning in 1999
based on Employee's individual performance and the
performance of Employer for the prior year pursuant to
Employer's then current Executive Incentive Compensation
Program.
(4) Any additional compensation payable by resolution of the
Board for outstanding performance.
(5) Such benefits as may be made available from time to time to
senior management employees of Employer, but at no time, less
than: (i) a personal company automobile including all the
costs of operating, maintaining and licensing the automobile
and (ii) initiation fees, dues, assessments and other
expenses of membership in appropriate clubs or organizations
of Employee's choice, as reasonably approved by Employer's
Board or an appropriate committee thereof.
3. Expenses. Employer agrees to reimburse Employee for ordinary and
necessary expenses incurred by Employee in performing services for Employer
pursuant to the terms of this Employment Agreement, in accordance with
established corporate policies.
4. Termination. Unless the employment of Employee previously has been
terminated pursuant to subparagraph 1(b), this Employment Agreement may be
terminated in the manner set forth in subparagraphs (a) through (f) below.
(1) Voluntary Termination by Employee.
Employee may terminate this Employment Agreement at any time
by giving at least ninety (90) days written notice to
Employer, with no further obligation on Employer's part after
the effective date of such termination. It is agreed that
should Employee voluntarily terminate Employee's employment
prior to the end of the initial term of this Employment
Agreement, Employee shall forfeit all rights to compensation
and all benefits based upon compensation occurring after the
effective date of such termination.
(2) Voluntary Termination by Employer.
Employer may terminate this Employment Agreement at any time
for any reason sufficient to it, by act of its Board. Such
termination shall be immediately effective. Following such
voluntary termination, Employee shall continue to receive
Employee's annual salary, payable immediately prior to
termination, together with any benefits accrued to the date
of termination, plus all benefits to which Employee is then
entitled, for the balance of the then current Employment
Agreement, provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for
3
<PAGE> 12
any trade or occupation that is in competition with Employer,
such salary and benefits shall thereupon terminate.
(3) Permanent Disability of Employee.
If Employee has been, for substantially all the normal
working days during three (3) consecutive months, unable to
perform Employee's responsibilities and duties and to
exercise Employee's authorities in a satisfactory manner due
to mental or physical disability, then Employee may be deemed
"permanently disabled," and Employee's employment may be
terminated at the election of the Board of Employer. Any
determination of permanent disability made by Employer shall
be final and conclusive. In the event that Employer deems
Employee "permanently disabled," Employee shall be entitled
to receive the unpaid balance of Employee's annual salary,
together with other accrued benefits to the date of the
determination of being permanently disabled, payable as
immediately prior to termination for the remaining term of
this Employment Agreement, less any amount received by
Employee under any Employer-provided long term disability
coverage and/or program; provided, however, if Employee
directly or indirectly engages in or acts as an executive of
or consultant for any trade or occupation that is in
competition with Employer, such salary and benefits shall
thereupon terminate.
(4) Death of Employee.
This Employment Agreement shall terminate on the date of
Employee's death, and Employer shall pay, in a lump sum, to
the estate or personal representative of Employee the unpaid
balance of Employee's annual salary, together with other
accrued benefits, to the date of death.
(5) Termination for Cause.
Employer's Board may terminate this Agreement for cause, but
only after a written notice specifying the cause has been
submitted to Employee. Employee shall be granted a reasonable
opportunity to respond to the notice, in writing, and in an
appearance before the Board. A determination by the Board to
terminate this Agreement for cause may be made at a meeting
of the Board at which a quorum is present and by a vote of at
least a majority of the entire then current membership of the
Board. If Employer terminates this Employment Agreement for
cause under this subparagraph, Employer shall not be
obligated to make any further payments under this Employment
Agreement other than amounts accrued at the time of such
termination. "Cause" for the purposes of this Agreement
consists of the following:
(1) Employee's commission of dishonest acts, fraud,
misappropriation, or embezzlement affecting Employer;
4
<PAGE> 13
(2) Employee's commission of any felony under state or
federal law; or
(3) the failure or refusal of Employee to comply with any
reasonable lawful policy, directive or instruction of the
Board, consistent with subparagraph l(c) hereof
(6) Constructive Discharge. Employee may terminate this
Employment Agreement in the event of Constructive Discharge
by providing written notice to Employer within three months
after the occurrence of such event, specifying the event
relied upon for a Constructive Discharge. "Constructive
Discharge" shall mean any (i) material change by Employer of
Employee's position, functions, or duties to an inferior
position, functions, or duties from that in effect on the
date of this Agreement, (ii) assignment, reassignment, or
relocation by Employer of Employee without Employee's consent
to another place of employment more than 50 miles from
Employee's current place of employment, (iii) liquidation,
dissolution, consolidation or merger of Employer, or transfer
of all or substantially all of its assets, other than a
transaction or series of transactions in which the resulting
or surviving transferee entity has, in the aggregate, a net
worth at least equal to that of Employer immediately before
such transaction and expressly assumes this Agreement and all
obligations and undertakings of Employer hereunder, or (iv)
reduction in Employee's base salary or target bonus
opportunity (if greater than the target bonus opportunity,
the average of the annual bonuses paid to Employee in the
three calendar years prior to the calendar year of the
Constructive Discharge). Following termination of Employee's
employment in the event of a Constructive Discharge, Employee
shall continue to receive Employee's annual salary, payable
as immediately prior to termination, plus all benefits to
which Employee is then entitled, for the balance of this
Agreement, provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in competition
with Employer, such salary and benefits shall thereupon
terminate. Employer and Employee, upon mutual agreement, may
waive any of the foregoing provisions that would otherwise
constitute a Constructive Discharge. Within ten days of
receiving such written notice from Employee, Employer may
cure the event that constitutes a Constructive Discharge.
(7) Upon any termination of this Agreement, Employee shall
immediately turn over to Employer all of Employer's property,
both tangible and intangible. To the extent that such
Employer's property shall constitute a benefit to Employee
under this Agreement, Employee shall receive from Employer
the value of that benefit for the remaining term of this
Agreement.
(8) Upon any termination of this Agreement, regardless of the
reason for termination, it is agreed:
5
<PAGE> 14
(1) Inducing Employees of Employer to Leave. Any attempt
on the part of Employee to induce others to leave Employer's
employ, or any efforts by Employee to interfere with
Employer's relationships with other employees, would be
harmful and damaging to Employer. Employee expressly agrees
that during the term of this employment and for a period of
two (2) years thereafter, Employee will not, in any way,
directly or indirectly: (A) induce or attempt to induce any
employee to terminate his or her employment with Employer;
(B) interfere with or disrupt Employer's relationship with
other employees; or (C) solicit, entice, take away or employ
any person employed by Employer.
(2) Confidentiality. Employee agrees not to, without prior
written consent of Employer, divulge to others, or use, for
Employee's own benefit or for the benefit of others, any
intellectual property, trade secrets or confidential or
proprietary information or data of Employer, including
without limitation, the contents of advertising, customer
lists, information regarding customers or their customers,
programming methods, business plans, strategies, financial
statements, copyrights, correspondence or other records of
Employer, except to the extent to which such information is
required by law to be disclosed to others.
(3) Remedy. Employee acknowledges that Employee will be
conversant with Employer's affairs, operations, trade
secrets, customers, customers' customers and other
proprietary information data; that Employee's compliance with
the provisions of this subparagraph is necessary to protect
the goodwill and other proprietary rights of Employer; and
that Employee's failure to comply with the provisions of this
subparagraph will result in irreparable and continuing damage
to Employer for which there will be no adequate remedy at
law. If Employee shall fail to comply with the provision of
this subparagraph, Employer (and its respective successors
and assigns) shall be entitled to injunctive relief and to
such other and further relief as may be proper and necessary
to ensure such compliance.
(4) Mitigation. In no event shall Employee be obligated to
seek other employment or to take other action by way of
mitigation of the amounts payable to Employee under any of
the provisions of this Agreement.
5. Employment Security.
(1) If Employer suffers from any natural or manmade disaster,
work stoppage, civil disobedience, act of war, or any other
emergency condition beyond Employee's control, the term of
this Employment Agreement shall remain in full force and
effect as if such event had not taken place.
6
<PAGE> 15
(2) In the event of the merger, consolidation or acquisition of
Employer with or by any other corporation, corporations or
other business entities, the sale of Employer or a major
portion of its assets, or of its business or good will or any
other corporate reorganization involving Employer, this
Employment Agreement shall be assigned and transferred to the
successor in interest as an asset of Employer and the
assignee shall assume Employer's obligations hereunder, and
Employee agrees to continue to perform Employee's duties and
obligations hereunder. Failure to assign this Employment
Agreement prior to any of the events set forth in this
subparagraph 5(b) will obligate Employer to fulfill the terms
and conditions hereof prior to consummating the applicable
event.
6. Arbitration. In the case of any dispute or disagreement arising out
of or connected with this Agreement, the parties hereby agree to submit such
disputes or disagreements to the American Arbitration Association within ninety
(90) days of such dispute or disagreement for resolution by a panel of three
arbitrators designated by the American Arbitration Association. The panel of
arbitrators shall be instructed to render their decision within one hundred
twenty (120) days of the initial submission of the dispute or disagreement to
them. Any decision or award by such arbitration panel shall be final and
binding, and except in a case of gross fraud or misconduct by one or more of
the arbitrators, the decision or award rendered with respect to such dispute or
disagreement shall not be appealable.
7. Miscellaneous.
(1) All notices, requests, demands, or other communications
hereunder shall be in writing, and shall be deemed to be duly
given when delivered or sent by registered or certified mail,
postage prepaid, to Employee's last home address as provided
to and reflected on the records of Employer and to Employer
when personally delivered to Employer's Secretary or when
sent by registered or certified mail, postage prepaid, to
such officer.
(2) Employer hereby agrees that no request, demand or requirement
shall be made to or of Employee that would violate any
federal or state law or regulations.
(3) Should any valid federal or state law or final determination
of any administrative agency or court of competent
jurisdiction affect any provision of this Employment
Agreement, the provision so affected shall be automatically
conformed to the law or determination; otherwise, this
Employment Agreement shall continue in full force and effect.
(4) This Employment Agreement is made and entered into in the
State of Florida and its validity and interpretation, and the
performance by the parties hereto of their respective duties
and obligations hereunder, shall be governed by the laws of
the State of Florida and of the United States of America.
7
<PAGE> 16
(5) This Employment Agreement and any agreements executed
contemporaneously herewith constitute the entire agreement
between the parties respecting the employment of Employee,
there being no representations, warranties or commitments
except as set forth herein or therein.
(6) This Employment Agreement may be amended only by an
instrument in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and date first set forth above.
<TABLE>
<S> <C>
Employee: FPIC Insurance Group, Inc.
By
- ---------------------------------- ----------------------------
John R. Byers William R. Russell
Chief Executive Officer
------------------------------
Attest Attest
</TABLE>
8
<PAGE> 17
FPIC INSURANCE GROUP, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 1st day of
January, 1999 by and between FPIC Insurance Group, Inc., a Florida corporation,
with its principal place of business at 1000 Riverside Avenue, Jacksonville,
Florida 32204 (hereinafter referred to as "Employer"), and Donald J. Sabia an
individual presently residing at 215 Myrtle Street, Neptune Beach, Florida
32266 (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, Employer desires to retain the services of Employee as the Vice
President/Controller of Employer, and Employee desires to perform such services
for Employer on the terms and conditions set forth herein;
WHEREAS, Employee represents and Employer acknowledges that Employee is
fully qualified, without the benefit of any further training or experience, to
perform the responsibilities and duties, with commensurate authorities, of the
position of Vice President/Controller of Employer; and
WHEREAS, Employee agrees to devote Employee's full time and business
effort, attention and energies to the diligent performance of Employee's duties
hereunder;
NOW, THEREFORE, Employer and Employee, intending to be legally bound,
covenant and agree as follows:
1. Terms of Employment.
(1) Employee's employment hereunder shall be for a term of two
(2) years beginning January 1, 1999, which term shall be
extended for an additional year at the end of each calendar
year upon Employer's Board of Directors (from time to time
herein referred to as the "Board"), or a committee thereof,
giving notice to Employee prior to the end of any calendar
year that it wishes to extend this Employment Agreement for
an additional year.
(2) In the event Employer does not give notice to Employee prior
to the end of any calendar year that it wishes to extend this
Employment Agreement as specified in subparagraph (a) above,
Employee may voluntarily terminate Employee's employment
under this Employment Agreement by giving at least ninety
(90) days written notice to Employer. Following the effective
date of such voluntary termination, Employee shall continue
to receive Employee's annual salary, payable as immediately
prior to termination, plus all benefits to which Employee is
then entitled for the balance of the term of this Employment
Agreement. It is provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade
<PAGE> 18
or occupation that is in competition with Employer, such
salary and benefits shall thereupon terminate.
