SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
FPIC INSURANCE GROUP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value transaction:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
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FPIC Insurance Group, Inc.
225 Water Street, Suite 1400
Jacksonville, Florida 32202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To The Shareholders Of Common Stock Of FPIC Insurance Group, Inc.:
The Annual Meeting of Shareholders of FPIC Insurance Group, Inc. (the
"Company") will be held in the Pensacola Room at the Omni Hotel, located at 245
Water Street, Jacksonville, Florida, on Wednesday, June 7, 2000, at 10:00 a.m.
local time. The purposes of the meeting are:
1. To elect four Directors to serve until their terms expire.
2. To vote on an amendment to the Director Stock Option Plan.
3. To vote on an amendment to the Omnibus Incentive Plan.
4. To transact such other business as may properly come before the
meeting and at any adjournments or postponements of the meeting.
The Board of Directors has set April 14, 2000, as the record date for the
meeting. This means that shareholders of common stock at the close of business
on that date are entitled to:
o receive this notice of the meeting; and
o vote, either by proxy or in person, at the meeting and any
adjournments or postponements of the meeting.
You are cordially invited to attend the Annual Meeting. However, whether
or not you plan to attend the Annual Meeting, we encourage you to sign and
return your proxy card before the meeting, so that your shares will be
represented and voted at the meeting even if you cannot attend. A return
envelope, which requires no postage if mailed in the United States, has been
provided for your use. If you attend the Annual Meeting and inform the Secretary
of the Company in writing that you wish to vote your shares in person, your
proxy will not be used.
By Order of the Board of Directors
-------------------------------------------
John R. Byers
Chief Operating Officer/General Counsel and
Secretary of the Company
Jacksonville, Florida
May 5, 2000
We urge each shareholder to promptly sign and return the enclosed proxy card.
See our question and answer section for information about voting, how to revoke
a proxy, and how to vote shares in person.
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FPIC Insurance Group, Inc.
225 Water Street, Suite 1400
Jacksonville, Florida 32202
May 5, 2000
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 7, 2000
Our Board of Directors is furnishing you this proxy statement to solicit
your proxy to be voted at the 2000 Annual Meeting of Shareholders of FPIC
Insurance Group, Inc. (the "Company"). The meeting will be held in the Pensacola
Room at the Omni Hotel, located at 245 Water Street, Jacksonville, Florida
32202, at 10:00 a.m., local time. Your proxy may also be voted at any
adjournments or postponements of the meeting.
The Annual Report of the Company to its shareholders for the 1999 fiscal
year and this proxy statement and form of proxy are being distributed on or
about May 5, 2000 to shareholders entitled to vote.
All properly executed written proxies that are delivered pursuant to this
solicitation will be voted at the meeting in accordance with the directions
given in the proxy, unless the proxy is revoked before the meeting.
Only holders of record of shares of Common Stock at the close of business
on April 14, 2000 are entitled to vote at the meeting, or at adjournments or
postponements of the meeting. Each holder of record on the record date is
entitled to one vote for each share of Common Stock held. At the close of
business on April 14, 2000, there were 9,388,853 shares of Common Stock issued
and outstanding.
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QUESTIONS AND ANSWERS ABOUT
THE MEETING AND VOTING
1. What is a proxy?
A proxy is your legal designation of another person to vote stock you own.
If you designate someone as your proxy in a written document, that
document is called a proxy or a proxy card. The enclosed proxy card names
two officers of the Company as proxies for the 2000 Annual Meeting of
Shareholders. These two officers are Kim D. Thorpe and Pamela D. Deyo.
2. What is a proxy statement?
A proxy statement is a document that the federal securities laws and
regulations require us to give you when we ask you to sign a proxy card
designating each of Kim D. Thorpe and Pamela D. Deyo as proxies to vote on
your behalf. This year proxy statements are being distributed on or about
May 5, 2000 to shareholders entitled to vote.
3. What is the difference between a shareholder of record and a shareholder who
holds stock in street name?
o If your shares are registered in your name, you are a shareholder of
record.
o If your shares are in the name of your broker or bank, your shares
are held in street name.
4. What different methods can you use to vote?
o Via Proxy: All shareholders may vote by returning the enclosed
proxy card; or
o In Person: All shareholders may vote in person at the meeting. If
you wish to vote in person at the meeting and your
shares of common stock of the Company are held in the
street name of your broker, you must obtain a legal
proxy from your broker in order to vote in person at the
meeting.
5. What is the record date and what does it mean?
The record date for the 2000 Annual Meeting of Shareholders is April 14,
2000. The record date is established by the Board of Directors, as
required by law. Each shareholder of common stock at the close of business
on the record date is entitled:
o to receive notice of the meeting; and
o to vote, one vote for each share of common stock held on the record
date, at the meeting and any adjournments or postponements of the
meeting.
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6. How can you revoke a proxy?
A shareholder can revoke a proxy by any one of the following three
actions:
o giving written notice to the Secretary of the Company;
o delivering a later dated proxy; or
o voting in person at the meeting.
7. Who counts the votes?
The Company's Transfer Agent will tabulate the proxies. John R. Byers,
Chief Operating Officer, General Counsel and Secretary of the Company, has
been designated as the Inspector of Election for the 2000 Annual Meeting
to certify the results of the tabulation.
8. What are your voting choices when voting for Director nominees through the
enclosed proxy card?
In voting on the election of four Director nominees to serve until the
2003 Annual Meeting of Shareholders, you may vote in one of the following
ways:
o in favor of all nominees;
o withhold votes as to all nominees; or
o withhold votes as to specific nominees.
9. What vote is needed to elect Directors?
Directors will be elected by a plurality of the votes cast by the
shareholders voting in person or by proxy at the meeting.
The Board recommends a vote "FOR" each of the nominees.
10. What are your voting choices when voting on each of the amendments to the
Company's stock option plans through the enclosed proxy card?
In voting on each of the amendments to the Company's stock option plans,
you may vote in one of the following ways:
o in favor of the amendment;
o against the amendment; or
o abstain from voting on the amendment.
11. What votes are needed to approve each of the amendments?
A majority of the votes cast by the shareholders voting in person or by
proxy at the Annual Meeting will be necessary to approve the amendment to
the Company's Director Stock Option Plan and the amendment to the
Company's Omnibus Incentive Plan.
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The Board recommends a vote "FOR" each of these amendments.
12. What if a shareholder does not specify a choice for a matter when returning
a proxy?
Shareholders should specify their choice for each matter on the enclosed
form of proxy. If no instructions are given, proxies that are signed and
returned will be voted FOR the election of all Director nominees and FOR
the amendments to the Company's stock option plans.
13. How are abstentions and broker non-votes counted?
Abstentions occur when a shareholder who is entitled to vote a share of
common stock of the Company chooses not to vote that share. Broker
non-votes occur when a broker that holds shares in street name for a
customer does not have authority to vote on certain non-routine matters
because its customer has not provided any voting instruction on the
matter.
Abstentions and broker non-votes will have no effect on business of the
meeting that is of a routine nature and is properly presented at the
meeting. Abstentions and broker non-votes will have no effect on the
outcome of the Company's votes at the 2000 Annual Meeting.
ELECTION OF DIRECTORS
The Company has a staggered Board of Directors, with three classes of
directors that serve for terms of three years. The Board of Directors currently
consists of 14 persons. The Company's Articles of Incorporation provide that the
number of directors may be determined from time to time by resolution adopted by
the affirmative vote of at least 75% of the entire Board of Directors. This
number and its determination is exclusive of directors to be elected by the
holders of any one or more series of Preferred Stock voting separately as a
class or classes. No such Preferred Stock is outstanding. The Company's Bylaws
provide that the Company's President will always be nominated by the Board of
Directors for election to the Board of Directors whenever the President's term
as a director expires or whenever the President is not a director.
The Board is considering a possible increase in its number of directors
for the purpose of adding additional areas of expertise to the Board. Any new
directorships created would be filled in accordance with Florida law and the
Company's Articles of Incorporation by the Board approving any new directors by
a vote of 75% of the directors then in office.
Members of the Board of Directors are required to be between 18 and 70
years of age; provided that (i) any director who is elected prior to becoming 70
years of age may complete his then current term as a director and (ii) any
director serving as of January 10, 1998 who as of such date was older than 70
years of age or who has or will become older than 70 years of age during his
then current term as a director will be eligible to serve one additional term as
a director for the term commencing upon the termination of his then current
term.
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At the Annual Meeting, four directors are to be elected to hold office
until the 2003 Annual Meeting of Shareholders or until their successors are
elected and qualified. The persons designated as nominees for election as
directors are Richard J. Bagby, M.D., Robert O. Baratta, M.D., Louis C. Murray,
M.D. and William R. Russell. Each of such nominees is currently a director of
the Company.
If, for any reason, any of the nominees is not a candidate when the
election occurs, the enclosed Proxy may be voted for a substitute nominee. The
Board of Directors does not anticipate that any nominee will not be a candidate.
Further information regarding the nominees and the other directors is set forth
below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES.
BOARD OF DIRECTORS OF FPIC INSURANCE GROUP, INC.
Nominees for Terms Expiring in 2003
Richard J. Bagby, M.D., 59, is engaged in the private practice of
diagnostic radiology in Orlando, Florida. Dr. Bagby has practiced medicine since
1972. Dr. Bagby is a Past-President of the Florida Medical Association ("FMA")
and has served as a director of the Company since its formation in 1996. Dr.
Bagby has also served as a director of the Company's subsidiary, Florida
Physicians Insurance Company, Inc. ("FPIC"), since 1993.
Robert O. Baratta, M.D., 59, is engaged in the private practice of
ophthalmology in Stuart, Florida. Dr. Baratta has practiced medicine since 1973.
He has served as a director of the Company since its formation in 1996, and has
served as Chairman since July 1999. Dr. Baratta also served as a director of
FPIC from 1993 to March 2000.
Louis C. Murray, M.D., 75, is a family physician engaged in private
practice in Orlando, Florida. Dr. Murray has practiced medicine since 1954. Dr.
Murray is a Past-President of the FMA and has served as a director of the
Company since its formation in 1996 and as a director of FPIC from 1988 to 1999.
William R. Russell, 53, is the President and Chief Executive Officer of
the Company. Mr. Russell has served as President, Chief Executive Officer and as
a director of the Company since its formation in 1996. He has served as a
director of FPIC since 1990. Mr. Russell also served as President and Chief
Executive Officer of FPIC from 1990 to 1999 and since 1999 has served as Chief
Executive Officer of FPIC.
Incumbent Directors Whose Terms Expire In 2002
Gaston J. Acosta-Rua, M.D., 62, is a neurosurgeon engaged in private
practice in Jacksonville, Florida. Dr. Acosta-Rua has practiced medicine since
1971. Dr. Acosta-Rua has served as a director of the Company since its formation
in 1996 and served as Chairman of the Board from 1996 to 1997. Dr. Acosta-Rua
has served as a director of FPIC since 1986 and served as Chairman of FPIC's
Board of Directors from 1994 to 1997.
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Curtis E. Gause, D.D.S., 75, is a retired dentist who is
President-Emeritus and consultant for a dental center in St. Petersburg,
Florida. Dr. Gause practiced dentistry from 1954 to 1992. Dr. Gause, a
Past-President of the Florida Dental Association (the "FDA"), has served as a
director of the Company since its formation in 1996 and as a director of FPIC
from 1993 to 1999.
Guy T. Selander, M.D., 64, is a family physician engaged in private
practice in Jacksonville, Florida. Dr. Selander has practiced medicine since
1964. Dr. Selander is a Past-President of the FMA and has served as a director
of the Company since its formation in 1996 and as a director of FPIC since 1989.
Dr. Selander served as Vice-Chairman of the Board of Directors of the Company
from 1997 to 1999. Dr. Selander is currently Vice-Chairman of the Board of
Directors of FPIC.
David M. Shapiro, M.D., 46, is engaged in the private practice of
anesthesiology in Ft. Myers, Florida. Dr. Shapiro has practiced medicine since
1986. Dr. Shapiro has served as a director of the Company and FPIC since 1996.
Dr. Shapiro is currently Vice-Chairman of the Board of Directors of the Company.
James G. White, M.D., 67, is engaged in the private practice of pediatric
medicine in Ormond Beach, Florida. Dr. White has practiced medicine since 1966.
Dr. White is a Past-President of the FMA and has served as a director of the
Company since its formation in 1996 and as a director of FPIC since 1986. Dr.
White served as Chairman of the Board of Directors of the Company from 1997
until 1999 and is currently Chairman of the Board of Directors of FPIC.
Incumbent Directors Whose Terms Expire In 2001
James W. Bridges, M.D., 65, is engaged in the private practice of
obstetrics and gynecology in Miami, Florida. Dr. Bridges has practiced medicine
since 1967. Dr. Bridges has served as a director of the Company since its
formation in 1996 and as a director of FPIC since 1985.
D. L. Van Eldik, M.D., 71, is a retired family physician who formerly
practiced in Lake Worth, Florida. Dr. Van Eldik practiced medicine from 1957 to
1998. Dr. Van Eldik is a Past-President of the FMA and has served as a director
of the Company since its formation in 1996 and as a director of FPIC from 1988
to 1998.
J. Stewart Hagen, M.D., 68, is a retired general surgeon who formerly
practiced in Ft. Myers, Florida. Dr. Hagen practiced medicine from 1965 to 1996.
Dr. Hagen has served as a director of the Company since its formation in 1996
and as a director of FPIC since 1988.
Frank Moya, M.D., 71, is a retired anesthesiologist who formerly practiced
in Miami, Florida. Dr. Moya practiced medicine from 1953 to 1997. Dr. Moya is a
Co-Founder, Chairman of the Board of Directors and Chief Executive Officer of
Anesthesiologists' Professional Assurance Company ("APAC"), a wholly owned
subsidiary of the Company. Dr. Moya is a former Dean of the University of Miami
School of Medicine and Chairman of the Department of Anesthesiology. Dr. Moya is
also a Past-President of the American Society of Anesthesiologists. Dr. Moya has
served as a director of the Company since 1998 and served as a director of FPIC
from 1998 to 1999.
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Henry M. Yonge, M.D., 79, is a retired physician who specialized in
internal medicine and formerly practiced in Pensacola, Florida. Dr. Yonge
practiced medicine from 1952 to 1999. Dr. Yonge has served as a director of the
Company since its formation in 1996 and served as a director of FPIC from 1985
to 1999. Dr. Yonge served as Chairman of FPIC's Board of Directors from 1988 to
1991.
PRINCIPAL SHAREHOLDERS AND SECURITIES OWNERSHIP
OF MANAGEMENT
According to the Company's stock transfer records, as of March 31, 2000,
no shareholder owned five percent or more of the Company's outstanding shares of
common stock.
The following table sets forth the beneficial ownership of the Company's
common stock, including stock options that have vested or are exercisable within
60 days of March 31, 2000, by each of the directors and nominees, each of the
current executive officers named in the Summary Compensation Table and all of
the Company's directors and executive officers as a group as of March 31, 2000.
Shares Percent of
Name of Beneficial Owner (18) Beneficially Owned Ownership (1)
----------------------------- ------------------ ------------
Gaston J. Acosta-Rua, M.D. 37,700 (2) *
Richard J. Bagby, M.D. 37,250 (3) *
Robert O. Baratta, M.D. 53,366 (4) *
James W. Bridges, M.D. 29,000 (5) *
John R. Byers 66,667 (6) *
Curtis E. Gause, D.D.S. 10,333 (7) *
J. Stewart Hagen, M.D 31,868 (8) *
Frank Moya, M.D. 102,817 (9) *
Louis C. Murray, M.D. 35,000 (10) *
William R. Russell 167,537 (11) 1.6
Guy T. Selander, M.D. 31,200 (12) *
David M. Shapiro, M.D. 29,000 (13) *
D.L. Van Eldik, M.D. 12,000 (14) *
James G. White, M.D. 32,050 (15) *
Henry M. Yonge, M.D. 13,434 (16) *
Directors and Executive Officers
as a Group (18 Persons) 727,545 (17) 7.0
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* Less than 1.0% of the Company's outstanding common stock.
