UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No.__)
Filed
by the Registrant
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by a Party other than the Registrant
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Check
the appropriate box:
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Preliminary
proxy statement
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Confidential,
for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
§240.14a-12
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FPIC Insurance Group,
Inc.
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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)
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of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
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calculated and state how it was determined):
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statement number, or the form or schedule and the date of its
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FPIC
INSURANCE GROUP, INC.
225
Water Street, Suite 1400
Jacksonville,
Florida 32202
Notice
of Annual Meeting of Shareholders
April 15, 2009
Dear
Shareholder:
You
are invited to join us at our annual meeting of shareholders to be held on
Friday, June 5, 2009, at 10:00 a.m., eastern time, at the Omni Hotel, 245 Water
Street, Jacksonville, Florida.
The
annual meeting will be held for the following purposes:
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1.
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To
vote on the election of four directors to serve until their terms
expire.
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2.
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To
ratify the appointment of PricewaterhouseCoopers LLP as our independent
registered certified public accounting firm for
2009.
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At
the annual meeting, we will also 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
1, 2009, as the record date for the meeting. This means that
shareholders at the close of business on that date are entitled to receive this
notice of the meeting and to vote at the meeting. A list of our
shareholders of record as of the record date will be available for inspection by
any shareholder at the meeting and for a period of ten days prior to the meeting
and continuing through the meeting at our principal executive
offices.
Your vote is
important.
Even if you plan to attend the annual meeting,
please vote, as instructed in your enclosed proxy/voting instruction card, via
the Internet or the telephone as promptly as possible to ensure that your vote
is recorded. Alternatively, you may complete your paper proxy/voting
instruction card and submit your vote by mail. If you attend the
meeting and your shares are registered in your name, you may withdraw your proxy
at that time and vote your shares in person.
Important Notice Regarding the
Availability of Proxy Materials for the 2009 Annual Shareholders’
Meeting.
Pursuant to new rules promulgated by the Securities
and Exchange Commission, we have elected to provide access to our proxy
materials both by: (i) sending you this full set of proxy materials, including a
proxy/voting instruction card; and (ii) notifying you of the availability of our
proxy materials on the internet.
This Notice and Proxy Statement and
our 2008 Annual Report may be accessed on our website:
www.fpic.com
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Very
truly yours,
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April
15, 2009
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/s/
John R. Byers
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John
R. Byers
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President
and Chief Executive Officer
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/s/
T. Malcolm Graham
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T.
Malcolm Graham
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Secretary
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Table
of Contents
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Page
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Questions
and Answers about the Meeting and Voting
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1
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Proposal
1. Election of Directors
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5
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Nominees
for Election – Terms Expiring in 2009
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5
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Incumbent
Directors Whose Terms Expire in 2010
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6
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Incumbent
Directors Whose Terms Expire in 2011
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7
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Corporate
Governance
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7
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Code
of Conduct; Code of Ethics; Corporate Governance
Guidelines
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8
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Board
of Directors’ Meeting Attendance
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8
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Director
Independence
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8
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Board
Committees
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9
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Director
Compensation
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12
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Executive
Compensation
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15
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Executive
Officers
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15
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Compensation
Discussion and Analysis
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15
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Compensation
Committee Report
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25
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Summary
Compensation Table
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25
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Grants
of Plan-Based Awards
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27
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Outstanding
Equity Awards
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28
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Option
Exercises and Stock Vested
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29
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Pension
Benefits
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30
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Nonqualified
Deferred Compensation
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31
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Potential
Payments Upon Termination or Change in Control
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32
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Equity
Compensation Plan Information
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37
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Compensation
Committee Interlocks and Insider Participation
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37
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Beneficial
Ownership of FPIC Common Stock
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38
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Section
16(a) Beneficial Ownership Reporting Compliance
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40
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Certain
Relationships and Related Transactions
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40
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Policies and Procedures
Relating to Transactions with Related Persons
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40
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Proposal
2. Ratification of Appointment of Independent Registered
Certified Public
Accounting Firm
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41
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Principal
Accountant Fees and Services
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41
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Report
of the Audit Committee
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43
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Additional
Information
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45
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Other
Matters
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45
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Shareholder
Proposals and Nominations
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45
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Shareholder
Communication with Directors
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46
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Annual
Report on Form 10-K
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46
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Solicitation
of Proxies
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47
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FPIC
INSURANCE GROUP, INC.
225
Water Street, Suite 1400
Jacksonville,
Florida 32202
April
15, 2009
Proxy
Statement
Annual
Meeting of Shareholders
To
Be Held June 5, 2009
The Board of Directors of FPIC
Insurance Group, Inc. (which we refer to as “the Company,” “FPIC,” “us,” “we,”
or “our”) is furnishing you this Proxy Statement in connection with the
solicitation of proxies to be voted at our 2009 annual meeting of
shareholders. The meeting will be held Friday, June 5, 2009, at the
Omni Hotel, 245 Water Street, Jacksonville, Florida, at 10:00 a.m., eastern
time.
Our annual report to shareholders for
2008, this Proxy Statement, and the accompanying proxy/voting instruction card
are being distributed on or about April 15, 2009 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. Your proxy may also be voted at any adjournments
or postponements of the meeting.
Only shareholders of record at the
close of business on April 1, 2009 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 1, 2009, we had 7,492,070
shares of common stock issued and outstanding.
Questions
and Answers about the Meeting and Voting
What
is a proxy?
A proxy is your legal designation of
another person to vote shares you own. If you designate someone as
your proxy in a written document, that document is called a proxy or a
proxy/voting instruction card. The enclosed proxy/voting instruction
card names two of our officers as proxies for the 2009 annual meeting of
shareholders. These two officers are Pamela D. Harvey, Vice President
and Controller, and Becky A. Thackery, Vice President and Director of Internal
Audit.
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/voting instruction card designating proxies to vote on your
behalf. This Proxy Statement is being distributed on or about April
15, 2009 to shareholders entitled to vote at the meeting.
What
different methods can I use to vote?
You may vote:
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by
telephone;
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over
the Internet;
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by
mail; or
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in
person at the annual meeting.
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Even
if you plan to attend the annual meeting, you may vote by telephone, over the
Internet or by mail. Please carefully read the instructions below on
how to vote your shares. Because the instructions vary depending on
how you hold your shares and the method you use to vote, it is important that
you follow the instructions that apply to your particular
situation.
How
do I vote if my shares are held in my name?
Via
the Internet
You
can simplify your voting by voting your shares via the Internet as instructed on
your proxy/voting instruction card.
Voting
by telephone
Your
proxy/voting instruction card includes a toll-free number you can call to
vote. Call this number on a touch-tone phone with your proxy/voting
instruction card in hand and listen for further instructions.
Voting
by mail
You
may elect to vote by mail. To do this, you should complete, sign and
date your proxy/voting instruction card and mail it in the postage-paid envelope
provided to you with this Proxy Statement.
Voting
in person at the meeting
If
you plan to attend the annual meeting, you can vote in person. To
vote in person at the annual meeting, you will need to bring proper personal
identification and evidence of your share ownership with you to the annual
meeting.
What
is the difference between a shareholder of record and a shareholder who holds
shares in “street name?”
If
your shares are registered in your name, you are a shareholder of
record.
If
your shares are in the name of your broker, bank or other nominee, your shares
are held in “street name.”
How
do I vote if my shares are held in street name?
Voting
by mail, telephone or the Internet
If your shares are held in street name,
you should vote your shares using the method directed by your broker, bank or
other nominee. A large number of banks and brokerage firms
participate in online or telephone voting programs. These programs
provide eligible street name shareholders the opportunity to vote over the
Internet or by telephone. Voting forms will provide instructions for
shareholders whose banks or brokerage firms are participating in such
programs.
Voting
by person at the meeting
If you plan to attend the annual
meeting and to vote in person, you should contact your broker, bank or other
nominee to obtain a broker’s proxy and bring it, together with proper personal
identification and your account statement or other evidence of your share
ownership, with you to the annual meeting.
How
do I vote shares held in the FPIC Insurance Group, Inc. Defined Contribution
Plan?
If
you own shares of FPIC common stock through our Defined Contribution Plan
(“401(k) Plan”), we will send you a voting instruction form for these
shares. If you do not provide voting instructions for these shares,
these shares will be voted by the trustee in the same proportion as the shares
for which other participants have timely provided voting
instructions.
What
is the record date and what does it mean?
The
record date for the 2009 annual meeting of shareholders is April 1,
2009. The Board of Directors, as required by law, has established the
record date. Each holder of FPIC common stock at the close of
business on the record date is entitled:
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to
receive notice of the meeting; and
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to
vote one vote for each share of FPIC common stock held on the record date
at the meeting and at any adjournments or postponements of the
meeting.
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How
many shares can be voted and what is a quorum?
A
quorum is the minimum number of shares that must be represented in person or by
proxy in order for us to conduct the annual meeting. As of the close
of business on the record date, there were 7,492,070 shares of FPIC common stock
outstanding and approximately 1,542 holders of record. The attendance
by proxy or in person of, or voting by telephone or over the Internet by,
holders of a majority of the shares of FPIC common stock entitled to vote at the
annual meeting, or 3,746,035 shares of FPIC common stock, will constitute a
quorum to hold the annual meeting. If you grant your proxy, your
shares will be considered part of the quorum.
How
can I change my vote after I return my proxy/voting instruction card or vote by
telephone or over the Internet?
You
can revoke a proxy and change your vote at any time before the final vote at the
annual meeting by any one of the following actions:
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giving
written notice to our Secretary;
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delivering
a later-dated proxy;
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subsequently
voting by telephone or over the Internet; or
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voting
in person at the meeting.
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If your shares are held in street name,
you must contact your broker, bank or other nominee to revoke your
proxy.
Who
counts the votes?
We
have retained Broadridge Investor Communications Services to tabulate the
proxies. T. Malcolm Graham, Secretary of the Company, has been
designated as the inspector of elections for the 2009 annual meeting of
shareholders to certify the results of voting.
What
are your voting choices when voting for nominees for director standing for
election?
In
voting on the election of the four nominees for director to serve until their
terms expire, you may vote in one of the following ways:
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in favor of all
nominees;
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withhold
votes as to all nominees; or
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withhold
votes as to a specific
nominee.
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What
vote is needed to elect directors?
Directors
will be elected by a plurality of the votes cast by the shareholders voting at
the meeting. A plurality of the votes, as distinguished from a
majority, is the greatest number of votes cast by those
voting. Non-voted shares and shares the votes of which are withheld
will not affect the outcome of the election of directors.
Th
e
Board
of Directors recommends a vote
FOR
each of the
nominees.