(3) The duties of Employee shall be as determined by the Board in
accordance with this Employment Agreement and the By-Laws of
Employer in effect form time to time. Employee may not be
reassigned to an inferior position, given a change in
classification or reclassified, or transferred, nor shall
Employee's responsibilities, duties, authority or title
change during the term of this Employment Agreement, except
as provided in subparagraph 1(b) above. Without limiting the
generality of the foregoing, Employee shall report to and
advise the Board regarding the management and operation of
Employer's business. Employee agrees to devote Employee's
full time business efforts, attention and energies to the
diligent performance of Employee's duties hereunder and will
not, during the term hereof, accept employment, full or
part-time, from any other person, firm, corporation,
governmental agency or other entity that, in the reasonable
opinion of the Board, would conflict with or detract from
Employee's capable performance of such duties, provided,
however, Employee may devote reasonable amounts of time to
activities of a public service, civic, or not-for-profit
nature.
2. Compensation and Expenses. Employer shall pay, or provide, and
Employee shall accept as full consideration for the services to be rendered
hereunder, and as a reimbursement or provision for expenses incurred by
Employee the following:
(1) An annual salary of $100,000 payable in twenty-four (24)
equal payments during each year of this Employment Agreement;
provided, however, that effective January 1 of each year
beginning in 2000, Employee's annual compensation shall be
increased in accordance with the provision for salary
increases set forth in paragraph (b) below. Employee's
minimum total compensation, which in no event may be reduced
in whole or in part, shall be the annual salary at the rate
of compensation received by Employee for any given period of
time or at the time of Employee's termination.
(2) Annual performance reviews will determine annual salary
increases to which Employee becomes entitled, effective
January 1, 2000, based upon Employer's then current
Compensation Program.
(3) Incentive compensation payable each year beginning in 1999
based on Employee's individual performance and the
performance of Employer for the prior year pursuant to
Employer's then current Executive Incentive Compensation
Program.
(4) Any additional compensation payable by resolution of the
Board for outstanding performance.
2
<PAGE> 19
(5) Such benefits as may be made available from time to time to
management employees of Employer, as reasonably approved by
Employer's Board or an appropriate committee thereof.
3. Expenses. Employer agrees to reimburse Employee for ordinary and
necessary expenses incurred by Employee in performing services for Employer
pursuant to the terms of this Employment Agreement, in accordance with
established corporate policies.
4. Termination. Unless the employment of Employee previously has been
terminated pursuant to subparagraph 1(b), this Employment Agreement may be
terminated in the manner set forth in subparagraphs (a) through (f) below.
(1) Voluntary Termination by Employee.
Employee may terminate this Employment Agreement at any time
by giving at least ninety (90) days written notice to
Employer, with no further obligation on Employer's part after
the effective date of such termination. It is agreed that
should Employee voluntarily terminate Employee's employment
prior to the end of the initial term of this Employment
Agreement, Employee shall forfeit all rights to compensation
and all benefits based upon compensation occurring after the
effective date of such termination.
(2) Voluntary Termination by Employer.
Employer may terminate this Employment Agreement at any time
for any reason sufficient to it, by act of its Board. Such
termination shall be immediately effective. Following such
voluntary termination, Employee shall continue to receive
Employee's annual salary, payable immediately prior to
termination, together with any benefits accrued to the date
of termination, plus all benefits to which Employee is then
entitled, for the balance of the then current Employment
Agreement, provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in competition
with Employer, such salary and benefits shall thereupon
terminate.
(3) Permanent Disability of Employee.
3
<PAGE> 20
If Employee has been, for substantially all the normal
working days during three (3) consecutive months, unable to
perform Employee's responsibilities and duties and to
exercise Employee's authorities in a satisfactory manner due
to mental or physical disability, then Employee may be deemed
"permanently disabled," and Employee's employment may be
terminated at the election of the Board of Employer. Any
determination of permanent disability made by Employer shall
be final and conclusive. In the event that Employer deems
Employee "permanently disabled," Employee shall be entitled
to receive the unpaid balance of Employee's annual salary,
together with other accrued benefits to the date of the
determination of being permanently disabled, payable as
immediately prior to termination for the remaining term of
this Employment Agreement, less any amount received by
Employee under any Employer-provided long term disability
coverage and/or program; provided, however, if Employee
directly or indirectly engages in or acts as an executive of
or consultant for any trade or occupation that is in
competition with Employer, such salary and benefits shall
thereupon terminate.
(4) Death of Employee.
This Employment Agreement shall terminate on the date of
Employee's death, and Employer shall pay, in a lump sum, to
the estate or personal representative of Employee the unpaid
balance of Employee's annual salary, together with other
accrued benefits, to the date of death.
(5) Termination for Cause.
Employer's Board may terminate this Agreement for cause, but
only after a written notice specifying the cause has been
submitted to Employee. Employee shall be granted a reasonable
opportunity to respond to the notice, in writing, and in an
appearance before the Board. A determination by the Board to
terminate this Agreement for cause may be made at a meeting
of the Board at which a quorum is present and by a vote of at
least a majority of the entire then current membership of the
Board. If Employer terminates this Employment Agreement for
cause under this subparagraph, Employer shall not be
obligated to make any further payments under this Employment
Agreement other than amounts accrued at the time of such
termination. "Cause" for the purposes of this Agreement
consists of the following:
(1) Employee's commission of dishonest acts, fraud,
misappropriation, or embezzlement affecting Employer;
(2) Employee's commission of any felony under state or
federal law; or
4
<PAGE> 21
(3) the failure or refusal of Employee to comply with any
reasonable lawful policy, directive or instruction of the
Board, consistent with subparagraph l(c) hereof
(6) Constructive Discharge. Employee may terminate this
Employment Agreement in the event of Constructive Discharge
by providing written notice to Employer within three months
after the occurrence of such event, specifying the event
relied upon for a Constructive Discharge. "Constructive
Discharge" shall mean any (i) material change by Employer of
Employee's position, functions, or duties to an inferior
position, functions, or duties from that in effect on the
date of this Agreement, (ii) assignment, reassignment, or
relocation by Employer of Employee without Employee's consent
to another place of employment more than 50 miles from
Employee's current place of employment, (iii) liquidation,
dissolution, consolidation or merger of Employer, or transfer
of all or substantially all of its assets, other than a
transaction or series of transactions in which the resulting
or surviving transferee entity has, in the aggregate, a net
worth at least equal to that of Employer immediately before
such transaction and expressly assumes this Agreement and all
obligations and undertakings of Employer hereunder, or (iv)
reduction in Employee's base salary or target bonus
opportunity (if greater than the target bonus opportunity,
the average of the annual bonuses paid to Employee in the
three calendar years prior to the calendar year of the
Constructive Discharge). Following termination of Employee's
employment in the event of a Constructive Discharge, Employee
shall continue to receive Employee's annual salary, payable
as immediately prior to termination, plus all benefits to
which Employee is then entitled, for the balance of this
Agreement, provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in competition
with Employer, such salary and benefits shall thereupon
terminate. Employer and Employee, upon mutual agreement, may
waive any of the foregoing provisions that would otherwise
constitute a Constructive Discharge. Within ten days of
receiving such written notice from Employee, Employer may
cure the event that constitutes a Constructive Discharge.
(7) Upon any termination of this Agreement, Employee shall
immediately turn over to Employer all of Employer's property,
both tangible and intangible. To the extent that such
Employer's property shall constitute a benefit to Employee
under this Agreement, Employee shall receive from Employer
the value of that benefit for the remaining term of this
Agreement.
(8) Upon any termination of this Agreement, regardless of the
reason for termination, it is agreed:
(1) Inducing Employees of Employer to Leave. Any attempt
on the part of Employee to induce others to leave Employer's
employ, or any efforts by
5
<PAGE> 22
Employee to interfere with Employer's relationships with
other employees, would be harmful and damaging to Employer.
Employee expressly agrees that during the term of this
employment and for a period of two (2) years thereafter,
Employee will not, in any way, directly or indirectly: (A)
induce or attempt to induce any employee to terminate his or
her employment with Employer; (B) interfere with or disrupt
Employer's relationship with other employees; or (C) solicit,
entice, take away or employ any person employed by Employer.
(2) Confidentiality. Employee agrees not to, without prior
written consent of Employer, divulge to others, or use, for
Employee's own benefit or for the benefit of others, any
intellectual property, trade secrets or confidential or
proprietary information or data of Employer, including
without limitation, the contents of advertising, customer
lists, information regarding customers or their customers,
programming methods, business plans, strategies, financial
statements, copyrights, correspondence or other records of
Employer, except to the extent to which such information is
required by law to be disclosed to others.
(3) Remedy. Employee acknowledges that Employee will be
conversant with Employer's affairs, operations, trade
secrets, customers, customers' customers and other
proprietary information data; that Employee's compliance with
the provisions of this subparagraph is necessary to protect
the goodwill and other proprietary rights of Employer; and
that Employee's failure to comply with the provisions of this
subparagraph will result in irreparable and continuing damage
to Employer for which there will be no adequate remedy at
law. If Employee shall fail to comply with the provision of
this subparagraph, Employer (and its respective successors
and assigns) shall be entitled to injunctive relief and to
such other and further relief as may be proper and necessary
to ensure such compliance.
(4) Mitigation. In no event shall Employee be obligated to
seek other employment or to take other action by way of
mitigation of the amounts payable to Employee under any of
the provisions of this Agreement.
5. Employment Security.
(1) If Employer suffers from any natural or manmade disaster,
work stoppage, civil disobedience, act of war, or any other
emergency condition beyond Employee's control, the term of
this Employment Agreement shall remain in full force and
effect as if such event had not taken place.
(2) In the event of the merger, consolidation or acquisition of
Employer with any other corporation, corporations or other
business entities, the sale of Employer or a major portion of
its assets, or of its business or good will or any other
corporate reorganization involving Employer, this Employment
6
<PAGE> 23
Agreement shall be assigned and transferred to the successor
in interest as an asset of Employer and the assignee shall
assume Employer's obligations hereunder, and Employee agrees
to continue to perform Employee's duties and obligations
hereunder. Failure to assign this Employment Agreement prior
to any of the events set forth in this subparagraph 5(b) will
obligate Employer to fulfill the terms and conditions hereof
prior to consummating the applicable event.
6. Arbitration. In the case of any dispute or disagreement arising out
of or connected with this Agreement, the parties hereby agree to submit such
disputes or disagreements to the American Arbitration Association within ninety
(90) days of such dispute or disagreement for resolution by a panel of three
arbitrators designated by the American Arbitration Association. The panel of
arbitrators shall be instructed to render their decision within one hundred
twenty (120) days of the initial submission of the dispute or disagreement to
them. Any decision or award by such arbitration panel shall be final and
binding, and except in a case of gross fraud or misconduct by one or more of
the arbitrators, the decision or award rendered with respect to such dispute or
disagreement shall not be appealable.
7. Miscellaneous.
(1) All notices, requests, demands, or other communications
hereunder shall be in writing, and shall be deemed to be duly
given when delivered or sent by registered or certified mail,
postage prepaid, Employee's last home address as provided to
and reflected on the records of Employer and to Employer when
personally delivered to Employer's Secretary or when sent by
registered or certified mail, postage prepaid, to such
officer.
(2) Employer hereby agrees that no request, demand or requirement
shall be made to or of Employee that would violate any
federal or state law or regulations.
(3) Should any valid federal or state law or final determination
of any administrative agency or court of competent
jurisdiction affect any provision of this Employment
Agreement, the provision so affected shall be automatically
conformed to the law or determination; otherwise, this
Employment Agreement shall continue in full force and effect.
(4) This Employment Agreement is made and entered into in the
State of Florida and its validity and interpretation, and the
performance by the parties hereto of their respective duties
and obligations hereunder, shall be governed by the laws of
the State of Florida and of the United States of America.
(5) This Employment Agreement constitutes the entire agreement
between the parties respecting the employment of Employee,
there being no representations, warranties or commitments
except as set forth herein.
7
<PAGE> 24
(6) This Employment Agreement may be amended only by an
instrument in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and date first set forth above.
<TABLE>
<S> <C>
Employee: FPIC Insurance Group, Inc.