(1) Based on an aggregate of (i) the number of shares of the Company's common
stock outstanding at March 31, 2000 and (ii) options vested as of March 31, 2000
or that are exercisable within 60 days of March 31, 2000.
(2) Dr. Acosta-Rua disclaims beneficial ownership of 1,000 of these shares,
which are owned by his wife. Dr. Acosta-Rua's beneficial ownership includes
25,000 shares that may be acquired upon the exercise of presently vested
nonqualified options.
(3) Dr. Bagby's beneficial ownership includes 25,000 shares that may be acquired
upon the exercise of presently vested nonqualified options.
(4) Dr. Baratta's beneficial ownership includes 25,000 shares that may be
acquired upon the exercise of presently vested nonqualified options.
(5) Dr. Bridges' beneficial ownership includes 25,000 shares that may be
acquired upon the exercise of presently vested nonqualified options.
(6) Mr. Byers' beneficial ownership includes 66,667 shares that may be acquired
upon the exercise of presently vested options (63,355 nonqualified and 3,312
incentive stock options).
(7) Dr. Gause's beneficial ownership includes 8,334 shares that may be acquired
upon the exercise of presently vested nonqualified options.
(8) Dr. Hagen's beneficial ownership includes 21,668 shares that may be acquired
upon the exercise of presently vested nonqualified options.
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(9) Dr. Moya's beneficial ownership includes 59,626 shares held by APAA
Liquidating Trust, of which Dr. Moya is a trustee; 8,000 shares held by American
Professional Assurance Ltd., of which Dr. Moya is Chairman of the Board of
Directors; 3,000 shares held in a Limited Partnership, of which Dr. Moya is a
partner; and 25,000 shares that may be acquired upon the exercise of presently
vested nonqualified options.
(10) Dr. Murray disclaims beneficial ownership of 600 of these shares, which are
owned by his children. Dr. Murray's beneficial ownership includes 25,000 shares
that may be acquired upon the exercise of presently vested nonqualified options.
(11) Mr. Russell's beneficial ownership includes 11,088 shares held in the
Company's 401(k) plan that are voted by the trustees of the plan, 3,116 shares
held in the Company's Employee Stock Purchase Plan, and 153,333 shares that may
be acquired upon the exercise of presently vested options (150,833 nonqualified
and 2,500 incentive stock options).
(12) Dr. Selander disclaims beneficial ownership of 1,000 of these shares, which
he transferred to grandchildren. Dr. Selander's beneficial ownership includes
25,000 shares that may be acquired upon the exercise of presently vested
nonqualified options.
(13) Dr. Shapiro's beneficial ownership includes 20,000 shares that may be
acquired upon the exercise of presently vested nonqualified options.
(14) Dr. Van Eldik's beneficial ownership includes 10,000 shares that may be
acquired upon the exercise of presently vested nonqualified options.
(15) Dr. White's beneficial ownership includes 25,000 shares that may be
acquired upon the exercise of presently vested nonqualified options.
(16) Dr. Yonge's beneficial ownership includes 13,334 shares that may be
acquired upon the exercise of presently vested nonqualified options.
(17) Includes 32,427 shares held by all employees in the Company's 401(k) plan
that are voted by the trustees of the plan and of which an aggregate of 11,810
shares are held in the plan in the name of certain of the Company's executive
officers. Also includes disclaimed beneficial ownership of 3,200 of these shares
that are owned by relatives of directors and executive officers.
(18) Steven R. Smith, former President and Chief Executive Officer of FPIC, and
Robert B. Finch, former Executive Vice President and Chief Financial Officer of
the Company, are not reported as beneficial owners due to their departure from
the Company in August 1999. Steven M. Rosenbloom, former Senior Vice President
of the Company, is not reported as a beneficial owner, as effective March 1999,
Mr. Rosenbloom ceased to be an executive officer of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers, directors and persons who own more than ten percent of
the Company's common stock are required by Section 16(a) of the Securities
Exchange Act of 1934 and related regulations to:
o File reports of their ownership and changes in ownership of common
stock with the SEC and the NASDAQ National Market; and
o Furnish the Company with copies of the reports.
Based solely on written representations from reporting persons and on our
review of the Section 16(a) reports provided by those individuals, we believe
that all filing requirements have been met, except as set forth below. Steven R.
Coniglio, who became Acting Chief Financial Officer of the Company on August 22,
1999, filed his initial Form 3 on October 12, 1999; J. Stewart Hagen, a
director, purchased shares of the Company on September 3, 1999, which were
reported on a Form 4 on October 20, 1999; Louis C. Murray, a director, purchased
shares of the Company on September 16, 1999, which were reported on a Form 4 on
October 20, 1999 and Dr. Murray gifted 500 shares on June 18, 1999 and 100
shares on December 23, 1999, which will be reported on an amended Form 5. David
L. Rader, who became President and Chief Operating Officer of FPIC on September
11, 1999, filed his initial Form 3 on October 8, 1999; Kim D. Thorpe, who became
Executive Vice President and Chief Financial Officer on November 6, 1999, filed
his initial Form 3 on December 2, 1999 and one transaction, inadvertently
omitted from that report, was reported by amendment as soon as the omission was
identified; and James G. White, a director, purchased shares of the Company on
November 12, 1999, which were reported on a Form 4 on January 4, 2000.
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MEETINGS OF THE BOARD OF DIRECTORS
During 1999, the Board of Directors held twelve meetings. All current
Directors attended at least 75% of the meetings of the Board of Directors and of
the committees on which they served.
The members of the Executive Committee of the Board of Directors are Mr.
Russell and Drs. Baratta (Chairman), Hagen, Selander, Shapiro and White. This
committee may exercise the powers of the Board of Directors whenever the
Chairman of the Company's Board of Directors has determined that it is not
practical for the full Board of Directors to meet and action is required to be
taken on matters that the Chairman determines to be of an urgent nature. The
Executive Committee met one time during 1999.
The members of the Nominating Committee of the Board of Directors are Drs.
Baratta (Chairman), Bagby, Moya, Shapiro, White and Yonge. During 1999, this
Committee had the responsibility for recommending qualified candidates to fill
vacancies on the Board of Directors. The Nominating Committee met one time
during 1999. Beginning March 2000, the Nominating Committee was renamed the
Board Governance Committee and its responsibilities were expanded to include:
determination of remuneration of Board members; oversight of the Director Stock
Option Plan; and development and implementation of a method of evaluating the
Company's Board, its Committees, and the Company's Chief Executive Officer.
The members of the Budget and Compensation Committee of the Board of
Directors are Drs. Acosta-Rua, Bagby, Hagen, Selander (Chairman), Shapiro and
Van Eldik. During 1999, this Committee reviewed and determined the compensation
of the Company's executive officers and directors, and administered the
Company's stock option and benefit plans. The Budget and Compensation Committee
met two times during 1999. Beginning March 2000, determination of remuneration
of directors and oversight of the Company's Director Stock Option Plan became
the responsibility of the Board Governance Committee.
The members of the Audit Committee of the Board of Directors are Drs.
Acosta-Rua (Chairman), Bridges, Moya, Murray and Selander. This committee
recommends selection of the Company's independent accountants to audit the
Company's consolidated financial statements and to perform professional services
related to the audit. The committee reviews the scope and results of such audit
and reviews the scope and results of procedures performed with respect to
systems of internal controls and accounting policies and procedures. The Audit
Committee met three times during 1999. Pursuant to the 1999 recommendations of
the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit
Committees and the recently adopted rules of the Securities and Exchange
Commission and the NASD, the Audit Committee recommended to the Board a new
Audit Committee charter, which was approved by the Board at its March 2000
meeting. The newly adopted charter complies with the new rules that are designed
to improve disclosure related to the functioning of corporate audit committees
and to enhance the reliability and credibility of financial statements of public
companies.
The members of the Investment Committee of the Board of Directors are Drs.
Acosta-Rua, Bridges, Gause, Hagen (Chairman), Moya, and Murray. The committee
oversees the
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Company's investment policy with respect to portfolio investments and approves
portfolio investments. The Investment Committee met five times during 1999.
The members of the Bylaws Committee of the Board of Directors are Drs.
Gause, Murray, Van Eldik, and Yonge (Chairman). This committee interprets the
Company's Bylaws if questions arise and reviews the Bylaws from time to time to
determine if changes are appropriate for legal or operational purposes. The
Bylaws Committee met two times during 1999.
DIRECTORS' COMPENSATION
Through October 1999, members of the Board of Directors received annual
compensation in two components - a quarterly fee, and a fee for each meeting
attended. The Chairman received a quarterly fee of $7,500, the Vice Chairman a
quarterly fee of $6,000, and the other members a quarterly fee of $4,500. Each
director received a fee of $800 for each day they attended Committee or Board
meetings. Mr. Russell, an employee of the Company, received no directors' fees.
Dr. Moya, an officer of Anesthesiologists' Professional Assurance Company, a
wholly owned subsidiary of the Company, received only the daily fee for each
Committee and Board meeting attended. Commencing November 1999, the method of
director compensation was changed, based on recommendations from an outside
compensation consultant and the Company's Budget and Compensation Committee and
approval of the Board, pursuant to which each director, other than Mr. Russell,
receives (i) an annual fee of $25,000 (subject to reduction as determined by the
Board in the event a director is absent from more than 25% of the Board meetings
during any calendar year), with the Chairman receiving an additional $12,000 and
the Vice Chairman receiving an additional $6,000, and (ii) annual grants of
5,000 options each issued pursuant to the Company's Director Stock Option Plan
(with an exercise price equal to the market price of the Company's common stock
on the date of grant and pro rata vesting over a three-year period), with the
first grant of 5,000 options to each outside director being made on November 6,
1999, and subsequent annual grants being made as of the date of each subsequent
annual shareholders' meeting. In addition, each director received during 1999,
and will continue to receive under the new plan, reimbursement for reasonable
expenses incurred for attendance at meetings.
In addition, under the Director Stock Option Plan, each new board member
who is not an employee of the Company receives an initial grant of nonqualified
options to purchase 5,000 shares of the Company's common stock. Such options are
granted on the date the person first becomes a director of the Company and have
an exercise price equal to the fair market value of the Company's Common Stock
on the date of grant. The Director Stock Option Plan gives the Board of
Directors the ability to make additional grants to members of the Board of
Directors from time to time at its discretion.
During 1999, the Company offered a Stock Purchase Incentive Program ("the
Program") to its directors to encourage their ownership of the Company's stock.
Under the Program, directors who purchased shares of the Company's common stock
during the term of the Program were granted matching nonqualified stock options
on a one-for-one basis, up to a maximum of 5,000 options per director. The
Program began July 1, 1999 and terminated April 28, 2000. For transactions prior
to November 6, 1999, the per share exercise price of options granted under the
Program equaled the per share closing market price of the Company's common stock
on November 6, 1999; and for transactions on or after November 6, 1999 and until
the end of the
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<PAGE>
Program, the per share exercise price equaled the per share closing price of the
Company's common stock on the date of the transaction. Options granted under the
Program will vest in three equal annual installments commencing on the one-year
anniversary of their grant. Options under the Program were granted under the
Director Stock Option Plan.
The Company also offers directors a nonqualified deferred compensation
plan. Under this plan, directors may defer into the plan all or a portion of
their directors' fees. Deferred fees will be paid, as adjusted for investment
gains or losses, at such time in the future as specified by the participating
director.
11
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation of
the principal executive officer and the four other most highly compensated
executive officers during 1999.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------------- ---------------
Securities All Other
Other Annual Underlying Compensation
Name and Principal Position Fiscal Year Salary ($) (1) Bonus ($) Compensation Options (#) ($)
- ------------------------------ ----------- ------------------ ----------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
William R. Russell 1999 500,000 172,260 -- 160,000 29,869 (2)
President and Chief 1998 269,555 225,000 -- -- 29,712
Executive Officer 1997 245,050 110,272 -- 60,000 29,629
- ----------------------------------------------------------------------------------------------------------------------------------
John R. Byers 1999 350,000 100,485 -- 60,000 24,125 (4)
Chief Operating Officer, 1998 -- -- -- 100,000 --
General Counsel and Secretary (3) 1997 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Steven R. Smith 1999 240,000 (5) -- -- 45,000 (5) 870,214 (6)
President and Chief Executive 1998 207,304 77,739 -- -- 27,410
Officer of FPIC 1997 191,948 71,980 -- 50,000 27,410
- ----------------------------------------------------------------------------------------------------------------------------------
Robert B. Finch 1999 233,333 (7) -- -- 80,000 (7) 852,163 (8)
Executive Vice President and 1998 159,000 105,000 -- -- 24,900
Chief Financial Officer 1997 150,000 45,000 -- 40,000 23,587
- ----------------------------------------------------------------------------------------------------------------------------------
Steven M. Rosenbloom 1999 186,575 42,853 -- 22,500 26,350 (10)
Senior Vice President and 1998 179,399 53,820 -- -- 26,378
Chief Investment Officer of FPIC (9) 1997 174,174 52,252 -- 40,000 26,615
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes compensation amounts earned during the fiscal year but deferred
under the Company's 401(k) plan and benefits set aside pursuant to the Company's
nonqualified deferred compensation plan (Mr. Russell $1,875; Mr. Smith $1,875;
Mr. Byers $1,875; Mr. Finch $1,875; and Mr. Rosenbloom $1,875.)
(2) Includes the Company's contributions to the profit sharing plan of $16,000,
the Company's matching contributions for the 401(k) plan of $4,000,
contributions from the Company pursuant to the Company's nonqualified deferred
compensation plan of $4,125, and $5,744 for the cost of an excess disability
insurance policy.
(3) Mr. Byers, age 45, became Executive Vice President and General Counsel of
the Company in January 1999. In May 1999, Mr. Byers became Secretary of the
Company and in June 1999, Mr. Byers was elected Chief Operating Officer. Mr.
Byers is a corporate/securities attorney with over twenty years of experience.
For ten years prior to joining the Company, Mr. Byers served as a partner with
the law firm LeBoeuf, Lamb, Greene & MacRae, L.L.P.
(4) Includes the Company's contributions to the profit sharing plan of $16,000,
the Company's matching contributions for the 401(k) plan of $4,000, and
contributions from the Company pursuant to the Company's nonqualified deferred
compensation plan of $4,125.
(5) Mr. Smith departed the Company in August 1999. Mr. Smith's salary is
reported through his departure date. Mr. Smith's departure from the Company
resulted in the forfeiture of 45,000 unvested options.
(6) Includes approximately $858,804 in salary and benefits due Mr. Smith under
the terms of his Employment Agreement. Of this amount, $122,514 was paid during
1999 and $736,290 was accrued during 1999 and will be paid in increments through
December 31, 2001. The terms of Mr. Smith's Employment Agreement are discussed
under the heading "Employment Agreements and Severance Agreements" on page 16.
Also includes the Company's matching contributions for the 401(k) plan of
$4,000, contributions from the Company pursuant to the Company's nonqualified
deferred compensation plan of $4,125, and $3,285 for the cost of an excess
disability insurance policy.
(7) Mr. Finch departed the Company in August 1999. Mr. Finch's salary is
reported through his departure date. Mr. Finch's departure from the Company
resulted in the forfeiture of 80,000 unvested options.
(8) Includes approximately $844,038 in salary and benefits due Mr. Finch under
the terms of his Employment Agreement. Of this amount, $116,667 was paid during
1999 and $727,371 was accrued during 1999 and will be paid in increments through
December 31, 2001. The terms of Mr. Finch's Employment Agreement are discussed
under the heading "Employment Agreements and Severance Agreements" on page 16.
Also includes the Company's matching contributions for the 401(k) plan of
$4,000, and contributions from the Company pursuant to the Company's
nonqualified deferred compensation plan of $4,125.
(9) Mr. Rosenbloom, age 49, has served as an officer of FPIC for four years and
was an officer of the Company from its inception until March 1999.
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<PAGE>
(10) Includes the Company's contributions to the profit sharing plan of $16,000,
the Company's matching contributions for the 401(k) plan of $4,000,
contributions from the Company pursuant to the Company's nonqualified deferred
compensation plan of $4,125, and $2,225 for the cost of an excess disability
insurance policy.