What
vote is needed to ratify the appointment of PricewaterhouseCoopers LLP as the
Company’s independent registered certified public accounting firm for
2009?
Ratification
of the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered certified public accounting firm for 2009 requires that the number of
votes cast at the meeting in favor of the proposal exceed the number of votes
cast against. Because abstentions and broker non-votes are not
considered to be “votes cast,” they will have no legal effect on the voting for
the proposal.
The
Board of Directors recommends a vote
FOR
ratification of
PricewaterhouseCoopers LLP as the Company’s independent registered certified
public
accounting firm for 2009.
What
if a shareholder does not specify a choice for a matter when voting or returning
a proxy/voting instruction card?
If
you vote via the Internet, by telephone or by mailing a proxy/voting instruction
card without indicating your choice for a matter, we will vote your shares
consistent with the recommendations of our Board of Directors as stated in this
Proxy Statement. If any other matters are properly presented at the
annual meeting for consideration, then the persons named on your proxy will have
discretion to vote for you on those matters in accordance with their best
judgment. As of the date of this Proxy Statement, we knew of no other
matters to be presented at the annual meeting.
How
are abstentions and broker non-votes counted?
Abstentions and broker non-votes will
be counted as present for quorum purposes but otherwise will have no effect on
the matters voted upon at the meeting.
Where
can I find the results of voting at the annual meeting?
We
will announce the preliminary voting results at the meeting. We will
publish the final voting results in our Quarterly Report on Form 10-Q for the
second quarter of 2009 filed with the Securities and Exchange Commission
(“SEC”).
Proposal
1
Election
of Directors
We
have a classified Board of Directors, with three classes of
directors. Members of each class hold office for three-year terms,
and the terms of the classes are staggered so that the term of one class expires
each year. The Board of Directors has fixed the number of directors
at 10.
Four
directors are to be elected at the 2009 annual meeting of shareholders to hold
office until 2012 or until their successors are elected and
qualified. The Nominating Committee of our Board of Directors has
nominated for re-election the four incumbent directors whose current terms of
office expire at the annual meeting: Richard J. Bagby, M.D., Robert
O. Baratta, M.D., John R. Byers and Terence P. McCoy, M.D. Each of
the nominees has consented to stand for election. 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.
None
of our directors, including the nominees, is related to a nominee or any other
director, or to any of our executive officers, by blood, marriage or
adoption. Further information regarding our directors is set forth
below.
Nominees
for Election - Terms Expiring in 2009
Richard J. Bagby, M.D.
, 68, is
engaged in the private practice of diagnostic radiology and nuclear medicine in
Orlando, Florida. Dr. Bagby has practiced medicine since
1972. In 2000, Dr. Bagby joined Boston Diagnostic Imaging Centers and
Open MRI of Sanford as its medical director. 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 also
served as a director of our subsidiary, First Professionals Insurance Company,
Inc. (“First Professionals”), from 1993 until 2006 and served on its Advisory
Board from 2006 to 2007.
Robert O. Baratta, M.D.
, 68,
is chairman and chief executive officer of Ascent, L.L.C., an ambulatory surgery
center development and management company. Prior to joining Ascent,
L.L.C. in 2004, Dr. Baratta was president, chief executive officer and vice
chairman of the board of directors of Ecosphere Technologies, Inc., formerly
known as UltraStrip Systems, Inc. (“Ecosphere”), an environmentally protective
marine industrial company. Prior to joining Ecosphere in 2001, Dr.
Baratta engaged in the private practice of ophthalmology in Stuart, Florida,
where he served as president and chairman of the board of directors of Stuart
Eye Institute. Dr. Baratta began practicing medicine in
1973. He has served as a director of the Company since its formation
in 1996 and served as Chairman of the
B
oard of
Directors from
1999
until May 2007. Dr. Baratta
currently serves as Immediate Past Chairman of the Board of
Directors. Dr. Baratta also served as a director of First
Professionals from 1993 to 2000.
John R. Byers
, 54, is
President and Chief Executive Officer of the Company. Mr. Byers
joined us in January 1999 as Executive Vice President and General Counsel and
has served as our President and Chief Executive Officer since July
2000. Mr. Byers also serves as a director of Florida Bank Group,
Inc., a Florida bank holding company, and its subsidiary, Florida
Bank. Before joining us, Mr. Byers was a partner in the Jacksonville
office of the Dewey & LeBoeuf LLP law firm from 1988 until
1998.
Terence P. McCoy, M.D.
, 64, is
a recently retired physician actively involved in management of property and
financial holdings. Prior to his retirement, Dr. McCoy was engaged in
the private practice of family medicine. He is a former member of the
Florida Board of Medicine where he chaired the expert witness
committee. He also served as president of the FMA, and as chief of
the medical staff at Tallahassee Memorial Hospital. He was a Florida
delegate to the American Medical Association (“AMA”) where he was elected to the
AMA Council on Constitution & Bylaws. Dr. McCoy holds a faculty
appointment at the Florida State University College of Medicine. He
was a founding member and later chairman of the board of Healthplan
Southeast. Dr. McCoy has served as a director of the Company since
2003. Dr. McCoy also served as a director of First Professionals from
1998 to 2006 and served on its Advisory Board from 2006 to 2007.
The
Board of Directors recommends a
vote
for
each
of the nominees
.
Incumbent
Directors Whose Terms Expire in 2010
John K. Anderson, Jr.
, 60, is
managing partner of Bott-Anderson Partners, Inc. (“Bott-Anderson”), an
investment consulting firm headquartered in Jacksonville, Florida, and a senior
advisor to Brown Gibbons Lang & Company (“Brown Gibbons”), an investment
banking firm headquartered in Cleveland, Ohio. Prior to joining Brown
Gibbons in September 2007 and Bott-Anderson in April 2003, Mr. Anderson was
executive vice president, treasurer, chief financial officer and secretary of
American Heritage Life Investment Corporation (“American Heritage”), a life
insurance company headquartered in Jacksonville, Florida, wholly owned by The
Allstate Corporation. From 1993 until he joined American Heritage in
January 1996, Mr. Anderson served as chief executive officer of E.G. Baldwin
& Associates, Inc., a regional distributor of medical imaging products and
services to hospitals and other medical providers based in Cleveland,
Ohio. Prior to that, he was president and chief executive officer of
Capitol American Life Insurance Company based in Cleveland, Ohio, and before
that executive vice president and chief financial officer of Baptist Health
Systems, Inc., in Jacksonville, Florida. Mr. Anderson is also
chairman of the board of directors of Baptist Medical Center Beaches in
Jacksonville Beach, Florida and a member of the board of directors of CNL Bank
First Coast in Jacksonville, Florida. Mr. Anderson is a former
certified public accountant, a registered financial principal and a chartered
life underwriter. Mr. Anderson has served as a director of the
Company since 2001 and is currently Vice Chairman of the Board of
Directors.
M. C. Harden, III
, 56, has
served as chairman of the board and chief executive officer of Harden &
Associates, Inc. (“Harden & Associates”), an insurance broker and risk
management and employee benefits consultant located in Jacksonville, Florida,
since 1976. Mr. Harden also serves on a number of community and
corporate boards, including the board of directors of Baptist Health System,
Inc. Mr. Harden formerly served as chair of the Jacksonville Regional
Chamber of Commerce. Mr. Harden also served as chairman of the
Jacksonville Economic Development Commission from 2003 to 2007. Mr.
Harden has served as a director of the Company since 2001.
John G. Rich
, 53, was
appointed a director of the Company by the Board of Directors in November 2003
and was elected by the shareholders to the Board of Directors in
2004. Mr. Rich is a partner of Rich & Intelisano, LLP in New
York, New York, a law firm specializing in securities and commodities litigation
and arbitration. Mr. Rich has practiced law in New York since
1982.
Joan D. Ruffier
,
69, currently serves on
various state and community boards, including the University of Florida
Foundation, where she served as president from 1998 until 2000, the University
of Central Florida Foundation, and Shands Healthcare. Ms. Ruffier
formerly served on the Board of Overseers of Rollins College. Ms.
Ruffier has also served on various corporate boards, including Florida Progress
Corporation and its subsidiary, Florida Power Corporation, the Federal Reserve
Bank of Atlanta and SunTrust Bank, Orlando. Ms. Ruffier was general
partner of Sunshine Cafes, located in Jacksonville, Florida and Orlando,
Florida, from 1987 until 1998. Before joining Sunshine Cafes, Ms.
Ruffier was a certified public accountant with Colley, Trumbower & Howell in
Orlando, Florida, from 1982 until 1986. Ms. Ruffier has served as a
director of the Company since 2002.
Incumbent
Directors Whose Terms Expire in 2011
Kenneth M. Kirschner
, 66,
currently serves as Chairman of the Board of Directors. Mr. Kirschner
is a member of the law firm of Kirschner & Legler, P.A. ("Kirschner &
Legler") and counsel to the law firm of Smith, Gambrell & Russell,
LLP. From 1998 until the formation of Kirschner & Legler in 2001,
Mr. Kirschner was a partner in the Jacksonville office of the law firm of
Holland & Knight LLP and, subsequently, of counsel to the law firm of Dewey
& LeBoeuf LLP. Prior to 1998, Mr. Kirschner was a shareholder of
Kirschner, Main, Graham, Tanner & Demont, P.A., a Jacksonville, Florida, law
firm. As an attorney, Mr. Kirschner specializes in corporate and
corporate governance matters, finance, and mergers and
acquisitions. Mr. Kirschner served as General Counsel of the Company
from January 2006 until March 2007. He has served as a director of
the Company since 2002 and served as Vice Chairman of the Board of Directors of
the Company from 2005 to 2007.
David M. Shapiro, M.D.
, 55, is
a partner in Ambulatory Surgery Center LLC, an ambulatory surgery center
consulting company. Dr. Shapiro served as the senior vice president
of Medical Affairs for Surgis, Inc. (“Surgis”), an ambulatory surgery center
management company, until its sale in 2006. Prior to joining Surgis
in 2000, Dr. Shapiro engaged in the private practice of anesthesiology in Fort
Myers, Florida. Dr. Shapiro serves on the board of the Ambulatory
Surgery Center Association, as its chair, as well as the Florida Society of
Ambulatory Surgery Centers, as chair-elect. He is also co-chair of
the Ambulatory Surgery Quality Alliance. Dr. Shapiro holds
designations both as a Certified Professional in Healthcare Risk Management
(CHPRM) from the American Hospital Association and as Certified in Healthcare
Compliance (CHC) from the Healthcare Compliance Certification
Board. Dr. Shapiro has served as a director of the Company since 1996
and served as Vice Chairman of the Board of Directors of the Company from 1999
to 2005. Dr. Shapiro also served as a director of First Professionals
from 1996 to 2006 and served on its Advisory Board from 2006 to
2007.