By
- ---------------------------------- -----------------------------
Donald J. Sabia William R. Russell
Chief Executive Officer
-------------------------------
Attest Attest
</TABLE>
8
<PAGE> 25
FPIC INSURANCE GROUP, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 1st day of
January, 1999 by and between FPIC Insurance Group, Inc., a Florida corporation,
with its principal place of business at 1000 Riverside Avenue, Jacksonville,
Florida 32204 (hereinafter referred to as "Employer"), and Charles W. Emanuel
an individual presently residing at 13704 Shipwatch Drive, Jacksonville,
Florida 32225 (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, Employer desires to retain the services of Employee as the Vice
President/Secretary of Employer, and Employee desires to perform such services
for Employer on the terms and conditions set forth herein;
WHEREAS, Employee represents and Employer acknowledges that Employee is
fully qualified, without the benefit of any further training or experience, to
perform the responsibilities and duties, with commensurate authorities, of the
position of Vice President/Secretary of Employer; and
WHEREAS, Employee agrees to devote Employee's full time and business
effort, attention and energies to the diligent performance of Employee's duties
hereunder;
NOW, THEREFORE, Employer and Employee, intending to be legally bound,
covenant and agree as follows:
1. Terms of Employment.
(1) Employee's employment hereunder shall be for a term of two
(2) years beginning January 1, 1999, which term shall be
extended for an additional year at the end of each calendar
year upon Employer's Board of Directors (from time to time
herein referred to as the "Board"), or a committee thereof,
giving notice to Employee prior to the end of any calendar
year that it wishes to extend this Employment Agreement for
an additional year.
(2) In the event Employer does not give notice to Employee prior
to the end of any calendar year that it wishes to extend this
Employment Agreement as specified in subparagraph (a) above,
Employee may voluntarily terminate Employee's employment
under this Employment Agreement by giving at least ninety
(90) days written notice to Employer. Following the effective
date of such voluntary termination, Employee shall continue
to receive Employee's annual salary, payable as immediately
prior to termination, plus all benefits to which Employee is
then entitled for the balance of the term of this Employment
Agreement. It is provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade
<PAGE> 26
or occupation that is in competition with Employer, such
salary and benefits shall thereupon terminate.
(3) The duties of Employee shall be as determined by the Board in
accordance with this Employment Agreement and the By-Laws of
Employer in effect form time to time. Employee may not be
reassigned to an inferior position, given a change in
classification or reclassified, or transferred, nor shall
Employee's responsibilities, duties, authority or title
change during the term of this Employment Agreement, except
as provided in subparagraph 1(b) above. Without limiting the
generality of the foregoing, Employee shall report to and
advise the Board regarding the management and operation of
Employer's business. Employee agrees to devote Employee's
full time business efforts, attention and energies to the
diligent performance of Employee's duties hereunder and will
not, during the term hereof, accept employment, full or
part-time, from any other person, firm, corporation,
governmental agency or other entity that, in the reasonable
opinion of the Board, would conflict with or detract from
Employee's capable performance of such duties, provided,
however, Employee may devote reasonable amounts of time to
activities of a public service, civic, or not-for-profit
nature.
2. Compensation and Expenses. Employer shall pay, or provide, and
Employee shall accept as full consideration for the services to be rendered
hereunder, and as a reimbursement or provision for expenses incurred by
Employee the following:
(1) An annual salary of $125,000 payable in twenty-four (24)
equal payments during each year of this Employment Agreement;
provided, however, that effective January 1 of each year
beginning in 2000, Employee's annual compensation shall be
increased in accordance with the provision for salary
increases set forth in paragraph (b) below. Employee's
minimum total compensation, which in no event may be reduced
in whole or in part, shall be the annual salary at the rate
of compensation received by Employee for any given period of
time or at the time of Employee's termination.
(2) Annual performance reviews will determine annual salary
increases to which Employee becomes entitled, effective
January 1, 2000, based upon Employer's then current
Compensation Program.
(3) Incentive compensation payable each year beginning in 1999
based on Employee's individual performance and the
performance of Employer for the prior year pursuant to
Employer's then current Executive Incentive Compensation
Program.
(4) Any additional compensation payable by resolution of the
Board for outstanding performance.
2
<PAGE> 27
(5) Such benefits as may be made available from time to time to
management employees of Employer, as reasonably approved by
Employer's Board or an appropriate committee thereof.
3. Expenses. Employer agrees to reimburse Employee for ordinary and
necessary expenses incurred by Employee in performing services for Employer
pursuant to the terms of this Employment Agreement, in accordance with
established corporate policies.
4. Termination. Unless the employment of Employee previously has been
terminated pursuant to subparagraph 1(b), this Employment Agreement may be
terminated in the manner set forth in subparagraphs (a) through (f) below.
(1) Voluntary Termination by Employee.
Employee may terminate this Employment Agreement at any time
by giving at least ninety (90) days written notice to
Employer, with no further obligation on Employer's part after
the effective date of such termination. It is agreed that
should Employee voluntarily terminate Employee's employment
prior to the end of the initial term of this Employment
Agreement, Employee shall forfeit all rights to compensation
and all benefits based upon compensation occurring after the
effective date of such termination.
(2) Voluntary Termination by Employer.
Employer may terminate this Employment Agreement at any time
for any reason sufficient to it, by act of its Board. Such
termination shall be immediately effective. Following such
voluntary termination, Employee shall continue to receive
Employee's annual salary, payable immediately prior to
termination, together with any benefits accrued to the date
of termination, plus all benefits to which Employee is then
entitled, for the balance of the then current Employment
Agreement, provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in competition
with Employer, such salary and benefits shall thereupon
terminate.
(3) Permanent Disability of Employee.
3
<PAGE> 28
If Employee has been, for substantially all the normal
working days during three (3) consecutive months, unable to
perform Employee's responsibilities and duties and to
exercise Employee's authorities in a satisfactory manner due
to mental or physical disability, then Employee may be deemed
"permanently disabled," and Employee's employment may be
terminated at the election of the Board of Employer. Any
determination of permanent disability made by Employer shall
be final and conclusive. In the event that Employer deems
Employee "permanently disabled," Employee shall be entitled
to receive the unpaid balance of Employee's annual salary,
together with other accrued benefits to the date of the
determination of being permanently disabled, payable as
immediately prior to termination for the remaining term of
this Employment Agreement, less any amount received by
Employee under any Employer-provided long term disability
coverage and/or program; provided, however, if Employee
directly or indirectly engages in or acts as an executive of
or consultant for any trade or occupation that is in
competition with Employer, such salary and benefits shall
thereupon terminate.
(4) Death of Employee.
This Employment Agreement shall terminate on the date of
Employee's death, and Employer shall pay, in a lump sum, to
the estate or personal representative of Employee the unpaid
balance of Employee's annual salary, together with other
accrued benefits, to the date of death.
(5) Termination for Cause.
Employer's Board may terminate this Agreement for cause, but
only after a written notice specifying the cause has been
submitted to Employee. Employee shall be granted a reasonable
opportunity to respond to the notice, in writing, and in an
appearance before the Board. A determination by the Board to
terminate this Agreement for cause may be made at a meeting
of the Board at which a quorum is present and by a vote of at
least a majority of the entire then current membership of the
Board. If Employer terminates this Employment Agreement for
cause under this subparagraph, Employer shall not be
obligated to make any further payments under this Employment
Agreement other than amounts accrued at the time of such
termination. "Cause" for the purposes of this Agreement
consists of the following:
(1) Employee's commission of dishonest acts, fraud,
misappropriation, or embezzlement affecting Employer;
(2) Employee's commission of any felony under state or
federal law; or
4
<PAGE> 29
(3) the failure or refusal of Employee to comply with any
reasonable lawful policy, directive or instruction of the
Board, consistent with subparagraph l(c) hereof
(6) Constructive Discharge. Employee may terminate this
Employment Agreement in the event of Constructive Discharge
by providing written notice to Employer within three months
after the occurrence of such event, specifying the event
relied upon for a Constructive Discharge. "Constructive
Discharge" shall mean any (i) material change by Employer of
Employee's position, functions, or duties to an inferior
position, functions, or duties from that in effect on the
date of this Agreement, (ii) assignment, reassignment, or
relocation by Employer of Employee without Employee's consent
to another place of employment more than 50 miles from
Employee's current place of employment, (iii) liquidation,
dissolution, consolidation or merger of Employer, or transfer
of all or substantially all of its assets, other than a
transaction or series of transactions in which the resulting
or surviving transferee entity has, in the aggregate, a net
worth at least equal to that of Employer immediately before
such transaction and expressly assumes this Agreement and all
obligations and undertakings of Employer hereunder, or (iv)
reduction in Employee's base salary or target bonus
opportunity (if greater than the target bonus opportunity,
the average of the annual bonuses paid to Employee in the
three calendar years prior to the calendar year of the
Constructive Discharge). Following termination of Employee's
employment in the event of a Constructive Discharge, Employee
shall continue to receive Employee's annual salary, payable
as immediately prior to termination, plus all benefits to
which Employee is then entitled, for the balance of this
Agreement, provided, however, if Employee directly or
indirectly engages in or acts as an executive of or
consultant for any trade or occupation that is in competition
with Employer, such salary and benefits shall thereupon
terminate. Employer and Employee, upon mutual agreement, may
waive any of the foregoing provisions that would otherwise
constitute a Constructive Discharge. Within ten days of
receiving such written notice from Employee, Employer may
cure the event that constitutes a Constructive Discharge.
(7) Upon any termination of this Agreement, Employee shall
immediately turn over to Employer all of Employer's property,
both tangible and intangible. To the extent that such
Employer's property shall constitute a benefit to Employee
under this Agreement, Employee shall receive from Employer
the value of that benefit for the remaining term of this
Agreement.
(8) Upon any termination of this Agreement, regardless of the
reason for termination, it is agreed:
(1) Inducing Employees of Employer to Leave. Any attempt
on the part of Employee to induce others to leave Employer's
employ, or any efforts by
5
<PAGE> 30
Employee to interfere with Employer's relationships with
other employees, would be harmful and damaging to Employer.
Employee expressly agrees that during the term of this
employment and for a period of two (2) years thereafter,
Employee will not, in any way, directly or indirectly: (A)
induce or attempt to induce any employee to terminate his or
her employment with Employer; (B) interfere with or disrupt
Employer's relationship with other employees; or (C) solicit,
entice, take away or employ any person employed by Employer.
(2) Confidentiality. Employee agrees not to, without prior
written consent of Employer, divulge to others, or use, for
Employee's own benefit or for the benefit of others, any
intellectual property, trade secrets or confidential or
proprietary information or data of Employer, including
without limitation, the contents of advertising, customer
lists, information regarding customers or their customers,
programming methods, business plans, strategies, financial
statements, copyrights, correspondence or other records of
Employer, except to the extent to which such information is
required by law to be disclosed to others.
(3) Remedy. Employee acknowledges that Employee will be
conversant with Employer's affairs, operations, trade
secrets, customers, customers' customers and other
proprietary information data; that Employee's compliance with
the provisions of this subparagraph is necessary to protect
the goodwill and other proprietary rights of Employer; and
that Employee's failure to comply with the provisions of this
subparagraph will result in irreparable and continuing damage
to Employer for which there will be no adequate remedy at
law. If Employee shall fail to comply with the provision of
this subparagraph, Employer (and its respective successors
and assigns) shall be entitled to injunctive relief and to
such other and further relief as may be proper and necessary
to ensure such compliance.
(4) Mitigation. In no event shall Employee be obligated to
seek other employment or to take other action by way of
mitigation of the amounts payable to Employee under any of
the provisions of this Agreement.
5. Employment Security.
(1) If Employer suffers from any natural or manmade disaster,
work stoppage, civil disobedience, act of war, or any other
emergency condition beyond Employee's control, the term of
this Employment Agreement shall remain in full force and
effect as if such event had not taken place.
(2) In the event of the merger, consolidation or acquisition of
Employer with any other corporation, corporations or other
business entities, the sale of Employer or a major portion of
its assets, or of its business or good will or any other
corporate reorganization involving Employer, this Employment
6
<PAGE> 31
Agreement shall be assigned and transferred to the successor
in interest as an asset of Employer and the assignee shall
assume Employer's obligations hereunder, and Employee agrees
to continue to perform Employee's duties and obligations
hereunder. Failure to assign this Employment Agreement prior
to any of the events set forth in this subparagraph 5(b) will
obligate Employer to fulfill the terms and conditions hereof
prior to consummating the applicable event.
6. Arbitration. In the case of any dispute or disagreement arising out
of or connected with this Agreement, the parties hereby agree to submit such
disputes or disagreements to the American Arbitration Association within ninety
(90) days of such dispute or disagreement for resolution by a panel of three
arbitrators designated by the American Arbitration Association. The panel of
arbitrators shall be instructed to render their decision within one hundred
twenty (120) days of the initial submission of the dispute or disagreement to
them. Any decision or award by such arbitration panel shall be final and
binding, and except in a case of gross fraud or misconduct by one or more of
the arbitrators, the decision or award rendered with respect to such dispute or
disagreement shall not be appealable.
