<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
INSpire INSURANCE SOLUTIONS, INC.
(Name of Registrant As Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price 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):
$___________
(4) Proposed maximum aggregate value of transaction: $___________
(5) Total fee paid: $___________
[ ] Fee paid previously with preliminary materials: $_____________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: $________________
(2) Form, Schedule or Registration Statement No.:__________________
(3) Filing Party:__________________________________________________
(4) Date Filed:______________________________
<PAGE> 2
INSPIRE INSURANCE SOLUTIONS, INC.
300 BURNETT STREET
FORT WORTH, TEXAS 76102-2799
NOTICE OF THE 2000 ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD JUNE 23, 2000
To the Shareholders
of INSpire Insurance Solutions, Inc.:
INSpire Insurance Solutions, Inc., a Texas corporation (the "Company" or
"INSpire"), cordially invites you to attend the 2000 annual meeting of its
shareholders at INSpire's corporate headquarters, 300 Burnett Street, Fort
Worth, Texas 76102-2799, on June 23, 2000, at 10:00 a.m. Central Standard Time,
for the following purposes:
(1) To elect three directors to INSpire's Board of Directors;
(2) To ratify the appointment of Deloitte & Touche LLP as the
independent auditors of INSpire's financial statements for the year ended
December 31, 2000; and
(3) To transact such other business as may properly come before the
annual meeting or any adjournments thereof.
The Board of Directors of INSpire has established the close of business on
April 28, 2000 as the record date for determining the shareholders entitled to
notice of, and to vote at, the annual meeting or any adjournment thereof. Any
shareholder may examine the list of shareholders as of the record date at
INSpire's office in Fort Worth, Texas, during regular business hours on any
business day before the annual meeting or any adjournment thereof.
WE URGE SHAREHOLDERS, WHETHER OR NOT THEY PLAN TO ATTEND THE ANNUAL
MEETING, TO SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED. IF A SHAREHOLDER WHO HAS SUBMITTED A PROXY ATTENDS THE ANNUAL MEETING
IN PERSON, THAT SHAREHOLDER MAY REVOKE THE PROXY AND VOTE IN PERSON ON ALL
MATTERS SUBMITTED AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ JEFFREY W. ROBINSON
Jeffrey W. Robinson
President and Chief Operating
Officer
May 17, 2000
Fort Worth, Texas
<PAGE> 3
INSPIRE INSURANCE SOLUTIONS, INC.
300 BURNETT STREET
FORT WORTH, TEXAS 76102-2799
PROXY STATEMENT
2000 ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD JUNE 23, 2000
INTRODUCTION
The board of directors (the "Board of Directors") of INSpire Insurance
Solutions, Inc., a Texas corporation (the "Company" or "INSpire"), hereby
solicits your proxy on behalf of INSpire for use at the 2000 annual meeting of
INSpire's shareholders and any continuation of this meeting pursuant to any
adjournment thereof (the "Annual Meeting"). The Annual Meeting will be held at
INSpire's corporate headquarters, 300 Burnett Street, Fort Worth, Texas
76102-2799, on June 23, 2000, at 10:00 a.m. Central Standard Time.
INSpire's principal executive office is located at 300 Burnett Street, Fort
Worth, Texas 76102-2799. INSpire's telephone number is (817) 348-3900.
INSpire mailed this proxy statement (this "Proxy Statement") and the
accompanying proxy card (the "Proxy Card") on or about May 17, 2000. The date of
this Proxy Statement is May 17, 2000.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the holders of record (the "Shareholders") of shares
of common stock, par value $0.01 per share (the "Common Stock"), of INSpire on
April 28, 2000 will vote upon the following matters:
(1) The proposal to elect Harry E. Bartel, John F. Pergande and Greg
B. Kent as directors to INSpire's Board of Directors;
(2) The ratification of the appointment by the Board of Directors of
Deloitte & Touche LLP as the independent auditors of INSpire's financial
statements for the year ended December 31, 2000; and
(3) The transaction of such other business as may properly come before
the Annual Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that you vote "FOR" each of:
(1) The election of Harry E. Bartel, John F. Pergande and Greg B. Kent
as directors to INSpire's Board of Directors;
(2) The ratification of the appointment by the Board of Directors of
Deloitte & Touche LLP as the independent auditors of INSpire's financial
statements for the year ended December 31, 2000.
1
<PAGE> 4
RECORD DATE AND VOTING
RECORD DATE
The Board of Directors has established the close of business on April 28,
2000 (the "Record Date"), as the record date for determining the Shareholders
entitled to notice of, and to vote at, the Annual Meeting. On the Record Date,
INSpire had 19,138,001 shares of Common Stock outstanding. INSpire did not have
any other shares of capital stock outstanding on the Record Date.
QUORUM, REQUIRED VOTE AND VOTING RIGHTS
Quorum. The presence, in person or by proxy, of Shareholders holding a
majority of the outstanding shares of Common Stock on the Record Date will
constitute a quorum at the Annual Meeting. Shares that are represented at the
Annual Meeting but abstain from voting on any or all matters and shares that are
"broker non-votes" (shares held by brokers or nominees as to which they have no
discretionary power to vote on a particular matter and have received no
instructions from the beneficial owners thereof or persons entitled to vote
thereon) will be counted in determining whether a quorum is present at the
Annual Meeting. The election inspectors appointed for the Annual Meeting will
determine the number of shares of Common Stock present at the meeting, determine
the validity of proxies and ballots, determine whether or not a quorum is
present, and count all votes and ballots. Unless a quorum is present at the
Annual Meeting, no action may be taken at the meeting except the adjournment
thereof until a later time.
Required Vote. To elect a nominee for director, a plurality of the votes
cast (in person or by proxy) is required. Therefore, if you abstain from voting
in the election of a director, your abstention will not affect the outcome of
that election. A majority of the shares of Common Stock entitled to vote and
present in person or by proxy is required to ratify the appointment by the Board
of Directors of Deloitte & Touche LLP as the independent auditors of INSpire's
financial statements for the year ended December 31, 2000. If you abstain from
voting on this proposal, your abstention will have the effect of a negative vote
with respect to this proposal because this proposal requires the affirmative
vote of a majority of shares of Common Stock present in person or by proxy at
the Annual Meeting and entitled to vote thereon. Broker non-votes will be
treated as not present and not entitled to vote with respect to each applicable
proposal. Therefore, broker non-votes will have no effect on the outcome of any
of the proposals, including the election of directors.
Voting Rights. With respect to each proposal, each Shareholder will be
entitled to one vote per share of Common Stock held as of the Record Date by
such Shareholder.
PROXIES
Jeffrey W. Robinson and R. Earl Cox, III, the persons named as proxies on
the Proxy Card accompanying this Proxy Statement, were selected by the Board of
Directors to serve as proxies (collectively, the "Proxyholders"). Each executed
and returned Proxy Card will be voted according to the directions indicated on
that Proxy Card. If no direction is indicated, the proxy will be voted according
to the Board of Directors' recommendations, which are contained in this Proxy
Statement.
The Board of Directors does not intend to present, and has no information
that others will present, any business at the Annual Meeting that requires a
vote on any other matter. If any other matter requiring a vote properly comes
before the Annual Meeting, the Proxyholders will vote the proxies that they hold
in accordance with their best judgment, including voting them to adjourn the
Annual Meeting to another time if a quorum is not present at the Annual Meeting
or if they believe that an adjournment is in the best interests of INSpire.
Each Shareholder giving a proxy has the power to revoke it at any time
before the shares of Common Stock it represents are voted. This revocation is
effective upon receipt, at any time before the Annual Meeting is called to
order, by the Secretary of INSpire of either (i) an instrument revoking the
proxy or (ii) a duly executed proxy bearing a later date than the preceding
proxy. Additionally, a Shareholder may change or revoke a previously executed
proxy by voting in person at the Annual Meeting.
2
<PAGE> 5
SHAREHOLDER LIST
A list of Shareholders entitled to vote at the Annual Meeting, which will
be arranged in alphabetical order and which will show each Shareholder's address
and the number of shares registered in his or her name, will be open to any
Shareholder to examine for any purpose related to the Annual Meeting. Any
Shareholder may examine this list during ordinary business hours commencing May
17, 2000, and continuing through the date of the Annual Meeting at the principal
office of INSpire, 300 Burnett Street, Fort Worth, Texas, 76102-2799.