Option Grants in 1999. The following table contains information concerning
stock option grants during 1999 to the Company's Chief Executive Officer and to
the Company's other four most highly compensated executive officers:
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed Annual Rates of
Stock Price Appreciation for Option Term (1)
-----------------------------------------------------
Individual Grants 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options Exercise Market
Underlying Granted to or Base Price on
Options Employees Price Date of Expiration Stock Dollar Gain Stock Price Dollar Gain
Name Granted (#) in 1999 ($/Sh) Grant ($) Date Price ($) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100,000 19.9 $ 40.00 $ 40.00 3/27/09 $ 65.16 $ 2,516,000 $ 103.76 $ 6,376,000
William R. Russell 60,000 11.9 14.63 14.63 9/11/09 23.84 552,600 37.95 1,399,200
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Byers 60,000 11.9 14.63 14.63 9/11/09 23.84 552,600 37.95 1,399,200
- ------------------------------------------------------------------------------------------------------------------------------------
Steven R. Smith 45,000 (2) 9.0 40.00 40.00 3/27/09 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Robert B. Finch 80,000 (3) 15.9 40.00 40.00 3/27/09 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Rosenbloom 22,500 4.5 40.00 40.00 3/27/09 65.16 556,100 103.76 1,434,600
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Potential Realizable Values are calculated based on the fair market
value of the Company's common stock on the date of grant, which is equal to the
exercise price of options granted in fiscal 1999, assuming that the stock
appreciates in value from the date of grant until the end of the option term at
the annual rate specified (5% and 10%). Potential Realizable Values are net of
the option exercise price. The assumed rates of appreciation are specified in
rules of the Securities and Exchange Commission, and do not represent the
Company's estimate or projection of its future stock price. Actual gains, if
any, resulting from stock option exercises and common stock holdings are
dependent on the future performance of the Company's common stock, overall stock
market conditions, and the option holder's continued employment through the
exercise/vesting period. There can be no assurance that the amounts reflected in
this table will be achieved.
(2) As a result of Mr. Smith's departure from the Company in August 1999, 45,000
unvested options were forfeited.
(3) As a result of Mr. Finch's departure from the Company in August 1999, 80,000
unvested options were forfeited.
13
<PAGE>
Option Exercises. The following table shows stock option exercises during
1999 by the Company's Chief Executive Officer and by the Company's other four
most highly compensated executive officers.
Option Exercises in Fiscal 1999 and
1999 Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money
at 12/31/99 Options at 12/31/99 (1)
-----------------------------------------------------------
Shares ($)
Acquired Value ($) ($)
Name Upon Exercise Realized (2) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William R. Russell 60,000 (3) 2,245,900 (3,4) 120,000 160,000 454,650 123,450
- ------------------------------------------------------------------------------------------------------------
John R. Byers -- -- 66,667 93,333 -- 123,450
- ------------------------------------------------------------------------------------------------------------
Steven R. Smith 62,000 1,275,928 73,000 -- (5) 194,753 --
- ------------------------------------------------------------------------------------------------------------
Robert B. Finch 30,000 276,106 65,000 -- (6) 211,688 --
- ------------------------------------------------------------------------------------------------------------
Steven M. Rosenbloom 13,500 366,713 91,500 22,500 384,457 --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option. The Value of Unexercised
In-The-Money Options represents the difference between the exercise price of
unexercised options and the closing market price of $16.6875 on December 31,
1999, of the Company's common stock. The actual value of unexercised options
fluctuates with market activity.
(2) Value Realized is calculated by determining the difference between the
exercise price of the options exercised and the fair market value of the
securities underlying the options, represented by the sales price of such shares
immediately sold upon exercise.
(3) Exercised at the direction of Mr. Russell's former spouse and then
transferred to his former spouse pursuant to a Domestic Relations Order. Any
value realized upon disposition of underlying shares will accrue to Mr.
Russell's former spouse as the owner of such shares.
(4) Because Mr. Russell transferred, rather than sold, the shares acquired upon
exercise, value realized has been calculated by determining the difference
between the exercise price of the options and the closing market price of the
Company's common stock, as a fair market value could not be determined from a
sales price.
(5) As a result of Mr. Smith's departure from the Company in August 1999, 45,000
unvested options were forfeited.
(6) As a result of Mr. Finch's departure from the Company in August 1999, 80,000
unvested options were forfeited.
Retirement Plans
The following table sets forth the maximum annual benefits payable in the
form of a straight life annuity under the Company's qualified defined benefit
plan (the "Retirement Plan") and, if eligible, the Company's Excess Benefit Plan
(the "Excess Benefit Plan") to an officer or employee retiring at age 65 with
the specified combination of final average compensation (the average of the five
consecutive years of compensation that give the highest average out of the ten
latest years) and years of credited service. The benefit accrual rate is higher
for compensation in excess of the compensation covered by Social Security than
for compensation covered by Social Security. The amounts shown in the Pension
Plan Table attributable to the Retirement Plan and Excess Benefit Plan, if
applicable, were calculated using Social Security covered compensation levels
based upon the average age of two executives and have been calculated without
reflection of the current limit of $170,000 on includible compensation. Messrs.
Russell and Byers are covered by the Retirement Plan, but not the Excess Benefit
Plan. As of December 31, 1999, the
14
<PAGE>
credited full Years of Service under the Retirement Plan of the following
officers were as follows: Mr. Russell -- eleven years; and Mr. Byers - one year.
Generally, compensation for purposes of the Retirement Plan and the Excess
Benefit Plan includes salary and annual bonus, as reported in the Summary
Compensation Table, as well as compensation that is contributed by the Company
pursuant to a salary reduction agreement and that is not currently includible in
the individual's gross income by reason of the application of certain provisions
of the Internal Revenue Code of 1986, as amended (the "Code").
PENSION PLAN TABLE
Years of Service
-------------------------------------------
Average Compensation 5 10 15
- ------------------------ ------------ ------------ ------------
$ 200,000 $ 11,855 23,710 35,565
300,000 18,855 37,710 56,565
400,000 25,855 51,710 77,565
500,000 32,855 65,710 98,565
600,000 39,855 79,710 119,565
700,000 46,855 93,710 140,565
800,000 53,855 107,710 161,565
900,000 60,855 121,710 182,565
The Retirement Plan is a funded, tax-qualified, non-contributory plan that
covers substantially all of the Company's employees including executive
officers. For the year ending December 31, 2000, the annual retirement benefit
payable under the Retirement Plan is limited by Federal Law to $135,000 and the
maximum covered compensation is limited to $170,000. The total number of years
of service that may be taken into consideration under the Retirement Plan is
limited to fifteen. Optional forms of payment available under the Retirement
Plan or a benefit commencement date prior to age sixty-five may result in
substantially reduced payments to any employee electing such an option.
The Excess Benefit Plan provides a means of equalizing the benefits of
those employees participating in the Retirement Plan, other than those
individuals covered under the SERP, whose funded benefits under the Retirement
Plan are or will be limited by the application of ERISA, the Code, or any
applicable law or regulation. The Excess Benefit Plan is a nonqualified plan and
benefits payable under the Excess Benefit Plan are not funded and are payable
out of the Company's general funds.
The SERP is an unfunded nonqualified plan. The SERP provides Messrs.
Russell and Byers, who have been selected by the Compensation Committee, with
income at retirement. A participant in the SERP is eligible to retire and
receive a retirement benefit beginning on the earlier of such participant's (i)
early retirement date, (ii) disability retirement date or (iii) normal
retirement date. The retirement benefit at the normal retirement date equals 60%
of
15
<PAGE>
pre-retirement compensation (averaged over the highest three consecutive years
of service), less Retirement Plan and all predecessor plans' benefits and Social
Security benefits. Compensation for purposes of the SERP includes the salary of
a participant as reported in the Summary Compensation Table, but does not
include bonuses. The early retirement benefit equals the retirement benefit at
the normal retirement date times the percentage of benefits vested, reduced by
an early retirement factor for each month a participant's early retirement date
occurs prior to such participant's normal retirement date. A participant
terminating employment due to a permanent and total disability will be eligible
for a disability retirement benefit equal to 60% of pre-retirement compensation,
less Retirement Plan and all predecessor plans' benefits and Social Security
benefits. In the event of the participant's death prior to retirement, such
participant's surviving spouse will be eligible to receive a death benefit equal
to 50% of the retirement benefit the participant would otherwise have been
eligible to receive. Benefits attributable to the SERP are subject to reduction
for Social Security benefits received by participants. The estimated annual
retirement benefits for Messrs. Russell and Byers were calculated using 1999
base salary; Social Security benefits were based on the maximum benefits payable
for an individual retiring at age sixty-five in 1999; and Retirement Plan
benefits were based on 1999 base salary, including bonuses, assuming fifteen
years of service. The estimated annual retirement benefit from the SERP on
December 31, 1999 is $72,803 for Mr. Russell and $7,833 for Mr. Byers.
The Company's qualified defined contribution plan has two parts. In the
first part, the Company contributes 10% of each participant's compensation for
the plan year. In the second part, the Company allows employees to contribute up
to 5% of their compensation earned during the plan year, of which up to 2.5% is
matched 100% by the Company.
The Company also offers certain key employees selected by the Board of
Directors a nonqualified deferred compensation plan. Messrs. Russell and Byers
participate in this plan. In this plan, key employees may defer into the plan
all or a portion of their compensation. In addition, the Company, at the
discretion of the Board of Directors, may match the contributions made by key
employees and may also make discretionary incentive contributions for key
employees. Participants' account balances generally will be paid, as adjusted
for investment gains or losses, following termination of employment. Company
contributions for 1999 were $4,125 for Mr. Russell and $4,125 for Mr. Byers.
Employment Agreements And Severance Agreements
The Company has entered into employment agreements (the "Employment
Agreements") with Messrs. Russell and Byers and with Kim D. Thorpe, the
Company's Chief Financial Officer. The Employment Agreements provide for a
minimum annual salary and the opportunity for annual salary increases, incentive
compensation and other compensation and perquisites as approved by the Board of
Directors. Messrs. Russell's and Byers' Employment Agreements are for a term of
three years and may be extended for an additional year by the Board of Directors
prior to the end of each year. Mr. Thorpe's Employment Agreement is for a term
of two years and also may be extended for an additional year by the Board of
Directors prior to the end of each year. If the Board of Directors does not
extend the Employment Agreements by the end of any year, Messrs. Russell, Byers
and Thorpe may terminate their respective employment by providing at least 90
days' written notice of such termination. Upon such termination, Messrs.
Russell, Byers and Thorpe would continue to receive their respective annual
salary and benefits for the remaining term of their respective Employment
Agreements, or until commencing work
16
<PAGE>
for a competing company. Under the Employment Agreements, Mr. Russell's minimum
annual salary for 2000 is $500,000, Mr. Byers' minimum annual salary for 2000 is
$380,000, and Mr. Thorpe's minimum annual salary for 2000 is $260,000. Each of
Messrs. Russell, Byers or Thorpe may also terminate their respective employment
in the event of a constructive discharge and continue to receive their
respective annual salary and benefits for the remaining term of their Employment
Agreements. Messrs. Smith and Finch departed from the Company in August 1999.
Each of Messrs. Smith and Finch held three-year Employment Agreements, with
approximately two years and four months remaining under the Agreements at the
time of their departure from the Company. Accordingly, the Company recorded a
one-time charge to earnings during the third quarter of 1999 of approximately
$1.75 million for payment of benefits due Mr. Smith and Mr. Finch under their
employment contracts. Payments under the Employment Agreements are not limited
to the maximum amount that would avoid the excise tax imposed by Code Section
4999.
The Company has entered into severance agreements (the "Severance
Agreements") with Messrs. Russell, Byers, Rosenbloom and Thorpe. The Severance
Agreements, which apply in the case of a change of control of the Company,
provide that if at any time during the coverage period, as defined under the
Severance Agreements, the employment of an individual covered under the
Severance Agreements is terminated by the Company for any reason other than
cause, death or disability, or by such individual in the event of a constructive
discharge, the Company will pay severance in a lump sum cash amount equal to
three times the sum of such individual's (i) annual salary and (ii) the greater
of the target bonus opportunity for the current calendar year or the average of
the annual bonuses for the three prior calendar years. Payments under the
Severance Agreements are limited to the maximum amount that would not trigger
the excise tax imposed by Code Section 4999.
If Messrs. Russell, Byers and Thorpe are entitled to receive benefits
under both their Employment Agreements and their Severance Agreements, then each
will be permitted to select and receive benefits under either his Employment
Agreement or his Severance Agreement, but not benefits from both the Employment
Agreement and the Severance Agreement.
Compensation Committee Interlocks And Insider Participation
During fiscal year 1999, no executive officer of the Company served as a
director of or as a member of the compensation or equivalent committee of any
other entity, one of whose executive officers served on the Board of Directors'
Compensation Committee or otherwise as a member of the Board of Directors.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that incorporated future filings, including
this Proxy Statement, in whole or in part, the following sections titled "Report
on Executive Compensation" and "Stock Performance" shall not be incorporated by
reference into any such filings.
REPORT ON EXECUTIVE COMPENSATION
General. The Board of Directors believes the Company has implemented an
executive compensation policy that serves to retain, motivate and reward
management while aligning
17
<PAGE>
management's interests closely with those of the Company and its shareholders.
The Company's compensation policies reflect the advice of an independent
executive compensation consultant who is retained from time to time to review
the Company's compensation practices.
The Company's executive compensation policy has the following components:
base salary, annual bonus, long-term compensation and retirement and disability
benefits. Each component is designed in relation to the other components to
offer management competitive remuneration and incentives to enhance shareholder
value.
Each year the Compensation Committee reviews executive compensation to
ensure that such compensation programs are aligned with the Company's long and
short-term performance goals and objectives. The Compensation Committee will
also consider, as part of this review, any changes in laws and regulations
governing compensation programs and will often seek advice from counsel and
other independent third parties.
The base salary for executives is established at a level that the
Compensation Committee believes is both appropriate and consistent within the
industry and relative to other peer companies. For 1999, the base salaries of
executive officers named in the Summary Compensation Table ranged from 74% to
100% of their total annual cash compensation (base salary plus bonus). There are
many criteria used in determining the appropriate executive salary level
including, but not limited to, contribution to performance, scope of
responsibility, productivity, expense and risk control, management development
and strategic planning.
The Company's bonus program provides for the establishment of a bonus pool
as a direct incentive for all employees to improve financial results of the
Company. This bonus program is assessed through a formal evaluation of overall
Company performance, which includes, but is not limited to, meeting specific
targets for increases in 1) operating profit, 2) return on equity and, 3)
premium growth, as well as a subjective evaluation of each employee in the areas
of, among others, quality of work, reliability, initiative and creativity. The
maximum formula bonus for all employees was determined as a percentage, ranging
from 6% to 45% of base salary. For the President and Chief Executive Officer,
the maximum bonus award, as a percentage of base salary, is 45%. Based on the
Company's financial performance in 1999, actual bonus percentages for the year
ranged from 5% to 35% of base salary.
Long-term compensation for executives is designed to motivate and reward
the creation of long-term shareholder value by linking executive compensation
with gains realized by shareholders. Through the Company's Omnibus Incentive
Plan, the Company grants from time to time stock options to the Company's
executives and other employees. The Company also offers an Employee Stock
Purchase Plan and an option under its 401(k) plan for the Company's executives
and other employees to purchase the Company's common stock.
During 2000, the Company offered a Stock Purchase Incentive Program ("the
Program") to eligible employees, including executive officers, to encourage
ownership of the Company's stock. Under the Program, employees who purchased
shares of the Company's common stock in the open market during the term of the
Program were granted matching nonqualified stock options on a one-for-one basis,
up to the maximum of 5,000 options per employee. The Program began January 22,
2000 and ended April 28, 2000. Option grants under the Program were made as of
May 1, 2000 at a per share exercise price equal to the per share closing market
price of the
18
<PAGE>
Company's common stock as of May 1, 2000. Options granted under the Program will
vest in three equal annual installments commencing on the one-year anniversary
of their grant. Options under this Program were granted under the Omnibus
Incentive Plan.