7. Miscellaneous.
(1) All notices, requests, demands, or other communications
hereunder shall be in writing, and shall be deemed to be duly
given when delivered or sent by registered or certified mail,
postage prepaid, Employee's last home address as provided to
and reflected on the records of Employer and to Employer when
personally delivered to Employer's Secretary or when sent by
registered or certified mail, postage prepaid, to such
officer.
(2) Employer hereby agrees that no request, demand or requirement
shall be made to or of Employee that would violate any
federal or state law or regulations.
(3) Should any valid federal or state law or final determination
of any administrative agency or court of competent
jurisdiction affect any provision of this Employment
Agreement, the provision so affected shall be automatically
conformed to the law or determination; otherwise, this
Employment Agreement shall continue in full force and effect.
(4) This Employment Agreement is made and entered into in the
State of Florida and its validity and interpretation, and the
performance by the parties hereto of their respective duties
and obligations hereunder, shall be governed by the laws of
the State of Florida and of the United States of America.
(5) This Employment Agreement constitutes the entire agreement
between the parties respecting the employment of Employee,
there being no representations, warranties or commitments
except as set forth herein.
7
<PAGE> 32
(6) This Employment Agreement may be amended only by an
instrument in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and date first set forth above.
<TABLE>
<S> <C>
Employee: FPIC Insurance Group, Inc.
By
- ---------------------------------- -----------------------------
Charles W. Emanuel William R. Russell
Chief Executive Officer
-------------------------------
Attest Attest
</TABLE>
8
<PAGE> 1
EXHIBIT 10.2
EXTENSION OF EMPLOYMENT AGREEMENT
WHEREAS, FPIC Insurance Group, Inc. (Employer) and William R. Russell
(Employee) are parties to an Employment Agreement under date of December 30,
1992, and
WHEREAS, said Employment Agreement stipulates that said Agreement shall
be extended for an additional year at the end of each calendar year upon
Employer's Board of Directors (Board) or a committee thereof giving notice to
Employee that it wishes to extend the Employment Agreement for an additional
year,
NOW THEREFORE, Employee is herein advised of the extension of the
Employment Agreement. It is agreed that the annual salary referred to in
paragraph 2(a) is changed to $450,000.
IN WITNESS WHEREOF, the parties have executed this extension as of the
7th day of November, 1998.
<TABLE>
<S> <C>
FPIC INSURANCE GROUP, INC.
Accepted:
By:
- ---------------------------- -----------------------------------
William R. Russell
Attest: Attest:
- ---------------------------- --------------------------------------
</TABLE>
<PAGE> 2
EXTENSION OF EMPLOYMENT AGREEMENT
WHEREAS, FPIC Insurance Group, Inc. (Employer) and Steven R. Smith
(Employee) are parties to an Employment Agreement under date of December 30,
1992, and
WHEREAS, said Employment Agreement stipulates that said Agreement shall
be extended for an additional year at the end of each calendar year upon
Employer's Board of Directors (Board) or a committee thereof giving notice to
Employee that it wishes to extend the Employment Agreement for an additional
year,
NOW THEREFORE, Employee is herein advised of the extension of the
Employment Agreement. It is agreed that the annual salary referred to in
paragraph 2(a) is changed to $360,000.
IN WITNESS WHEREOF, the parties have executed this extension as of the
7th day of November, 1998.
<TABLE>
<S> <C>
FPIC INSURANCE GROUP, INC.
Accepted:
By:
- ---------------------------- ----------------------------------
Steven R. Smith
Attest: Attest:
- ---------------------------- -------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.3
ADMINISTRATORS FOR THE PROFESSIONS, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of January 1, 1999
by and between ADMINISTRATORS FOR THE PROFESSIONS, INC., a New York
corporation, with its principal place of business at 111 East Shore Road,
Manhasset, NY 11030 ("Employer"),and ANTHONY BONOMO, an individual presently
residing at___________________________________________ ("Employee").
WITNESSETH:
WHEREAS, Employer desires to retain the services of Employee as its Chief
Executive Officer and President, and Employee desires to perform such services
for Employer on the terms and conditions set forth herein;
WHEREAS, Employee represents and Employer acknowledges that Employee is
fully qualified, without the benefit of any further training or experience, to
perform the responsibilities and duties, with commensurate authorities of the
position of Chief Executive Officer and President of Employer; and
WHEREAS, Employee agrees to devote Employee's full time and business
effort, attention and energies to the diligent performance of Employee's duties
hereunder.
NOW, THEREFORE, Employer and Employee, intending to be legally bound,
covenant and agree as follows:
1. Terms of Employment.
(1) Term. Employee's employment hereunder shall be for a term of three
(3) years beginning January 1, 1999, which term shall be extended for an
additional year at the end of each calendar year upon Employer's Board of
Directors (from time to time herein referred to as the "Board"), or a committee
thereof, giving notice to Employee prior to the end of any calendar year that
it wishes to extend this Employment Agreement for an additional year.
(2) Voluntary Termination. In the event Employer does not give notice
to Employee prior to the end of any calendar year that it wishes to extend this
Employment Agreement as specified in subparagraph (a) above, Employee may
voluntarily terminate Employee's employment under this Employment Agreement by
giving at least ninety (90) days written notice to Employer. Following the
effective date of such voluntary termination, Employee shall continue to
receive Employee's annual salary, payable as immediately prior to termination,
plus all benefits to which Employee is then entitled for the balance of the
term of this Employment Agreement. It is provided, however, that if Employee
breaches or fails to fulfill Employee's obligations under or is in violation of
Section
<PAGE> 2
4(h), Section 7(g), or the fifth sentence of Section 1(c), such salary and
benefits shall thereupon terminate.
(3) Duties. The duties of Employee shall be as determined by the Board
in accordance with this Employment Agreement and the By-Laws of Employer in
effect from time to time. Employee may not be reassigned to an inferior
position, given a change in classification or reclassified, or transferred, nor
shall Employee's responsibilities, duties, authority or title change during the
term of this Employment Agreement, except as provided in subparagraph 1(b)
above. Without limiting the generality of the foregoing, Employee shall report
to and advise the Board regarding the management and operation of Employer's
business. In addition, Employee shall serve as one of Employer's nominated,
appointed, and designated representatives (a "Designated Representative") on
the Board of Governors of Physicians Reciprocal Insurers ("PRI"), the insurer
for which Employer serves as attorney-in-fact, for so long as Employer so
desires. If Employer notifies Employee that it or they no longer desire
Employee to serve as a Designated Representative, Employee shall immediately
resign and vacate such position. Failure of Employee to immediately resign and
vacate the position of Designated Representative shall entitle Employer to
terminate this Employment Agreement and, notwithstanding any other provision to
the contrary in this Employment Agreement, upon such termination, Employee
shall not be entitled to any salary or benefits for the remainder of the then
current term of this Employment Agreement or for any period thereafter.
Employee agrees to devote Employee's full time business efforts, attention and
energies to the diligent performance of Employee's duties hereunder and will
not, during the term hereof, accept employment, full or part-time, from any
other person, firm, corporation, governmental agency or other entity that, in
the reasonable opinion of the Board, would conflict with or detract from
Employee's capable performance of such duties; provided, however, Employee may
devote reasonable amounts of time to activities of a public service, civic, or
not-for-profit nature.
2. Compensation and Expenses. Employer shall pay or provide and
Employee shall accept as full consideration for the services to be rendered
hereunder, and as a reimbursement or provision for expenses incurred by
Employee the following:
(1) Salary. An annual salary of $400,000 payable in fifty-two (52)
equal weekly payments during each year of this Employment Agreement. Employee's
minimum total compensation, which in no event may be reduced in whole or in
part, shall be the annual salary at the rate of compensation received by
Employee for any given period of time or at the time of Employee's termination.
(2) Reviews. Annual performance reviews will determine annual salary
increases to which Employee becomes entitled, effective January 1, 2000, based
upon Employer's then current Compensation Program.
(3) Performance Bonus. If the Chief Executive Officer (the "FPIC CEO")
of Florida Physicians Insurance Company, Inc. ("FPIC") earns incentive
compensation for any year during the term of this Agreement beginning in 1999
based upon the performance of FPIC Insurance Group, Inc. ("FIG") for such year
pursuant to the then current Executive Incentive Compensation Program
2
<PAGE> 3
applicable to the FPIC CEO, then Employee shall receive incentive compensation
comparable to, and in no case less than, that paid to the FPIC CEO based upon
FIG's performance for such year and shall have the opportunity to receive
additional incentive compensation based upon Employee's performance pursuant to
an incentive plan comparable to that presently available to the FPIC CEO,
subject to adjustment in the event of across-the-board increases or decreases
in bonus levels as determined by FIG's board of directors.
(4) Discretionary Additional Compensation. Any additional compensation
payable by resolution of the Board of Directors of Employer, and approved by
FIG, for Employee's outstanding performance.
(5) Benefits. Such benefits as may be made available from time to time
to senior management employees of FIG, but at no time, less than: (i) a
personal company automobile (BMW 740 or equivalent) including all the costs of
operating, maintaining, insuring, and licensing the automobile, (ii) initiation
fees, dues, assessments and other expenses of membership in appropriate clubs
or organizations of Employee's choice, as reasonably approved by the Board or
an appropriate committee thereof, it being understood that the Cherry Valley
Country Club of which Employee is a member as of the date of this Employment
Agreement shall be deemed approved by the Board or by such committee, and (iii)
those benefits provided pursuant to a Supplemental Executive Retirement Plan
(the "Bonomo SERP") created by Employer for the benefit of Employee, which
Bonomo SERP will provide to Employee retirement benefits as necessary so that
the aggregate level of retirement benefits (taking into account such factors as
years of service) provided by Employer to Employee is comparable to the level
of retirement benefits received by the current FPIC CEO.
(6) Signing Bonus. In consideration of and as a material inducement to
Employee's execution and delivery of this Employment Agreement and his
agreements hereunder, including, but not limited to, his agreements set forth
in Sections 4(h) and 7(g), Employer shall pay to Employee at the Closing of
FIG's acquisition of all of the outstanding capital stock of Employer (the "AFP
Acquisition") $500,000 (the "Signing Bonus"). Notwithstanding anything to the
contrary in this Employment Agreement, in the event of a breach of this
Agreement by Employee, Employer's remedies for such breach shall not include
requiring Employee to return to Employer the Signing Bonus.
(7) Special Performance Incentive. Employee shall have the opportunity
to earn a special performance incentive (the "Special Performance Incentive")
of up to $3,000,000, subject to adjustment as provided herein. Payment of any
Special Performance Incentive or any Remainder Incentive, as hereinafter
defined, to Employee shall be made 50% in cash and 50% in shares of FIG common
stock, par value $.10 per share ("FIG Common Stock").
(1) Incentive Related to Conversion and Acquisition of PRI.
Thirty (30) business days following (x) the conversion in accordance with
applicable New York law of PRI from a reciprocal to a stock insurer (the
"Conversion") and (y) the acquisition by FIG, Employer, or an affiliate thereof
of more than 50% (the actual percentage acquired being hereinafter referred to
as
3
<PAGE> 4
the "Acquisition Percentage") of the outstanding stock of such stock insurer
(the "Acquisition"), Employer shall pay to Employee the Special Performance
Incentive, subject to adjustment as provided below. For purposes of
subparagraphs (A) and (B) below, the "Target Price" shall mean the Acquisition
Percentage multiplied by 115% of the total amount contained on the date of the
Conversion in the Subscribers' accounts established and maintained pursuant to
and in accordance with New York Insurance Law Section 6112 or any successor
provision and in accordance with the Subscribers Agreement as in effect on the
date hereof.
(A) If the Acquisition is completed at or below the Target
Price, the total amount of the Special Performance Incentive that Employee
shall be eligible to receive shall be $3,000,000.
(B) If, however, the Acquisition is completed at a price
above the Target Price (an "Excess Price"), then the amount of the Special
Performance Incentive that Employee shall be eligible to receive shall be
reduced by the percentage obtained by subtracting the Target Price from the
Excess Price and dividing the result by the Target Price.