SOLICITATION AGENT AND CERTAIN REIMBURSEMENTS
INSpire will bear the cost to solicit proxies. INSpire has retained Morrow
& Co., Inc. (the "Solicitation Agent") to solicit proxies for the Annual
Meeting. The Solicitation Agent may solicit proxies from the Shareholders and
other persons in person or by mail, facsimile transmission, telephone, personal
interview, or any other means. INSpire will pay the Solicitation Agent a fee of
$4,000 and reimburse it for its out-of-pocket expenses in connection with this
solicitation. INSpire also will reimburse banks, brokers, custodians,
fiduciaries, nominees, securities dealers, trust companies, and other persons
for the reasonable expenses that they incur when forwarding this Proxy Statement
and the accompanying materials to the beneficial owners of shares of Common
Stock. INSpire's directors and officers also may solicit proxies from
Shareholders and other persons by any of the means described above. INSpire will
not pay these directors and officers any extra compensation for participating in
this solicitation.
PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
Three directors are to be elected at the Annual Meeting. Harry E. Bartel,
John F. Pergande and Greg B. Kent have been nominated to serve as director and,
if elected will serve for a term of three (3) years that expires at the annual
meeting of shareholders to be held in 2003. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEES NAMED IN THIS
PROXY STATEMENT TO SERVE AS DIRECTORS OF INSPIRE. See "--Nominees" below.
The four remaining directors, whose terms of office expire in 2001 and
2002, will continue to serve after the Annual Meeting until their respective
terms of office expire or their successors are duly elected and qualified. See
"-- Other Directors" below.
NOMINEES
Harry E. Bartel, age 57, has served as a director of INSpire since 1996,
and his current term as director expires at the 2000 Annual Meeting. Mr. Bartel
has been a partner with the law firm of Cantey & Hanger, LLP since 1968.
John F. Pergande, age 37, is nominated to serve as a director to replace
the vacancy created with the resignation of F. George Dunham, III on May 3,
2000. Mr. Pergande has served as the vice president of Buena Holdings Genpar,
Inc., which is the general partner of the entity which is the general partner of
Buena Venture Associates, L.P., since 1998. Prior to this position, Mr. Pergande
was the chief financial officer of Pyramid Services, Inc. from 1997 to 1998.
From 1995 to 1997, Mr. Pergande was a member of the Corporate Finance Group of
Electronic Data Systems, Inc. Prior to 1995, Mr. Pergande was a corporate banker
for Citibank.
Greg B. Kent, age 52, is nominated to serve as a director to fill the
additional board seat created by the Board of Directors in May 2000. Mr. Kent
has served as the risk manager for Bass Enterprises Production Co. since 1989.
Mr. Kent served as a director of National Reinsurance Corporation from 1991
through 1996.
3
<PAGE> 6
OTHER DIRECTORS
The following persons will continue to serve as directors of INSpire after
the Annual Meeting until their terms of office expire (as indicated below) or
until their successors are elected and qualified.
<TABLE>
<CAPTION>
POSITION SERVED AS TERM
NAME AGE WITH COMPANY DIRECTOR SINCE EXPIRES
- ---- --- ------------ -------------- -------
<S> <C> <C> <C> <C>
Daniel E. Berce.................... 46 Director 1999 2001
R. Earl Cox, III................... 66 Director 1996 2001
Mitch S. Wynne..................... 41 Director 1997 2002
Jeffrey W. Robinson................ 42 Director, President and 2000 2002
Chief Operating Officer
</TABLE>
Mr. Berce has served as a director of INSpire since March 1999, and his
current term as director expires in 2001. Mr. Berce has served as Vice Chairman
of AmeriCredit Corp., a publicly traded consumer finance company
("AmeriCredit"), since November 1996. Mr. Berce has served as Chief Financial
Officer and a director of AmeriCredit since May 1990, and Treasurer of
AmeriCredit from May 1990 to November 1996. Mr. Berce has also served as a
director of Curative Health Services, Inc., a publicly traded health services
company, since February 2000. Previously, Mr. Berce was a partner with
PricewaterhouseCoopers LLP.
Mr. Cox has served as a director of INSpire since 1996, and his current
term as director expires in 2001. Since 1977, Mr. Cox has served as president of
R.E. Cox Realty Co. and has been a co-owner of OFCO Office Furniture, Inc. since
1985. Mr. Cox has served as a director of KBK Capital Corp., a factoring
company, since 1995 and a director of Tandycraft, Inc., a manufacturer and
retailer of craft products, since 1985. Mr. Cox served as Chairman of the Board
of Tandycraft, Inc. from 1985 until November 1999.
Mr. Wynne has served as a director of INSpire since March 1997, and his
current term as director expires in 2002. Mr. Wynne has owned and operated Wynne
Petroleum Company, an oil and gas production company, for more than five years.
Jeffrey W. Robinson was appointed as a director and President and Chief
Operating Officer by the Board of Directors effective January 7, 2000. His
current term as director expires in 2002. Mr. Robinson previously served as
Executive Vice President -- Outsourcing of INSpire since June 1997. From
November 1996 to June 1997, Mr. Robinson served as Vice President -- Policy Life
Cycle of INSpire, the Millers Mutual Fire Insurance Company ("Millers
Insurance") and Millers Casualty Insurance Company ("Millers Casualty"). From
1985 to November 1996, Mr. Robinson served in various management positions with
Policy Management Systems Corporation ("PMSC"), including Vice President of the
Risk Services Division. Prior to 1985, Mr. Robinson served in various management
and business operations positions for Home Insurance Company.
William J. Smith, III, whose term as director was scheduled to expire in
2002, resigned from the Board of Directors effective January 7, 2000. Mr. Smith
served as President, Chief Operating Officer and a director of INSpire from
April 1998 to January 2000.
F. George Dunham, III, whose term as director was scheduled to expire in
2000, resigned from the Board of Directors effective May 3, 2000. Mr. Dunham
served as Chief Executive Officer and a director of INSpire from its inception
in 1995.
4
<PAGE> 7
EXECUTIVE OFFICERS
Set forth below is a table identifying executive officers of INSpire who
are not identified herein as a director or nominee for director.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
John C. Aldredge...................... 54 Executive Vice President and Chief
Technology Officer
Ronald O. Lynn........................ 62 Executive Vice President and Chief
Information Officer
Robert K. Agazzi...................... 56 Executive Vice President -- Software
and Systems
James P. Strickland................... 33 Senior Vice President -- Sales and
Marketing
</TABLE>
Mr. Aldredge has served as Executive Vice President and Chief Technology
Officer of INSpire since September 1999, and previously served as Senior Vice
President -- Research and Development of INSpire since September 1998. From
January 1996 to September 1998, Mr. Aldredge served as Senior Vice President for
Technology Services for Insurance Technology Services, Inc., an insurance
systems integration and consulting firm. From 1993 to December 1995, Mr.
Aldredge served as the Chief Information Officer of the Texas Workers
Compensation Insurance Fund. Before 1993, he served as an officer of several
software companies and Chief Information Officer of the City of Lubbock, Texas.
Mr. Lynn has served as Executive Vice President and Chief Information
Officer of INSpire since March 1997 and, from March 1996 to March 1997, as Vice
President of INSpire. Mr. Lynn also served as Executive Vice President and Chief
Information Officer from March 1997 to June 1997 and as Vice President from 1993
to March 1997 of Millers Insurance and Millers Casualty. From 1992 to 1993, Mr.
Lynn served as Vice President of Harco National Insurance Company, where he was
responsible for computer related functions. From 1988 to 1992, Mr. Lynn served
as Assistant Vice President of Property and Casualty Processing Services for
PMSC.
Mr. Agazzi has served as Executive Vice President -- Software and Systems
of INSpire since July 1997. Mr. Agazzi served as President of Strategic Data
Systems, Inc. ("SDS") from 1989 until July 1997 and as Vice
President -- Marketing of SDS from 1983 to 1989. Prior to 1983, Mr. Agazzi
served in various management positions with PMSC and several insurance and
software development companies.
Mr. Strickland has served as Senior Vice President -- Sales and Marketing
of INSpire since January 1998. From 1996 to January 1998, Mr. Strickland served
as Vice President of Integrated Business Services of Computer Sciences
Corporation (formerly The Continuum Company, Inc.), a software development and
policy and claims administration company for property and casualty and life
insurance companies. From 1992 to 1996, Mr. Strickland served as Vice President
of Outsourcing Services for The Continuum Company, Inc. From 1988 to 1996, Mr.