Also included in the Company's overall compensation package for its
executive officers are various employee benefits, including retirement and
disability benefits. Generally, the benefits offered to such persons serve a
different purpose than do the other components of compensation. In general,
these benefits provide protection against financial loss that can result from
illness, disability or death. Benefits offered to executive officers are mainly
those that are offered to the Company's other employees, with some variation
primarily to promote tax efficiency and replacement of benefit opportunities
lost due to regulatory limits.
Deductibility of Executive Compensation. Section 162(m) of the Code limits
the Company's ability to deduct, for federal income tax purposes, certain
compensation in excess of $1 million per year paid to individual officers named
in the Summary Compensation Table unless such compensation is
"performance-based." The determination of whether compensation is
performance-based depends upon a number of factors, including shareholder
approval of the plan under which the compensation is paid, the exercise price at
which options or similar awards are granted, the disclosure to and approval by
the shareholders of applicable performance standards, the composition of the
Compensation Committee, and certification by the Compensation Committee that
performance standards were satisfied. The amount of compensation paid to each of
the named officers during fiscal 1999 was less than $1 million. It is possible
for the Company to compensate or make awards under the Omnibus Incentive Plan
that may either qualify or not qualify as performance-based compensation
deductible under Section 162(m). The Compensation Committee, in structuring
compensation programs for its top executive officers, intends to give strong
consideration to the deductibility of awards.
This report is submitted by the members of the Compensation Committee: Dr.
Selander, Chairman, and Drs. Acosta-Rua, Bagby, Hagen, Shapiro and Van Eldik.
STOCK PERFORMANCE
The following graph compares the cumulative total return for the Company's
common stock, the Russell 2000 index and a peer group comprised of MMI
Companies, Inc., Frontier Insurance Group, Inc., Medical Assurance, Inc.,
Professionals Group, Inc. and St. Paul Companies for the period August 1, 1996
(first day of public trading of the Company's common stock on the Nasdaq
National Market) through December 31, 1999. The graph assumes an investment on
August 1, 1996 of $100 in each of the Company's common stock, the stocks
comprising the Russell 2000 index and the common stocks of the peer group
companies. The graph further assumes that all paid dividends were reinvested.
The peer group and the Russell 2000 index are weighted by market capitalization.
The calculations for the information below were prepared by SNL Securities, LC
of Charlottesville, Virginia.
19
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[TOTAL RETURN PERFORMANCE GRAPH]
20
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the bylaws of FPIC, a subsidiary of the Company, the FMA
recommends to FPIC's Board of Directors three nominees for FPIC's Board of
Directors each year. Current directors of the Company that were recommended for
their current terms on FPIC's Board of Directors by the FMA are Drs. Bagby and
Shapiro. Dr. Shapiro is a non-voting member of the FMA's Board of Governors. In
addition, Terence P. McCoy, M.D., a director of FPIC, was also recommended by
the FMA. Dr. McCoy, a physician specializing in family practice, is a voting
member of the FMA Board of Governors.
The FMA and FPIC are parties to an Endorsement Agreement pursuant to which
the FMA endorses FPIC and cooperates with FPIC's marketing efforts. Under such
agreement, FPIC pays the FMA a minimum of $750,000 per year with such amount
increasing if certain premium or revenue targets are met by FPIC or its
affiliates.
Pursuant to FPIC's bylaws, the FDA recommends to FPIC's Board of Directors
a nominee for FPIC's Board of Directors each year. H. Raymond Klein, D.D.S., a
practicing pediatric dentist, presently serves as the FDA's recommended nominee
on FPIC's Board of Directors. The FDA has an insurance agency that receives
commissions from FPIC.
In connection with the acquisition of Anesthesiologists' Professional
Assurance Company ("APAC") by the Company, the Company, APAC and APA Management,
Inc. ("APAM"), an affiliate of Frank Moya, M.D., a director of the Company,
entered into a Management Agreement pursuant to which APAM manages APAC's
business (the "Management Agreement"). Under the APAC acquisition agreement, the
Company agreed to cause Dr. Moya or another person designated by APAM to be
appointed to the Company's and FPIC's Boards of Directors so long as the
Management Agreement remains in effect. Dr. Moya is APAM's current designee to
the Company's Board of Directors and Elizabeth Moya, who is Dr. Moya's daughter
and is a practicing attorney and an officer and director of APAC, is APAM's
current designee to FPIC's Board of Directors.
All of the members of the Company's Board of Directors other than Mr.
Russell are also policyholders of FPIC or FPIC's other insurance company
affiliates and as such may experience claims from time to time in the usual
course of business that may require coverage under their policies that FPIC or
FPIC's other insurance company affiliates would provide to any policyholder.
PROPOSAL 2 - AMENDMENT TO THE DIRECTOR STOCK OPTION PLAN
The Company's Director Stock Option Plan (the "Plan") was adopted in 1996
to provide the Company's non-employee directors an incentive to contribute
materially to expanding and improving the Company's profits, to aid in
attracting and retaining directors of outstanding ability, and to encourage
ownership of shares by directors.
The Director Stock Option Plan currently provides that a non-employee
director will receive nonqualified options for 5,000 shares when such director
initially joins the Company's Board of Directors. Subsequent options will be
granted on an annual basis and additional
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options may be granted to directors from time to time at the discretion of the
Board of Directors. Under the Director Stock Option Plan, options vest at the
rate determined by the Board of Directors, provided that no option may vest
prior to six months or after the tenth anniversary of the date of grant.
The Board of Directors of the Company has adopted a resolution approving
and recommending to the Company's shareholders for their approval an amendment
to increase the number of shares of the Company's common stock issuable under
the Director Stock Option Plan to 630,000 shares from 430,000 shares.
The Director Stock Option Plan as it is proposed to be amended is set
forth in Exhibit A to this Proxy Statement. If the amendment is adopted, it will
become effective immediately.
Reasons for the Proposed Amendment
The increase in the number of shares authorized for issuance under the
Director Stock Option Plan is sought because only approximately 17,800
authorized shares remain available to be issued under the plan. The Board of
Directors believes that the ability to grant stock options allows the Company to
attract and retain the services of experienced and knowledgeable independent
directors and provides an additional incentive for such directors to work for
the benefit of the Company and its shareholders.
The Board of Directors believes that it is desirable to continue providing
incentives to the Company's directors and therefore recommends that the
shareholders approve the amendment to the Director Stock Option Plan.
The Plan
Administration. The Director Stock Option Plan is administered by the
Director Stock Option Plan Committee (the "DSOP Committee"), which is the Board
Governance Committee of the Board of Directors.
Awards. A director receives options to purchase shares on the date on
which such individual first becomes a director. The options granted at such time
are for 5,000 shares with an option price equal to the fair market value of such
shares on the date of grant. Directors also may be granted additional options
from time to time. Each of the Company's directors, other than Mr. Russell, is
eligible to participate in the plan.
Transferability, Term and Vesting. The Director Stock Option Plan, as
previously amended, allows options to be transferred by the optionee during his
or her lifetime to any member of his or her immediate family or to a trust
established for the exclusive benefit of one or more members of his or her
immediate family or to a former spouse pursuant to a domestic relations order.
In general, the Director Stock Option Plan, as previously amended,
provides an option will terminate upon the earlier of:
(i) the exercise of the option;
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(ii) the expiration date of the option by its terms; or
(iii) no more than two years following the date of termination of service
as a director.
No option may be granted ten years after the effective date of the Plan.
Grants under the Plan may vest anywhere between six months and ten years as
determined by the DSOP Committee at the time of grant.
Amendment and Termination. The Board of Directors may amend the Director
Stock Option Plan, without shareholder approval, at any time in any respect,
unless shareholder approval of the amendment in question is required under
Florida law, the Code, any exemption from Section 16 of the Securities Exchange
Act of 1934, as amended, any national securities exchange system on which the
Company's shares are then listed or reported, by any regulatory body having
jurisdiction with respect to the Director Stock Option Plan, or any other
applicable laws, rules or regulations. No amendment to the Director Stock Option
Plan may alter or impair any option previously granted under the Plan without
the consent of the holders thereof.
The Director Stock Option Plan may be terminated at any time by the Board
of Directors.
Number of Shares. A total of 430,000 shares have previously been
authorized for issuance pursuant to the Director Stock Option Plan. Options for
412,200 of the 430,000 shares have been previously granted. If the shareholders
approve the proposed amendment to the Director Stock Option Plan, a total of
630,000 shares will be authorized for issuance. The exercise prices for options
granted under the Director Stock Option Plan range from $8.22 to $48.0625 per
share and with expiration dates ranging from January 29, 2006 to January 30,
2010. On April 14, 2000, the closing market price for the Company's common stock
was $15.9375 per share.
The maximum number of shares that may be sold pursuant to the Director
Stock Option Plan, as well as the number of shares that may be purchased
pursuant to the exercise of any option outstanding thereunder, may be equitably
adjusted by the DSOP Committee in the event of a stock split, stock dividend,
recapitalization, merger, consolidation, combination or similar events.
Federal Tax Consequences. The stock options granted under the Director
Stock Option Plan are nonqualified stock options. Non-employee directors
recognize no taxable income at the time of grant. Upon the exercise of
nonqualified stock options, non-employee directors recognize ordinary income and
the Company is entitled to a deduction equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise.
Non-employee directors recognize as capital gain or loss any subsequent profit
or loss realized on the sale or exchange of any shares disposed of or sold. The
income, estate and gift tax consequences of options that have been transferred
are described under "Proposal 3 - Amendment to the Omnibus Incentive Plan -
Federal Tax Consequences."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE DIRECTOR STOCK OPTION PLAN.
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PROPOSAL 3 - AMENDMENT TO THE OMNIBUS INCENTIVE PLAN
The Company's Omnibus Incentive Plan was adopted in 1996 to provide
incentives to employees whose performance, contributions and skills add to the
value of the Company.
The Board of Directors of the Company has adopted a resolution approving
and recommending to the Company's shareholders for their approval an amendment
to the Omnibus Incentive Plan. The amendment will increase the number of shares
of the Company's common stock issuable under the Omnibus Incentive Plan to
1,865,000 shares from 1,665,000 shares.
The Omnibus Incentive Plan as it is proposed to be amended is set forth in
Exhibit B to this Proxy Statement. If the amendments are adopted, they will
become effective immediately.
Reasons for the Proposed Amendment
The increase in the number of shares authorized for issuance under the
Omnibus Incentive Plan is sought because only approximately 374,000 authorized
shares remain available to be issued under the plan. The Board of Directors
believes that the ability to grant stock options allows the Company to attract
and retain the services of experienced and knowledgeable employees and provides
an additional incentive for such employees to work for the benefit of the
Company and its shareholders.
The Plan
Administration. The Omnibus Incentive Plan is administered by the OIP
Committee, which is the Compensation Committee of the Board of Directors. The
OIP Committee will determine, from time to time, the individuals to whom awards
shall be made, the type of awards, and the amount, size and terms of each award.
Each of these types of awards is described below. The OIP Committee will make
all other determinations necessary or advisable for the administration of the
Omnibus Incentive Plan.
Types of Awards. Awards under the Omnibus Incentive Plan may be in the
form of options (both nonqualified stock options and incentive stock options),
contingent stock, restricted stock, and stock appreciation rights, or such other
forms as the OIP Committee in its discretion may deem appropriate.
Number of Shares. A total of 1,665,000 shares have previously been
authorized for issuance pursuant to the Omnibus Incentive Plan. As of March 31,
2000, options for approximately 1,291,000 of the 1,665,000 shares have
previously been granted and not been forfeited. If the shareholders approve the
proposed amendments to the Omnibus Incentive Plan, a total of 1,865,000 shares
will be authorized for issuance. The exercise prices for options granted under
the Omnibus Incentive Plan range from $8.22 to $40.00 per share and with
expiration dates ranging from January 13, 2006 to March 25, 2010. On April 14,
2000, the closing market price for the Company's common stock was $15.9375 per
share.
As currently amended, the maximum number of shares that may be issued
pursuant to options granted to any one individual during the life of the Omnibus
Incentive Plan is 600,000 shares of the Company's common stock.
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The OIP Committee has discretion to grant nonqualified stock options
pursuant to the Omnibus Incentive Plan that are transferable by the optionee
during his or her lifetime to any member of his or her immediate family or a
trust established for the exclusive benefit of one or more members of his or her
immediate family or to a former spouse pursuant to a domestic relations order.
During 1999, a total of 367,500 options were granted under the Omnibus
Incentive Plan for shares of the Company's common stock to the President and
Chief Executive Officer and the four other most highly compensated executive
officers. These options have a three-year vesting period and an exercise price
equal to the closing price of the Company's common stock on the last business
day prior to the date of grant. As a result of Messrs. Smith and Finch departing
the Company in August 1999, 125,000 of these options were forfeited.
Awards that may be made in the future under the Omnibus Incentive Plan are
within the discretion of the OIP Committee. The OIP Committee has not determined
future awards or who might receive them.
The maximum number of shares that may be granted pursuant to options under
the Omnibus Incentive Plan, as well as the number of shares that may be
purchased pursuant to the exercise of any option outstanding thereunder, may be
equitably adjusted by the OIP Committee in the event of a stock split, stock
dividend, recapitalization, merger, consolidation, combination or similar
events.
Amendment and Termination. The Board of Directors may amend the Omnibus
Incentive Plan, without shareholder approval, at any time in any respect, unless
shareholder approval of the amendment in question is required under Florida law,
the Code, any exemption from Section 16 of the Exchange Act, any national
securities exchange system on which the shares are then listed or reported, by
any regulatory body having jurisdiction with respect to the Omnibus Incentive
Plan, or any other applicable laws, rules or regulations.
No amendment to the Omnibus Incentive Plan may alter or impair any option
granted under such Plan without the consent of the holder thereof.
The Omnibus Incentive Plan may be terminated at any time by the Board of
Directors.
Stock Options. The OIP Committee may grant both incentive stock options
and nonqualified stock options to the same individual. When both an incentive
stock option and a nonqualified stock option are awarded at one time, such
options are deemed to have been awarded in separate grants, and in no event will
the exercise of one such option affect the right to exercise the other such
option except to the extent the OIP Committee determines in writing otherwise.
The option price of an incentive stock option shall not be less than 100%
of the fair market value of the underlying share on the day the option is
granted, as determined by the OIP Committee. The option price of a nonqualified
stock option issued under the Omnibus Incentive Plan shall not be less than 50%
of the fair market value of the underlying share on the day the option is
granted, as determined by the OIP Committee.
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Each option may be exercised by a participant, in whole or in part,
provided such exercise shall not occur earlier than six months after the grant
of the option and not later than ten years after the grant of the option.
Any option designated by the OIP Committee as an incentive stock option
will be subject to the general provisions applicable to all options granted
under the Omnibus Incentive Plan and will be subject to the following specific
provisions:
(a) At the time the incentive stock option is granted, if a recipient
employee owns, directly or indirectly, stock representing more than
10% of the total combined voting power of all classes of the
Company's stock then: (i) the option price must equal at least 110%
of the fair market value on the effective date of grant of the
shares subject to the option; and (ii) the term of the option shall
not be greater than five years from the date such option is granted.
(b) The aggregate fair market value of shares (determined at the date of
grant) with respect to which incentive stock options granted by the
Company that can be exercised by a participant employee for the
first time in any one calendar year shall not exceed $100,000.
If any option is not granted, exercised, or held pursuant to the
provisions applicable to an incentive stock option, it will be considered to be
a nonqualified stock option to the extent that any or all of the grant is in
conflict with these restrictions.
In general, options granted pursuant to the Omnibus Incentive Plan
terminate upon the earlier of: (i) the full exercise of the option; (ii) the
expiration of the option by its terms; or (iii) no more than three years (three
months for incentive stock options) following termination of the option holder's
employment with the Company.
Stock Appreciation Rights. A stock appreciation right ("SAR") may be
granted in connection with an option and entitles the grantee, subject to the
terms and conditions determined by the OIP Committee, to receive, upon surrender
of the option, all or a portion of the excess of (i) the fair market value of a
specified number of shares at the time of the surrender, as determined by the
OIP Committee, over (ii) 100% of the fair market value of such shares at the
time the option was granted plus any dividends paid while the option was
outstanding but unexercised.