(C) If the Acquisition Percentage is greater than or equal to
70%, then the Special Performance Incentive shall be as provided in
subparagraphs (A) and (B) above;
(D) If the Acquisition Percentage is greater than 50% but
less than 70%, then the Special Performance Incentive shall be as provided in
subparagraphs (A) and (B) above, but shall be reduced by multiplying the amount
of the Special Performance Incentive determined as provided in subparagraphs
(A) and (B) by the Acquisition Percentage (the "Partial Incentive");
(2) Incentive Related to Performance Goals. In the event FIG
undertakes but is unsuccessful in the completion of the Conversion or the
Acquisition, or if FIG notifies Employee that FIG has determined to not seek
the Conversion and the Acquisition, or if the Acquisition Percentage is less
than 70% (each, a "Noncompletion Event"), then Employee shall be eligible to
receive the difference between the Special Performance Incentive determined in
accordance with subparagraphs (A) and (B) above and the Partial Incentive, if
any, earned by Employee (the "Remainder Incentive") only if Employee has
accomplished each of the following performance goals established in
subparagraphs (1) through (4) below (collectively, the "Performance Goals" on
or before eighteen months after the occurrence of a Noncompletion Event:
(1) Either (i) the ratio of the number of employees of
Employer per medical malpractice insured of PRI is less than or equal to the
ratio of the number of employees of FPIC per medical malpractice insured of
FPIC, or (ii) the total salary expense of AFP, including claim chargebacks, is
less than or equal to that of FPIC, on a percent of premium basis;
(2) Employee, Employer, and FIG jointly have developed,
designed, organized, and implemented a reinsurance program approved by FIG, in
FIG's reasonable discretion,
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<PAGE> 5
and available generally to FIG and all entities that are subsidiaries or
affiliates of FIG (collectively, the "FIG Group") and available to PRI;
(3) Employee has organized, developed a business plan and
operating parameters for, staffed, obtained appropriate licenses for, and
accumulated a mutually agreed amount of managed assets in, an investment
management entity approved by FIG, in FIG's reasonable discretion, to manage
investment portfolio assets for the FIG Group and PRI; and
(4) Employee has organized, developed a business plan and
operating parameters for, staffed, and obtained appropriate licenses for, a
reinsurance brokerage business approved by FIG, in FIG's reasonable discretion,
to broker reinsurance for the FIG Group and PRI.
Employer shall cause the FIG Group to use all commercially reasonable efforts
to assist in accomplishing the Performance Goals.
The number of shares of FIG Common Stock comprising the stock portion of any
Special Performance Incentive or Partial Incentive to be paid to Employee
following the Conversion and Acquisition shall be determined by dividing 50% of
the amount of such Special Performance Incentive or Partial Incentive, as the
case may be, by the average (weighted to reflect daily trading volume) of the
daily closing prices per share of FIG Common Stock on the NASDAQ National
Market (or, if the FIG Common Stock is then traded on a national securities
exchange rather than through the NASDAQ National Market, on such national
securities exchange) as reported in the Southeast edition of the Wall Street
Journal for the first twenty (20) business days preceding the public
announcement of a definitive agreement concerning the Conversion and the
Acquisition.
In the event Employee has timely met the Performance Goals (the date thereof
being hereinafter referred to as the "Achievement Date"), then any Special
Performance Incentive or Remainder Incentive payable to Employee shall be paid
to Employee thirty (30) days following the Achievement Date and the number of
shares of FIG Common Stock payable as a portion of such Special Performance
Incentive or Remainder Incentive shall be determined by dividing an amount
equal to 50% of such Special Performance Incentive or Remainder Incentive by
the average (weighted to reflect daily trading volume) of the daily closing
prices per share of FIG Common Stock on the NASDAQ National Market (or, if the
FIG Common Stock is then traded on a national securities exchange rather than
through the NASDAQ National Market, on such national securities exchange) as
reported in the Southeast edition of the Wall Street Journal for the first
twenty (20) business days preceding the Achievement Date.
Notwithstanding the foregoing, no Special Performance Incentive or Partial
Incentive shall be paid to Employee regardless of whether the Conversion and
Acquisition ultimately are completed, if, prior to the completion of the
Conversion, Employee has voluntarily terminated this Employment Agreement or
has been dismissed for Cause following receipt of notice and an opportunity to
appear
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<PAGE> 6
before the Board as provided in Section 4(e), or Employee's employment has been
terminated due to death or permanent disability.
Employee acknowledges that any FIG Common Stock received by Employee shall
constitute unregistered securities and shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES ACTS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
AND ANY APPLICABLE STATE SECURITIES ACTS OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
(8) Piggyback Registration. In the event that FIG, at any time after
the AFP Acquisition, proposes to register any FIG Common Stock, any other of
its equity securities or securities convertible into or exchangeable for its
equity securities and registrable under the Securities Act of 1933
(collectively, including FIG Common Stock, "Other Securities") under the
Securities Act of 1933 (the "Securities Act"), whether or not for sale for its
own account, in a manner that would permit registration of registrable
securities ("Registrable Securities") for sale for cash to the public under the
Securities Act, it shall at each such time give prompt written notice to
Employee. Subject to the terms and conditions hereof, such notice shall offer
Employee the opportunity to include in such registration statement such number
of Registrable Securities then owned by Employee as Employee requests. Upon the
written request of Employee (which written request shall specify the number of
Registrable Securities intended to be disposed of and the intended method of
disposition thereof) made within 15 days after the receipt of FIG's notice, FIG
shall use its commercially reasonable efforts to effect, in connection with the
registration of the Other Securities, the registration under the Securities Act
of all Registrable Securities which FIG has been so requested to register, to
the extent required to permit the disposition (in accordance with such intended
methods thereof) of the Registrable Securities so requested to be registered;
provided, that:
(1) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date of
the registration statement filed in connection with such registration, FIG
shall determine for any reason not to register the Other Securities, FIG may,
at its election, give written notice of such determination to Employee and
thereupon FIG shall be relieved of its obligation to register such Registrable
Securities in connection with the registration of such Other Securities;
(2) if the registration referred to in the first sentence of this
Section 2(iii) is to be an underwritten registration on behalf of FIG, and a
nationally recognized investment banking firm selected by FIG advises FIG in
writing that, in such firm's good faith view, the inclusion of all or a part of
such Registrable Securities in such registration would be likely to have an
adverse effect upon the price, timing or distribution of the offering and sale
of the Other Securities then contemplated,
6
<PAGE> 7
FIG shall include in such registration: (i) first, all Other Securities FIG
proposes to sell for its own account ("Company Securities"), (ii) second, up to
the full number of Registrable Securities held by other holders and are
requested to be included in such registration (Registrable Securities that are
so held being sometimes referred to herein as "Holder Securities") in excess of
the number of Company Securities to be sold in such offering which, in the good
faith view of such investment banking firm, can be sold without adversely
affecting such offering and the sale of the Other Securities then contemplated
(and if such number is less than the full number of such Holder Securities,
such number shall be allocated by FIG among such holders pro rata);
(3) FIG shall not be required to effect any registration of
Registrable Securities under this Section 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock option or
other executive or employee benefit or compensation plans.
(4) All underwriting discounts and selling commissions applicable
to the sale of Registrable Securities shall be borne by the holders of the
Holder Securities so registered pro rata on the basis of the number of their
shares sold, and all fees and disbursements of counsel for each holder shall be
paid by such holder. All other expenses incurred in connection with any
registration, qualification or compliance pursuant to this Section 2 shall be
borne by FIG.
3. Expenses. Employer agrees to reimburse Employee for ordinary and
necessary expenses incurred by Employee in performing services for Employer
pursuant to the terms of this Employment Agreement, in accordance with
established corporate policies.
4. Termination. Unless the employment of Employee previously has been
terminated pursuant to subparagraph 1(b), this Employment Agreement may be
terminated in the manner set forth in subparagraphs (a) through (f) below.
(1) Voluntary Termination by Employee. Employee may terminate this
Employment Agreement at any time by giving at least ninety (90) days written
notice to Employer, with no further obligation on Employer's part after the
effective date of such termination. It is agreed that should Employee
voluntarily terminate Employee's employment prior to the end of the term of
this Employment Agreement, Employee shall forfeit all rights to compensation
and all benefits based upon compensation occurring after the effective date of
such termination.
(2) Voluntary Termination by Employer. Employer may terminate this
Employment Agreement at any time for any reason sufficient to it, by act of its
Board. Such termination shall be immediately effective. Following such
voluntary termination, Employee shall continue to receive Employee's annual
salary, payable immediately prior to termination; together with any benefits
accrued to the date of termination, plus all benefits to which Employee is then
entitled, for the balance of the then current term of this Employment
Agreement. It is provided, however, that if Employee breaches or fails to
fulfill Employee's obligations under or is in violation of Section 4(h),
7
<PAGE> 8
Section 7(g), or the fifth sentence of Section 1(c), such salary and benefits
shall thereupon terminate.
(3) Permanent Disability of Employee. If Employee has been, for
substantially all the normal working days during five (5) consecutive months,
unable to perform Employee's responsibilities and duties and to exercise
Employee's authorities in a satisfactory manner due to mental or physical
disability, then Employee may be deemed "permanently disabled," and Employee's
employment may be terminated at the election of the Board. Any determination of
permanent disability made by Employer shall be final and conclusive. In the
event that Employer deems Employee "permanently disabled," Employee shall be
entitled to receive the unpaid balance of Employee's annual salary, together
with other accrued benefits to the date of the determination of being
permanently disabled, payable as immediately prior to termination for the
remaining then current term of this Employment Agreement, less any amount
received by Employee under any Employer or Employer affiliate-provided long
term disability coverage and/or program. It is provided, however, that if
Employee breaches or fails to fulfill Employee's obligations under or is in
violation of Section 4(h), Section 7(g), or the fifth sentence of Section 1(c),
such salary and benefits shall thereupon terminate.
(4) Death of Employee. This Employment Agreement shall terminate on the
date of Employee's death, and Employer shall pay, in a lump sum, to the estate
or personal representative of Employee the unpaid balance of Employee's annual
salary, together with other accrued benefits, to the end of the year of death.
(5) Termination for Cause. The Board may terminate this Agreement for
cause, but only after a written notice specifying the cause has been submitted
to Employee. Employee shall be granted a reasonable opportunity to respond to
the notice, in writing, and in an appearance before the Board. A determination
by the Board to terminate this Agreement for cause may be made at a meeting of
the Board at which a quorum is present and by a vote of at least a majority of
the entire then current membership of the Board. If Employer terminates this
Employment Agreement for cause under this subparagraph, Employer shall not be
obligated to make any further payments under this Employment Agreement other
than amounts accrued at the time of such termination. "Cause" for the purposes
of this Agreement consists of the following:
(1) Employee's conviction of or plea of nolo contendere to a
dishonest act materially affecting Employer or fraud, misappropriation, or
embezzlement affecting Employer;
(2) Employee's conviction of or plea of nolo contendere to any
felony under state or federal law; or
(3) the failure or refusal of Employee to comply with any
reasonable material lawful policy, directive or instruction of the Board,
consistent with subparagraph l(c) hereof.
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<PAGE> 9
(6) Constructive Discharge. Employee may terminate this Employment
Agreement in the event of Constructive Discharge by providing written notice to
Employer within three months after the occurrence of such event, specifying the
event relied upon for a Constructive Discharge. "Constructive Discharge" shall
mean any (i) material change by Employer of Employee's position, functions, or
duties to an inferior position, functions, or duties from that in effect on the
date of this Agreement, (ii) assignment, reassignment, or relocation by
Employer of Employee without Employee's consent to another place of employment
that is not on Long Island, New York or is more than 50 miles from Employee's
current place of employment, [(iii) liquidation, dissolution, consolidation or
merger of Employer, or transfer of all or substantially all of its assets,
other than a transaction or series of transactions in which the resulting or
surviving transferee entity has, in the aggregate, a net worth at least equal
to that of Employer immediately before such transaction and expressly assumes
this Agreement and all obligations and undertakings of Employer hereunder,] or
(iv) reduction in Employee's base salary or target bonus opportunity (if
greater than the target bonus opportunity, the average of the annual bonuses
paid to Employee in the three calendar years prior to the calendar year of the
Constructive Discharge). Following termination of Employee's employment in the
event of a Constructive Discharge, Employee shall continue to receive
Employee's annual salary, payable as immediately prior to termination, plus all
benefits to which Employee is then entitled, for the balance of this Employment
Agreement. It is provided, however, that if Employee breaches or fails to
fulfill Employee's obligations under or is in violation of Section 4(h),
Section 7(g), or the fifth sentence of Section 1(c) of this Agreement, such
salary and benefits shall thereupon terminate. Employer and Employee, upon
mutual agreement, may waive any of the foregoing provisions that would
otherwise constitute a Constructive Discharge. Within ten days of receiving
such written notice from Employee, Employer may cure the event that constitutes
a Constructive Discharge.