Strickland served as Director of Outsourcing Sales Support for Electronic Data
Systems.
5
<PAGE> 8
MANAGEMENT
Amounts and prices related to shares of Common Stock have been adjusted to
give effect to a three-for-two stock split of the Common Stock, effected in the
form of a stock dividend, paid on August 17, 1998.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation with
respect to the Chief Executive Officer of INSpire and INSpire's four most highly
compensated executive officers other than the Chief Executive Officer (the
"named executive officers") for services rendered during 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION(1) SECURITIES
----------------------------- UNDERLYING ALL OTHER
YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
F. George Dunham, III(2)................. 1999 400,000 -- -- --
Chief Executive Officer 1998 391,667 -- 270,000 --
and Chairman of the Board 1997 175,000(3) 175,000 1,397,309 --
William J. Smith, III.................... 1999 325,000 -- 50,000 100,000(5)
President and Chief Operating 1998 216,667(6) -- 375,000 199,332(7)
Officer(4)
Jeffrey W. Robinson...................... 1999 210,000 -- 75,000 --
President and Chief Operating 1998 127,500 -- 45,000 --
Officer(4) 1997 115,000 57,500 237,543 --
Kenneth J. Meister....................... 1999 275,000(8) -- 300,000 105,603(9)
Executive Vice President
and Chief Financial Officer
James P. Strickland...................... 1999 152,500 150,000 25,000 --
Senior Vice President -- 1998 130,000(10) -- 112,500 --
Sales and Marketing
</TABLE>
- ---------------
(1) Does not include "Other Annual Compensation" because amounts of certain
perquisites and other noncash benefits provided by INSpire did not exceed
the lesser of $50,000 or 10% of the total annual base salary and bonus
disclosed in this table for the respective officer.
(2) Mr. Dunham resigned from his positions with INSpire effective as of May 3,
2000. See "Certain Transactions."
(3) Represents salary paid to Mr. Dunham for the six months ended December 31,
1997. Mr. Dunham was compensated by Millers Insurance for the six months
ended June 30, 1997.
(4) Mr. Robinson succeeded Mr. Smith as President and Chief Operating Officer
of INSpire upon Mr. Smith's resignation effective January 7, 2000. Mr.
Robinson served as Executive Vice President -- Outsourcing prior to January
7, 2000.
(5) Represents deferred compensation paid to Mr. Smith pursuant to his
employment agreement.
(6) Represents salary paid to Mr. Smith during 1998 since his employment with
INSpire began in April 1998.
(7) Represents moving expenses and a one-time bonus paid to Mr. Smith in
connection with his employment with INSpire.
(8) Mr. Meister began employment with INSpire in January 1999 and resigned his
position effective March 31, 2000.
(9) Represents moving expenses and club dues paid on behalf of Mr. Meister in
connection with his employment with INSpire.
(10) Represents salary paid to Mr. Strickland during 1998 since his employment
with INSpire began in January 1998.
6
<PAGE> 9
The following table sets forth certain information concerning the options
granted to the named executive officers during 1999. For additional information
on and certain terms of options, see "-- Stock Option Plan."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL MARKET ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE ON PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE DATE OF FOR OPTION TERM($)(2)
OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION ---------------------
GRANTED(#) FISCAL YEAR(1) ($/SH) ($/SH) DATE 5% 10%
---------- -------------- -------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
William J. Smith,
III.................. 50,000(3) 4 15.38 15.38 1/27/05 261,449 593,138
Jeffrey W. Robinson.... 75,000(4) 7 4.11 4.11 12/21/05 104,809 237,776
Kenneth J. Meister..... 300,000(5) 27 16.13 16.13 1/11/05 1,645,213 3,732,426
James P. Strickland.... 25,000(4) 2 4.11 4.11 12/21/05 34,936 79,259
</TABLE>
- ---------------
(1) Options to purchase a total of 1,121,500 shares of Common Stock were granted
to employees in 1999.
(2) The amounts under the columns labeled "5%" and "10%" are included by the
Company pursuant to certain rules promulgated by the Securities and Exchange
Commission (the "SEC") and are not intended to forecast future appreciation,
if any, in the price of the Common Stock. Such amounts are based on the
assumption that the named persons hold the options for the full term of the
options. The actual value of the options will vary in accordance with the
market price of the Common Stock.
(3) Options are subject to a five-year vesting schedule, with one-fifth becoming
exercisable on each of the first five anniversaries of the date of grant.
(4) Options are subject to a three-year vesting schedule, with one-third
becoming exercisable on each of the first three anniversaries of the date of
grant.
(5) Options are subject to a four-year vesting schedule, with one-fifth becoming
exercisable on the date of grant and one-fifth becoming exercisable on each
of the first four anniversaries of the date of grant.
The following table sets forth certain information concerning options
exercised in 1999 by the named executive officers and all unexercised options
held by the named executive officers as of December 31, 1999. The value of
unexercised in-the-money options at fiscal year-end is based on the closing
price of the Common Stock of $4.59 on December 31, 1999. For additional
information on and certain terms of such options, see "-- Stock Option Plan."
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ON VALUE --------------------------- ---------------------------
EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
F. George Dunham, III............ -- -- 1,042,846 270,000 520,777 --
William J. Smith, III............ -- -- -- -- -- --
Jeffrey W. Robinson.............. -- -- 143,418 159,126 315,792 36,375
Kenneth J. Meister............... -- -- 60,000 240,000 -- --
James P. Strickland.............. -- -- 22,500 115,000 -- 12,125
</TABLE>
The following table sets forth certain information concerning all
repricings between the date of INSpire's initial public offering and December
31, 1999 of options that were held by any executive officer at the time of the
repricing. In addition to the options repricings set forth below, a total of
27,500 directors' options held by Messrs. Bartel, Berce, Cox and Wynne were
repriced to an exercise price of $6.00 as of December 21, 1999. For additional
information regarding the basis for options repricings, see "Joint Report of the
Compensation Committee and the Board of Directors on Executive
Compensation -- 1999 Compensation."
7
<PAGE> 10
TEN-YEAR OPTIONS REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE OPTION TERM
UNDERLYING OF STOCK EXERCISE PRICE NEW REMAINING
OPTIONS AT TIME OF AT TIME OF EXERCISE AT DATE OF
DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) REPRICING
-------- ----------- ------------ -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey W. Robinson............. 12/21/99 97,813 4.11 8.00 6.00 44 months
President and Chief Operating 12/21/99 45,000 4.11 22.00 6.00 52 months
Officer
John C. Aldredge................ 12/21/99 50,000 4.11 21.06 6.00 56 months
Executive Vice President and
Chief Technology Officer
Ronald O. Lynn.................. 12/21/99 97,813 4.11 8.00 6.00 44 months
Executive Vice President and 12/21/99 9,693 4.11 22.17 6.00 39 months
Chief Information Officer
Robert K. Agazzi................ 12/21/99 58,813 4.11 8.00 6.00 44 months
Executive Vice President --
Software and Systems
James P. Strickland............. 12/21/99 75,000 4.11 13.96 6.00 48 months
Senior Vice President -- Sales 12/21/99 37,500 4.11 22.00 6.00 52 months
and Marketing
</TABLE>
EMPLOYMENT AND INDEMNIFICATION AGREEMENTS
INSpire entered into an employment agreement with Mr. Robinson in July
1997, which was amended in January 1998. This agreement terminates in June 2000.
On April 1, 2000, INSpire entered into a new employment agreement with Mr.
Robinson to be effective July 1, 2000. This agreement extends until July 1,
2003. Pursuant to this agreement, Mr. Robinson will receive an annual salary of
$300,000, subject to adjustments. In addition to the salary, Mr. Robinson is
entitled to participate in INSpire's Bonus Plan for the remainder of his
employment agreement and is granted options to purchase shares of Common Stock
under the Second Amended and Restated 1997 Stock Option Plan (the "Stock Option
Plan"). Under this agreement, Mr. Robinson is subject to noncompetition,
nonsolicitation and confidentiality provisions.