Corporate
Governance
Pursuant to the Florida Business
Corporation Act and our articles of incorporation and bylaws, our business is
managed under the direction of our Board of Directors. Members of the
Board are kept informed of our business through discussions with our President
and Chief Executive Officer and other officers, by reviewing materials provided
to them, and by participating in meetings of the Board and its
committees. In addition, to promote open discussion among our
non-management directors, those directors meet in regularly scheduled executive
sessions without management participation
.
Our
Board of Directors has a strong commitment to sound and effective corporate
governance practices. We maintain a corporate governance page on our
Internet website (
www.fpic.com
),
which includes key information about our corporate governance initiatives,
including our Code of Conduct for Directors, Officers and Employees, our Code of
Ethics, our Corporate Governance Guidelines, and the charters of our Audit,
Compensation, Governance and Nominating Committees. The charter of
our Nominating Committee contains our policy and procedures for nominations to
our Board of Directors.
Code
of Conduct; Code of Ethics; Corporate Governance Guidelines
In 2004, our Board of Directors adopted
our Code of Conduct, which sets forth the fundamental legal and ethical
principles for conducting all aspects of our business. Our Code of
Conduct applies to all directors, officers and employees of the Company and its
subsidiaries, as well as to agents and representatives doing business on our
behalf. Our Code of Conduct, together with specific policies and
procedures, outlines the behavior expected of such individuals in carrying out
their daily activities within appropriate ethical and legal
standards. Our Code of Conduct is available on the Corporate
Governance page of our website (
www.fpic.com
)
.
We
have also adopted a Code of Ethics, which applies to our principal executive
officer, principal financial officer and principal accounting officer or
controller, or persons performing similar functions for us. The Code
of Ethics is also available on the Corporate Governance page of our website
(
www.fpic.com
).
In 2006, our Board of Direc
tors adopted our Corporate Governance
Guidelines.
Our Governance Committee is responsible
for overseeing the Corporate Governance
Guidelines
and
for
reporting and making recommendations to
our Board concerning corporate governance matters.
Our
Corporate
Governance
Guidelines
address matters including board
composition, director independence, selection of Board nominees, Board
membership criteria, director compensation, mandatory retirement, meetings,
executive sessions of non-management directors, evaluation of the performance of
the Chief Executive Officer, committees, succession planning, director
responsibilities, orientation and continuing education, and self-evaluation of
the Board and Board committees.
A copy of our Corporate Governance
Guidelines
is available on the Corporate Governance
page of
our website at
(
www.fpic.com
).
Board
of Directors’ Meeting Attendance
Our Board of Directors held four
meetings during 2008, and committees of the Board of Directors held a total of
26 meetings. Overall aggregate attendance at such meetings was more
than 94%. Each director attended more than 75% of the aggregate of
all meetings of the Board of Directors and of the committees on which he or she
served during 2008.
The
Board of Directors has adopted a policy that encourages all our directors to
attend our annual meeting of shareholders. All but one of our
directors attended the 2008 annual meeting.
Director
Independence
Our Board of Directors has determined
that all of our directors, other than John R. Byers, our President and Chief
Executive Officer, are “independent,” in accordance with the current rules of
The NASDAQ Stock Market (“NASDAQ”).
Except
as discussed below, none of our independent directors has any relationship with
us except as directors and shareholders. In determining the
independence of Dr. Bagby, our Board considered the fact that he is a
policyholder of our First Professionals subsidiary. In determining
the independence of Drs. Bagby, McCoy and Shapiro, our Board considered their
current membership in, and past positions with, the FMA, which has endorsed our
medical professional liability insurance program, and its related
organizations. In determining the independence of Mr. Kirschner, our
Board considered that Mr. Kirschner served as our General Counsel from January
1, 2006 until March 2007. In determining Dr. Baratta’s independence,
our Board considered services provided to our subsidiaries in 2007 and prior
years by a law firm of which Dr. Baratta’s son-in-law is a
shareholder. Our Board also considered the transactions and
relationships described below under the heading
Certain Relationships and Related
Transactions
.
Board
Committees
The
Board of Directors has established an Audit Committee, a Claims and Underwriting
Committee, a Compensation Committee, an Executive Committee, a Governance
Committee, an Investment Committee, a Nominating Committee, and a Strategic
Planning Committee.
The following table
lists
the
current
members of each of the Committees and
the number of meetings held during
2008.
|
AUDIT
|
|
CLAIMS
AND UNDERWRITING
|
|
COMPENSATION
|
|
EXECUTIVE
|
|
GOVERNANCE
|
|
INVESTMENT
|
|
NOMINATING
|
|
STRATEGIC
PLANNING
|
|
John
K. Anderson, Jr.*
|
Chair
|
|
|
|
|
X
|
|
|
X
|
|
|
|
|
X
|
|
Chair
|
|
|
|
Richard
J. Bagby, M.D.*
|
|
|
|
X
|
|
Chair
|
|
|
|
|
|
X
|
|
|
|
|
|
X
|
|
|
|
Robert
O. Baratta, M.D.*
|
|
|
|
X
|
|
|
|
|
|
X
|
|
|
X
|
|
|
|
|
|
|
|
|
X
|
|
John
R. Byers
|
|
|
|
|
|
|
|
|
|
X
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
M.C.
Harden, III*
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
X
|
|
Kenneth
M. Kirschner*
|
|
|
|
|
|
|
|
|
Chair
|
|
Chair
|
|
|
X
|
|
|
|
|
|
X
|
|
Terence
P. McCoy, M.D.*
|
|
X
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
Chair
|
|
|
X
|
|
|
|
|
John
G. Rich*
|
|
X
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
X
|
|
Joan
D. Ruffier*
|
|
X
|
|
|
|
|
|
|
|
|
X
|
|
|
X
|
|
|
|
|
|
X
|
|
Chair
|
|
David
M. Shapiro, M.D.*
|
|
|
|
Chair
|
|
|
X
|
|
|
|
|
|
|
|
|
X
|
|
|
X
|
|
|
|
|
Number
of Meetings
|
|
6
|
|
|
2
|
|
|
5
|
|
|
2
|
|
|
4
|
|
|
3
|
|
|
1
|
|
|
3
|
|
The
Audit Committee
.
The
Audit Committee is established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is
composed entirely of nonemployee directors, all of whom are considered
independent under SEC and NASDAQ rules. The Board of Directors has
determined that John K. Anderson, Jr., who has served on the Audit Committee
since 2001 and as its chairman since 2003, satisfies the criteria for “audit
committee financial expert” and that he is “independent” under SEC and NASDAQ
rules. For more information on Mr. Anderson’s background, see his
biographical information under
Proposal 1. Election of Directors -
Incumbent Directors Whose Terms Expire in 2010
.
The Audit Committee oversees our
accounting, financial reporting and internal control processes and audits of our
financial statements and provides assistance to the Board of Directors with
respect to its oversight of the integrity of our financial statements, our
compliance with legal and regulatory requirements, the qualifications and
independence of our independent registered certified public accounting firm
(“Independent Accounting Firm”), and the performance of our internal audit
function.
The duties of the Audit Committee
include, among other things:
|
—
|
Directly appointing, compensating,
retaining, terminating and overseeing our Independent Accounting
Firm;
|
|
—
|
Pre-approving, or adopting
appropriate procedures to pre-approve, all audit services, internal
control-related services and non-audit services to be provided by our
Independent Accounting Firm;
|
|
—
|
Reviewing and discussing with our
Independent Accounting Firm and management any major issues regarding
accounting principles and financial statement presentations, including any
significant changes in the selection or application of accounting
principles, and major issues concerning the adequacy of our internal
controls and any special audit steps adopted in light of any material
control deficiencies, and the effect of regulatory and accounting
initiatives as well as off balance sheet structures on our financial
statements;
|
|
—
|
Reviewing
and discussing with our Independent Accounting Firm and management
significant risks and exposures, if any, and the steps to monitor and
minimize such risks and exposures;
|
|
—
|
Reviewing and discussing our
earnings press releases
;
|
|
—
|
Reviewing
and discussing with our Independent Accounting Firm and management
quarterly and year-end operating results, reviewing interim financial
statements prior to their inclusion in Form 10-Q filings, and recommending
to the Board of Directors the inclusion of the financial statements in our
Annual Report on Form 10-K; and
|
|
—
|
Reviewing
and discussing disclosures made to the Audit Committee by our Chief
Executive Officer and Chief Financial Officer during their certification
process for our Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q about any significant deficiencies in the design or operation of
internal controls or material weaknesses in internal controls or about any
fraud involving management or other employees who have a significant role
in our internal controls.
|
For
more details regarding the duties and responsibilities of the Audit Committee,
please refer to the Report of the Audit Committee below.
The Claims and Underwriting
Committee
.
The
Claims and Underwriting Committee performs various functions with respect to our
insurance underwriting and claims-related matters.
The
Compensation Committee
.
The
Compensation Committee is composed entirely of nonemployee directors considered
independent under SEC and NASDAQ rules. The Compensation Committee
establishes our executive compensation. For more detailed information
regarding the Compensation Committee’s administration of our executive
compensation program, please refer to the
Compensation Discussion and Analysis
below.
The
Compensation Committee has a written charter, which is available on our website
(
www.fpic.com
).
The
Executive Committee
.
The
Executive Committee may exercise the powers of the Board of Directors, subject
to the limitations of Florida law, whenever the Chairman of the Board of
Directors determines 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 of the
Board determines to be of an urgent nature.
The
Governance
Committee
.
A
majority of the members of the Governance Committee is comprised of nonemployee
directors considered independent under SEC and NASDAQ rules. Only Mr.
Byers is not considered independent.
The
Governance Committee’s responsibilities are, among other things,
to:
|
—
|
Ensure
that the Board of Directors is independent, effective, competent and
committed to enhancing shareholder value. To this end, the
Committee provides input to the Nominating Committee in connection with
that Committee’s selection and nomination (or re-nomination) of
individuals who provide the needed qualities and competencies that the
Board may require from time to time;
|
|
—
|
Oversee director remuneration,
including equity compensation under the Director Stock
Plan;
|
|
—
|
Review
and jointly recommend with both the Chairman and Vice-Chairman of the
Board all nominations for committee memberships (including the Committee
itself) and their terms of office;
|
|
—
|
Develop
and implement methods for evaluating the performance and effectiveness of
each director, the Board as a whole, the Chairman of the Board, the
Vice-Chairman of the Board, the Chief Executive Officer, and all Board
committees and their chairmen;
|
|
—
|
Oversee
the senior management succession plan;
|
|
—
|
Develop
and recommend to the Board a set of Corporate Governance Guidelines and a
Code of Conduct and Ethics and review these at least annually;
and
|
|
—
|
Review
and, if desirable, suggest revisions to the Company’s Bylaws on a periodic
basis.
|
The
Governance Committee has a written charter, which is available on our website
(
www.fpic.com
).