(7) Return of Property. Upon any termination of this Agreement,
Employee shall immediately turn over to Employer all of Employer's property,
both tangible and intangible. To the extent that such Employer's property shall
constitute a benefit to Employee under this Agreement, Employee shall receive
from Employer the value of that benefit for the remaining term of this
Agreement.
(8) Covenants. Employer and Employee acknowledge, covenant and agree as
follows:
(1) Wrongful Inducement. Any attempt on the part of Employee to
induce others to leave Employer's employ, or any efforts by Employee to
interfere with Employer's relationships with other employees, or to interfere
with Employer's relationship with PRI, would be harmful and damaging to
Employer. Employee expressly agrees that during the term of this Employment
Agreement and for any period of time during which Employer is paying to
Employee salary and other benefits provided for in this Employment Agreement
and for a period of two (2) years thereafter, Employee will not, in any manner,
directly or indirectly, or through any means: (A) induce or attempt to induce
any employee of Employer or an affiliate thereof to terminate his or her
employment; (B) interfere with or disrupt Employer's or any affiliate's
relationship with any of their
9
<PAGE> 10
employees; or (C) solicit, entice, take away or employ any person employed by
Employer or any affiliate.
(2) Restrictive Covenants. Employee expressly agrees that during
the term of this Employment Agreement and for any period of time during which
Employer is paying to Employee salary and other benefits provided for in this
Employment Agreement and for a period of two (2) years thereafter, Employee
shall not, directly or indirectly, own, operate, manage, have a proprietary
interest of any kind in, extend financial assistance to, solicit, encourage or
handle patronage for, be employed by or serve as a consultant, officer,
director, employee, or in any other capacity for any person, corporation,
company, partnership or other entity engaged in the medical professional
liability insurance business or the business of providing management or other
insurance services to medical professional liability insurers in or operating
within the State of New York, except that Employee may own two percent (2%) of
the outstanding stock in a publicly held corporation engaged in such a business
provided that such stock does not in any way represent any form of compensation
for any services rendered by Employee to such publicly held corporation.
(3) Designated Representative. Upon any termination of this
Agreement, regardless of the reason for termination, Employee shall resign and
be deemed to have resigned as Employer's Designated Representative on the Board
of Governors of PRI.
(4) Confidentiality. Employee agrees not to, without prior
written consent of Employer, divulge to others, or use, for Employee's own
benefit or for the benefit of others, any intellectual property, trade secrets
or confidential or proprietary information or data of Employer, PRI or their
affiliates, including without limitation, the contents of advertising, customer
lists, information regarding customers or their customers, programming methods,
business plans, strategies, financial statements, copyrights, correspondence or
other records of Employer, PRI or their affiliates. The restrictions of this
Section shall not apply to information relating to the business or interests of
Employer, PRI, or their affiliates that is, or shall lawfully and rightfully
become, public knowledge and in the public domain through no fault or wrongful
act of Employee; nor shall the restrictions of this Section 4(h)(iv) apply to
information that is (i) disclosed by Employee after obtaining prior written
consent of Employer, or (ii) is required or ordered to be divulged by a court
of competent jurisdiction or an administrative agency having lawful authority
to require disclosure of Employer's knowledge of such information. If Employee
is requested or required to disclose any such information, Employee will
provide Employer with written notice thereof so that Employee may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section 4(h)(iv).
(5) Remedy. Employee acknowledges that Employee will be
conversant with Employer's, PRI's, and their affiliates' affairs, operations,
trade secrets, customers, customers' customers and other proprietary
information data; that Employee's compliance with the provisions of this
Section (h) is necessary to protect the goodwill and other proprietary rights
of Employer; and that Employee's failure to comply with the provisions of this
Section (h) will result in irreparable and continuing damage to Employer, PRI,
and their respective affiliates for which there will be no
10
<PAGE> 11
adequate remedy at law. If Employee shall fail to comply with the provision of
this Section (h), Employer (and its respective successors and assigns) shall be
entitled to injunctive relief and to such other and further relief as may be
proper and necessary to ensure such compliance. Employee further acknowledges
that the restrictions, prohibitions and other provisions of this Section are
reasonable, fair and equitable in scope, term and duration, are necessary to
protect the legitimate business interests of Employer, and its affiliates, and
are a material inducement to Employer to enter into the transactions herein
contemplated. Employee covenants that he will not challenge the enforceability
of this Section (h) or any provision hereof nor will he raise any equitable
defenses to such enforcement. In the event that any restriction contained in
this Section (h) shall be held to be too broad in scope or too long in duration
to allow enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and
Employee hereby consents and agrees that such scope or duration may be
judicially modified accordingly in any proceeding brought to enforce such
restriction.
(6) Mitigation. In no event shall Employee be obligated to seek
other employment or to take other action by way of mitigation of the amounts
payable to Employee under any of the provisions of this Agreement and if
Employee obtains other employment, provided that such employment is not in
violation of the restrictive covenants of Section 4(h)(ii) or in violation of
Section 7(g), no compensation or other payments received by Employee in
connection with such other employment shall mitigate the amounts payable to
Employee under this Agreement.
5. Employment Security.
(1) Uncontrollable Event. If Employer suffers from any natural or
manmade disaster, work stoppage, civil disobedience, act of war, or any other
emergency condition beyond Employee's control the term of this Employment
Agreement shall remain in full force and effect as if such event had not taken
place.
(2) Corporate Reorganization. In the event of the merger, consolidation
or acquisition of Employer with or by any other corporation, corporations or
other business entities, the sale of Employer or a major portion of its assets,
or of its business or good will or any other corporate reorganization involving
Employer, this Employment Agreement shall be assigned and transferred to the
successor in interest as an asset of Employer and the assignee shall assume
Employer's obligations hereunder, and Employee agrees to continue to perform
Employee's duties and obligations hereunder. Failure to assign this Employment
Agreement prior to any of the events set forth in this subparagraph 5(b) will
obligate Employer to fulfill the terms and conditions hereof prior to
consummating the applicable event.
6. Arbitration. In the case of any dispute or disagreement arising out
of or connected with this Agreement, the parties hereby agree to submit such
disputes or disagreements to the American Arbitration Association within ninety
(90) days of such dispute or disagreement for resolution by a panel of three
arbitrators designated by the American Arbitration Association, sitting in
Jacksonville, Florida. The panel of arbitrators shall be instructed to render
their decision within
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<PAGE> 12
one hundred twenty (120) days of the initial submission of the dispute or
disagreement to them. Any decision or award by such arbitration panel shall be
final and binding, and except in a case of gross fraud or misconduct by one or
more of the arbitrators, the decision or award rendered with respect to such
dispute or disagreement shall not be appealable.
7. Miscellaneous.
(1) All notices and other communications hereunder shall be in writing
and shall be delivered personally, telegraphed, telexed (with appropriate
answerback received), sent by facsimile transmission (with immediate
confirmation by telephone conference with the recipient party thereafter), or
sent by registered, certified or express mail, postage prepaid, return receipt
requested, or sent by a nationally recognized overnight courier service, marked
for overnight delivery. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed (provided the correct answerback is received),
or sent by facsimile transmission (provided confirmation is received
immediately thereafter); or if mailed, three (3) business days after the date
of deposit in the mails; or if sent by overnight courier, one (1) business day
after the date of delivery to the courier service marked for overnight
delivery; in each case addressed as follows:
FPIC Insurance Group, Inc.
1000 Riverside Avenue, Suite 800
Jacksonville, FL 32204
Attention: Robert B. Finch
Telephone: 904/350-1016
Facsimile: 904/350-1049
with a copy to:
John R. Byers, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
50 North Laura Street, Suite 2800
Jacksonville, FL 32202-3650
Telephone: 904/354-8000
Facsimile: 904/353-1673
and
Anthony Bonomo
816 Forte Boulevard
Franklin Square, NY 11010
Telephone: 516/538-8320
Facsimile: 516/564-8682
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<PAGE> 13
with a copy to:
Eric M. Mencher, Esq.
Horowitz, Mencher, Klosowski & Nestler, P.C.
595 Stewart Avenue
Suite 710
Garden City, NY 11530
Telephone: 516/222-2345
Facsimile: 516/222-2665
(2) Employer hereby agrees that no request, demand or requirement shall
be made to or of Employee that would violate any federal or state law or
regulations.
(3) Should any valid federal or state law or final determination of any
administrative agency or court of competent jurisdiction affect any provision
of this Employment Agreement, the provision so affected shall be automatically
conformed to the law or determination; otherwise, this Employment Agreement
shall continue in full force and effect.
(4) This Employment Agreement is made and entered into in the State of
New York and its validity and interpretation, and the performance by the
parties hereto of their respective duties and obligations hereunder, shall be
governed by the laws of the State of New York and of the United States of
America, without regard to any conflicts of interest laws that would call for
the application of the laws of any other jurisdiction.
(5) This Employment Agreement may be amended only by an instrument in
writing executed by the parties hereto.
(6) The headings of the various sections of this Employment Agreement
are inserted for the convenience of the parties and shall not affect the
meaning, construction, or interpretation of this Employment Agreement. They are
not intended to modify or explain, or to be a full or accurate description of
the contents thereof.
(7) Employee acknowledges that the relationships of Employer with PRI
and with the insureds of PRI are unique, key assets of Employer and of
fundamental and material importance to Employer in determining to execute and
deliver this Agreement. Therefore, Employee acknowledges and agrees that he
shall not at any time or in any manner induce or attempt to induce PRI to
terminate its relationship or contractual agreements with Employer.
Notwithstanding any other provisions of this Agreement, the provisions of this
Section 7(g) shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement on the day and date first set forth above.
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<TABLE>
<S> <C>
Anthony Bonomo Administrators for the Professions,
Inc.
By
- ---------------------------------- ---------------------------------
Its President
-----
- ---------------------------------- -----------------------------------
Attest Attest
</TABLE>
GUARANTY
FPIC Insurance Group, Inc., by its execution hereof, hereby guarantees
the performance by Administrators for the Professions, Inc. of its obligations
to Anthony Bonomo under the foregoing Employment Agreement.
FPIC Insurance Group, Inc.
By:
------------------------------
Its President
-----
14
<PAGE> 1
EXHIBIT 10.4
SEVERANCE AGREEMENT
BETWEEN
FPIC INSURANCE GROUP, INC.
AND
JOHN R. BYERS
THIS AGREEMENT, effective as of the 1st day of January, 1999, between
FPIC Insurance Group, Inc., a Florida corporation (the "Company"), and John R.
Byers, an individual (the "Executive").
W I T N E S E T H:
WHEREAS, the Executive is a valuable employee of the Company and an
integral part of its management and a key participant in the decision making
process relative to planning and policy for the Company; and
WHEREAS, the Company wishes to encourage the Executive to continue his
career and services with the Company for the period during and after an actual
or threatened Change in Control (as hereinafter defined);
NOW THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. Definitions.
a. "Board" shall mean the Board of Directors of the Company.
b. "Cause" shall mean the Executive's fraud or dishonesty that
has resulted or is likely to result in material economic damage to the
Company, or the Executive's willful nonfeasance if such nonfeasance is
not cured within ten days of written notice from the Company, as
determined in good faith by a vote of at least two-thirds of the
non-employee directors of the Company at a meeting of the Board at which
the Executive is provided an opportunity to be heard.
c. "Change in Control" shall mean the earlier of the following
events:
(i) either (A) receipt by the Company of a report on Schedule
13D, or an amendment to such a report, filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), disclosing that any person
(as such term is used in Section 13(d) of the 1934 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 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
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<PAGE> 2
of time specified in Section 13(d) of the 1934 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 1934 Act regardless of whether the Company or such Person would
otherwise be subject to the 1934 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
1934 Act in the case of rights to acquire stock regardless of
whether the Company or such Person would otherwise be subject to
the 1934 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 to Section 628.461 of the Florida Statutes or a
successor statutory provision, 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 or a
successor provision.