SARs may be granted for a period of not less than six months nor more than
ten years, and shall be exercisable in whole or in part, at such time or times
and subject to such other terms and conditions as shall be prescribed by the OIP
Committee at the time of the grant.
SARs will be exercisable only during a grantee's employment by the
Company, except that in the discretion of the OIP Committee an SAR may be made
exercisable for up to three months after a grantee's employment is terminated
for any reason other than death, retirement or disability.
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In the event that a grantee's employment is terminated as a result of
death, retirement or disability without having fully exercised such grantee's
SARs, the grantee, or the grantee's beneficiary following the grantee's death,
may have the right to exercise the SARs during their term within a period of 24
months after the date of such termination to the extent that the right was
exercisable at the date of such termination, or such other period and subject to
such terms as may be determined by the OIP Committee.
Contingent Stock Awards. The OIP Committee will determine the amount of a
contingent stock award to be granted to an employee based on the expected impact
the employee can have on the financial well being of the Company and other
factors determined by the OIP Committee to be appropriate. Contingent stock
awards under the Omnibus Incentive Plan shall be subject to such terms,
conditions, and restrictions, if any, including without limitation, substantial
risks of forfeiture and/or attainment of performance objectives, and for such
period or periods (in excess of six months) as will be determined by the OIP
Committee at the time of grant. The OIP Committee in its discretion may permit
an acceleration of the expiration of the applicable restriction period, so long
as the minimum six-month period is retained, with respect to any part or all of
the award to any participant.
In the event of a participant's termination of employment for any reason
prior to lapse of restrictions applicable to a contingent stock award paid to
such participant and unless otherwise provided for by the Omnibus Incentive Plan
or as provided in a contingent stock agreement, all rights to shares as to which
there still remain unlapsed restrictions will be forfeited by such participant
to the Company without payment of any consideration by the Company.
Restricted Stock Award. The OIP Committee will determine the amount of a
restricted stock award to be granted to an employee based on the past or
expected impact the employee has had or can have on the financial well-being of
the Company and other factors deemed by the OIP Committee to be appropriate.
Restricted stock awards made pursuant to the Omnibus Incentive Plan shall be
subject to such terms, conditions, and restrictions, including attainment of
performance objectives, and for such period or periods (in excess of six
months), as will be determined by the OIP Committee at the time of grant. The
OIP Committee in its discretion may permit an acceleration of the expiration of
the applicable restriction period, so long as the minimum six-month period is
retained, with respect to any part or all of the award to any participant.
In the event of a participant's termination of employment for any reason
prior to the lapse of restrictions applicable to a restricted stock award made
to such participant and unless otherwise provided for by the Omnibus Incentive
Plan or as provided in a restricted stock agreement, all rights to shares as to
which there still remain unlapsed restrictions will be forfeited by such
participant to the Company without payment of any consideration by the Company.
Change in Control. Upon a change in control, all options, contingent stock
awards, restricted stock awards and stock appreciation rights will automatically
vest as of the date of the change in control and all restrictions or
contingencies will be deemed to have been satisfied.
Federal Tax Consequences
General. The rules governing the tax treatment of stock options,
contingent stock,
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restricted stock, and stock appreciation rights are very technical. Therefore,
the description of the federal income tax consequences set forth below is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their applications may vary in individual circumstances. Finally, the tax
consequences under applicable state and local tax laws may not be the same as
under the federal tax laws. Individuals who have received stock based
compensation under any of the Company's plans are encouraged to consult with
their own tax advisors regarding tax consequences.
Incentive Stock Options. The participant recognizes no gain or loss when
an incentive stock option (an "ISO") is granted. In general, an employee
exercising an ISO will not be taxed at the time of exercise if the stock
purchased is held for at least one year after the exercise date and at least two
years after the date of grant (the "Holding Period"); provided, however, the
bargain element of the exercised ISO is treated as an item of adjustment under
the alternative minimum tax rules. If the Holding Period is satisfied, the
difference between the exercise price and the amount realized upon subsequent
disposition of the stock will constitute long-term capital gain or loss. If the
Holding Period is not satisfied, the employee will recognize ordinary income to
the extent of the lesser of the gain realized or the excess of the fair market
value of the stock on the exercise date over the exercise price and any gain
realized in excess of the amount recognized as ordinary income will be
short-term or long-term capital gain. The Company will not recognize income,
gain, or loss upon the granting or exercise of an ISO, nor will it be entitled
to any deduction upon the disposition of an ISO or the shares subject thereto,
if the Holding Period is satisfied. If the Holding Period is not satisfied, the
Company will be entitled to a deduction equal to the amount of the ordinary
income recognized by the employee.
Nonqualified Stock Options. If any Option granted under the Plan does not
meet the conditions set forth in the Code for ISOs, then the Option is a
non-qualified stock option (an "NSO"). Such an Option is taxable under Section
83 of the Code. The participant typically recognizes no taxable income and the
Company receives no deduction when an NSO is granted. Upon exercise of an NSO,
however, the participant recognizes ordinary income and the Company is entitled
to a deduction equal to the difference between the exercise price and the fair
market value of the shares on the date of the exercise. When stock obtained
under an NSO is disposed of by the participant, the difference between the sales
price and the tax basis (the amount, if any, paid for the Option, plus the
exercise price) of the stock will be treated as long-term or short-term capital
gain or loss by the participant, depending on the holding period of the shares.
Restricted Stock. A participant granted restricted stock is not required
to include the value of such shares in income until the first time such
participant's rights in the shares are transferable or are not subject to
substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Code Section 83(b) to be taxed on the
receipt of the shares. In either case, the amount of such ordinary income will
be equal to the excess of the fair market value of the shares at the time the
income is recognized over the amount (if any) paid for the shares. The Company
is entitled to a deduction in the amount of the ordinary income recognized by
the participant, for the Company's taxable year in which the participant
recognizes such income.
Contingent Stock. A participant granted contingent stock is not required
to include the value of such shares in income until the first time such
participant's rights in the shares are
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transferable or are not subject to a substantial risk of forfeiture, whichever
occurs earlier, unless such participant timely files an election under Code
Section 83(b) to be taxed on the receipt of the shares. In either case, the
amount of such ordinary income will be equal to the excess of the fair market
value of the shares at the time the income is recognized over the amount (if
any) paid for the shares. The Company is entitled to a deduction, in the amount
of the ordinary income recognized by the participant, for the Company's taxable
year in which the participant recognizes such income.
Options that Have Been Transferred. Participants who transfer an NSO will
not recognize income at the time of transfer. Instead, at the time of exercise,
the participant will recognize ordinary income in an amount equal to the excess
of the fair market value of the shares of stock received over the exercise price
paid for the stock. If an Option is exercised after the death of a participant,
the participant's estate will recognize ordinary income. The tax basis for
shares of such stock will be the exercise price, plus the amount of ordinary
income recognized by the participant at the time of exercise. If the stock
acquired upon exercise is later sold, any gain or loss recognized upon the sale
or exchange of such stock will be treated as capital gain or loss and will be
long-term or short-term, depending on how long the stock has been held.
Estate and Gift Tax Effects of Options that Have Been Transferred. If a
participant transfers an Option as a completed gift, the participant may have
gift tax liability. Whether the participant will owe gift tax depends upon
whether the participant has exhausted his or her applicable credit, which
currently effectively exempts from gift tax the first $650,000 of gifts made
during the participant's lifetime, or whether the transfer qualifies for the
annual $10,000-per-donee gift tax exclusion. Once the gift is complete, there
generally is no further estate or gift tax liability for the participant upon
exercise of the Option or upon later disposition of the stock after exercise of
the transferred Option.
The Internal Revenue Service has recently ruled that the transfer of an
Option is not a completed gift until the Option has vested. If the transfer of
an Option is incomplete, the imposition of the gift tax is deferred until the
gift is completed.
Stock Appreciation Rights. Upon the grant of an SAR, the participant
recognizes no taxable income and the Company receives no deduction. The
participant recognizes ordinary income and the Company is entitled to a
deduction at the time of exercise equal to the cash and fair market value of the
shares payable upon such exercise.
Parachute Payments. Under certain circumstances, an accelerated vesting or
cash out of stock options, or accelerated lapse of restrictions on other awards,
in connection with a change in control of the Company might be deemed an "excess
parachute payment" for purposes of the golden parachute tax provisions of Code
Sections 280G and 4999. To the extent it is so considered, the participant may
be subject to a 20% excise tax and the Company may be denied a tax deduction.
Section 162(m). Code Section 162(m) limits to $1,000,000 per year the
federal income tax deduction available to a public company for compensation paid
to any of its chief executive officer and four other highest paid executive
officers. However, Code Section 162(m) provides an exception from its limitation
for certain "performance based" compensation if various requirements are
satisfied.
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The Omnibus Incentive Plan contains provisions that are intended to
satisfy these requirements for awards that are "performance based" compensation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE OMNIBUS INCENTIVE PLAN.
INDEPENDENT AUDITORS
The Audit Committee of the Company has recommended to the Board of
Directors, and the Board of Directors has approved, effective April 24, 2000,
the appointment of PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as the
Company's independent auditors for the 2000 fiscal year. KPMG LLP ("KPMG")
previously served as the Company's independent auditors. No report of KPMG on
the financial statements of the Company contained an adverse opinion, or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles. There were no disagreements between the Company
and KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. Representatives of both
PricewaterhouseCoopers and KPMG are expected to be present at the Annual Meeting
and will be available to respond to appropriate questions and have the
opportunity to make a statement, if they desire to do so.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals by the Company's shareholders intended to be presented at the
Company's 2001 Annual Meeting of Shareholders must be received by the Company at
its principal executive offices on or before January 4, 2001, in order to be
included in the Company's Notice of Meeting, Proxy Statement and Proxy relating
to such Meeting. In accordance with the Company's Bylaws, shareholders who wish
to submit a proposal for consideration at the Company's 2001 Annual Meeting of
Shareholders but who do not wish to submit the proposal for inclusion in the
Company's proxy statement must deliver a copy of their proposal to the Company
at its principal executive offices on or before February 9, 2001.
ANNUAL REPORT ON FORM 10-K
The Company will provide, without charge, to each security holder
solicited, a copy of the Company's Annual Report on Form 10-K required to be
filed with the Securities and Exchange Commission, for the most recent year,
including financial statements, financial statement schedules, and a listing of
all exhibits to Form 10-K. The Company will also furnish a copy of any exhibit,
upon payment of a reasonable fee to cover the cost of copying and mailing the
exhibit. Requests should be directed to the attention of the Finance Department,
FPIC Insurance Group, Inc., P. O. Box 44033, Jacksonville, Florida 32231-4033.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company,
including expenses in connection with the preparation and mailing of this proxy
statement. The Company may retain a proxy solicitation firm to assist in the
solicitation of proxies at a cost that will be borne by the
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Company. In addition, the Company will reimburse banks, brokers and nominees for
their reasonable expenses incurred in sending proxy material to principals and
obtaining their proxies. In addition to solicitation by mail, proxies may be
solicited in person or by telephone by directors, officers and other employees
of the Company.
OTHER BUSINESS
The Board of Directors is not aware of any other matters that will be
presented for action at the meeting. However, if any other matters come before
the meeting, the persons named in the enclosed form of proxy or their
substitutes will vote such proxy in respect of any such matters in accordance
with their best judgment pursuant to the discretionary authority conferred
thereby.
BY ORDER OF THE BOARD OF DIRECTORS
May 5, 2000 -------------------------------------------------
John R. Byers
Chief Operating Officer/General Counsel/Secretary
PLEASE RETURN THE ENCLOSED FORM OF PROXY,
DATED AND SIGNED, IN THE ENCLOSED ADDRESSED
ENVELOPE, WHICH REQUIRES NO POSTAGE.
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Exhibit A
DIRECTOR STOCK OPTION PLAN
1. PURPOSE
1.1 The purpose of the Florida Physicians Insurance Company Director Stock
Option Plan is to provide an incentive to Directors of the Company who are in a
position to contribute materially to expanding and improving the Company's
profits, to aid in attracting and retaining Directors of outstanding ability,
and to encourage ownership of Shares by Directors.
2. DEFINITIONS
2.1 For purposes of the Plan the following terms shall have the
definition, which is attributed to them, unless another definition is clearly
indicated by a particular usage and context.
a. "Board" means the Company's Board of Directors.
b. "Book Value" means the value per Share determined for statutory book
purposes by dividing the total equity of the Company on a given date
by all Shares of stock outstanding on such date.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Director Stock Option Committee appointed by
the Company's Board of Directors pursuant to Section 3.1 hereof.
e. "Company" means Florida Physicians Insurance Company until the
Restructure and on and after the Restructure, FPIC Insurance Group,
Inc.
f. "Directors" means the members of the Board who are not employees
either of the Company or an affiliate thereof.
g. "Effective Date of Exercise" means the later of (i) the date on
which the Company has received a written notice of exercise of an
Option and full payment of the purchase price from the Optionee, or
(ii) the effective date of exercise set forth in the written notice.
h. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
i. "Fair Market Value" means on, or with respect to, any given date:
(i) If determined on the date of the IPO, the initial offering
price to the public.
(ii) If not on the date of the IPO and the Shares are listed on a
national stock exchange, the closing market price of such
Shares as reported on the composite tape for issues listed on
such exchange on such date or, if no trades shall have been
reported for such date, on the next preceding date on which
there were trades reported; provided, that if no such
quotations shall have been made within the ten business days
preceding such date, Fair Market Value shall be determined
under (iv) below.
<PAGE>
(iii) If not on the date of the IPO and the Shares are not listed on
a national stock exchange but is traded on the
over-the-counter market, the mean between the closing dealer
bid and asked price of such Shares of Common Stock as reported
by the National Association of Securities Dealers through
their Automated Quotation System for such date, or if no
quotations shall have been made on such date, on the next
preceding date on which there were quotations; provided, that,
if no such quotations shall have been made within the ten
business days preceding such date, Fair Market Value shall be
determined under (iv) below.
(iv) If (i), (ii), and (iii) do not apply, the Fair Market Value of
a Share without regard to any control premium or discount for
lack of control as determined by the Committee in good faith
consistent with the valuation by the Company as provided by a
third party appraiser for other corporate purposes before
adjustments or any discounts applied due to lack of
marketability. The Committee may rely upon the most recent
valuation and there shall be no requirement to cause a more
recent valuation to be made.
j. "IPO" means the initial public offering of the Company's common
stock pursuant to a registration statement on Form S-1 filed by the
Company with the U.S. Securities and Exchange Commission.
k. "Option" means the right to purchase from the Company Shares at a
specified price and subject to the terms of the Plan, and such other
conditions and restrictions as the Committee deems appropriate.
l. "Option Price" means the purchase price per Share subject to an
Option.
m. "Optionee" means a Director who has been awarded an Option under the
Plan.
n. "Optioned Shares" means Shares subject to outstanding Options.
o. "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the
time of a granting of an Option, each of the corporations (other
than the Company) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain within the meaning of Section 424(e) of
the Code and any regulations or rulings promulgated thereunder.
p. "Permanent and Total Disability" shall have the same meaning as
given to that term by Section 22(e)(3) of the Code and any
regulations or rulings promulgated thereunder.
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q. "Plan" means Florida Physicians Insurance Company Director Stock
Option Plan, as evidenced herein and as amended from time to time.
r. "Plan Effective Date" means January 13, 1996.
s. "Restructure" means the corporate reorganization pursuant to which
Florida Physicians Insurance Company shall become the wholly owned
subsidiary of FPIC Insurance Group, Inc.
t. "SEC Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Exchange Act.
u. "Section 16 Person" means a person subject to Section 16(b) of the
Exchange Act with respect to transactions involving equity
securities of the Company.
v. "Share" means one share of the $1.00 par value common stock of the
Company. On and after the Restructure, "Share" means one share of
$0.10 par value common stock of FPIC Insurance Group, Inc.
w. "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of the Option, each of the corporations (other than the
last corporation) in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in
one of the other corporations in such chain, within the meaning of
Section 424(f) of the Code and any regulations or rulings
promulgated thereunder.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee. The Committee shall
be comprised of not less than two of the then members of the Board. The Plan is
intended to be a formula plan meeting the conditions of Rule 16b-3(c)(2)(ii).