The Investment Committee
.
The
Investment Committee oversees our investment policy with respect to portfolio
investments and recommends such investment policy to the Board of Directors for
its approval.
The
Nominating
C
ommittee
.
The Nominating Committee is comprised solely of directors considered independent
under SEC and NASDAQ rules. There is a subcommittee of the Nominating
Committee known as the “Nomination Review Subcommittee,” which is comprised of
the members of the Nominating Committee who are also members of the Governance
Committee.
The
Nomination Review Subcommittee has the duty and responsibility to:
|
—
|
Identify,
interview and recruit candidates for the Board, based on, among other
qualifications, his or her capability, availability to serve, conflicts of
interest, and other relevant factors; and
|
|
—
|
Select
proposed nominees for directors (for election by shareholders and to
recommend candidates to fill vacancies) and present them to the Board for
its views and input.
|
As part of its selection process, the
Nomination Review Subcommittee considers timely suggestions from any member or
committee of the Board and may consider recommendations from other sources of
director candidates. The Nomination Review Subcommittee also will, if
warranted, investigate and interview such candidates and report its conclusions
with respect to each person considered (whether or not investigated or
interviewed) to the Board.
The Nomination Review Subcommittee will
also consider nominees timely proposed by shareholders in the manner set forth
below in this Proxy Statement from time to time.
The Nominating Committee has the duty
and responsibility to choose any person or persons it may select in its sole
discretion (whether or not such person had been considered by the Board) for
nomination as a director and to recommend a candidate to fill any vacancy
existing on the Board, but only after the Nomination Review Subcommittee will
have presented its selections to, and received the views of and input from, the
Board. The Nominating Committee also is to establish such other
policies and procedures as it deems appropriate to be followed in the selection
of directors and nominees for directors.
In evaluating director nominees, among
other things, the needs of the Board of Directors and its committees and the
qualifications of sitting directors are considered. While the
Nominating Committee has no specific, minimum qualifications for directors or
director nominees, in general terms, the Nominating Committee considers, among
other things, the following criteria: (i) personal and professional integrity;
(ii) achievements and skills; (iii) personal attributes, including leadership
abilities, strength of character, ethics, practical wisdom, mature judgment,
inquisitiveness and independence of mind, interpersonal skills, including the
ability to work together with other members to make a contribution to the work
of the Board of Directors and its committees, and the ability and willingness to
commit the necessary time required for membership on the Board and its
committees; and (iv) experience attributes, including education, expertise,
industry knowledge, business knowledge, financial acumen, special expertise, and
diversity of viewpoints. The Nominating Committee believes that
members should represent a balance of diverse backgrounds and skills relevant to
our needs that together ensure a strong board of directors. The same
criteria are applied to shareholder-recommended nominees.
The
Nominating Committee has a written charter, which is available on our website
(
www.fpic.com
).
The
Strategic Planning Committee
.
The
Strategic Planning Committee has responsibility for (i) providing broad
strategic direction; (ii) considering strategic implications; (iii) providing
oversight of strategic activities; and (iv) considering alignment of corporate
activities with long-term strategic goals and direction. The
Strategic Planning Committee also establishes budgetary guidelines and processes
for us, the Board of Directors and the Board of Directors’ committees and
oversees the budgeting function.
Director
Compensation
The following describes the various
elements of our director compensation program.
Annual
Board Retainers
.
An
annual retainer of $60,000 is paid to each member of the Board of Directors who
is not an employee of ours, subject to reduction as determined by the Board of
Directors in the event a director is absent from more than 25% of the Board of
Directors’ meetings during any calendar year. The Chairman of the
Board receives an additional annual Board fee of $25,000 and the Vice Chairman
of the Board and the Immediate Past Chairman of the Board each receive an
additional annual Board fee of $6,000.
Annual Committee Retainers
.
Annual retainer fees to
the nonemployee chairmen of the committees of the Board of Directors are paid as
follows:
|
|
Chairman
|
|
Audit
|
|
$
|
9,000
|
|
Compensation
|
|
$
|
5,000
|
|
Governance
|
|
$
|
2,500
|
|
Executive
|
|
|
—
|
|
Nominating
|
|
|
—
|
|
All Other
|
|
$
|
2,500
|
|
Fees for Off-Cycle Meetings
.
A fee of $650 is paid to each nonemployee member of the Board of Directors for
attendance at any “Off-Cycle” meeting of the Board of Directors or any Committee
of the Board of Directors (regardless of whether the Director is a member of
that Committee). “Off-Cycle” means (i) any meeting of the Board of
Directors in excess of five meetings per year and (ii) any meeting of any
Committee of the Board of Directors not coinciding with a regularly scheduled
meeting of the Board of Directors.
Equity Compensation
.
Each
nonemployee member of the Board of Directors receives on the date of each of our
annual meetings of shareholders an award under our Amended and Restated Director
Stock Plan (the “Director Stock Plan”) of 1,000 shares of restricted common
stock, which fully vest on the first anniversary of the date of
grant. In addition, any new nonemployee directors will receive on the
date of their initial election to the Board of Directors an award under our
Director Stock Plan of 1,000 shares of restricted common stock, which will fully
vest on the first anniversary of the date of grant.
Payment or Reimbursement for Reasonable
Expenses
.
Reasonable
expenses incurred by a director for attendance at meetings of the Board of
Directors and its committees are paid or reimbursed by us.
Deferred Compensation Plan
.
We
also offer our directors a nonqualified deferred compensation plan, under which
directors may defer all or a portion of their fees earned as
directors. Under this plan, deferred fees will be paid, as adjusted
for investment gains or losses, at such time in the future as specified by the
participating director under the terms of the plan.
Insurance Coverages
.
We
also provide our nonemployee directors with coverage under a group accidental
death and dismemberment policy that provides up to a $500,000
benefit. We pay for this coverage, and the aggregate cost of this
coverage for all nonemployee directors during 2008 was approximately
$2,100. If they desire, and at their own expense, we also include our
nonemployee directors in our group health insurance plan.
The following table provides the
information specified with respect to compensation of our nonemployee Directors
during 2008.
Director
Compensation
|
|
for the Year Ended December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
Earned
|
|
|
|
|
|
|
|
|
|
or
|
|
|
Stock
|
|
|
|
|
|
|
Paid in
Cash
|
|
|
Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
(1)
(2)
|
|
|
($)
|
|
John K. Anderson,
Jr.
|
|
|
81,500
|
|
|
|
46,106
|
|
|
|
127,606
|
|
Richard J. Bagby,
M.D.
|
|
|
68,900
|
|
|
|
46,106
|
|
|
|
115,006
|
|
Robert O. Baratta,
M.D.
|
|
|
73,150
|
|
|
|
46,106
|
|
|
|
119,256
|
|
M. C. Harden,
III
|
|
|
62,600
|
|
|
|
46,106
|
|
|
|
108,706
|
|
Kenneth M.
Kirschner
|
|
|
94,650
|
|
|
|
46,106
|
|
|
|
140,756
|
|
Terence P. McCoy,
M.D.
|
|
|
69,650
|
|
|
|
46,106
|
|
|
|
115,756
|
|
John G.
Rich
|
|
|
66,500
|
|
|
|
46,106
|
|
|
|
112,606
|
|
Joan D.
Ruffier
|
|
|
69,000
|
|
|
|
46,106
|
|
|
|
115,106
|
|
David M. Shapiro,
M.D.
|
|
|
69,650
|
|
|
|
46,106
|
|
|
|
115,756
|
|
|
|
|
|
|
|
|
(1)
|
The amounts included in the “Stock
Awards” column represent the compensation cost recognized by
the Company
in 200
8
related to awards
of restricted stock
to directors, computed in
accordance with Statement of Fin
ancial Accounting Standards No.
123R.
During 2008, each
director received an award of 1,000 shares of restricted stock with a
grant date fair value of $45.91.
For a discussion of
valuation assumptions, see
Note
11
,
Share-
B
ased
Compensation Plans
,
to our consolidated financial
statements includ
ed
in our Annual Report on Form
1
0-K for the year ended December
31, 200
8
.
|
|
(2)
|
At
December 31, 2008, the following directors had the total number of shares
underlying outstanding unexercised options and the total number of shares
of outstanding unvested restricted stock shown in the table
below:
|
|
|
|
Shares
Underlying
Stock
Options
|
Shares
of
Restricted
Stock
|
|
|
John
K. Anderson, Jr.
|
25,000
|
1,000
|
|
|
Richard
J. Bagby, M.D.
|
15,000
|
1,000
|
|
|
Robert
O. Baratta, M.D.
|
—
|
1,000
|
|
|
M.C.
Harden, III
|
25,000
|
1,000
|
|
|
Kenneth
M. Kirschner
|
20,000
|
1,000
|
|
|
Terence
P. McCoy, M.D.
|
15,000
|
1,000
|
|
|
John
G. Rich
|
—
|
1,000
|
|
|
Joan
D. Ruffier
|
20,000
|
1,000
|
|
|
David
M. Shapiro, M.D.
|
26,500
|
1,000
|
Executive
Compensation
Executive
Officers
The
following table lists our executive officers and sets forth certain information
concerning them.
|
Name
|
Age
|
Position
|
Executive
Officer Since
|
|
John
R. Byers
|
54
|
President
and Chief Executive Officer
|
1999
|
|
Charles
Divita, III
|
39
|
Chief
Financial Officer
|
2006
|
|
Robert
E. White, Jr.
|
62
|
President
of insurance subsidiaries
|
2006
|
For
information regarding Mr. Byers, see
“Proposal 1. Election of Directors –
Nominees for Election - Terms Expiring in 2009.”
Mr. Divita
became Chief
Financial Officer of the Company on January 1, 2006. Prior to that
time, Mr. Divita was Senior Vice President - Operations and Strategy of the
Company and has been with us since 2000 in various executive
capacities. Prior to joining us, Mr. Divita held management positions
with Prudential Financial in the areas of operations and risk
management.
Mr. White
has served as
President of First Professionals since 2002 and also serves as the President of
our other insurance subsidiaries. Mr. White joined us in 2000 as
Senior Vice President of administration of First Professionals. Prior
to 2000, Mr. White was a senior claims officer of ProNational Insurance
Company.
Compensation
Discussion and Analysis
Our executive compensation program is
administered by the Compensation Committee of our Board of Directors, which is
comprised solely of independent directors who also qualify as “outside
directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the “Code”).