(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 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
2
<PAGE> 3
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.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended.
e. "Constructive Discharge" shall mean any (i) material change by
the Company of the Executive's position, functions, or duties to an
inferior position, functions, or duties from that in effect on the date
of this Agreement, (ii) assignment or reassignment by the Company of the
Executive without the Executive's consent to another place of employment
more than 50 miles from the Executive's current place of employment,
(iii) liquidation, dissolution, consolidation or merger of the Company,
or transfer of all or substantially all of its assets, other than a
transaction or series of transactions in which the resulting or surviving
transferee entity has, in the aggregate, a net worth at least equal to
that of the Company immediately before such transaction and expressly
assumes this Agreement and all obligations and undertakings of the
Company hereunder, or (iv) reduction in the Executive's base salary or
target bonus opportunity (if greater than the target bonus opportunity,
the average of the annual bonuses paid to the Executive in the three
calendar years prior to the calendar year of the Constructive Discharge).
f. "Coverage Period" shall mean the period beginning on the
Starting Date and ending on the Ending Date. The "Starting Date" shall be
the date on which a Change in Control occurs. The "Ending Date" shall be
the earlier of (i) the date on which a public announcement is made by the
Company of its intention to abandon a Change in Control transaction, or
(ii) the date that is 36 full calendar months following the date on which
a Change in Control occurs, or (iii) if such Change in Control is subject
to shareholder approval of such transaction, the date that is 36 months
following the date on which the actual consolidation, merger or sale
transaction occurs.
g. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
h. "Independent Tax Counsel" shall mean an attorney, a certified
public accountant with a nationally recognized accounting firm, or a
compensation consultant with a nationally recognized actuarial and
benefits consulting firm, with expertise in the area of executive
compensation tax law, who shall be selected by the Company and shall be
reasonably acceptable to the Executive, and whose fees and disbursements
shall be paid by the Company.
2. Term.
This Agreement shall be effective as of the date of this Agreement and
shall continue thereafter until the earlier of (i) 36 full calendar months
following the date of an occurrence of a Change in Control, or (ii) the date of
the termination of the Executive's employment if such date is prior to the
Coverage Period. After a Change in Control, this Agreement shall remain in
effect until all of the obligations of the parties hereunder are satisfied.
3
<PAGE> 4
3. Severance Benefit.
a. If at any time during the Coverage Period the Executive's
employment hereunder is terminated by the Company for any reason other than
Cause, death or disability, or by the Executive in the event of a Constructive
Discharge, then the Company shall pay to the Executive (or if the Executive has
died before receiving all payments to which he has become entitled hereunder,
the estate of the Executive) severance pay in a lump sum cash amount equal to
three times the sum of Executive's (i) annual salary and (ii) target bonus
opportunity for the current calendar year (if greater than the target bonus
opportunity, the average of the annual bonuses for the three prior calendar
years). The Company shall also pay Executive any unpaid salary or benefits
accrued to the date of termination. In such event, the Executive shall be 100%
vested in all stock options, stock appreciation rights, contingent stock,
restricted stock and other long-term incentive plans. The Executive's
termination of employment with the Company to become an employee of a
corporation that owns 100% of the Company shall not be considered a termination
of employment for purposes of this Agreement. The subsequent termination of
Executive's employment from such corporation shall be considered a termination
of employment for purposes of this Agreement.
b. The Company and the Executive, upon mutual written
agreement, may waive any of the provisions in paragraph 1(e) that would
otherwise constitute a Constructive Discharge. Pursuant to paragraph 3(a) of
this Agreement, Executive may terminate his employment in the event of a
Constructive Discharge by providing written notice to the Company within three
months after the occurrence of such event, specifying the event relied upon for
a Constructive Discharge. Within ten days of receiving such written notice from
Executive, the Company may cure the event that constitutes a Constructive
Discharge.
c. If at any time during the Coverage Period the Executive's
employment is terminated by the Company for any reason other than Cause, death
or disability or by the Executive in the event of a Constructive Discharge, and
the Executive is entitled to the benefits described under subparagraph 1(b) or
subparagraph 4(b) of his Employment Agreement dated as of January 1, 1999, and
as extended and amended thereafter, then the Executive shall be permitted to
select either the benefits (i) that he would otherwise have been entitled to
receive for the remaining term of his Employment Agreement or (ii) those
payments provided for under this Agreement. The Executive shall be permitted to
receive benefits under either the Employment Agreement or this Agreement, but
not benefits from both the Employment Agreement and this Agreement.
d. For a period commencing with the month in which termination
of employment as described in paragraph 3(a) above shall have occurred, and
ending 24 months thereafter, the Executive shall be entitled to all benefits
under the Company's welfare benefit plans (within the meaning of Section 3(1)
of ERISA), as if the Executive were still employed during such period, at the
same level of benefits and at the same dollar cost to the Executive as is
available to all of the Company's senior executives generally and if and to the
extent that equivalent benefits shall not be payable or provided under any such
plan, the Company shall pay or provide tax equivalent benefits on an individual
basis. The benefits provided in accordance with this paragraph 3(d) shall be
secondary to any comparable benefits provided by another employer.
4
<PAGE> 5
e. If Independent Tax Counsel shall determine that the
aggregate payments made to the Executive pursuant to this Agreement and any
other payments to the Executive from the Company that constitute "parachute
payments" as defined in Section 280G of the Code (or any successor provision
thereto) ("Parachute Payments") would be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then payments under this Agreement
shall be reduced to the maximum amount that would not trigger such excise tax.
The Executive shall be permitted to select the benefits to be reduced.
f. In the event of any termination of the Executive's
employment described in paragraph 3(a), the Executive shall be under no
obligation to seek other employment, and, except as provided in paragraph 3(a),
there shall be no offset against amounts due the Executive under this Agreement
on account of any remuneration attributable to any subsequent employment.
4. Source of Payments.
All payments provided for in paragraph 3 above shall be paid in cash from
the general funds of the Company; provided, however, that such payments shall
be reduced by the amount of any payments made to the Executive or his
dependents, beneficiaries or estate from any trust or special or separate fund
established by the Company to assure such payments. The Company shall not be
required to establish a special or separate fund or other segregation of assets
to assure such payments, and, if the Company shall make any investments to aid
it in meeting its obligations hereunder, the Executive shall have no right,
title or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and the Executive or
any other person. To the extent that any person acquires a right to receive
payments from the Company pursuant to this Agreement, such right shall be no
greater than the right of an unsecured creditor of the Company.
5. Mediation and Arbitration.
Any dispute or controversy arising out of or in relation to this
Agreement shall first be submitted to mediation in the City of Jacksonville,
Florida in accordance with the Commercial Mediation Rules of the American
Arbitration Association. If mediation fails to resolve such dispute or
controversy, then such dispute or controversy shall be determined and settled
by arbitration in the City of Jacksonville, Florida, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator may be entered
in any court of competent jurisdiction. The parties hereto agree to use good
faith efforts to select a mediator and, if mediation fails to resolve such
dispute or controversy, an arbitrator. If the parties cannot agree upon a
mediator or arbitrator, such mediator or arbitrator shall be selected in
accordance with the relevant Commercial Rules of the American Arbitration
Association then in effect. The Company's mediation and arbitration expenses,
as well as any litigation costs, including legal counsel and reasonable
experts, shall be paid by the Company. The Executive's mediation and
arbitration costs, as well as any litigation costs, including legal counsel and
reasonable experts, shall be paid by the Company, unless the trier of fact
determines the Executive's claims thereunder are without merit. Whenever any
action is required to be taken under this Agreement within a specified
5
<PAGE> 6
period of time and the taking of such action is materially affected by a matter
submitted to mediation or arbitration, such period shall automatically be
extended by the number of days plus ten that are taken for the determination of
that matter by the parties through mediation or otherwise by the arbitrator.
6. Income Tax Withholding.
The Company may withhold from any payments made under this Agreement all
federal, state or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understanding between the Company and
the Executive with respect to the subject matter hereof and supersedes any
prior severance agreement between the Company and the Executive, except that
this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of any kind elsewhere provided and not
expressly provided for in this Agreement, including without limitation, any
benefit or compensation provided under an executive incentive compensation
program of the Company.
8. Severability.
If, for any reason, any one or more of the provisions or part of a
provision contained in this Agreement shall be held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement not held so invalid, illegal or
unenforceable, and each other provision or part of a provision shall to the
full extent consistent with law continue in full force and effect.
9. Consolidation, Merger, or Sale of Assets.
If the Company consolidates or merges into or with, or transfers
all or substantially all of its assets to, another corporation, the term
"Company" as used herein shall mean such other corporation and this Agreement
shall continue in full force and effect.
10. Notices.
All notices, requests, demands and other communications required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given if hand delivered or mailed, postage prepaid, certified or
registered, first class as follows:
a. to the Company:
FPIC Insurance Group, Inc.
Attention: Chief Executive Officer
1000 Riverside Avenue
Jacksonville, Florida 32204
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<PAGE> 7
b. to the Executive:
John R. Byers
2795 Via Baya Lane
Jacksonville, Florida 32223
or to such other address as either party shall have previously specified in
writing to the other.
11. No Attachment.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall inure to the benefit of,
the Executive and the Company and their respective permitted successors and
assigns.
13. Modification and Waiver.
This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any estoppel against
the enforcement of any provision of this Agreement except by written instrument
signed by the party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for the
future or as to any act other than that specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agreement are included solely
for convenience of reference and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.
15. Governing Law.
This Agreement and its validity, interpretation, performance, and
enforcement shall be governed by the laws of the State of Florida without
giving effect to the choice of law provisions in effect in such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
7
<PAGE> 8
FPIC INSURANCE GROUP, INC.
By:
----------------------------
William R. Russell
John R. Byers
8
<PAGE> 1
EXHIBIT 10.5
FPIC INSURANCE GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Amended and Restated Effective January 1, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PREAMBLE................................................................... 1
1. DEFINITIONS............................................................ 2
2. ELIGIBILITY FOR RETIREMENT BENEFITS.................................... 6
3. AMOUNT AND FORM OF RETIREMENT BENEFIT.................................. 6
4. PAYMENT OF RETIREMENT BENEFITS......................................... 8
5. DEATH BENEFITS PAYABLE................................................. 8
6. MISCELLANEOUS.......................................................... 9
</TABLE>
<PAGE> 3
FPIC INSURANCE GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PREAMBLE
The Supplemental Executive Retirement Plan is amended and restated in its
entirety effective as of January 1, 1999. The provisions of the Plan were
originally effective January 1, 1996. The principle objective of this
Supplemental Executive Retirement Plan continues to be to ensure the payment of
a competitive level of retirement income in order to attract, retain and
motivate selected executives. The plan is designed to provide a benefit which,
when added to other retirement income of the executive, will meet the objective
described above. Eligibility for participation on January 1, 1996 was limited
to William R. Russell and Steven R. Smith. Eligibility for participation in the
plan on January 1, 1999 continues to be William R. Russell and Steven R. Smith
and in addition, John R. Byers shall be eligible to participate.
<PAGE> 4
1. DEFINITIONS
1.1 "Affiliate" means any corporation, partnership or other
organization which, during any period of employment of a Participant, was at
least 50% controlled by the Company or an affiliate of the Company.
1.2 "Basic Plan" means the Florida Physicians Insurance Company, Inc.
Defined Benefit Plan and any successor thereto.
1.3 "Basic Plan Benefit" means the amount of benefit payable from the
Basic Plan to a Participant in the form of a straight life annuity.
1.4 "Board" means the Board of Directors of the Company.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Committee" means members of the Compensation Committee of the
Board.
1.7 "Company" means FPIC Insurance Group, Inc.
1.8 "Disability Retirement Benefit" means the benefit payable at the
Normal Retirement Date determined pursuant to Section 3.3 of this Plan.
1.9 "Early Retirement Benefit" means the benefit payable at the Early
Retirement Date determined pursuant to Section 3.2 of this Plan.
1.10 "Early Retirement Date" means the first day of the month following
the earlier of (i) the date on which the Participant terminates employment on
or after age 60 and elects to commence benefits hereunder, or (ii) the date on
which the Participant terminates employment on or after age 55 and elects to
commence benefits hereunder with the consent of the Committee. A Participant is
eligible for an Early Retirement Date only if the Participant is an employee of
the Company or an Affiliate on or after the age specified in the clause (i) or
(ii) of this Section 1.10.
1.11 "Earnings" means the basic salary of a Participant excluding
bonuses, averaged over the highest three consecutive years of Service;
provided, however,
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<PAGE> 5
Earnings as a result of employment after attainment of age 65 shall not be
considered.
1.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.13 "Normal Retirement Benefit" means the benefit payable at or after
age 65 determined pursuant to Section 3.1 of this Plan.
1.14 "Normal Retirement Date" means the first day of the month
following the later of (i) the date the Participant reaches age 65, or (ii) the
date the Participant terminates employment with the Company.