Pursuant to this agreement, if Mr. Robinson is terminated by INSpire
without notice or for any reason other than for cause, Mr. Robinson is entitled
to a severance payment in an amount equal to the salary he would have received
for the remainder of the term of his employment. The employment agreement also
provides that if there is a "change of control" of INSpire, he shall be paid,
for the term of his employment agreement plus a period of two years thereafter,
his annual "cash compensation" (which is based upon his average cash
compensation for the two years prior to such change of control), along with an
annual amount equal to 50% of such average annual cash compensation (the
"Bonus"). The total amount, however, cannot exceed the amount that would cause
such payment to be deemed a "parachute payment" under Section 280G of the
Internal Revenue Code of 1986, as amended. The agreement also provides that the
payments to Mr. Robinson will cease if he is terminated for cause or in the
event of reasonable proof of any violation of the noncompetition or
confidentiality provisions of his employment agreement. Also, if following a
change of control Mr. Robinson voluntarily terminates employment for other than
good reason (as defined in the employment agreement), his annual cash
compensation and Bonus will be payable for only one year following such
termination.
In July 1997, INSpire entered into an employment agreement with Mr. Dunham,
which was amended in January 1998. The agreement provided for an annual salary
of $350,000. The term of the employment agreement extended until June 2000. Mr.
Dunham's employment agreement also provided that if there was a change in
control, Mr. Dunham would be paid for the term of his employment agreement plus
a period of two years thereafter, along with an annual bonus amount of 50% of
his average annual cash compensation.
8
<PAGE> 11
Mr. Dunham resigned his employment with INSpire effective May 3, 2000 and
entered into a Separation Agreement with INSpire, whereby INSpire has paid Mr.
Dunham $1.3 million. See "Certain Transactions."
In April 1998, INSpire entered into a five-year employment agreement with
Mr. Smith, which provided for an annual salary of $325,000. Mr. Smith's
employment agreement also provided that: (i) he would be entitled to five equal
annual installments of $100,000 in cash on each April 28 during the term of his
employment agreement provided he is employed on such date, and (ii) in the event
his employment agreement was terminated for any reason other than cause (as
defined in his employment agreement) prior to April 27, 2003, he would be
entitled to an additional one-time cash payment, the amount of which depended on
the date of such termination. Mr. Smith resigned his employment with INSpire
effective January 7, 2000, and received a one-time cash payment of $375,000 and
severance compensation equal to one year's salary. Mr. Smith was granted stock
options to purchase 425,000 shares of Common Stock under the Stock Option Plan,
all of which were canceled pursuant to an agreement between Mr. Smith and the
Company effective December 10, 1999.
In January 1999, INSpire entered into a three-year employment agreement
with Mr. Meister, which provided for an annual salary of $275,000. Mr. Meister
resigned his employment with INSpire effective March 31, 2000, and received a
one-time severance payment upon his termination equal to his annual salary. Mr.
Meister was granted stock options to purchase 300,000 shares of Common Stock
under the Stock Option Plan. Pursuant to the terms of the Stock Option Plan, Mr.
Meister's unexercisable options were canceled on his termination date, and any
outstanding exercisable options will be canceled 60 days after his termination
date.
INSpire has entered into indemnification agreements with each of its
directors. Each indemnification agreement provides that INSpire shall indemnify
the director against certain liabilities and expenses actually and reasonably
incurred by the director in connection with any threatened, pending or completed
action, suit or proceeding, including an action by or on behalf of shareholders
of INSpire or by or in the right of INSpire, to which the director is, or is
threatened to be made, a party by reason of his status as a director, provided
that such individual did not derive an improper benefit, such individual did not
commit acts or omissions that were not in good faith or that involved
intentional misconduct or a knowing violation of the law, or such
indemnification is not otherwise disallowed under Texas law.
EMPLOYEE BENEFIT PLANS
Millers Insurance has a defined benefit pension plan that covered the
employees of INSpire. INSpire and Millers Insurance have reached an agreement
that provides for the assets of this plan attributable to INSpire's employees to
be handled in the same manner as those assets attributable to terminated
employees who were 100% vested under such plan. Under the defined benefit
pension plan, participating employees of INSpire receive benefits as follows.
With respect to normal and late retirement benefits, a participating employee
who retires after age 65 will receive an annuity for life, payable monthly in an
amount determined actuarially on the basis of the participating employee's
account balance at age 65. A participant's account balance is equal to the
present value of his accrued benefit on July 1, 1996, calculated using an 8%
interest rate plus quarterly additions to the account equal to 5% of quarterly
considered compensation plus an interest credit equal to the rate on one-year
U.S. Treasury securities (but not greater than 30-year U.S. Treasury
securities). With respect to early retirement benefits, a participating employee
who retires on or after age 55 and before his normal retirement age is eligible
to receive an annuity for life, commencing at age 65 and payable monthly in an
amount equal to the amount calculated above for normal retirement benefits,
provided, however, that if such employee so elects, such employee may receive a
reduced pension benefit beginning on his elected retirement date. As of the date
of this Proxy Statement, the estimated annual benefit payable upon retirement at
normal retirement age under the defined benefit pension plan for Mr. Dunham is
expected to be $10,789. Messrs. Smith, Robinson, Meister and Strickland were not
participants in the defined benefit pension plan, and therefore will not receive
any payments upon retirement under such plan.
In addition, INSpire maintains a defined contribution plan for its
employees that is qualified under Section 401(k) of the Internal Revenue Code of
1986, as amended.
9
<PAGE> 12
STOCK OPTION PLAN
A total of 4,500,000 shares of Common Stock has been reserved for issuance
pursuant to the Stock Option Plan. The Stock Option Plan was initially adopted
by the Board of Directors in March 1997, amended and restated by the Board of
Directors in July 1997, amended by the Board of Directors effective as of July
30, 1997, and amended and restated by the Board of Directors in February 1998.
The Stock Option Plan was administered by the Board of Directors through January
27, 1998 and thereafter has been administered by the Compensation Committee.
Both nonqualified stock options and incentive stock options (as defined in the
Internal Revenue Code) may be granted under the Stock Option Plan. Incentive
stock options granted under the Stock Option Plan may be exercised solely by the
grantee, or in the case of a grantee's death or incapacity, by the grantee's
executors, administrators, guardians or other legal representatives and are not
assignable or transferable by such grantee. Nonqualified stock options may be
transferred to certain permitted transferees under the Stock Option Plan.
DIRECTOR STOCK OPTION PLAN
In July 1997, the Board of Directors adopted the 1997 Director Stock Option
Plan, which was amended by the Board of Directors in February 1998 (the
"Director Plan"). The Director Plan is administered by the Board of Directors. A
total of 75,000 shares of Common Stock has been reserved for issuance pursuant
to the Director Plan.
Each new nonemployee director who is elected (or appointed to fill any
vacancy) as a director of INSpire will be granted options under the Director
Plan to purchase 3,750 shares of Common Stock at the fair market value of the
Common Stock on the date of grant. Also, each nonemployee director who has
previously been granted options under the Director Plan will be granted
additional options under the Director Plan to purchase 375 shares of Common
Stock on the day immediately after each annual meeting of shareholders of
INSpire subsequent to the time at which such nonemployee director is first
elected or appointed as a director of INSpire if such nonemployee director
continues to serve as a director on such date of grant. The options under the
Director Plan will vest and be exercisable as of the date of grant. Options
granted under the Director Plan may be exercised solely by the grantee, or in
the case of a grantee's death or incapacity, by the grantee's executors,
administrators, guardians or other legal representatives, and are not assignable
or transferable by such grantee, except for certain permitted transfers subject
to the prior consent of the Board of Directors.
EMPLOYEE STOCK PURCHASE PLAN
In July 1997 the Board of Directors adopted INSpire's 1997 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), under which a total of 637,500 shares
of Common Stock has been reserved for issuance. Any employee who has been
employed by INSpire for 90 days is eligible to participate in offerings under
the Stock Purchase Plan.
In 1999, INSpire implemented two semiannual offerings of Common Stock,
beginning on January 1 and July 1, of 75,000 shares of Common Stock each.
Pursuant to such offerings, 18,455 and 30,691 shares of Common Stock,
respectively, were purchased by participants under the Stock Purchase Plan.
INSpire anticipates that the Stock Purchase Plan will be further implemented by
four additional semiannual offerings of Common Stock beginning on January 1 and
July 1 for each of the years 2000 and 2001. The maximum number of shares issued
in each semi-annual offering will be 75,000 shares plus the number of unissued
shares from prior offerings under the Stock Purchase Plan.