Objectives
of Our Executive Compensation Program
The goal of our executive compensation
program is to establish remuneration in an appropriate, fair manner, with
compensation that is linked to our financial and strategic business objectives,
that is justifiable and within industry norms, and that provides incentives
sufficient to attract and retain high-performing executives. Also,
the program seeks to align, insofar as is practicable, the interests of
management with those of our shareholders. In addition to providing a
competitive level of base pay, the program is designed to reward:
|
—
|
efforts
that result in increased shareholder value;
|
|
—
|
commitment
to the long-term success of the Company; and
|
|
—
|
achievement
of Company, individual and business unit
objectives.
|
How We
Chose Amounts or Formulas for Each Element of Compensation
Each
executive’s current and prior compensation is considered in setting future
compensation. In addition, we review the compensation practices of
other companies. To some extent, our compensation plan is based on
the market and the companies we compete against for employees. Each
element of compensation for executives is established at a level that the
Compensation Committee believes is both appropriate and consistent within the
industry and relative to peer companies. The Compensation Committee
examines many other criteria used in determining the appropriate level,
including, but not limited to, industry surveys, consumer price index data, the
recommendation of our President and Chief Executive Officer, and the executive’s
performance, scope of responsibility, and productivity, as well as issues
involving expense and risk control, management development, and strategic
planning. The Compensation Committee also considers how each element
of compensation relates to each other element and to total compensation in an
effort to ensure a proper balance between the elements and a proper level of
total compensation. Since 1999, the Compensation Committee has
utilized the services of a compensation advisor, Frederic W. Cook & Co.,
Inc. (“Frederic Cook”), both in determining the compensation practices of our
peers and for advice concerning the overall design and individual elements of
our compensation program.
Peer
Group Analysis
In
2006, Frederic Cook performed a thorough analysis of the compensation practices
and levels of a Peer Group determined by them. This Peer Group
consisted of companies with business operations that compete with us or operate
in the financial services industry generally. The Compensation
Committee recognized that many of these companies were larger than we are and
operated in different geographical areas, and the Compensation Committee
considers these factors in its decision-making. The Peer Group was
comprised of the following seven companies:
|
—
|
American
Physicians Capital, Inc.;
|
|
—
|
Fremont
General Corporation;
|
|
—
|
Markel
Corporation;
|
|
—
|
Philadelphia
Consolidated Holdings Corporation;
|
|
—
|
PICO
Holdings, Inc.;
|
|
—
|
ProAssurance
Corp.; and
|
|
—
|
SCPIE
Holdings, Inc.
|
Peer
Group compensation data is limited to publicly available information and
therefore generally does not provide precise comparisons by position as offered
by more comprehensive survey data. As a result, the Compensation
Committee has used Peer Group data on a limited basis to analyze the
competitiveness of our compensation and the consistency between our target
compensation and our general compensation philosophy. In its review
of 2008 compensation, the Compensation Committee did not ask Frederic Cook to
conduct an additional Peer Group study but rather utilized the 2006 Peer Group
study as part of its overall assessment of executive compensation.
Elements
of Our Executive Compensation Program
Our executive compensation program is
comprised of two basic components: direct compensation and post-employment and
other benefits. Direct compensation consists of base salary, annual
incentive
award,
and long-term incentive compensation. While the Compensation
Committee recognizes the importance of maintaining competitive post-employment
and other benefits, direct compensation is the primary method through which we
have sought to achieve our compensation objectives.
The following table
shows the percentages of total cash compensation, total direct compensation and
total compensation comprised by the separate elements of our direct compensation
program for each of our executive officers in 2008:
|
|
Mr.
Byers
|
Mr.
Divita
|
Mr.
White
|
|
Percentage
of Total Cash Compensation:
|
|
|
|
|
Base salary
|
45
|
62
|
62
|
|
Annual incentive
award
|
55
|
38
|
38
|
|
Long-term incentive award
*
|
—
|
—
|
—
|
|
Total
|
100
|
100
|
100
|
|
|
|
|
|
|
Percentage
of Total Direct Compensation:
|
|
|
|
|
Base salary
|
28
|
38
|
41
|
|
Annual incentive
award
|
34
|
24
|
25
|
|
Long-term incentive award
*
|
38
|
38
|
34
|
|
Total
|
100
|
100
|
100
|
|
|
|
|
|
|
Percentage
of Total Compensation:
|
|
|
|
|
Base salary
|
22
|
32
|
29
|
|
Annual incentive
award
|
27
|
20
|
18
|
|
Long-term incentive award
*
|
30
|
31
|
24
|
|
Total
|
79
|
83
|
71
|
|
|
*
|
The
amount shown is the value of the portion of 2008 awards attributable to
2008, together with the value of prior-year awards attributable to
2008.
|
The
Compensation Committee believes that these amounts and percentages are
reasonable and appropriate.
Post-employment and other benefits
consist of severance and change in control benefits and retirement, disability,
and other arrangements. In 2005, the Compensation Committee began a
review of our post-employment and other benefits. This review
resulted in changes in 2007 and 2008 to certain plans and programs for
administrative purposes as well as for the purpose of compliance with Section
409A of the Code. In addition, effective December 31, 2008 the
Compensation Committee approved the substantive changes to the retirement
programs discussed below. See
Post-Employment and Other
Benefits
below.
Direct
Compensation Program
Base Salary
.
We use base salaries to
provide the foundation of a fair and competitive compensation opportunity for
each individual executive officer. Generally, the Compensation
Committee sets base salaries for the coming year at the last committee meeting
of each calendar year by reviewing data presented by our management and Frederic
Cook. The most important factors considered by the Compensation
Committee in setting executive base salaries for 2008 were the executive’s
performance, the executive’s then-current salary, changes in cost-of-living, the
recommendation of Frederic Cook, and the recommendation of Mr.
Byers. The determination of base salaries for 2008 was generally
independent of the decisions regarding other elements of compensation, but the
other elements of direct
compensation are
dependent on the determination of base salary to the extent they are expressed
as percentages of base salary.
Annual Incentive
Award
.
Our
annual Executive Incentive Compensation Plan (“EICP”) is a broad-based program
that links the compensation of participants directly to the accomplishment of
specific business goals, as well as, for certain executives, to individual
performance. Annual cash incentive compensation under the EICP is
intended to focus and reward individuals based on measures identified as having
a positive impact on our annual business results. Annual cash
incentive awards to our executive officers for 2008 are governed by our 2008
Senior Executive Annual Incentive Plan, which was approved by our shareholders
in June 2008 and which was intended to make awards under this plan qualify as
performance-based compensation to the extent permitted under Section 162(m) of
the Code.
Our
EICP is directly linked to financial and strategic objectives established by the
Strategic Planning Committee of our Board of Directors. Our President
and Chief Executive Officer presents to the Compensation Committee for its
ultimate approval recommended corporate performance objectives, recommended
weights to be given to each objective and recommended target award
percentages. Frederic Cook has advised the Compensation Committee
concerning the appropriateness of these target awards as a percentage of our
executive’s base salaries. Through this process, the Compensation
Committee believes that it has established performance objectives that are
challenging, that are consistent with the strategic objectives for the Company
established by the Strategic Planning Committee, and that do not provide our
employees incentives to take excessive risks. The annual cash
incentive award for a given year is normally paid in a single installment in the
first calendar quarter of the following year.
Annual
incentive awards are established as a target percentage of the participant's
base salary with more senior executives being compensated at a higher percentage
of base salary. The EICP is administered by the Compensation
Committee, is consistent with the Compensation Committee’s belief that a
significant percentage of the compensation of the most senior members of our
management should be performance-based, and is consistent with our policy of
rewarding highly performing executives.
The
payment amount, if any, of an incentive award is determined based on: (1) the
attainment of Company-wide financial and strategic performance measures
(including in the case of executives with operating responsibilities, financial
and strategic performance measures relative to their operating subsidiary or
group) and (2) (in the case of executives other than our President and Chief
Executive Officer and our Chief Financial Officer) the attainment of individual
performance measures. For 2008, annual incentive awards to our
President and Chief Executive Officer and to our Chief Financial Officer were
based solely on Company-wide financial and strategic performance measures, while
Mr. White’s award was based 45% on Company-wide financial and strategic
performance measures, 35% on financial and strategic performance measures
related to our insurance operations, and 20% on individual performance
measures. Each performance measure is stated as a threshold, target
and maximum performance level, which, if achieved, results in payments of 50% to
150% of the component of the target award related to that performance measure
component. If the threshold measure is not achieved, no amount is
paid. For 2008, the following target award percentages were
established for our executive officers: 100% for Mr. Byers and 50%
for Messrs. Divita and White. For purposes of evaluating financial
performance components, the Compensation Committee may adjust our results, as
determined under accounting principles generally accepted in the United States
of America (“GAAP”), for unusual, non-recurring or other items at the
Compensation Committee’s discretion. Achievement of an individual
performance component is determined by the Compensation Committee, based in part
upon the recommendation of Mr. Byers, which is made by him after discussion with
Messrs. Divita and White.
Company-wide target financial and
strategic performance objectives for 2008 were established in December
2007. These financial objectives were subsequently adjusted slightly
by the Committee to reflect a delay by the Florida Office of Insurance
Regulation in approving certain filings.
As revised,
these targets were as
follows:
|
Measure
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Weight
|
|
|
Total
revenue
|
|
$196.7
million
|
|
|
$207.1
million
|
|
|
$217.6
million
|
|
|
|
10%
|
|
|
Operating
earnings per
diluted share
|
|
|
$3.65
|
|
|
|
$4.06
|
|
|
|
$4.47
|
|
|
|
50%
|
|
|
Return
on average
equity
|
|
|
11%
|
|
|
|
13%
|
|
|
|
15%
|
|
|
|
15%
|
|
|
Strategic
measures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25%
|
|
Strategic
measures included measures related to: maintaining or improving the ratings by
certain rating agencies of the financial strength of our insurance subsidiaries;
further developing and communicating our capital management strategy; evaluating
our long-term debt and related alternatives; assessing our strategic position
and diversification and merger and acquisition opportunities; prudently managing
our investment portfolio; and proactively focusing on Florida legislative and
regulatory matters.
Target financial and strategic
performance objectives for 2008 (before intercompany allocations and
adjustments) for our insurance operations were established in December
2007. These financial objectives were subsequently adjusted slightly
by the Committee to reflect a delay by the Florida Office of Insurance
Regulation in approving certain filings.