The members of the Committee shall be appointed by the Board. The Board may from
time to time remove members from or add members to the Committee. Vacancies on
the Committee, howsoever caused, shall be filled by the Board.
3.2 The action of a majority of the Committee at which a quorum is
present, or acts reduced to or so approved in writing by a majority of the
Committee, shall be the valid acts of the Committee.
3.3 The interpretation and construction by the Committee of any provisions
of the Plan or of any Option granted under it and all actions of the Committee
shall be final and binding on all parties hereto. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
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4. ELIGIBILITY
4.1 Each Optionee shall be a Director of the Company.
5. STOCK
5.1 Prior to the Restructure, the aggregate number of Shares which may be
issued under Options granted pursuant to the Plan shall not exceed 33,000 Shares
and on or after the Restructure the aggregate number of Shares which may be
issued under Options granted pursuant to the Plan shall not exceed 165,000
Shares.
5.2 Each eligible individual who is a Director on the Plan Effective Date,
except those Directors who on the Plan Effective Date have not been nominated
for additional service on the Board and whose terms expire in 1996, shall
receive an Option to purchase 1,000 Shares with an Option Price equal to Book
Value of such Shares on the Plan Effective Date. In addition, such individual
who is also a Director on the date of the IPO shall receive an Option to
purchase 1,000 additional Shares with an Option Price equal to Fair Market Value
of such Shares on the date of the IPO.
5.3 Each eligible individual who is not a Director on the Plan Effective
Date shall receive an Option to purchase 1,000 Shares with an Option Price equal
to the Fair Market Value of such Shares on the date of grant which shall be the
later of (i) the date of the IPO, or (ii) the date on which such individual
first becomes a Director.
5.4 In the event that any outstanding Option under the Plan expires or is
terminated for any reason, the Optioned Shares subject to that option may again
be subjected to an Option under the Plan.
5.5 For Options issued prior to the Restructure, any Option still
unexercised and outstanding on the effective date of the Restructure shall be
deemed to be an Option to purchase FPIC Insurance Group, Inc. shares as adjusted
pursuant to Section 6.1(f).
6. TERMS AND CONDITIONS
6.1 Options granted pursuant to the Plan shall be evidenced by agreements
in such form as the Committee shall from time to time approve, which agreements
shall contain or shall be subject to the following terms and conditions, whether
or not such terms and conditions are specifically included therein:
(a) Number of Shares. Each Option shall state the number of Shares
to which it pertains.
(b) Date. Each Option shall state the effective date of grant of the
Option.
(c) Option Price. Each Option shall state the Option Price.
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(d) Method and Time of Payment. The Option Price shall be payable on
the exercise of the Option and shall be paid in cash, in Shares, including
Shares acquired pursuant to the Plan, or part in cash and part in Shares.
Shares transferred in payment of the Option Price shall be valued as of
date of transfer based on the Fair Market Value.
(e) Transfer of Option. No Option shall be transferable by the
Optionee, except by will or the laws of descent and distribution upon the
Optionee's death and subject to any other limitations of the Plan.
(f) Recapitalization. The number of Optioned Shares and the Option
Price shall be correspondingly adjusted in order to give effect to changes
made in the number of outstanding Shares as a result of a merger,
consolidation, recapitalization, reclassification, combination, stock
dividend, stock split, or other relevant change.
(g) Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any Optioned Shares until the date of the
issuance of a stock certificate to him for such Shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued,
except as provided in Section 6.1(f).
(i) Duration of Option. Each Option shall be for a term of ten years
from the effective date of grant, except as provided in Section 7.1(b).
(j) Vesting. One-third (rounded up to a whole number) of each grant
under this Plan shall vest on the one-year anniversary of the date of
grant, with an additional one-third vesting on each of the next two
anniversaries of the date of grant. A Director shall forfeit the unvested
Options upon termination of service as a Director.
(k) Other Provisions. Options authorized under the Plan may contain
any other provisions or restrictions as the Committee in its sole and
absolute discretion shall deem advisable including but not limited to
offering Options in tandem with or reduced by other options or benefits
and reducing one award by the exercise of another option or benefit. The
Company may place such restriction legends on stock certificates
representing the Shares as the Company, in its sole discretion, deems
necessary or appropriate to reflect restrictions under the securities laws
or this Plan.
6.2 Options granted pursuant to the Plan shall not be exercisable until
such Options are vested as provided in Section 6.1(j). Any person entitled to
exercise an Option may do so in whole or in part by delivering to the Company,
attention Corporate Secretary, at its principal office a written notice of
exercise. The written notice shall specify the number of Shares for which an
Option is being exercised and shall be accompanied by full payment of the Option
Price for the Shares being purchased. During the Optionee's lifetime, an Option
may be exercised only by the Optionee, or on his
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behalf by the Optionee's guardian or legal representative.
7. TERMINATION OF OPTIONS
7.1 An Option may be terminated as follows:
(a) During the period of continuous service as a Director of the
Company or Subsidiary, an Option will be terminated only if it has been
fully exercised or it has expired by its terms.
(b) Upon termination of service as a Director for any reason, the
Option will terminate upon the earlier of (i) the full exercise of the
Option, (ii) the expiration of the Option by its terms, or (iii) one year
following the date of termination of service as a Director.
(c) If an Optionee shall die or becomes subject to a Permanent and
Total Disability prior to the termination of an Option, such Option may be
exercised to the extent that the Optionee shall have been entitled to
exercise it at the time of death or disability, as the case may be, by the
Optionee, the estate of the Optionee or the person or persons to whom the
Option may have been transferred by will or by the laws of descent and
distribution, provided, however, such right must be exercised, if at all,
within one year after the date of such death or disability.
7.2 Except as otherwise expressly provided in the written agreement with
the Optionee referred to in Section 6 hereof, and except as provided in this
Section, in no event will the continuation of the term of an Option beyond the
date of termination of service allow the Director, or his beneficiaries or
heirs, to accrue additional rights under the Plan, or to purchase more Shares
through the exercise of an Option than could have been purchased on the day that
service as a Director was terminated.
8. AMENDMENT OR DISCONTINUANCE OF PLAN
8.1 The Plan may be amended by the Board, without Shareholder approval, at
any time in any respect unless Shareholder approval of the amendment in question
is required under Florida law, the Code, any exemption from Section 16 of the
Exchange Act (including without limitation SEC Rule 16b-3) for which the Company
intends Section 16 persons to qualify, any national securities exchange system
on which the shares are then listed or reported, by any regulatory body having
jurisdiction with respect to the Plan, or any other applicable laws, rules or
regulations.
8.2 The Plan provisions that determine the amount, price and timing of the
option grants to Section 16 persons may not be amended more than once every six
months, other than to comport with changes in the Code, the Employment Income
Retirement Security act of 1974, or rules thereunder, unless the Company's legal
counsel determines that such restriction on amendments is not necessary to
secure or maintain any exemptions from Section 16 of the Exchange Act for which
the Company intends Section 16 persons to qualify.
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8.3 The Plan may be terminated at any time by the Board of Directors.
8.4 No amendment to the Plan will alter or impair any Option granted under
the Plan without the consent of the holders thereof.
9. NO OBLIGATION TO EXERCISE OPTION
9.1 The granting of an option shall impose no obligation upon the Optionee
to exercise such option.
10. EFFECTIVE DATE; DURATION OF THE PLAN
10.1 The Plan shall be effective as of January 13, 1996.
10.2 No Option may be granted after the tenth anniversary of the earlier
of the date the Plan is adopted or the date the Plan is approved by
shareholders.
11. EFFECT OF PLAN
11.1 The granting of an option pursuant to the Plan shall not give the
Optionee any right to similar grants in future years or any right to be retained
in the employ of the Company, the Parent or a Subsidiary, but an Optionee shall
remain subject to discharge to the same extent as if the Plan were not in
effect.
FIRST AMENDMENT TO THE
DIRECTOR STOCK OPTION PLAN
This First Amendment to the Florida Physicians Insurance Company Director
Stock Option Plan (the "Plan") is made effective as of March 16, 1996.
1. Section 2.1(q) of the Plan shall be amended to read as follows:
"(q) 'Plan' means the Director Stock Option Plan, as evidenced
herein and as amended from time to time."
2. Section 6.1(j) of the Plan shall be amended to read as follows:
"(j) Vesting. One-third (rounded up to a whole number) of the number
of shares set forth in paragraph 2 shall vest on the one year
anniversary of this Agreement, with an additional one-third vesting
on each of the next two anniversaries of this Agreement. Unvested
options shall vest on the death or Permanent and Total Disability of
the Director. The Director shall forfeit any unvested Options upon
termination of service as a Director for any reason other than death
or Permanent and Total Disability of the Director."
All provisions of the Plan not specifically mentioned in this First
Amendment shall be considered modified to the extent necessary to be consistent
with the changes
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made in this First Amendment.
SECOND AMENDMENT TO THE
DIRECTOR STOCK OPTION PLAN
This Second Amendment to the Florida Physicians Insurance Company Director
Stock Option Plan (the "Plan") is made effective as of September 14, 1997.
1. Section 3.1 of the Plan shall be amended to read as follows:
"3.1 The Plan shall be administered by the Committee. The Committee
shall be comprised of not less than two of the then members of the
Board. The members of the Committee shall be appointed by the Board.
The Board may from time to time remove members from or add members
to the Committee. Vacancies on the Committee, howsoever caused,
shall be filled by the Board."
2. Section 5.1 of the Plan shall be amended to read as follows:
"5.1 The aggregate number of Shares which may be issued under
Options granted pursuant to the Plan shall not exceed 300,000
Shares."
3. Section 5.6 shall be added to the Plan to read as follows:
"5.6 In addition to the Option grants provided for above, the Board
may, in its sole discretion, grant from time to time additional
Options to eligible Directors."
4. Section 6.1(j) of the Plan shall be amended to read as follows:
"6.1(j) Vesting. The vesting schedule of an Option granted under
this Plan shall be determined by the Board, in its sole discretion,
upon granting of the Option; provided, however, that no Option shall
vest prior to the expiration of six months from the effective date
of the Option grant or after the tenth anniversary of the effective
date of the Option grant. A director shall forfeit any unvested
Options upon termination of service as a Director."
All provisions of the Plan not specifically mentioned in this Second
Amendment shall be considered modified to the extent necessary to be consistent
with the changes made in this Second Amendment.
1999 AMENDMENT TO THE
DIRECTOR STOCK OPTION PLAN
This 1999 Amendment to the Florida Physicians Insurance Company Director
Stock Option Plan (the "Plan") is made effective as of June 8, 1999.
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1. Section 5.1 of the Plan shall be amended to read as follows:
"5.1 The aggregate number of Shares which may be issued under
Options granted pursuant to the Plan shall not exceed 430,000
Shares."
2. Section 6.1(e) shall be amended to read as follows:
"(e) Transfer of Option. Options may be transferred by the Optionee
during his or her lifetime only to any member of his or her
immediate family or a trust established for the exclusive benefit of
one or more members of his or her immediate family or to a former
spouse pursuant to a domestic relations order. For purposes of this
Section, the term "immediate family" is defined as an Optionee's
spouse, children, stepchildren, grandchildren (including
relationships arising from legal adoption), and parents. Upon an
Optionee's death, Options are transferable by will or the law of
descent and distribution."
3. Section 7.1(b) of the Plan shall be amended to read as follows:
"(b) Upon termination of service as a Director for any reason, the
Option will terminate upon the earlier of (i) the full exercise of
the Option, (ii) the expiration of the Option by its terms, or (iii)
two years following the date of termination of service as a
Director."
All provisions of the Plan not specifically mentioned in this 1999
Amendment shall be considered modified to the extent necessary to be consistent
with the changes made in this Amendment.
SECOND 1999 AMENDMENT TO THE
DIRECTOR STOCK OPTION PLAN
This Second 1999 Amendment to the Florida Physicians Insurance Company
Director Stock Option (the "Plan") is entered into to clarify the original
intent of FPIC Insurance Group, Inc., the sponsor of the Plan, in adopting the
1999 Amendment to the Plan and is made effective as of June 8, 1999.
1. Section 7.1(c) of the Plan shall be amended by deleting the phrase
"within one year after the date of such death or disability" and
replacing it with the phrase "within two years after the date of
such death or disability."
All provisions of the Plan not specifically mentioned in this Second 1999
Amendment shall be modified to the extent necessary to be consistent with the
changes made in this Amendment.
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PROPOSED
2000 AMENDMENT TO THE
DIRECTOR STOCK OPTION PLAN
This 2000 Amendment to the Director Stock Option Plan (the "Plan") is made
effective as of June 7, 2000, subject to shareholder approval at the 2000 Annual
Meeting of Shareholders.
Section 5.1 of the Plan shall be amended to read as follows:
"5.1 The aggregate number of shares that may be issued under options
granted pursuant to the Plan shall not exceed 630,000 shares."
All provisions of the Plan not specifically mentioned in this 2000
Amendment shall be considered modified to the extent necessary to be consistent
with the changes made in this Amendment.
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EXHIBIT B
OMNIBUS INCENTIVE PLAN
1. PURPOSE
1.1 The purpose of the Florida Physicians Insurance Company Omnibus
Incentive Plan is to provide incentives to specified individuals whose
performance, contributions and skills add to the value of Florida Physicians
Insurance Company. The Company also believes that the Plan will facilitate
attracting, retaining and motivating Employees of high caliber and potential.
1.2 Plan participants shall include those officers and key employees of
the Company and subsidiaries who, in the opinion of the Committee, are making or
are in a position to make substantial contributions to the Company by their
ability and efforts.
2. DEFINITIONS
2.1 For purposes of the Plan, the following terms shall have the
definition, which is attributed to them, unless the context clearly indicates to
the contrary.
(a) "Award" shall mean a grant of Restricted Stock, Contingent
Stock, an Option, or an SAR.
(b) "Board" means the Company's Board of Directors.
(c) "Book Value" means the value per Share determined for
statutory book purposes by dividing the total equity of the
Company on a given date by all Shares of stock outstanding on
such date.
(d) "Change in Control" shall not mean the Restructure but shall
mean the earlier of the following events which are not
connected to the Restructure:
(i) either (A) receipt by the Company of a report on
Schedule 13D, or an amendment to such a report, filed
with the SEC pursuant to Section 13(d) of the Exchange
Act, disclosing that any person (as such term is used in
Section 13(d) of the Exchange Act) ("Person"), is the
beneficial owner, directly or indirectly, of twenty (20)
percent or more of the outstanding stock of the Company,
or (B) actual knowledge by the Company of facts on the
basis of which any Person is required to file such a
report on Schedule 13D, or to file an amendment to such
a report, with the SEC (or would be required to file
such a report or amendment upon the lapse of the
applicable period of time specified in Section 13(d) of
the Exchange Act) disclosing that such Person is the
beneficial owner, directly or indirectly, of twenty (20)
percent or more of the outstanding stock of the Company;
(ii) purchase by any Person, other than the Company or a
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owned subsidiary of the Company, of shares pursuant to a
tender or exchange offer to acquire any stock of the
Company (or securities convertible into stock) for cash,
securities or any other consideration provided that,
after consummation of the offer, such Person is the
beneficial owner (as defined in Rule 13d-3 under the
Exchange Act regardless of whether the Company or such
Person would otherwise be subject to the Exchange Act),
directly or indirectly, of twenty (20) percent or more
of the outstanding stock of the Company (calculated as
provided in paragraph (d) of Rule 13d-3 under the
Exchange Act in the case of rights to acquire stock
regardless of whether the Company or such Person would
otherwise be subject to the Exchange Act);
(iii) either (A) the filing by any Person acquiring, directly
or indirectly, twenty percent (20%) or more of the
outstanding stock of the Company of a statement with the
Florida Department of Insurance pursuant to Section
628.461 of the Florida Statutes, or (B) actual knowledge
by the Company of facts on the basis of which any Person
acquiring, directly or indirectly, twenty percent (20%)
or more of the outstanding stock of the Company or a
controlling company is required to file such a statement
pursuant to Section 628.461.