On the commencement date of each offering under the Stock Purchase Plan, a
participating employee will be deemed to have been granted an option to purchase
a maximum number of shares of Common Stock equal to (i) the percentage of the
employee's base pay that such employee has elected to be withheld (not to exceed
10%), (ii) multiplied by such employee's base pay during the period of such
offering and (iii) divided by the lower of 85% of the closing market price of
the Common Stock on the applicable offering commencement date or 85% of the
closing market price of the Common Stock on the offering termination date.
Options held by a participant shall be exercisable only by that participant.
10
<PAGE> 13
No employee may be granted options to participate in the Stock Purchase
Plan if, as a result of such grant, such employee would (i) own stock or hold
options to purchase stock possessing 5% or more of the total combined voting
power or value of all classes of stock of INSpire or (ii) have rights to
purchase stock under all employee stock purchase plans of INSpire that accrue at
a rate in excess of $25,000 in fair market value for any calendar year.
1998 ANNUAL BONUS PLAN
In January 1998, the Board of Directors adopted the 1998 Annual Bonus Plan,
which is administered by the Compensation Committee of the Board of Directors.
The Compensation Committee may designate earnout periods and, for each such
earnout period, the performance goal, participants, performance award for each
such participant and the award percentage of the performance award for each such
participant for various degrees of achievement of such performance goal. At the
end of each earnout period, based on a comparison of the actual performance of
INSpire over such earnout period to the applicable performance goal, each
participant shall receive a lump sum cash award within 75 days after the
issuance of INSpire's audited financial statements corresponding to such earnout
period. This lump sum cash payment shall be an amount equal to the performance
award designated for such participant for such earnout period multiplied by the
award percentage corresponding to the extent to which such performance goal was
achieved. No performance awards were paid for the years ended December 31, 1999
or 1998 under the 1998 Annual Bonus Plan.
MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 1999, the Board of Directors held 12
formal meetings. Each of the directors attended at least 75% of the meetings of
the Board of Directors and the committees of the Board of Directors on which
such director served.
COMMITTEES OF THE BOARD OF DIRECTORS
INSpire has an Audit Committee and a Compensation Committee. INSpire has
not established a formal nominating committee. The Audit Committee currently is
comprised of Messrs. Bartel, Cox and Wynne and is responsible for reviewing the
independence, qualifications and activities of INSpire's independent certified
accountants and INSpire's financial policies, control procedures and accounting
staff. The Audit Committee recommends to the Board of Directors the appointment
of the independent certified public accountants and reviews and approves
INSpire's financial statements. The Audit Committee held no formal meetings in
1999. The Compensation Committee currently is comprised of Messrs. Bartel,
Berce, Cox and Wynne and is responsible for establishing the compensation of
INSpire's directors, officers and other managerial personnel, including
salaries, bonuses, termination agreements and other executive officer benefits
as well as certain grants of stock options. The Compensation Committee held
three formal meetings in 1999. See "Joint Report of the Compensation Committee
and the Board of Directors on Executive Compensation."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1999, INSpire's Compensation Committee was comprised of Harry E. Bartel,
Daniel E. Berce, R. Earl Cox, III and Mitch S. Wynne, each of whom is an outside
independent director and none of whom is currently or was formerly an officer or
employee of INSpire or any of its affiliates.
DIRECTOR COMPENSATION
Directors who are executive officers or employees of INSpire receive no
compensation as such for service as members of either the Board of Directors or
committees thereof. Directors who are not executive officers or employees of
INSpire receive an annual fee of $15,000, plus $1,000 per meeting of the Board
of Directors attended, $300 per committee meeting attended and reimbursement for
travel expenses to attend such meetings. Directors who serve as chairman of a
committee receive an additional annual fee of $3,000. The nonemployee directors
are also eligible to receive options to purchase Common Stock under the Director
Plan. See "-- Director Stock Option Plan."
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<PAGE> 14
JOINT REPORT OF
THE COMPENSATION COMMITTEE
AND
THE BOARD OF DIRECTORS
ON
EXECUTIVE COMPENSATION
FEBRUARY 18, 2000
GENERAL
In 1999, the Compensation Committee was comprised of Messrs. Bartel, Berce,
Cox and Wynne, each of whom is an outside independent director and none of whom
is currently or was formerly an officer or employee of INSpire or any of its
affiliates.
The Compensation Committee is responsible for establishing the compensation
of INSpire's directors, officers and other managerial personnel, including
salaries, bonuses, termination agreements and other executive officer benefits
as well as certain grants of stock options.
Although the Board of Directors delegated certain responsibilities as
described above to the Compensation Committee, in determining compensation for
directors, officers and other managerial personnel for 1999, the Board of
Directors as a whole either ratified the actions of the Compensation Committee
or acted directly with respect to such decisions. As of the date of this joint
report, the Board of Directors is comprised of Messrs. Bartel, Berce, Cox,
Dunham, Robinson and Wynne. Mr. Dunham abstained from all compensation decisions
with respect to himself for his service as Chief Executive Officer and Chairman
of the Board of Directors.
1999 COMPENSATION
Base Salary. The base salaries of executive officers are established in
consideration of the competitive market for executives of comparable levels at
companies of a comparable stage of development. In establishing base salaries
for INSpire's executive officers, INSpire has engaged a consulting group (the
"Consultant") to prepare independent job evaluations and market research reports
for INSpire. The Consultant uses a formal compensation point factor system that
evaluates appropriate compensation for an executive position based on the
know-how and problem-solving abilities required in connection with, and the
accountability with respect to, such position. INSpire obtains a salary survey
from the Consultant at least once each year to ensure that INSpire's executive
compensation is competitive in the marketplace.
The Board of Directors caused INSpire to enter into employment agreements
with Messrs. Dunham, Lynn and Robinson in July 1997. The Board of Directors
believed these contracts to be necessary to ensure the continuation of
experienced management familiar with INSpire after its initial public offering.
The Board of Directors caused INSpire to enter into employment agreements with
Messrs. Smith and Aldredge in 1998, and Mr. Meister in 1999. The Board of
Directors believed these contracts to be necessary to hire and retain management
that the Board of Directors believes to be vital to INSpire's continued growth,
development and success. All of these employment agreements require certain
annual compensation to these individuals, which for Messrs. Dunham, Smith,
Robinson and Meister for 1999 are included in the Summary Compensation Table set
forth above. The Board of Directors believes the annual compensation provided to
each of INSpire's executive officers, whether pursuant to an employment
agreement or otherwise, is commensurate with the responsibilities, experience
and individual performance of such executive officer.
Bonuses. The criteria in awarding bonuses to executive officers is
established by the Compensation Committee pursuant to the 1998 Annual Bonus
Plan. If such criteria are not met, no bonuses will be granted to executive
officers.
Stock Options. The Board of Directors believes that equity ownership in
INSpire provides important incentives to INSpire's directors, officers and
significant employees to enhance the financial performance of INSpire and
encourage the continued creation of shareholder value. The Stock Option Plan is
also designed to
12
<PAGE> 15
enhance INSpire's ability to attract and retain qualified management and other
personnel necessary for the success and progress of INSpire. Stock options are
granted to the executive officers on a discretionary basis based on INSpire's
performance and the executive officer's contributions to INSpire. The number of
stock options granted to each of the named executive officers in 1999 is set
forth under "Management -- Executive Compensation -- Option Grants in Last
Fiscal Year." These grants were made in 1999 to reward the performance of these
individuals for their past performance and to encourage retention of these
individuals in a competitive marketplace for such executive talent. The amounts
of the grants were based on each individual's responsibilities and contributions
to INSpire without establishing any specific quantitative formula.
Stock Options Repricing. Due to an extended decline in the Company's stock
price, the Board of Directors determined that the number of options outstanding
with an exercise price significantly above the market price was no longer an
effective tool for retaining key management and employees. Therefore, effective
December 21, 1999, the Board of Directors approved a stock option repricing
program pursuant to which 877,657 unexercised stock options held by eligible
employees and directors were amended to have an exercise price of $6.00. The
amended exercise price represented a premium of approximately 50% over the
market price of INSpire's common stock on the date of repricing. All other terms
of the options, including vesting and expiration dates, remained the same.