As revised,
these targets were as
follows:
|
Measure
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Weight
|
|
|
Gross
premiums written
|
|
$181.9
million
|
|
|
$191.6
million
|
|
|
$201.3
million
|
|
|
|
*
|
|
|
Net
premiums written
|
|
$161.1
million
|
|
|
$169.6
million
|
|
|
$178.2
million
|
|
|
|
*
|
|
|
Net
premiums earned
|
|
$167.5
million
|
|
|
$176.4
million
|
|
|
$185.3
million
|
|
|
|
*
|
|
|
GAAP
underwriting margin
|
|
$21.3
million
|
|
|
$26.6
million
|
|
|
$32.0
million
|
|
|
|
45%
|
|
|
Strategic
measures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25%
|
|
Strategic
measures included measures related to: maintaining or improving the ratings by
certain rating agencies of the financial strength of our insurance subsidiaries;
maintaining price adequacy to achieve underwriting margin objectives;
maintaining reserve adequacy; maintaining market position and seeking growth;
pursuing opportunities in the self-insured market; and enhancing our information
technology structure.
Long-Term Incentive Compensation
.
We
make awards of long-term incentive compensation to our management, including our
executive officers, under our Amended and Restated Omnibus Incentive Plan (the
“Omnibus Incentive Plan”). These awards are designed to motivate our
executives to create long-term shareholder value by linking executive
compensation with gains realized by shareholders. In 2008, we made
equity awards to our executive officers in the form of a combination of
restricted stock and performance units.
In recent years we had included stock
options as a significant portion of our equity awards. After in-depth
discussions with Frederic Cook and management and an analysis of recent trends
and relevant tax laws, the Compensation Committee determined that stock options
were an expensive, unpredictable and relatively ineffective method of providing
long-term incentives to our management employees. In addition, the
Compensation Committee felt that multi-year performance unit awards would more
closely align executive compensation with Company objectives. The
Compensation Committee, in consultation with Frederic Cook, also felt that a
combination of time-vested restricted stock and performance units, with more
senior executives receiving a higher percentage of performance units than less
senior executives, was appropriate.
After extensive discussions with
Frederic Cook and the members of the Strategic Planning Committee, other Board
members, and management, the Compensation Committee established the following
terms for the performance unit awards granted in 2008. Awards were
made in units that entitle the holder to receive a payout of a number of shares
of our Common Stock determined by multiplying the number of units by a Payout
Percentage dependent upon our achievement of a performance goal during a
two-year performance period ending December 31, 2009.
The following table sets forth the
Threshold, Target and Maximum Performance Goals for the Performance Period and
the Payout Percentages resulting from achievement of these Performance
Goals:
|
Performance
Goals:
|
The
following levels of ROAE*:
|
Payout
Percentage:
|
|
|
Less
than Threshold
|
-
|
0%
|
|
|
Threshold
|
10.0%
|
50%
|
|
|
Target
|
12.0%
|
100%
|
|
|
Maximum
|
14.0%
|
150%
|
|
|
More
than Maximum
|
-
|
150%
|
|
|
|
*
|
“ROAE”
means the average of our “returns on average equity” for the calendar
years 2008 and 2009, as adjusted as applicable for: the cumulative effect
of accounting and tax changes; the impact of mergers and acquisitions; the
effect of state-levied guaranty fund assessments to the extent not
recovered; and costs and expenses accrued or incurred associated with
merger and acquisition activities that do not ultimately result in a
transaction.
|
As is
the case with our EICP described above, the Compensation Committee believes that
these performance goals are challenging and consistent with our strategic
objectives. The Compensation Committee recognized that the structure
of these awards might provide incentives to our executives to take certain
actions that may not necessarily be in the Company’s best interests, but the
Compensation Committee does not believe that this risk is
significant.
Generally,
these performance unit awards vest at the end of the performance period;
however, (i) a holder whose employment with the Company is terminated in the
second year of the performance period or who retires before the end of the
performance period is eligible for a pro rata payout; (ii) a holder who dies or
becomes disabled becomes 100 percent vested in his or her award; and (iii) upon
a Change in Control (as defined) a holder becomes 100 percent vested and
eligible to receive an immediate payout (using a Payout Percentage equal to the
greater of 100 percent or the Payout Percentage determined as though the
Performance Period had ended on the last day of the calendar quarter immediately
preceding the earlier of the first public announcement of the Change in Control
Event or of the Company’s entry into a definitive agreement with respect to the
Change in Control Event, the Company’s entry into a definitive agreement with
respect to the Change in Control Event, or the date the Change in Control Event
occurs).
The restricted stock awards made in
2008 have a three-year vesting period and no performance
conditions.
In
determining the number of shares of restricted stock and performance units to be
granted, the Compensation Committee first decided upon the dollar value of
awards to be granted, considering competitive and trend data and a
recommendation by Frederic Cook. Next, the Compensation Committee
granted awards with estimated values (determined in accordance with valuation
procedures used by the Company in the preparation of its financial statements)
approximately equal to these dollar values.
The
Compensation Committee also considers the outstanding amount of equity awards
made in prior years in setting the amount of equity incentive awards, both as an
indicator of the degree to which the interests of our executives are already
aligned with shareholders and also as an indicator of how much of an additional
incentive will be provided by an additional award.
The following table sets forth the
equity incentive awards discussed above granted to our executive officers in
2008:
|
|
No.
of Shares of
Restricted
Stock
|
No.
of
Performance
Units
|
Total
Estimated
Grant-Date
Value
*
|
|
|
Mr.
Byers
|
4,105
|
12,316
|
$732,705
|
|
|
Mr.
Divita
|
2,052
|
6,158
|
$366,330
|
|
|
Mr.
White
|
2,052
|
6,158
|
$366,330
|
|
|
|
*
|
Approximately
eight percent of this amount was
attributable
to 2008 in view of the vesting features of these
awards.
|
We
take care to avoid questionable timing practices in connection with our equity
incentive awards. Grants are initially considered by the Compensation
Committee at its December meeting and are finalized and made at a special
meeting held as early in January as practicable on a date set by the
Compensation Committee at its December meeting. Except with respect
to new hires, we do not make grants of equity incentive awards to our executives
at other dates. If at the time of any planned equity incentive award
grant date, we were aware of material non-public information, we would not make
the planned award grant on that date but would reschedule the meeting of the
Compensation Committee to an appropriate time. The Compensation
Committee does not delegate any function related to equity incentive
awards.
Post-Employment
and Other Benefits
Retirement Benefits
.
Our
overall compensation package for our executive officers also includes various
retirement benefits, including participation in our Defined Benefit Plan, 401(k)
Plan and Nonqualified Deferred Compensation Plan. In 2008 and prior
years, our executive officers also participated in either our Excess Benefit
Plan or our Supplemental Executive Retirement Plan (“SERP”). As
discussed below, effective December 31, 2008, we terminated our Excess Benefit
Plan and SERP as to all active employees including our executive
officers. In lieu of benefits under these Plans, we entered into
deferred compensation agreements (“Deferred Compensation Agreements”) with
certain officers.
Generally,
the benefits offered to participants in these plans are intended to provide
retirement security and serve a different purpose than do the other components
of compensation. We believe that providing our executive officers
with an appropriate level of retirement benefits is an important factor in our
ability to attract and retain key executives.
401(k) Plan
.
Our 401(k) Plan
is a broad-based, non-discriminatory qualified plan that is designed to
encourage our employees to save for their retirement. Our
contributions to our employees, including our executive officers, under this
plan are limited. Our 401(k) Plan has two components. The
plan allows employees to contribute up to 100% of their compensation earned,
subject to statutory limitations ($15,500 for 2008, $20,500 in the case of
employees age 50 and over), during the plan year. We match 100% of an
employee’s contributions up to 2.5% of compensation (provided that compensation
for this purpose is limited to $230,000 for 2008). In addition, we
may make a discretionary contribution of up to 25% of each participant’s
compensation (with compensation limited to $230,000 for this purpose, also) for
the plan year. For 2008, we made a discretionary contribution of six
percent of compensation, subject to the applicable statutory
limitations. The total matching and discretionary contributions we
made to the accounts of our executive officers with respect to 2008 were $19,550
each.
Retirement Plans
.
Our retirement plans for
executive officers consist of our Defined Benefit Plan and, during 2008 and
prior years, our Excess Benefit Plan and SERP. Our Defined Benefit
Plan is a funded, tax qualified, noncontributory plan that covers the majority
of our employees, including executive officers. All participants in
our Defined Benefit Plan whose benefits were limited by the Code (including our
executive officers other than Mr. Byers) automatically participated in our
Excess Benefit Plan. This plan provided a supplemental pension
benefit intended to ensure that participants received total pension benefits
equal to the benefits that would have been payable under our Defined Benefit
Plan but for the limitations of the Code. Mr. Byers was the only
active participant in our SERP, which was an unfunded, nonqualified plan, that
paid a higher level of retirement benefits than would have been payable under
our Excess Benefit Plan. For further information concerning our
Defined Benefit Plan, our Excess Benefit Plan, and our SERP, see the
Pension Benefits
table and
accompanying narrative below.
Effective
December 31, 2008, we terminated our Excess Benefit Plan and SERP as to all
active employees and entered into Deferred Compensation Agreements with Messrs.
Byers, Divita and White to replace the benefits previously provided to these
executives by our Excess Benefit Plan and SERP. The decision to
terminate the Excess Benefit Plan and SERP was made by the Compensation
Committee in consultation with Frederic Cook in order to replace the relatively
unpredictable and open-ended obligations under these defined benefit plans with
fixed contributions to a defined contribution plan under which participants
rather than the Company would bear the associated investment risks.
Pursuant
to the Deferred Compensation Agreements entered into in December 2008, in
January 2009, in consideration of the relinquishment by our executive officers
of their accrued and vested benefits under the Excess Benefit Plan and SERP, in
January 2009 we contributed to the accounts of our executive officers under our
Deferred Compensation Plan (a defined contribution plan) the following
amounts:
John
R. Byers
|
$1,276,433
|
Charles
Divita, III
|
$ 137,947
|
Robert
E. White, Jr.
|
$ 535,430
|
In
addition, the Deferred Compensation Agreements provide that the Company will,
for 2009 and each year in which Messrs. Byers, Divita and White continue their
employment with the Company, contribute to their accounts under the Deferred
Compensation Plan the following percentages of their respective base
salaries.
John
R. Byers
|
19%
in 2009, increasing by 2.75 percentage points annually
through
2018 and reverting to 19% in 2019 and later years
|
Charles
Divita, III
|
5.25%
|
Robert
E. White, Jr.
|
16.0%
|
These
one-time and annual contribution amounts were determined by the Compensation
Committee in consultation with Frederic Cook and are intended to replace as
nearly as possible the anticipated benefits the participants would have received
under our Excess Benefit Plan or SERP and generally at an anticipated cost to
the Company no greater than would have been anticipated under the terminated
plans.