(iv) approval by the shareholders of the Company of (A) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation
or pursuant to which shares of stock of the Company
would be converted into cash, securities or other
property, other than a consolidation or merger of the
Company in which holders of its stock 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
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(v) a change in the majority of the members of the Board
within a 24-month period unless the election or
nomination for election by the Company's shareholders of
each new director was approved by the vote of at least
two-thirds of the directors then still in office who
were in office at the beginning of the 24-month period.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the members of the Compensation Committee of
the Board who are "outside directors" (within the meaning of
Code Section 162(m)) and "disinterested persons" (within the
meaning of Rule 16b-3 of the Exchange Act).
(g) "Company" means Florida Physicians Insurance Company until the
Restructure and on and after the Restructure, FPIC Insurance
Group, Inc.
(h) "Contingent Stock" means stock issued, subject to certain
conditions, to a Grantee pursuant to Section 9 hereof.
(i) "Directors" means the members of the Board.
(j) "Effective Date" means January 13, 1996.
(k) "Employee" means any individual who performs services for the
Company, a Parent or Subsidiary, and is included on the
regular payroll of the Company, a parent or subsidiary.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means on, or with respect to, any given
date:
(i) If determined on the date of the IPO, the initial
offering price to the public.
(ii) If not on the date of the IPO and the Shares are listed
on a national stock exchange, the closing market price
of such Shares as reported on the composite tape for
issues listed on such exchange on such date or, if no
trade shall have been reported for such date, on the
next preceding date on which there were trades reported;
provided, that if no such quotation shall have been made
within the ten business days preceding such date, Fair
Market Value shall be determined under (iv) below.
(iii) If not on the date of the IPO and the Shares are not
listed on a national stock exchange but are traded on
the over-the-counter market, the mean between the
closing dealer bid and asked price of such Shares as
reported by the National Association of Securities
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Dealers through their Automated Quotation System for
such date, or if no quotations shall have been made on
such date, on the next preceding date on which there
were quotations; provided, that, if such quotations
shall have been made within the ten business days
preceding such date, Fair Market Value shall be
determined under (iv) below.
(iv) If (i), (ii), and (iii) do not apply, the Fair Market
Value of a Share without regard to any control premium
or discount for lack of control (except as otherwise
required by Section 422 of the Code) as determined by
the Committee in good faith consistent with the
valuation of the Company as provided by a third party
appraiser for other corporate purposes before
adjustments or any discounts applied due to lack of
marketability. The Committee may rely upon the most
recent valuation and there shall be no requirement to
cause a more recent valuation to be made.
(n) "Grantee" means an Employee who is an Optionee or an Employee
who has received an Award.
(o) "Incentive Stock Option" shall have the same meaning as given
to the term by Section 422 of the Code and any regulations or
rulings promulgated thereunder.
(p) "IPO" means the initial public offering of the Company's
common stock pursuant to a registration statement on Form S-1
filed by the Company with the U.S. Securities and Exchange
Commission.
(q) "Nonqualified Stock Option" means any option granted under the
Plan which is not considered an Incentive Stock Option.
(r) "Option" means the right to purchase from the Company a stated
number of Shares at a specified price. The Option may be
granted to an Employee subject to the terms of this Plan, and
such other conditions and restrictions as the Committee deems
appropriate. Each Option shall be designated by the Committee
to be either an Incentive Stock Option or a Nonqualified Stock
Option.
(s) "Option Price" means the purchase price per Share subject to
an Option, as described in Section 7.2(a).
(t) "Optionee" means an Employee who has been awarded an Option
under the Plan.
(u) "Parent" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company
if, at the time of a granting of an Option, each of the
corporations (other than the Company) owns stock possessing
50% or more of the total combined voting power of all classes
of
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stock in one of the other corporations in such chain within
the meaning of Section 424(e) of the Code and any regulations
or rulings promulgated thereunder.
(v) "Plan" means Florida Physicians Insurance Company Omnibus
Incentive Plan, as evidenced herein and as amended from time
to time.
(w) "Restricted Stock" shall mean stock issued, subject to
restrictions, to a Grantee pursuant to Section 10 hereof.
(x) "Restructure" means the corporate reorganization pursuant to
which Florida Physicians Insurance Company shall become the
wholly owned subsidiary of FPIC Insurance Group, Inc.
(y) "SAR" means a stock appreciation right.
(z) "SEC" means the U.S. Securities and Exchange Commission.
(aa) "Section 16 Person" means a person subject to Section 16(b) of
the Exchange Act with respect to transactions involving equity
securities of the Company.
(bb) "Share" means one share of the $1.00 par value common stock of
the Company. On and after the Restructure, "Share" means one
share of $.10 par value common stock of FPIC Insurance Group,
Inc.
(cc) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of the Option, each of the corporations (other than
the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain, within the meaning of Section 424(f) of the Code and
any regulations or rulings promulgated thereunder.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee. As applied to
Employees, the Committee shall have full and final authority in its discretion
to:
(a) conclusively interpret the provisions of the Plan and to
decide all questions of fact arising in its application;
(b) determine the individuals to whom awards shall be made under
the Plan;
(c) determine the type of award to be made to such Employees and
the amount, size and terms of each award;
(d) determine the time when awards will be granted to Employees;
and
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(e) make all other determinations necessary or advisable for the
administration of the Plan.
4. SHARES SUBJECT TO THE PLAN
4.1 Prior to the Restructure the Shares subject to Awards under the Plan
shall not exceed in the aggregate 183,000 Shares and on and after the
Restructure the Shares subject to Awards under the Plan shall not exceed in the
aggregate 915,000 Shares.
4.2 Shares may be authorized and unissued Shares or treasury Shares.
4.3 The maximum number of Shares that may be awarded pursuant to the
Contingent or Restricted Stock Award provisions of Sections 9 and 10 shall be
25% of the total Shares authorized for issuance under the Plan.
4.4 Except as provided herein, any Shares subject to an Option or right
for which any reason expires or is terminated unexercised as to such Shares
shall again be available under the Plan.
5. PARTICIPANTS
5.1 Awards permitted pursuant to the Plan may only be made to Employees.
6. AWARDS UNDER THE PLAN
6.1 Awards under the Plan may be in the form of Options (both Nonqualified
Stock Options and Incentive Stock Options), Contingent Stock, Restricted Stock,
and SARs, or such other forms as the Committee may in its discretion deem
appropriate but in any event which are consistent with the Plan's purpose,
including any combination of the above.
6.2 Prior to the Restructure the maximum number of Awards that may be
awarded to any one person during the life of the Plan shall be 60,000 Shares and
on and after the Restructure the maximum number of Awards that may be awarded to
any one person during the life of the Plan shall be 300,000 Shares. Prior to the
Restructure the maximum number of Shares with respect to which Options or rights
may be granted during a calendar year to any Employee is 60,000 Shares and on
and after the Restructure the maximum number of Shares with respect to which
Options or rights may be granted during a calendar year to any Employee is
300,000 Shares.
7. STOCK OPTIONS
7.1 The Committee in its sole discretion may designate whether an Option
is to be considered an Incentive Stock Option or a Nonqualified Stock Option.
The Committee may grant both an Incentive Stock Option and a Nonqualified Stock
Option to the same individual. However, where both an Incentive Stock Option and
a Nonqualified Stock Option are awarded at one time, such Options shall be
deemed to have been awarded in separate grants, shall be clearly identified, and
in no event will the exercise of one such Option affect the right to exercise
the
B-6
<PAGE>
other such Option except to the extent the Committee determines in writing
otherwise.
7.2 Options granted pursuant to the Plan shall be authorized by the
Committee under terms and conditions approved by the Committee, not inconsistent
with this Plan or Exchange Act Rule 16b-3(c), and shall be evidenced by
agreements in such form as the Committee shall from time to time approve, which
agreements shall contain or shall be subject to the following terms and
conditions, whether or not such terms and conditions are specifically included
therein:
(a) The Option Price of an Incentive Stock Option shall not be
less than 100% of the Fair Market Value of such Share on the
day the Option is granted, as determined by the Committee. The
Option Price of a Nonqualified Stock Option issued prior to
the IPO shall not be less than 100% of Book Value of such
Share on the day the Option is granted, as determined by the
Committee. The Option Price of a Nonqualified Stock Option
issued on or after the IPO shall not be less than 50% of the
Fair Market Value of such Share on the day the Option is
granted, as determined by the Committee. The option agreement
for a Nonqualified Stock Option at the Committee's sole
discretion, may, but need not, provide for a reduction of the
purchase price by dividends paid on a Share as long as the
Option is outstanding and not exercised, but in no event shall
this price be less than the par value of such Share.
(b) Each option agreement shall state the period or periods of
time, as may be determined by the Committee, within which the
Option may be exercised by the participant, in whole or in
part, provided such period shall not commence earlier than six
months after the date of grant of the Option and not later
than ten years after the date of the grant of the Option. The
Committee shall have the power to permit in its discretion an
acceleration of previously determined exercise terms, subject
to the terms of this Plan, to the extent permitted by Exchange
Act Rule 16b-3(c), and under such circumstances and upon such
terms and conditions as deemed appropriate and which are not
inconsistent with Exchange Act Rule 16b-3(c)(1).
(c) Shares purchased pursuant to an option agreement shall be paid
for in full at the time of purchase, either in the form of
cash, common stock of the Company at Fair Market Value, or a
combination thereof, as the Committee may determine.
(d) Notwithstanding anything herein to the contrary, the aggregate
Fair Market Value (determined as of the time the Option is
granted) of Incentive Stock Options for any Employee which may
become first exercisable in any calendar year shall not exceed
$100,000.
(e) Notwithstanding anything herein to the contrary, no Incentive
Stock Option shall be granted to any individual if, at the
time the Option is to be granted, the individual owns stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company unless at the time such
Option is granted the Option Price is at least 110% of the
Fair Market Value of the stock subject to Option and such
Option by its terms is not exercisable
B-7
<PAGE>
after the expiration of five years from the date such Option
is granted.
(f) Each Incentive Stock Option agreement shall contain such other
terms, conditions and provisions as the Committee may
determine to be necessary or desirable in order to qualify
such Option as a tax-favored option within the meaning of
Section 422 of the Code, or any amendment thereof, substitute
therefor, or regulation thereunder. Subject to the limitations
of Section 19, and without limiting any provisions hereof, the
Committee shall have the power without further approval to
amend the terms of any Option for Employees.
7.3 If any Option is not granted, exercised, or held pursuant to the
provisions applicable to an Incentive Stock Option, it will be considered to be
a Nonqualified Stock Option to the extent that any or all of the grant is in
conflict with such provisions.
7.4 An Option may be terminated (subject to any shorter periods set forth
in an individual option agreement by the Committee, in its sole discretion) as
follows:
(a) During the period of continuous employment with the Company or
Subsidiary, an Option will be terminated only if it has been
fully exercised or it has expired by its terms.
(b) In the event of termination of employment for any reason, the
Option will terminate upon the earlier of (i) the full
exercise of the Option, (ii) the expiration of the Option by
its terms, or (iii) except as provided in 7.4(c), no more than
three years (three months for Incentive Stock Options)
following the date of employment termination. For purposes of
the Plan, a leave of absence approved by the Company shall not
be deemed to be termination of employment except with respect
to an Incentive Stock Option as required to comply with Code
Section 422 and the regulations issued thereunder.
(c) If an Optionee's employment terminates by reason of death or
Permanent and Total Disability prior to the termination of an
Option, such Option may be exercised to the extent that the
Optionee shall have been entitled to exercise it at the time
of death or disability, as the case may be, by the Optionee,
the estate of the Optionee or the person or persons to whom
the Option may have been transferred by will or by the laws of
descent and distribution for the period set forth in the
Option, but no more than three years following the date of
such death or disability, provided, however, with respect to
an Incentive Stock Option, such right must be exercised, if at
all, within one year after the date of such death or
disability.
8. STOCK APPRECIATION RIGHTS
8.1 SARs shall be evidenced by SAR agreements in such form, and not
inconsistent with this Plan or Exchange Act Rule 16b-3(c)(1), as the Committee
shall approve from time to time, which agreements shall contain in substance the
following terms and conditions as discussed in Sections 8.2 through 8.4.
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<PAGE>
8.2 An SAR may be granted in connection with an Option and shall entitle
the Grantee, subject to such terms and conditions determined by the Committee,
to receive, upon surrender of the Option, all or a portion of the excess of (i)
the Fair Market Value of a specified number of Shares at the time of the
surrender, as determined by the Committee, over (ii) 100% of the Fair Market
Value of such Shares at the time the Option was granted less any dividends paid
while the Option was outstanding but unexercised.
8.3 SARs shall be granted for a period of not less than six months nor
more than ten years, and shall be exercisable in whole or in part, at such time
or times and subject to such other terms and conditions as shall be prescribed
by the Committee at the time of grant, subject to the following:
(a) No SAR shall be exercisable, in whole or in part, during the
six-month period starting with the date of grant; and
(b) SARs will be exercisable only during a Grantee's employment by
the Company or a Subsidiary, except that in the discretion of
the Committee an SAR may be made exercisable for up to three
months after the Grantee's employment is terminated for any
reason other than death, retirement or disability. In the
event that a Grantee's employment is terminated as a result of
death, retirement or disability without having fully exercised
such Grantee's SARs, the Grantee or such Grantee's beneficiary
may have the right to exercise the SARs during their term
within a period of 24 months after the date of such
termination to the extent that the right was exercisable at
the date of such termination, or during such other period and
subject to such terms as may be determined by the Committee.
The Committee in its sole discretion may reserve the right to
accelerate previously determined exercised terms, within the
terms of the Plan, under such circumstances and upon such
terms and conditions as it deems appropriate.
(c) The Committee shall establish such additional terms and
conditions, without limiting the foregoing, as it determines
to be necessary or desirable to avoid "short-swing" trading
liability in connection with an SAR within the meaning of
Section 16(b) of the Exchange Act.
8.4 Upon exercise of an SAR, payment shall be made in the form of common
stock of the Company (at Fair Market Value on the date of exercise), cash, or a
combination thereof, as the Committee may determine.
9. CONTINGENT STOCK AWARDS
9.1 Contingent Stock Awards under the Plan shall be evidenced by
Contingent Stock agreements in such form and not inconsistent with this Plan as
the Committee shall approve from time to time, which agreements shall contain in
substance the terms and conditions described in Sections 9.2 through 9.5.
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<PAGE>
9.2 The Committee shall determine the amount of Contingent Stock Award to
be granted to an Employee based on the expected impact the Employee can have, or
actually has had, on the financial well being of the Company and other factors
deemed by the Committee to be appropriate.
9.3 Contingent Stock Awards made pursuant to this Plan shall be subject to
such terms, conditions, and restrictions, including without limitation,
substantial risks of forfeiture and/or attainment of performance objectives, and
for such period or periods (in excess of six months) as shall be determined by
the Committee at the time of grant. The Committee shall have the power to
permit, in its discretion, an acceleration of the expiration of the applicable
restriction period (so long as the minimum six-month period is retained) with
respect to any part or all of the Award to any participant. The Committee shall
have the power to make a Contingent Stock Award that is not subject to vesting
or any other contingencies in recognition of an Employee's prior service and
financial impact on the Company.
9.4 The agreement shall specify the terms and conditions upon which any
restrictions on the right to receive Shares representing Contingent Stock Awards
under the Plan shall lapse, as determined by the Committee. Upon the lapse of
such restrictions, Shares shall be issued to the participant or such
Participant's legal representative.
9.5 In the event of a participant's termination of employment for any
reason prior to the lapse of restrictions applicable to a Contingent Stock Award
made to such participant and unless otherwise provided for herein by this Plan
or as provided for in the Contingent Stock agreement, all rights to Shares as to
which there still remain unlapsed restrictions shall be forfeited by such
participant to the Company without payment or any consideration by the Company,
and neither the participant nor any successors, heirs, assigns or personal
representatives of such participants shall thereafter have any further rights or
interest in such Shares.
10. RESTRICTED STOCK AWARD
10.1 Restricted Stock Awards under the Plan shall be evidenced by
Restricted Stock agreements in such form, and not inconsistent with this Plan,
as the Committee shall approve from time to time, which agreements shall contain
in substance the terms and conditions described in Sections 10.2 through 10.6.