1.15 "Other Retirement Income" means retirement income payable to a
Participant from the following sources:
(a) his Social Security Benefit,
(b) any benefit previously paid or payable from a defined benefit
plan maintained by:
(i) Florida Physicians Insurance Company,
(ii) Physicians Insurance Company of Ohio, or
(iii) Professional Insurance Management Company, or
(iv) Any subsidiaries of any of the above
(c) any benefits which would have been paid or payable from a
defined benefit plan described in Section 1.15(b), which were
not paid because the individual elected not to receive the
benefit or continued employment and was ineligible for the
benefits, shall be considered to have been paid for purposes
of determining Other Retirement Income. For purposes of
determining a Participant's Early Retirement Benefit or
Disability Retirement Benefit under this Plan any amount paid
or payable from a defined benefit plan described in Section
1.15(b) shall be based
3
<PAGE> 6
on such Participant's Earnings at the time of such Early
Retirement Date.
1.16 "Participant" means an employee of the Company designated as a
Participant. The Participants on January 1, 1999, are as follows: William R.
Russell; Steven R. Smith; and John R. Byers. A change in the Participant's
title will not affect their status as a Participant. Any additional
Participants will be selected by the Committee.
1.17 "Permanent and Total Disability" means termination of employment
with the Company on or after the date the Participant has at least 10 years of
Service due to an injury or illness which is considered a permanent and total
disability within the meaning of Code Section 22(e)(3) and any regulations or
rulings promulgated thereunder. A doctor approved, or selected by, the
Committee shall make the final determination of whether a Participant meets the
provisions of such Code Section.
1.18 "Plan" means the Company's Supplemental Executive Retirement
Plan.
1.19 "Retirement Benefit" means either the Early Retirement Benefit,
Disability Retirement Benefit, or Normal Retirement Benefit as determined
pursuant to Section 3.
1.20 "Service" means a Participant's credited years of service as
defined in the Basic Plan.
1.21 "Social Security Benefit" means the annual Primary Insurance
Amount estimated by the Company to be payable to the Participant at age 65 (or
later date if applicable) under the Federal Social Security Act, provided,
however, that:
(a) the Social Security Benefit for a Participant who dies,
retires, or terminates employment prior to age 65 will be
calculated assuming:
(i) the Participant will receive future wages which would
be treated as wages for purposes of the Federal Social
Security Act at the same level as received by the
Participant from the Company on the date of employment
termination; and
4
<PAGE> 7
(ii) the Participant will elect to begin receiving his
Social Security Benefit as of the earliest age then
allowable under the said Act, or if later, the date the
Participant terminates employment with the Company.
(b) the Social Security Benefit for a Participant who is entitled
to a Disability Retirement Benefit will be calculated
assuming the Participant's disability would make him eligible
for Social Security disability benefits.
(c) the Social Security Benefit; once calculated, will be frozen
as of the date the Participant dies, retires, is totally
disabled or otherwise terminates employment, whichever is
applicable.
(d) For purposes of determining the Social Security Benefit,
amounts which would have been payable beginning at age 65 (or
such later date as specified as the Normal Retirement Age as
specified under the Social Security Act) but were not paid
because the Participant did not apply for such benefits or was
ineligible for such because of continued employment, will be
considered to have been paid.
1.22 "Surviving Spouse" means the spouse to whom the Participant is
married on the earlier of (i) the date of the Participant's death, or (ii) the
effective date the Participant's Normal, Early or Disability Retirement
Benefits, whichever is applicable, begin.
1.23 "Vested Benefit Percentage" means the percentage of a
Participant's Retirement Benefit which is vested pursuant to Section 2.2, or if
applicable Section 2.3 or 2.4.
2. ELIGIBILITY FOR RETIREMENT BENEFITS
2.1 Each Participant under this Plan is eligible to retire and receive
a Retirement Benefit, as determined under Section 3 of this Plan, beginning on
the earlier of such Participant's (i) Early Retirement Date or (ii) Normal
Retirement Date.
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<PAGE> 8
2.2 A Participant's Retirement Benefit will vest ratably commencing on
such Participant's initial date of employment with the Company, or an Affiliate
(considering only the time the entity was an Affiliate) with 1/240 of the total
Retirement Benefit vesting at the end of each month the Participant is employed
by the Company, or an Affiliate (considering only the time the entity was an
Affiliate). A Participant's vested Retirement Benefit shall not be forfeited.
2.3 Notwithstanding Section 2.2 of this Plan, a Participant shall be
100% vested in such Participant's Retirement Benefit under this Plan on the
date such Participant attains age 64 if such Participant is an employee of the
Company or an Affiliate on such date.
2.4 Notwithstanding Section 2.2, the Committee may, in its sole
discretion, 100% vest a Participant's Retirement Benefit even if the
Participant has not attained age 64 or does not have 20 years of Service with
the Company and Affiliates.
3. AMOUNT AND FORM OF RETIREMENT BENEFIT
3.1 The Normal Retirement Benefit will equal ((60% x A)-B) x C), where
<TABLE>
<S> <C>
A = Earnings
B = Other Retirement Income
C = Vested Benefit Percentage
</TABLE>
3.2 The Early Retirement Benefit will equal the Normal Retirement
Benefit, multiplied by the factor shown below corresponding to the number of
years a Participant's Early Retirement Date precedes such Participant's Normal
Retirement Date. The factors will be prorated for a partial year (counting a
partial month as a complete month).
<TABLE>
<CAPTION>
Number of Years Early
Retirement Date Precedes
Normal Retirement Date Factor
---------------------- ------
<S> <C>
1 .9231
2 .8462
3 .7692
4 .7308
</TABLE>
6
<PAGE> 9
<TABLE>
<S> <C>
5 .6923
6 .6538
7 .6154
8 .5769
9 .5292
10 .4862
</TABLE>
3.3 If a Participant terminates employment due to a Permanent and Total
Disability, the Participant will be eligible for a Disability Retirement
Benefit. The Disability Retirement Benefit will equal (60% x A)-B, where
<TABLE>
<S> <C>
A = Earnings
B = Other Retirement Income
</TABLE>
The Company may require, no more frequently than once in any calendar year,
that a disabled Participant submit medical evidence of disability satisfactory
to the Company. The Company will have sole discretion to discontinue a
disability benefit based on a consideration of such evidence or lack thereof.
3.4 The Normal Retirement Benefit will be determined as of the first
day of the month following the date the Participant attains, or would have
attained, age 65, even if the Participant continued employment with the
Company. Payments of the Normal Retirement Benefit will begin on the Normal
Retirement Date.
3.5 The Early Retirement Benefit will be determined as of, and will
begin on, the Early Retirement Date.
3.6 Payments of the Disability Retirement Benefit will begin on the
Normal Retirement Date.
3.7 The benefits determined under this Plan will be payable in the same
form as benefits payable under the Basic Plan; provided, however, that in the
event the Participant elects to receive benefits under the Basic Plan in the
form of a lump sum, benefits under this Plan will be payable in the form of a
straight life annuity, unless the Committee approves a payment of a lump sum
hereunder. (If the Basic Plan is not in existence, such form of benefit
hereunder shall be the form elected by the Participant as if the Basic Plan
were still in existence based on Basic Plan
7
<PAGE> 10
provisions in effect on the date of its termination). The amount payable under
all forms of benefits other than a straight life annuity shall be determined
pursuant to Section 3.8.
3.8 For purposes of determining the amount of payment under any form of
benefit other than a single life annuity, the Committee shall determine the
single sum amount necessary to purchase a straight life annuity in the amount
determined in Sections 3.1 or 3.2 from an insurance company "A Best Rated" or
better as selected by the Committee. All other forms of benefits shall be the
benefit which can be purchased with such single sum amount as determined by
such selected insurance company.
4. PAYMENT OF RETIREMENT BENEFITS
4.1 Benefits payable in accordance with Section 3 will commence on the
first day of the month following the earlier of Participant's (i) Normal
Retirement Date or (ii) Early Retirement Date. Benefits will continue to be
paid on the first day of each succeeding month. The last payment will be on the
first day of the month in which the retired Participant dies unless otherwise
elected in accordance with Section 3.7.
5. DEATH BENEFITS PAYABLE
5.1 If a vested Participant dies before receiving a Retirement Benefit
under this Plan, the Surviving Spouse of such Participant will be eligible to
receive an annuity for the life of the Surviving Spouse equal to 50% of the
Retirement Benefit such Participant would have received pursuant to Section 3
if, for purposes of determining his eligibility for Early Retirement Benefits,
but not for purposes of determining his Vested Percentage (for which purposes
actual date of employment termination shall be used), the Participant's
employment had continued until the earliest permissible benefit commencement
date (which for purposes of this Section 5.1 shall be deemed to be age 55 or
the date of death if later), had received all necessary consents and elected to
receive a benefit under the form of a 50% joint and survivor annuity. A
Surviving Spouse's benefits will be payable monthly, and will commence on the
date selected by the Surviving Spouse, but no sooner than the first date the
Participant could have begun receiving benefits under the Plan. The last
payment will be on the first day of the month in which the Surviving Spouse
dies.
8
<PAGE> 11
5.2 If a Participant dies after receiving a Retirement Benefit under
this Plan, survivor benefits, if any, shall be paid in accordance with the form
of benefit determined under Section 3.7 hereof.
6. MISCELLANEOUS
6.1 The Committee may amend this Plan at any time or from time to time,
in whole or in part. However, no amendment to the Plan will reduce a
Participant's right to receive the benefits or the right of a Surviving Spouse
to continue to receive a benefit in accordance with this Plan as in effect on
the date of execution.
6.2 The Company agrees that it will not merge or consolidate with any
other company or organization, or permit its business activities to be taken
over by any other organization unless and until the succeeding or continuing
company or other organization shall expressly assume all obligations and
liabilities herein set forth.
6.3 Nothing contained herein will confer upon any Participant the right
to be retained in the service of the Company, nor will it interfere with the
right of the Company to discharge or otherwise deal with Participants without
regard to the existence of this Plan.
6.4 This Plan is unfunded, unsecured promise to pay. The Company will
make Plan benefit payments solely on a current disbursement basis.
6.5 To the maximum extent permitted by law, including the provision of
Plan benefits to an alternate payee named in a qualified domestic relations
order, no benefit under this Plan shall be assignable or subject in any manner
to alienation, sale, transfer, claims of creditors, pledge, attachment or
encumbrances of any kind.
6.6 If the Company shall acquire an insurance policy or annuity
contract or any other asset in connection with the liabilities assumed
hereunder, it is expressly understood and agreed that a Participant shall not
have any right with respect to, or claim against, such policy or other asset.
Such policy or asset shall not be deemed to be held under any trust for the
benefit of or to be held in any way as collateral security for the fulfillment
of the obligations of the Company under this Plan. It shall be and remain, a
general, unpledged, unrestricted asset of the Company and to the extent a
Participant acquires a right to receive any payments from the
9
<PAGE> 12
Company under this Plan, such right shall be no greater than the right of any
unsecured, general creditor of the Company.
6.7 The Committee shall have the full authority to and power to
interpret the plan including but not limited to determining eligibility, the
amount of benefits and the date benefits are payable.
6.8 The masculine gender, where appearing in the Plan will be deemed to
include the feminine gender, and the singular may include the plural, unless
the context clearly indicates the contrary.
6.9 Each Participant shall receive a copy of this Plan and the Company
will make available for inspection by any Participant a copy of the rules and
regulations used in administering the Plan.
6.10 This Plan is established under and will be construed according to
the laws of the State of Florida.
Executed as of this 1st day of January, 1999.
FPIC INSURANCE GROUP, INC.
By /s/ WILLIAM R. RUSSELL
-------------------------------
WITNESSES:
/s/ C.M. ALLISON
- ----------------------
/s/ PEGGY A. PARKS
- ----------------------
10
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FPIC INSURANCE GROUP,INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<DEBT-HELD-FOR-SALE> 325,039
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 10,123
<MORTGAGE> 0
<REAL-ESTATE> 4,910
<TOTAL-INVEST> 344,557
<CASH> 17,366
<RECOVER-REINSURE> 1,984
<DEFERRED-ACQUISITION> 2,685
<TOTAL-ASSETS> 584,196
<POLICY-LOSSES> 278,756
<UNEARNED-PREMIUMS> 57,618
<POLICY-OTHER> 1,654
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 58,178
0
0
<COMMON> 984
<OTHER-SE> 164,422
<TOTAL-LIABILITY-AND-EQUITY> 584,196
27,584
<INVESTMENT-INCOME> 4,452
<INVESTMENT-GAINS> 304
<OTHER-INCOME> 7,669
<BENEFITS> 18,649
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 4,003
<INCOME-PRETAX> 9,505
<INCOME-TAX> 2,271
<INCOME-CONTINUING> 7,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,234
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.70
<RESERVE-OPEN> 242,377
<PROVISION-CURRENT> 27,298
<PROVISION-PRIOR> (10,702)
<PAYMENTS-CURRENT> 17
<PAYMENTS-PRIOR> 17,060
<RESERVE-CLOSE> 278,756
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