Also
pursuant to the Deferred Compensation Agreements, we agreed to transfer cash
equal to the amount of these contributions to the rabbi trust previously
established with respect to the Deferred Compensation
Plan. Contributions to the Deferred Compensation Plan made pursuant
to the Deferred Compensation Agreements are credited to a Retirement Account
under the Deferred Compensation Plan and are 100% vested at the time of
contribution. All accounts under the Deferred Compensation Plan
increase or decrease in accordance with investment elections made from time to
time by the participants. Funds in the Retirement Accounts are to be
paid out (in a lump sum or in up to ten installments) to the executive officers
at the time of their separation from service with the Company.
Nonqualified Deferred Compensation
Plan
.
Our
nonqualified Deferred Compensation Plan is offered to key employees, including
our executive officers, selected by the Board of Directors. While we
generally have not contributed to this plan (other than pursuant to the Deferred
Compensation Agreements with Messrs. Byers, Divita and White) and thus
historically have not considered this plan to be a part of our compensation
program
per se
, we
consider providing our executives the ability to manage their personal finances
by deferring compensation into this plan to be an important benefit that we can
afford with a low level of associated administrative cost. For
further information concerning our Nonqualified Deferred Compensation Plan, see
the
Nonqualified Deferred
Compensation
table and accompanying narrative below. In
December 2008, we amended and restated our Deferred Compensation Plan, among
other reasons, to create the Retirement Accounts required by the Deferred
Compensation Agreements.
Employment and Change in Control Severance
Agreements
.
We
have entered into employment and change in control severance agreements with our
executive officers. These employment agreements are for three years
in the case of Mr. Byers and two years in the cases of Messrs. Divita and White
and provide for specified minimum levels of base salary, incentive compensation
in accordance with our executive incentive compensation program, and such other
benefits as we may provide to senior executives from time to time, including an
automobile or automobile allowance and club dues. Severance under
these employment agreements is provided if we terminate the executive’s
employment before the end of the term of employment for any reason other than
cause (as defined) or if the executive terminates his employment within 90 days
after we notify the executive that his agreement will not automatically be
extended at the end of a year. Our change in control severance
agreements with these executives provide change in control benefits on a
so-called “double-trigger” basis. That is, severance benefits under
these agreements are paid only if there is a change in control (as defined) of
the Company and a termination of the executive’s employment by his employer (or
a constructive discharge) at the time of or within 36 months after the change in
control.
These long-term employment and change
in control severance arrangements with our executive officers were entered into
to assist us in attracting and retaining our executives as well as to help
assure continuity of management.
As of December 15, 2008, effective
January 1, 2008, we entered into revised employment agreements and change in
control severance agreements with our executive officers and terminated the
previously existing employment agreements and severance
agreements. The primary purpose of the revised agreements was to
bring them into compliance with Section 409A of the Code. The terms
of the revised agreements are substantially similar to the terms of the
previously existing agreements.
Other Change in Control
Benefits
.
Outstanding awards of restricted stock,
performance units and stock options made under our Omnibus Incentive Plan vest
immediately upon a change in control. We believe that utilizing
so-called “single trigger” vesting of these awards can be a powerful retention
device during change in control discussions and removes employee uncertainty
after a change in control occurs.
Other Benefits
.
Executives,
together with employees generally, may participate in our Employee Stock
Purchase Plan. They also receive health and dental benefits, and
life, short-term disability, and long-term disability insurance. Our
executive officers also receive excess disability and life insurance
coverage.
Our overall compensation plan for
executives also includes certain perquisites, including,
among other things,
automobiles or automobile allowances and expense reimbursements and dues for
approved social or country clubs, as provided by the employment agreements
described above. In addition, we reimburse our executive officers for
expenses of their spouses on company-related travel when
appropriate. These perquisites are provided to assist us in
attracting and retaining our executives.
Tax
Considerations
Section
162(m) of the Code eliminates the tax deduction of any publicly held corporation
for compensation to certain executives of such corporation exceeding $1,000,000
in any taxable year, unless the compensation qualifies as being
performance-based within the meaning of Section 162(m). The increase
in the trading price of our common stock in recent years resulted in a
significant increase in the value of restricted stock awards (which does not
qualify as performance-based) under our Omnibus Incentive Plan
.
As a result of
these factors, Mr. Byers’ non-performance based compensation for 2008 exceeded
the $1,000,000 deductibility limit. Also, depending upon the value of
previously made restricted stock awards vesting in a particular future year and
the amounts received by our executive officers under our Senior Executive Annual
Incentive Plan that do not qualify as performance-based compensation, it is
possible that Mr. Byers (and possibly other executive officers) could receive
more than $1,000,000 of non-performance-based compensation in that
year. The Compensation Committee has taken steps to mitigate the
amount of executive compensation that might not be deductible under Section
162(m), including by adopting and obtaining shareholder approval of our 2008
Senior Executive Annual Incentive Plan.
Compensation
Committee Report
We
have reviewed and discussed with management the
Compensation Discussion and
Analysis
contained in this Proxy Statement. Based on that
review and those discussions, we recommended to the Board of Directors that such
Compensation Discussion and
Analysis
be included in this Proxy Statement.
|
Compensation
Committee
|
|
Report
Submitted by:
|
|
|
|
Richard
J. Bagby, M.D., Chairman
|
|
John
K. Anderson, Jr.
|
|
John
G. Rich
|
|
David
M. Shapiro, M.D.
|
Summary
Compensation Table
The
following table sets forth information concerning the compensation paid by us to
our executive officers for 2006, 2007 and 2008, for all services in all
capacities during these years.
Summary
Compensation Table
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Compen-
|
|
|
Compensation
|
|
|
Compen-
|
|
|
|
|
Name and
Principal
|
|
|
Salary
|
|
|
Awards
|
|
|
Awards
|
|
|
sation
|
|
|
Earnings
|
|
|
sation
|
|
|
Total
|
|
Position
|
Year
|
|
($)
|
|
|
($)
(1)
|
|
|
($)
(2)
|
|
|
($)
(3)
|
|
|
($)
(4)
|
|
|
($)
(5)
|
|
|
($)
(6)
|
|
John R.
Byers
|
2008
|
|
|
723,000
|
|
|
|
543,807
|
|
|
|
450,761
|
|
|
|
896,520
|
|
|
|
660,046
|
|
|
|
54,187
|
|
|
|
3,328,321
|
|
President
and
|
2007
|
|
|
695,000
|
|
|
|
274,057
|
|
|
|
534,040
|
|
|
|
966,050
|
|
|
|
196,877
|
|
|
|
62,047
|
|
|
|
2,728,071
|
|
Chief Executive
Officer
|
2006
|
|
|
600,000
|
|
|
|
292,215
|
|
|
|
304,957
|
|
|
|
444,000
|
|
|
|
129,125
|
|
|
|
153,191
|
|
|
|
1,923,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Divita,
III
|
2008
|
|
|
365,000
|
|
|
|
261,482
|
|
|
|
101,664
|
|
|
|
226,300
|
|
|
|
147,881
|
|
|
|
51,838
|
|
|
|
1,154,165
|
|
Chief Financial
Officer
|
2007
|
|
|
335,000
|
|
|
|
112,347
|
|
|
|
121,180
|
|
|
|
232,825
|
|
|
|
9,069
|
|
|
|
59,672
|
|
|
|
870,093
|
|
|
2006
|
|
|
260,000
|
|
|
|
53,101
|
|
|
|
95,668
|
|
|
|
144,300
|
|
|
|
13,628
|
|
|
|
47,231
|
|
|
|
613,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert E. White,
Jr.
|
2008
|
|
|
436,800
|
|
|
|
261,736
|
|
|
|
102,113
|
|
|
|
268,850
|
|
|
|
344,699
|
|
|
|
85,439
|
|
|
|
1,499,637
|
|
President,
|
2007
|
|
|
420,000
|
|
|
|
126,549
|
|
|
|
145,662
|
|
|
|
278,460
|
|
|
|
98,552
|
|
|
|
98,437
|
|
|
|
1,167,660
|
|
First
Professionals
|
2006
|
|
|
400,000
|
|
|
|
65,760
|
|
|
|
152,478
|
|
|
|
214,050
|
|
|
|
118,325
|
|
|
|
75,060
|
|
|
|
1,025,673
|
|
|
|
|
|
(1)
|
The
amounts included in the “Stock Awards” column represent the compensation
cost we recognized in the years shown related to non-option stock awards
in 2008 and prior years, in accordance with Statement of Financial
Accounting Standards No. 123R. For a discussion of valuation
assumptions, see
Note
11, Share-Based Compensation Plans
, to our consolidated financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2008. Please see the
Grants of Plan-Based
Awards
table for more information regarding the stock awards we
granted in 2008.
|
|
(2)
|
The
amounts included in the “Option Awards” column represent the compensation
cost we recognized in the years shown related to option awards in prior
years, in accordance with Statement of Financial Accounting Standards No.
123R. For a discussion of valuation assumptions, see
Note 11, Share-Based
Compensation Plans
, to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31,
2008.
|
|
(3)
|
The
amount shown for each named executive officer in the “Non-Equity Incentive
Plan Compensation” column is attributable to an award under our EICP
earned in the years shown, but paid in the succeeding
year. Please see
Compensation Discussion and
Analysis – Direct Compensation Program – Annual Incentive Award
and
the
Grants of Plan-Based
Awards
table below for more information regarding our EICP and the
2008 EICP awards and performance measures.
|
|
(4)
|
The
amount shown for each named executive officer in the “Change in Pension
Value and Nonqualified Deferred Compensation Earnings” column for 2006 and
2007 is attributable to the change in actuarial present value of the
accumulated benefit under our Defined Benefit Plan and our Excess Benefit
Plan or SERP, as applicable, at the end of the year shown, as compared to
the end of the previous year. For 2008, the amount shown is
attributable to the change in actuarial present value of the accumulated
benefit under our Defined Benefit Plan, plus the excess of the amount of
the initial contributions made to the named executive officer’s account
under our Nonqualified Deferred Compensation Plan pursuant to the Deferred
Compensation Agreements effective December 31, 2008 over the actuarial
present value of the executives’ benefit at December 31, 2007 under our
Excess Benefit Plan or SERP, as applicable. See the
Pension Benefits
and
Nonqualifed Deferred
Compensation
tables below and accompanying
narrative.
|
|
(5)
|
The
amounts shown in the “All Other Compensation” column are attributable to
the following:
|
|
|
Name
|
Year
|
Company
Contributions
to
Retirement
Plans
(a)
|
Insurance
Premiums
(b)
|
Perquisites
and
Other
Personal
Benefits
(c)
|
Total
|
|
|
Mr.