1999 COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Dunham's base salary, bonus and grants of options were determined in
accordance with the same procedures and standards as for other executive
officers of INSpire.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
In 1999, INSpire was subject to compliance with Section 162(m) of the
Internal Revenue Code of 1986, as amended ("Section 162(m)"). Section 162(m)
provides that compensation in excess of $1,000,000 paid to the chief executive
officer of INSpire and the four highest compensated officers of INSpire (other
than the chief executive officer) cannot be deducted by INSpire for federal
income tax purposes unless, in general, such compensation is performance based,
is established by a committee of outside directors, is objectively determined
and the plan or agreement providing for such performance-based compensation is
approved by shareholders. All compensation paid to executive officers during
1999 was tax deductible to INSpire. The Compensation Committee expects all
compensation paid to executive officers during 2000 to be tax deductible to
INSpire. In the future, however, the Compensation Committee may determine to
adopt a compensation program that does not satisfy the conditions of Section
162(m) if, in its judgment after considering the additional costs of not
satisfying Section 162(m), such program is appropriate.
<TABLE>
<S> <C>
COMPENSATION COMMITTEE BOARD OF DIRECTORS
R. Earl Cox, III, Chairman F. George Dunham, III, Chairman
Harry E. Bartel Harry E. Bartel
Daniel E. Berce Daniel E. Berce
Mitch S. Wynne R. Earl Cox, III
Jeffrey W. Robinson
Mitch S. Wynne
</TABLE>
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<PAGE> 16
PERFORMANCE GRAPH
The following performance graph sets forth the cumulative total shareholder
return for the Common Stock, the S&P 500 Index and the Nasdaq Computer & Data
Processing Index for the period indicated. The performance graph assumes $100
invested in the Common Stock at its closing price on August 22, 1997, the date
on which the Common Stock commenced trading on the Nasdaq National Market, and
in each of the S&P 500 Index and the Nasdaq Computer & Data Processing Index on
the same date. The performance graph also assumes the reinvestment of all
dividends, if any. The dates on the performance graph represent the last trading
day of each month indicated.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
INSPIRE, THE S&P 500 INDEX, AND NASDAQ COMPUTER & DATA PROCESSING INDEX
[GRAPH]
<TABLE>
<CAPTION>
8/22/97 9/97 12/97 3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
------- ---- ----- ---- ---- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSpire Insurance
Solutions, Inc. ..... 100 151 174 277 277 295 230 238 181 86 57
S&P 500 Index.......... 100 103 106 120 123 111 134 144 154 144 166
Nasdaq Computer & Data
Processing Index..... 100 99 93 123 137 129 167 200 209 215 352
</TABLE>
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<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of April 15, 2000, certain information
with respect to the beneficial ownership of the Common Stock by (i) each person
known by INSpire to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each director and nominee for director of INSpire, (iii) each
named executive officer as of such date and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- ------------------------ ------------------ ------------------
<S> <C> <C>
Millers Insurance........................................... 4,606,875(1) 24.1%
777 Main Street, Suite 1000
Fort Worth, Texas 76102
Buena Venture Associates, L.P. ............................. 2,135,000(2) 11.2
201 Main Street, Suite 3200
Fort Worth, Texas 76102
Massachusetts Financial Services Company.................... 2,109,430(3) 11.0
500 Boylston Street
Boston, Massachusetts 02116
Eagle Asset Management, Inc. ............................... 1,068,174(4) 5.6
880 Carillon Parkway
St. Petersburg, Florida 33716
Warburg Pincus Asset Management, Inc. ...................... 965,100(5) 5.1
466 Lexington Avenue
New York, New York 10017
F. George Dunham, III....................................... 1,232,757(6) 6.1
Jeffrey W. Robinson......................................... 158,268(7) *
James P. Strickland......................................... 45,000(7) *
John Aldredge............................................... 10,000(7) *
Ronald O. Lynn.............................................. 151,418(8) *
Robert K. Agazzi............................................ 168,045(9) *
Harry E. Bartel............................................. 12,375(10) *
Daniel E. Berce............................................. 4,125(11) *
R. Earl Cox, III............................................ 12,375(10) *
Mitch S. Wynne.............................................. 36,875(12) *
John F. Pergande............................................ 0 *
Greg B. Kent................................................ 0 *
All directors and executive officers as a group (12
individuals).............................................. 1,831,238(13) 9.6
</TABLE>
- ---------------
* Less than 1%.
(1) Based on the Schedule 13G/A filed by Millers American Group, Inc., Trilogy
Holdings, Inc. and Millers Insurance with the SEC on January 21, 2000.
(2) Based on the Schedule 13D filed by Buena Venture Associates, L.P. with the
SEC on October 28, 1999.
(3) Based on the Schedule 13G/A filed by Massachusetts Financial Services
Company with the SEC on February 18, 2000.
(4) Based on the Schedule 13G filed by Eagle Asset Management, Inc. with the
SEC on January 10, 2000.
(5) Based on the Schedule 13G filed by Warburg Pincus Asset Management, Inc.
with the SEC on January 13, 1999.
(6) Includes 10,600 shares of Common Stock held in trusts, of which Mr. Dunham
or a person controlled by Mr. Dunham is trustee, for the benefit of certain
family members of Mr. Dunham, and 992,214 shares of Common Stock issuable
upon exercise of options exercisable within 60 days of April 15, 2000.
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<PAGE> 18
(7) Represents shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 15, 2000.
(8) Includes 148,418 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 15, 2000.
(9) Includes 4,640 shares of Common Stock held in trusts, which Mr. Agazzi or a
person controlled by Mr. Agazzi is trustee, for the benefit of certain
family members of Mr. Agazzi and 19,688 shares of Common Stock issuable
upon exercise of options exercisable within 60 days of April 15, 2000.
(10) Includes 7,875 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 15, 2000. Does not include options
covering additional shares expected to be granted following the Annual
Meeting pursuant to the Director Plan.
(11) Represents shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 15, 2000. Does not include options
covering additional shares expected to be granted following the Annual
Meeting pursuant to the Director Plan.
(12) Includes 24,000 shares of Common Stock held in trusts, of which Mr. Wynne
or a person controlled by Mr. Wynne is trustee, for the benefit of certain
family members of Mr. Wynne, and 7,875 shares of Common Stock issuable upon
exercise of options exercisable within 60 days of April 15, 2000. Does not
include options covering additional shares expected to be granted following
the Annual Meeting pursuant to the Director Plan.
(13) Includes 1,401,338 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 15, 2000.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP, independent certified public accountants, as
independent auditors of INSpire's financial statements for 2000. Deloitte &
Touche LLP has acted as auditors for INSpire since 1996.
The Board of Directors has determined to afford the Shareholders the
opportunity to express their opinions on the matter of auditors, and,
accordingly, is submitting to the Shareholders at the Annual Meeting a proposal
to ratify the appointment by the Board of Directors of Deloitte & Touche LLP. If
a majority of the shares of Common Stock present, in person or by proxy, and
entitled to vote on this proposal are not voted in favor of the ratification of
the appointment of Deloitte & Touche LLP, the Board of Directors will interpret
this as an instruction to seek other auditors. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF DELOITTE
& TOUCHE LLP AS INDEPENDENT AUDITORS OF INSPIRE'S FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 2000.
It is expected that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting and will be available to respond to appropriate
questions. These representatives will be given an opportunity to make a
statement if they desire to do so.
CERTAIN TRANSACTIONS
MILLERS MASTER SERVICES AGREEMENT
On December 30, 1999, INSpire entered into a consolidated Master Services
Agreement (the "Millers Master Services Agreement") with Millers American Group,
Inc. ("Millers American"), of which Millers Insurance is an indirect
wholly-owned subsidiary, and its subsidiaries (collectively, the "Millers
Group"), which supercedes the claims services contracts, policy services
contract, information services contract and other outsourcing contracts
described below. The Millers Master Services Agreement includes seven service
addendums, each applicable to a certain line or lines of business with specific
Millers Group entities, pursuant to which INSpire performs policy
administration, claims administration and/or information system services.
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<PAGE> 19
Generally, these service addendums provide for INSpire to be paid a percentage
of written premiums, subject to a monthly minimum, for policy administration, a
percentage of earned premium and a percentage of incurred catastrophe losses for
claims administration, a percentage of written premium, subject to a monthly
minimum, for information system services and an hourly fee for the services of
consultants and programmers. The Millers Master Services Agreement provides that
the aggregate fees due and payable to INSpire will be reduced when such monthly
fees reach certain levels, based on a sliding scale of discount rates set forth
in the agreement. Each service addendum executed pursuant to the Millers Master
Services Agreement is effective through December 31, 2004, at which time it will
be automatically extended unless earlier terminated.