10.2 The Committee shall determine the amount of a Restricted Stock Award
to be granted to an Employee based on the past or expected impact the Employee
has had or can have on the financial well-being of the Company and other factors
deemed by the Committee to be appropriate.
10.3 Restricted Stock Awards made pursuant to this Plan shall be subject
to such terms, conditions, and restrictions, including without limitation,
substantial risks of forfeiture and/or attainment of performance objectives, and
for such period or periods (in excess of six months) as shall be determined by
the Committee at the time of grant. The Committee shall have the power to
permit, in its discretion, an acceleration of the expiration of the applicable
restriction period (so long as the minimum six-month period is retained) with
respect to any part or all of the Award to any participant. Upon issuance of a
Restricted Stock Award, Shares will be
B-10
<PAGE>
issued in the name of the recipient. During the restriction period, recipient
shall have the rights of a shareholder for all such Shares of Restricted Stock,
including the right to vote and the right to receive dividends thereon as paid.
10.4 Each certificate evidencing stock subject to Restricted Stock Awards
shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award. Any attempt to dispose of stock in
contravention of such terms, conditions and restrictions shall be ineffective.
The Committee may adopt rules which provide that the certificates evidencing
such Shares may be held in custody by a bank or other institution, or that the
Company may itself hold such Shares in custody, until the restrictions thereon
shall have lapsed and may require as a condition of any Award that the recipient
shall have delivered a stock power endorsed in blank relating to the stock
covered by such Award.
10.5 The Restricted Stock agreement shall specify the terms and conditions
upon which any restrictions on the right to receive shares representing
Restricted Stock awarded under the Plan shall lapse as determined by the
Committee. Upon the lapse of such restrictions, Shares which have not been
delivered to the recipient or such recipient's legal representative shall be
delivered to such participant or such participant's legal representative.
10.6 In the event of a participant's termination of employment for any
reason prior to the lapse of restrictions applicable to a Restricted Stock Award
made to such participant and unless otherwise provided for herein by this Plan
or as provided for in the Restricted Stock agreement, all rights to Shares as to
which there remain unlapsed restrictions shall be forfeited by such participant
to the Company without payment or any consideration by the Company, and neither
the participant nor any successors, heirs, assigns or personal representatives
of such participant shall thereafter have any further rights or interest in such
Shares.
11. OTHER PROVISIONS RELATING TO CONTINGENT AND RESTRICTED STOCK AWARDS AND
STOCK OPTIONS
11.1 Notwithstanding any other provisions to the contrary in Sections 7,
9, or 10 or elsewhere in this Plan, the additional provisions described in
Sections 11.1 and 11.2 shall apply to Contingent and Restricted Stock Awards and
to stock option Awards (except that Section 11.2 shall only apply to Contingent
and Restricted Stock Awards).
11.2 If a recipient of a Contingent or Restricted Stock Award has his or
her employment terminated and his or her salary continued through an employment
agreement, severance program or other comparable arrangement, then any
contingencies and restrictions which are satisfied or which would have been
satisfied during the period for which the recipient's salary is to be continued,
irrespective of form, will be deemed to have been satisfied, and such Shares of
Contingent and/or Restricted Stock shall be issued and delivered to the
recipient or such recipient's legal representative no later than the expiration
of the salaries continuation program.
11.3 Upon a Change in Control, all Options, Contingent Stock Awards,
Restricted Stock Awards, and SARs will automatically vest as of that date and
all restrictions or contingencies will be deemed to have been satisfied.
B-11
<PAGE>
11.4 The Committee may provide in any individual agreement in connection
with an Award that upon a Change in Control the Executive may have a period of
time to exercise such Award which period does not exceed its original term.
12. GENERAL RESTRICTIONS
12.1 The Plan and each Award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the Shares subject or related thereto
upon any securities exchange or under any state or federal law, (ii) the consent
or approval of any government regulatory body, or (iii) an agreement by the
recipient of an Award with respect to the disposition of Shares, is necessary or
desirable as a condition of, or in connection with the Plan or the granting of
such Award or the issue or purchase of Shares of common stock thereunder, the
Plan will not be effective and/or the Award may not be consummated in whole or
in part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
13. RIGHTS OF A SHAREHOLDER
13.1 The recipient of any Award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for Shares of
common stock are issued to such recipient, except for the rights provided in
Section 11 of this Plan as it pertains to Restricted Stock Awards.
14. RIGHTS TO TERMINATE EMPLOYMENT
14.1 Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any participant the right to continue in the employment
of the Company or its subsidiary or affect any right which the Company or its
subsidiary may have to terminate the employment of such participant.
15. WITHHOLDING OF TAXES
15.1 Whenever the Company proposes, or is required, to issue or transfer
Shares under the Plan, the Company shall have the right to require the recipient
to remit to the Company an amount, or a number of shares, sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such Shares. Whenever under the
Plan payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements.
16. NONASSIGNABILITY
16.1 No Award or benefit under the Plan shall be assignable or
transferable by the recipient thereof except by will or by the laws of descent
and distribution. During the life of the recipient, such Award shall be
exercisable only by such person or by such person's guardian or legal
representative.
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<PAGE>
17. NON-UNIFORM DETERMINATIONS
17.1 The Committee's determination under the Plan (including, without
limitation, determinations of the persons to receive Awards, the form, amount
and timing of such Awards, the terms and conditions of such Awards and the
agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made by the Committee selectively among
persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.
18. ADJUSTMENTS
18.1 In the event of any change in the outstanding common stock of the
Company by reason of the Restructure, a stock dividend, recapitalization,
merger, consolidation, split-up, combination, exchange of Shares or the like,
the Committee shall adjust the number of Shares of common stock which may be
issued under the Plan and shall provide for an equitable adjustment of any
outstanding Award or Shares issuable pursuant to an outstanding Award under this
Plan.
19. AMENDMENT
19.1 The Plan may be amended by the Board, without Shareholder approval,
at any time in any respect, unless Shareholder approval of the amendment in
question is required under Florida law, the Code, any exemption from Section 16
of the Exchange Act (including without limitation SEC Rule 16b-3) for which the
Company intends Section 16 Persons to qualify, any national securities exchange
system on which the Shares are then listed or reported, by any regulatory body
having jurisdiction with respect to the Plan, or any other applicable laws,
rules or regulations.
19.2 The termination or modification or amendment of the Plan shall not,
without the consent of a participant, affect a participant's rights under an
Award previously granted. Notwithstanding the foregoing, however, the
corporation reserves the right to terminate the Plan in whole or in part, at any
time and for any reason, provided that full and equitable compensation is made
to participants with respect to Awards previously granted.
20. EFFECT ON OTHER PLAN
20.1 Participation in this Plan shall not affect a participant's
eligibility to participate in any other benefit or incentive plan of the
Company, and any Awards made pursuant to this Plan shall not be used in
determining the benefits provided under any other plan of the Company unless
specifically provided.
21. DURATION OF PLAN
21.1 The Plan shall remain in effect until all Awards under the Plan have
been satisfied by the issuance of Shares or the payment of cash, but no Awards
shall be granted more than ten years after the date the Plan is adopted by the
Company.
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<PAGE>
22. FUNDING OF THE PLAN
22.1 This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under this Plan, and payment of Awards
shall be on the same basis as the claims of the Company's general creditors. In
no event shall interest be paid or accrued on any Award including unpaid
installments of Awards.
23. GOVERNING LAW
23.1 The laws of the State of Florida shall govern, control and determine
all questions arising with respect to the Plan and the interpretation and
validity of its respective provisions.
FIRST AMENDMENT TO THE
FLORIDA PHYSICIANS INSURANCE COMPANY
OMNIBUS INCENTIVE PLAN
This First Amendment to the Florida Physicians Insurance Company Omnibus
Incentive Plan (the "Plan") is made effective as of March 16, 1996.
1. Section 2.1(v) of the Plan shall be amended to read as follows:
"(v) 'Plan' means Omnibus Incentive Plan, as evidenced herein and as
amended from time to time."
All provisions of the Plan not specifically mentioned in this First
Amendment shall be considered modified to the extent necessary to be consistent
with the changes made in this First Amendment.
SECOND AMENDMENT TO THE
OMNIBUS INCENTIVE PLAN
This Second Amendment to the Omnibus Incentive Plan (the "Plan") is made
effective as of September 14, 1997.
1. Section 4.1 of the Plan shall be amended to read as follows:
"4.1 The aggregate number of Shares which may be issued under
Options granted pursuant to the Plan shall not exceed in the
aggregate 1,165,000 Shares."
All provisions of the Plan not specifically mentioned in this Second
Amendment shall be considered modified to the extent necessary to be consistent
with the changes made in this Second Amendment.
B-14
<PAGE>
1999 AMENDMENT TO THE
OMNIBUS INCENTIVE PLAN
This 1999 Amendment to the Omnibus Incentive Plan (the "Plan") is made
effective as of June 8, 1999.
1. Section 4.1 of the Plan shall be amended to read as follows:
"4.1 The aggregate number of Shares which may be issued under
Options granted pursuant to the Plan shall not exceed
1,665,000 Shares."
2. Section 6.2 of the Plan shall be amended to read as follows:
"6.2 The maximum number of Awards that may be awarded to any
one person during the life of the Plan shall be 600,000
Shares."
3. Section 16.1 shall be amended by the addition of the following
sentence at the end of such Section:
"Notwithstanding the foregoing, under certain circumstances
The Committee may grant (or sanction by amending an existing
grant) Nonqualified Stock Options which may be transferred by
the Optionee during his or her lifetime to any member of his
or her immediate family or a trust established for the
exclusive benefit of one or more members of his or her
immediate family or to a former spouse pursuant to a domestic
relations order. For purposes of this Section, the term
"immediate family" is defined as an Optionee's spouse,
children, stepchildren, grandchildren (including relationships
arising from legal adoption), and parents."
All provisions of the Plan not specifically mentioned in this 1999
Amendment shall be considered modified to the extent necessary to be consistent
with the changes made in this Amendment.
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<PAGE>
PROPOSED
2000 AMENDMENT TO THE
OMNIBUS INCENTIVE PLAN
This 2000 Amendment to the Omnibus Incentive Plan (the "Plan") is made
effective as of June 7, 2000, subject to shareholder approval at the 2000 Annual
Meeting of Shareholders.
Section 4.1 of the Plan shall be amended to read as follows:
"4.1 The aggregate number of Shares that may be issued under
Options granted pursuant to the Plan shall not exceed
1,865,000 Shares."
All provisions of the Plan not specifically mentioned in this 2000
Amendment shall be considered modified to the extent necessary to be consistent
with the changes made in this Amendment.
B-16
<PAGE>
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FPIC INSURANCE GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS JUNE 7, 2000
The undersigned shareholder hereby appoints Kim D. Thorpe and Pamela D.
Deyo, or either of them, as proxies, with full power of substitution, to vote
all shares of Common Stock that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of the Company on June
7, 2000, and at any adjournment thereof, upon all subjects that may properly
come before the meeting, including the matters described in the proxy statement
furnished herewith, subject to any directions indicated on the other side of
this card.
If no directions are given, the proxies will vote for (1) the election of
all nominees for director listed on the other side of this card, (2) the
approval of amendment to the Director Stock Option Plan as described in the
proxy statement furnished herewith, (3) the approval of amendment to the Omnibus
Incentive Plan as described in the proxy statement furnished herewith and (4) at
their discretion, on any other matters that may properly come before the
meeting. The undersigned hereby revokes any proxy heretofore given to any person
or persons whomsoever (other than the proxies named above) to vote such Common
Stock and ratifies and confirms all that such proxies may or shall do by virtue
hereof.
Your vote is important. Please sign and date on the reverse and return
promptly in the enclosed postage-paid envelope.
(Continued and to be dated and signed on reverse side.)
<PAGE>
Please mark votes |X| This Proxy will be voted as directed. If no direction is
as in this made, it will be voted "FOR" the proposals set forth
example: below. The Board of Directors recommends a vote "FOR"
all nominees, a vote "FOR" amending the Director Stock
Option Plan, and a vote "FOR" amending the Omnibus
Incentive Plan.
1. Election of Directors: Richard J. Bagby, M.D., Robert O. Baratta, M.D.,
Louis C. Murray, M.D., William R. Russell
|_| FOR all nominees listed above. |_| WITHHOLD AUTHORITY to vote for
all nominees listed above.
(except as marked to the contrary)
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
out that nominee's name on the list above)
2. Approval of Amendment to Director Stock Option Plan
|_| FOR Approval |_| AGAINST Approval |_| ABSTAIN
3. Approval of Amendment to Omnibus Incentive Plan
|_| FOR Approval |_| AGAINST Approval |_| ABSTAIN
- --------------------------------------------------------------------------------
Account No.
Date:__________________________,2000
____________________________________
PLEASE DATE THIS PROXY AND SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON.
WHERE MORE THAN ONE OWNER IS SHOWN, EACH SHOULD SIGN. WHEN SIGNING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE GIVE FULL TITLE. IF ANY PROXY IS
SUBMITTED BY A CORPORATION, IT SHOULD BE EXECUTED IN FULL CORPORATE NAME BY A
DULY AUTHORIZED OFFICER. IF ANY PROXY IS SUBMITTED BY A PARTNERSHIP, IT SHOULD
BE EXECUTED IN THE PARTNERSHIP NAME BY AN AUTHORIZED PERSON.
<PAGE>
- --------------------------------------------------------------------------------
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FPIC INSURANCE GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS JUNE 7, 2000
The undersigned shareholder hereby appoints Kim D. Thorpe and Pamela D.
Deyo, or either of them, as proxies, with full power of substitution, to vote
all shares of Common Stock that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of the Company on June
7, 2000, and at any adjournment thereof, upon all subjects that may properly
come before the meeting, including the matters described in the proxy statement
furnished herewith, subject to any directions indicated on the other side of
this card.
Your vote is important. Please sign and date on the reverse and return
promptly in the enclosed postage-paid envelope.
1. Election of Directors: Richard J. Bagby, M.D., Robert O. Baratta, M.D.,
Louis C. Murray, M.D., William R. Russell
|_| FOR all nominees listed above. |_| WITHHOLD AUTHORITY to vote for
all nominees listed above.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike out that nominee's name on the list above)
2. Approval of Amendment to Director Stock Option Plan
|_| FOR Approval |_| AGAINST Approval |_| ABSTAIN
3. Approval of Amendment to Omnibus Incentive Plan
|_| FOR Approval |_| AGAINST Approval |_| ABSTAIN
(Continued and to be SIGNED on Reverse Side)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
This Proxy will be voted as directed. If no directions are given, the proxies
will vote for (1) the election of all nominees for director listed on the other
side of this card, (2) the approval of amendment to the Director Stock Option
Plan as described in the proxy statement furnished herewith, (3) the approval of
amendment to the Omnibus Incentive Plan as described in the proxy statement
furnished herewith and (4) at their discretion, on any other matters that may
properly come before the meeting. The undersigned hereby revokes any proxy
heretofore given to any person or persons whomsoever (other than the proxies
named above) to vote such Common Stock and ratifies and confirms all that such
proxies may or shall do by virtue hereof.
The Board of Directors recommends a vote "FOR" all nominees, a vote "FOR"
amending the Director Stock Option Plan, and a vote "FOR" amending the Omnibus
Incentive Plan.
PLEASE DATE THIS PROXY AND SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON.
WHERE MORE THAN ONE OWNER IS SHOWN, EACH SHOULD SIGN. WHEN SIGNING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE GIVE FULL TITLE. IF ANY PROXY IS
SUBMITTED BY A CORPORATION, IT SHOULD BE EXECUTED IN FULL CORPORATE NAME BY A
DULY AUTHORIZED OFFICER. IF ANY PROXY IS SUBMITTED BY A PARTNERSHIP, IT SHOULD
BE EXECUTED IN THE PARTNERSHIP NAME BY AN AUTHORIZED PERSON.
Dated: _____________________________, 2000
__________________________________________
Signature of Stockholder
__________________________________________
Signature of Stockholder (If held Jointly)
- --------------------------------------------------------------------------------