Claims Services Contracts. Effective October 1, 1997, INSpire, Millers
Insurance and Millers Casualty entered into a claims administration services
agreement (the "Claims Services Agreement"), which provides for INSpire to
perform claims administration services for and on behalf of Millers Insurance
and Millers Casualty. Under the Claims Services Agreement, each of Millers
Insurance and Millers Casualty pays a fee per claim administered and a monthly
fee for claims open greater than 31 days, both of which are in an amount that
depends on the insurance policy line under which a claim is administered, and a
fee per hour for the services of consultants and programmers. The Claims
Services Agreement was amended in 1998 to provide that INSpire will perform
claims administration services to Millers Insurance with respect to three
general agents that Millers Insurance or Millers Casualty entered into agency
relationships with during 1998. For the year ended December 31, 1999, Millers
Insurance and Millers Casualty paid INSpire aggregate service fees of $8.8
million under the Claims Services Agreement. The Claims Services Agreement was
superceded by the Millers Master Services Agreement executed on December 30,
1999.
INSpire and the Specialty Personal Lines Division of Millers Insurance are
parties to a service contract effective as of April 1, 1997 under which INSpire
provides claims administration services to Millers Insurance with respect to
nonstandard auto policies issued by Sun Coast General Insurance Agency ("Sun
Coast"). During 1998, INSpire and Millers Insurance agreed to amend the Sun
Coast Services Contract to increase the rate charged by INSpire for claims
administration services. Millers Insurance paid INSpire fees for services
related to policies issued by Sun Coast of $2.2 million in 1999. The Sun Coast
Services Contract was superceded by the Millers Master Services Agreement
executed on December 30, 1999.
Policy Services Contract. Effective October 1, 1997, INSpire, Millers
Insurance and Millers Casualty entered into a policy administration services
agreement (the "Policy Services Agreement"), which provides for INSpire to
perform policy administration services for and on behalf of Millers Insurance
and Millers Casualty. In 1999, Millers Insurance and Millers Casualty paid
INSpire aggregate service fees of approximately $3.6 million under the Policy
Services Agreement. The Policy Services Agreement was superceded by the Millers
Master Services Agreement executed on December 30, 1999.
Information Services Contract. Effective October 1, 1997, INSpire, Millers
Insurance and Millers Casualty entered into a second amended information
services contract (the "Second Amended Information Services Contract"), which
provides for INSpire to provide certain information technology ("IT") services
to Millers Insurance and Millers Casualty, including telecommunications
services, hardware services, application software services, system software
services, network services and system integration services. Under the Second
Amended Information Services Contract, each of Millers Insurance and Millers
Casualty pays monthly service fees based on the amount and type of services
provided, subject to a minimum monthly fee. In addition, each of Millers
Insurance and Millers Casualty pays a fee per hour for modifications by INSpire
to INSpire-supplied application software. For the year ended December 31, 1999,
Millers Insurance and Millers Casualty paid INSpire aggregate service fees of
$7.6 million under the Second Amended Information Services Contract. The Second
Amended Information Services Contract was superceded by the Millers Master
Services Agreement executed on December 30, 1999.
Outsourcing Services Contracts with Millers Casualty. Effective May 1,
1997, INSpire and Millers Casualty entered into a policy administration services
agreement, which was amended effective October 1, 1997 (the "Policy
Administration Services Agreement"), pursuant to which INSpire provides policy
administration services for Millers Casualty's homeowners line of business in
Florida. For the year ended December 31, 1999, Millers Casualty paid INSpire
aggregate fees of approximately $1.0 million under the
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Policy Administration Services Agreement. The Policy Administration Services
Agreement was superceded by the Millers Master Services Agreement executed on
December 30, 1999.
Effective June 1, 1997, INSpire and Millers Casualty entered into a claims
administration services agreement (the "Claims Administration Services
Agreement") pursuant to which INSpire provides claims administration services
for Millers Casualty's homeowners line of business in Florida. For the year
ended December 31, 1999, Millers Casualty paid INSpire aggregate fees of
approximately $1.1 million under the Claims Administration Services Agreement.
The Claims Administration Services Agreement was superceded by the Millers
Master Services Agreement executed on December 30, 1999.
ASSET AND EMPLOYEE TRANSFER AGREEMENT
On September 1, 1999, INSpire entered into an asset and employee transfer
agreement (the "Phoenix Acquisition") with Millers American pursuant to which
INSpire agreed to acquire from Millers American for a purchase price of $3.5
million certain assets and employees used in the conduct of its policy and
claims administration with respect to its policies written by Phoenix Indemnity
Insurance Company. In conjunction with this transaction, which is expected to
close upon obtaining all necessary regulatory authority approvals, INSpire
entered into a Service Addendum to the Company's Master Services Agreement with
Millers American to provide certain policy and claims administration services
with respect to the Phoenix Indemnity book of business (the "Phoenix Services
Agreement") for a period of ten years beginning September 1, 1999. For the year
ended December 31, 1999, Millers Insurance paid INSpire service fees of $4.1
million under the Phoenix Services Agreement.
BENEFITS ADMINISTRATION CONTRACT
Effective July 1, 1997, INSpire and Millers Insurance entered into a
benefits administration contract (the "Benefits Administration Contract")
pursuant to which Millers Insurance provides INSpire with certain benefits
administration services, including payroll, and INSpire pays Millers Insurance a
service fee of $15,000 per month. The term of the Benefits Administration
Contract is three years. Effective January 1, 1998, INSpire and Millers
Insurance amended the Benefits Administration Contract to provide that INSpire
shall provide Millers Insurance, rather than Millers Insurance providing to
INSpire, the benefits administration services specified in the Benefits
Administration Contract, and Millers Insurance shall pay INSpire a service fee
of $15,000 per month. For the year ended December 31, 1999, Millers Insurance
paid INSpire aggregate service fees of $180,000 under the Benefits
Administration Contract, as amended.
CONSULTING AGREEMENT
Effective March 15, 1998, INSpire entered into a consulting agreement with
Stuart H. Warrington pursuant to which Mr. Warrington retired as an executive
officer of INSpire. The consulting agreement provides that Mr. Warrington would
serve as a consultant to INSpire until May 30, 1999 for a consulting fee of
$2,000 per month and would be fully vested with respect to options for 139,731
shares of Common Stock granted to Mr. Warrington on March 12, 1997, which were
scheduled to vest in three equal annual installments commencing on the date of
grant. Mr. Warrington also retained the vested portion of options granted
effective August 22, 1997, covering 19,563 shares of Common Stock. The
consulting agreement also provides for deferred annual compensation of $40,000
to be paid each year for the 20-year period commencing January 1, 1999 and
ending December 31, 2018. The consulting agreement contains noncompetition and
confidentiality provisions. Mr. Warrington founded SDS and served in one or more
capacities as its President, Chief Executive Officer and Chairman of the Board
from inception in 1981 until July 1997 and served from July 1997 until March 15,
1998 as an executive officer of INSpire.
SEPARATION AGREEMENT
On May 7, 2000, INSpire entered into a separation agreement with F. George
Dunham, III in connection with his resignation from all positions held with
INSpire. Pursuant to the agreement, Mr. Dunham received a payment of $1.3
million and continued health care coverage for him and his family for a period
of up to
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three years. INSpire also agrees to provide Mr. Dunham with a legal defense in
any actions brought against him arising out of his role as an officer or
director during the period of his employment. In return for the above
consideration, Mr. Dunham agrees to keep certain information regarding INSpire
confidential and not to interfere with INSpire's business or solicit any of
INSpire's employees or customers for a period of three years. In addition, the
parties entered into a mutual release of claims as part of the separation
agreement.
MISCELLANEOUS
INSpire leases its approximately 129,400 square foot corporate headquarters
in Fort Worth, Texas from IIS Realty, Ltd., a Texas limited partnership (the
"Partnership") pursuant to a lease agreement, dated as of November 13, 1998 (the
"Lease Agreement") and amendments to the Lease Agreement effective May 1, 1999
and November 1, 1999. F. George Dunham, III owns a 50% interest in the
Partnership and Messrs. Bartel, Cox and Wynne own in equal parts the remaining
50% interest. The term of the Lease Agreement is ten years, with one renewal
option of five years. The Lease Agreement, as amended, provides for monthly
rental payments of approximately $86,000 for the first five years, $97,000 for
the next five years, and $108,000 for the five-year renewal period, plus taxes,
insurance and maintenance costs. For the year ended December 31, 1999, INSpire
made rental payments of approximately $835,000 to the Partnership under the
Lease Agreement.
INSpire leases its principal Sheboygan, Wisconsin facility pursuant to a
lease dated March 12, 1997 (the "Building Lease"). The building is owned by
Riverview Building, LLC ("Riverview"), which is controlled by Stuart H.
Warrington, a former executive officer of INSpire. The term of the Building
Lease ends February 28, 2007. Pursuant to the Building Lease, Riverview leases
to INSpire approximately 28,100 square feet of office space at a monthly rate of
approximately $21,000 for the first four years, $23,000 for the next five years,
and $25,000 for the last year. For the year ended December 31, 1999, INSpire
paid Riverview approximately $248,000 under the Building Lease.
INSpire and Millers Insurance are parties to a sublease agreement, dated as
of January 1, 1997, pursuant to which Millers Insurance subleases to INSpire
certain furniture, equipment and other personal property that Millers Insurance
has leased from third parties under various equipment leases for the benefit of
INSpire. The sublease payments by INSpire to Millers Insurance under the
sublease equal the lease payments by Millers Insurance to the lessors under the
respective leases.
Prior to INSpire's initial public offering, Millers Insurance, INSpire and
the other subsidiaries of Millers Insurance were parties to the Tax Allocation
Agreement. Under the Tax Allocation Agreement, Millers Insurance was required to
pay INSpire an amount equal to any decrease in the income taxes otherwise
payable by the Millers Insurance consolidated tax group attributable to any net
losses of INSpire. Conversely, the Tax Allocation Agreement required INSpire to
pay to Millers Insurance the amount of any income taxes that INSpire would have
paid if it had not been included in the Millers Insurance consolidated tax
group. Effective August 23, 1997, the Tax Allocation Agreement was terminated as
it related to INSpire due to INSpire leaving the Millers Insurance consolidated
tax group at the time of INSpire's initial public offering. The agreement to
terminate the Tax Allocation Agreement provides that INSpire will indemnify the
other members of the Millers Insurance consolidated tax group for any of the
group's income taxes and related expenses attributable to INSpire and Millers
Insurance will indemnify INSpire for any income taxes and related expenses
attributable to any members of the consolidated tax group other than INSpire.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors and officers of INSpire, and persons who own
more than 10% of the Common Stock, to file with the SEC initial reports of
Common Stock ownership and reports of changes in such ownership. A reporting
person must file a Form 3 -- Initial Statement of Beneficial Ownership of
Securities within 10 days after such person becomes a reporting person. A
reporting person must file a Form 4 -- Statement of Changes of Beneficial
Ownership of Securities within 10 days after any month in which such person's
beneficial ownership of securities changes, except for certain changes exempt
from the reporting requirements of Form 4. Such exempt changes include stock
options granted under a plan qualifying pursuant to Rule 16b-3 under the
Exchange Act. A reporting person must file a Form 5 -- Annual Statement of
Beneficial Ownership of Securities within 45 days after the end of the issuer's
fiscal year to report any changes in ownership during such year not reported on
a Form 4, including changes exempt from the reporting requirements of Form 4.
The SEC's rules require INSpire's reporting persons to furnish INSpire with
copies of all Section 16(a) reports that they file. Based solely upon a review
of the copies of such reports furnished to INSpire and written representations
that no other reports were required with respect to the year ended December 31,
1999, INSpire believes that the reporting persons have complied with all
applicable Section 16(a) filing requirements for 1999 on a timely basis, except
for Forms 4 due in January 2000 with respect to Messrs. Agazzi, Aldredge,
Bartel, Berce, Cox, Lynn, Robinson, Strickland and Wynne, which were filed late.
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
To be considered for inclusion in INSpire's proxy statement for the 2001
annual meeting, shareholder proposals must be received at INSpire's principal
executive office no later than January 19, 2001. Pursuant to Rule 14a-4(c)(1)
under the Exchange Act, if INSpire has notice of any shareholder proposal
intended to be presented at the 2001 annual meeting after April 2, 2001, then a
proxy will have the ability to confer discretionary authority to vote on such
proposal.
INCORPORATION BY REFERENCE
With respect to any future filings with the Commission into which this
Proxy Statement is incorporated by reference, the material under the headings
"Joint Report of the Compensation Committee and the Board of Directors on
Executive Compensation" and "Performance Graph" shall not be incorporated into
such future filings.
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact included in this
Proxy Statement, including without limitation statements regarding INSpire's
financial position, business strategy and plans and objectives of management of
INSpire for future operations, are forward-looking statements. When used in this
Proxy Statement, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to INSpire or its management,
identify forward-looking statements. Such forward-looking statements are based
on the beliefs of INSpire's management as well as assumptions made by and
information currently available to INSpire's management. Actual results could
differ materially from those contemplated by the forward-looking statements as a
result of certain factors, including but not limited to difficulties associated
with growth, INSpire's dependence on major customers and limited operating
history, technological change, competitive factors and pricing pressures,
product development risks, changes in legal and regulatory requirements and
general economic conditions. Such statements reflect the current views of
INSpire with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the operations, results of operations,
growth strategy and liquidity of INSpire. All subsequent written and oral
forward-looking statements attributable to INSpire or persons acting on its
behalf are expressly qualified in their entirety by this paragraph.
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ANNUAL REPORT
A copy of INSpire's Annual Report for the year ended December 31, 1999,
which contains financial and other information pertaining to INSpire was sent to
you on or about April 22, 2000.
FORM 10-K
A copy of INSpire's Form 10-K for the year ended December 31, 1999 was sent
to you on or about April 22, 2000. INSPIRE WILL MAIL ADDITIONAL COPIES OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 TO EACH
SHAREHOLDER OR BENEFICIAL OWNER OF SHARES OF COMMON STOCK WITHOUT CHARGE UPON
SUCH PERSON'S WRITTEN REQUEST TO THE INVESTOR RELATIONS DEPARTMENT AT INSPIRE'S
EXECUTIVE OFFICES AT 300 BURNETT STREET, FORT WORTH, TEXAS 76102-2799.
By Order of the Board of Directors
[JEFFREY W. ROBINSON]
Jeffrey W. Robinson
President and Chief Operating
Officer
Fort Worth, Texas
May 17, 2000
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INSPIRE INSURANCE SOLUTIONS, INC.
300 Burnett Street
Fort Worth, Texas 76102-2799
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF INSPIRE INSURANCE SOLUTIONS, INC.
I hereby appoint Jeffrey W. Robinson and R. Earl Cox, III, or any one
of them acting in the absence of the other, as proxyholders, each with the power
to appoint his substitute, and hereby authorize them to represent me and to vote
for me as designated on the reverse side, at the annual meeting (the "Annual
Meeting") of INSpire Insurance Solutions, Inc., a Texas corporation ("INSpire"),
to be held on June 23, 2000, at 10:00 a.m. Central Standard Time, at INSpire's
corporate headquarters, 300 Burnett Street, Fort Worth, Texas 76102-2799, and at
any postponement or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BELOW, OR IF NO DIRECTION IS INDICATED BELOW, IN ACCORDANCE WITH THE
RECOMMENDATION OF THE BOARD OF DIRECTORS ON EACH PROPOSAL. This proxy will be
voted, in the discretion of the proxyholders, upon such other business as may
properly come before the Annual Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nominees: Harry E. Bartel, John F. Pergande,
(1) The election of directors Greg B. Kent
WITHHOLD authority
FOR all nominees to vote for all nominees *Exceptions (INSTRUCTIONS: To withhold authority to vote for
listed to the right listed to the right any individual nominee, mark the "Exceptions"
[ ] [ ] [ ] box and write that nominees name in the space
provided below.)
*Exceptions
------------------------------------
</TABLE>
(4) The proposal to ratify the appointment by the Board of Directors of
Deloitte & Touche LLP as the independent auditors of INSpire's
financial statements for the year ended December 31, 2000:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The undersigned hereby acknowledges receipt of the Proxy Statement
dated May 17, 2000 and hereby revokes any proxy or proxies heretofore given to
vote at said meeting or any adjournment thereof.
(PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED
SELF-ADDRESSED AND POSTMARKED ENVELOPE)
Signature Date , 2000
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Name
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