Byers
|
2008
|
$
19,550
|
$
6,572
|
$
28,065
|
$ 54,187
|
|
|
Mr.
Divita
|
2008
|
$
19,550
|
$
5,727
|
$
26,561
|
$ 51,838
|
|
|
Mr.
White
|
2008
|
$
19,550
|
$
8,233
|
$
57,656
|
$ 85,439
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Matching
and profit-sharing contributions made by us to the executive’s account
under our 401(k) Plan.
|
|
|
(b)
|
Premiums
paid by us for executive disability, life, accidental death, and emergency
medical insurance.
|
|
|
(c)
|
Perquisites
included: participation in our executive automobile program; social club
dues; and for Mr. White, expenses of his spouse during company-related
travel. No individual perquisite exceeded $25,000, except the
following for Mr. White: spousal travel
expenses: $27,828.
|
|
(6)
|
The
amount shown in the “Total” compensation column for each named executive
officer represents the sum of all columns of the Summary Compensation
Table.
|
Employment and Severance
Agreements
We
have entered into an employment agreement with Mr. Byers providing 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. Under the agreement, Mr. Byers’ minimum annual salary is
$752,000, which may be increased at the discretion of the Board of
Directors. The agreement is for a term of three years and is extended
automatically for an additional year unless the Board of Directors before the
end of a year notifies Mr. Byers that the agreement will not be so
extended. The term currently continues through December 31,
2011. We have also entered into employment agreements with Messrs.
Divita and White providing 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. Under these
agreements, Mr. Divita’s minimum annual salary is $379,600 and
that of Mr. White
is $454,272, each of which may be increased at the discretion of the Board of
Directors. The agreements are for a term of two years and are extended
automatically for an additional year unless the Board of Directors notifies
Messrs. Divita or White that the agreement will not be so extended before the
end of each year. The terms currently continue through December 31,
2010. For a description of amendment to these agreements in December
2008, see
Compensation
Discussion and Analysis.
See
Potential
Payments Upon Termination or Change in Control
below for a description of
the provisions of these employment agreements applicable upon termination of the
executive officers’ employment.
For
a description of severance arrangements we have entered into with our executive
officers, see
Potential
Payments Upon Termination or Change in Control
below.
Grants
of Plan-Based Awards
The
following table contains information concerning cash and equity incentive
compensation awards during 2008 to our executive officers under our equity
incentive and other plans.
Grants
of Plan-Based Awards
During
the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Future Payouts
Under
|
Estimated
Future Payouts
Under
|
|
All
Other
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Awards
(1)
|
Equity
Incentive Plan Awards
(2)
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
Name
|
Grant
Date
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
Awards:
Number
of Shares
of Stock
or Units
(#)
(3)
|
|
Awards:
Number
of
Securities
Underlying Options
(#)
|
|
|
Exercise
or Base Price
of
Option Awards
($/Sh)
|
|
|
Grant
Date Fair Value
of
Stock
and
Option Awards
(4)
|
|
John
R.
Byers
|
1/4/2008
|
—
|
|
—
|
|
—
|
6,158
|
|
12,316
|
|
18,474
|
|
4,105
|
|
—
|
|
|
—
|
|
|
732,705
|
|
|
—
|
361,500
|
|
723,000
|
|
1,084,500
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
Divita,
III
|
1/4/2008
|
—
|
|
—
|
|
—
|
3,079
|
|
6,158
|
|
9,237
|
|
2,052
|
|
—
|
|
|
—
|
|
|
366,330
|
|
|
—
|
91,250
|
|
182,500
|
|
273,750
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
E. White,
Jr.
|
1/4/2008
|
—
|
|
—
|
|
—
|
3,079
|
|
6,158
|
|
9,237
|
|
2,052
|
|
—
|
|
|
—
|
|
|
366,330
|
|
|
—
|
109,200
|
|
218,400
|
|
327,600
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
(1)
|
The
amounts shown reflect grants of 2008 EICP awards. In December
2007, our Compensation Committee established target EICP awards, expressed
as a percentage of the executive’s 2008 base salary, and individual,
company, and subsidiary performance measures for the purpose of
determining the amount paid out under the EICP for each executive officer
for the year ended December 31, 2008. The amount shown in the
“target” column represents the target percentage of each executive
officer’s 2008 base salary. For 2008, the target percentages
were: 100% for Mr. Byers; and 50% for Messrs. Divita and
White. The amount shown in the “maximum” column represents the
maximum amount payable under the EICP, which is 150% of the target amount
shown. The amount shown in the “threshold” column represents the amount
payable under the EICP if only the minimum level of company performance of
the EICP is attained, which is 50% of the target amount shown. Please see
Compensation Discussion
and Analysis
–
Direct Compensation Program – Annual Incentive Award
for more
information regarding our EICP and the 2008 EICP awards and performance
measures.
|
|
(2)
|
The
“Estimated Future Payouts Under Equity Incentive Plan Awards” column shows
the range of shares, that may be earned in respect of performance units
granted under our Omnibus Incentive Plan in 2008 for the two-year
performance period covering fiscal years 2008 and 2009. The
number of shares that will be earned by each named executive will range
from 0% to a maximum of 150% of the target number of shares and will be
based upon the achievement of two-year cumulative Return on Average
Equity, as adjusted, for the fiscal 2008-2009 period. The
threshold level for a payout is 50% of the target performance goal. For
additional information related to
the
|
|
|
performance
measure and other terms of these performance units, see the
Compensation Discussion and Analysis
above.
|
|
(3)
|
The
amounts shown reflect the number of shares of restricted stock received
pursuant to awards granted under our Omnibus Incentive
Plan. The restrictions on one-third of such shares lapse on
each of the first three anniversaries of the date of grant. The
restrictions on all shares will lapse if the executive officer’s
employment terminates as a result of death or disability, or if there is a
change in control. Please see
Compensation Discussion and
Analysis
above for more information regarding these awards of
restricted stock.
|
|
(4)
|
The
amounts included in the “Fair Value of Awards” column represent the full
grant date fair value of the awards computed in accordance with Statement
of Financial Accounting Standards No. 123R. For a discussion of
valuation assumptions, see
Note 11, Share-Based
Compensation Plans
, to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31,
2008.
|
Outstanding
Equity Awards
The
following table contains information regarding awards under our equity incentive
and other plans held at December 31, 2008, by our executive
officers.
Outstanding
Equity Awards at December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
Stock
Awards
|
|
|
Number
of
|
Number
of
|
|
|
|
Number
of
|
|
Market
Value
of
|
Equity
Incentive
Plan
|
Equity
Incentive
Plan
|
|
Securities
|
Securities
|
|
|
|
Shares
or
Units
|
Shares
or
Units
|
Awards;
Number
of
|
Awards;
Market
or
|
|
Underlying
|
Underlying
|
|
Option
|
|
of
Stock
That
|
of
Stock
That
|
Unearned
Shares,
|
Payout
Value
of
|
|
Unexercised
|
Unexercised
|
|
Exercise
|
Option
|
Have
Not
|
|
Have
Not
|
Units
or Other
Rights
|
Unearned
Shares,
|
|
|
Options
|
Options
|
|
Price
|
Expiration
|
Vested
|
|
Vested
(1)
|
that
Have Not
Vested
|
that
Have Not
Vested
(1)
|
Name
|
(#)
Exercisable
|
(#)
Unexercisable
|
|
($)
|
Date
|
(#)
|
|
($)
|
(#)
|
|
($)
|
|
John
R.
Byers
|
2,000
|
—
|
|
14.38
|
05/01/10
|
19,324
|
(4)
|
846,005
|
12,316
|
(5)
|
539,194
|
(5)
|
|
78,575
|
—
|
|
10.38
|
12/11/10
|
2,293
|
(6)
|
100,388
|
—
|
|
—
|
|
|
24,128
|
—
|
|
14.00
|
12/14/11
|
4,105
|
(7)
|
179,717
|
—
|
|
—
|
|
|
23,666
|
—
|
|
6.80
|
12/12/12
|
—
|
|
—
|
—
|
|
—
|
|
|
39,800
|
—
|
|
23.05
|
12/12/13
|
—
|
|
—
|
|
|
|
|
|
15,000
|
—
|
|
30.38
|
01/20/15
|
—
|
|
—
|
—
|
|
—
|
|
|
7,799
|
3,899
|
(2)
|
35.27
|
01/06/16
|
—
|
|
—
|
—
|
|
—
|
|
|
18,150
|
36,298
|
(3)
|
39.37
|
01/08/17
|
—
|
|
—
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
Divita,
III
|
777
|
—
|
|
6.80
|
12/12/12
|
1,147
|
(6)
|
50,216
|
6,158
|
(5)
|
269,597
|
(5)
|
|
9,900
|
—
|
|
23.05
|
12/12/13
|
3,104
|
(8)
|
135,893
|
—
|
|
—
|
|
|
3,750
|
—
|
|
30.38
|
01/20/15
|
2,052
|
(7)
|
89,837
|
—
|
|
—
|
|
|
3,899
|
1,950
|
(2)
|
35.27
|
01/06/16
|
—
|
|
—
|
—
|
|
—
|
|
|
2,926
|
5,851
|
(3)
|
39.37
|
01/08/17
|
—
|
|
—
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
E. White,
Jr.
|
7,056
|
—
|
|
23.05
|
12/12/13
|
1,147
|
(6)
|
50,216
|
6,158
|
(5)
|
269,597
|
(5)
|
|
7,500
|
—
|
|
30.38
|
01/20/15
|
3,104
|
(8)
|
135,893
|
—
|
|
—
|
|
|
3,899
|
1,950
|
(2)
|
35.27
|
01/06/16
|
2,052
|
(7)
|
89,837
|
—
|
|
—
|
|
|
2,926
|
5,851
|
(3)
|
39.37
|
01/08/17
|
—
|
|
—
|
—
|
|
—
|
|
|
|
|
|
(1)
|
Market
value is based on the closing price of FPIC common stock on December 31,
2008 ($43.78), as reported by NASDAQ.
|
|
(2)
|
This
option will become fully exercisable on January 6,
2009.
|
|
(3)
|
This
option will become exercisable in equal amounts on January 8 of each of
2009 and 2010.
|
|
(4)
|
Restricted
stock that vests in equal amounts on January 26 of each of 2010 and
2012.
|
|
(5)
|
The
period of performance unit awards is January 1, 2008 to December 31,
2009. Number of unearned shares is based on achievement of 100
percent of the performance target. Market value is based on the
closing price of FPIC common stock as of December 31, 2008 ($43.78), as
reported by NASDAQ.
|
|
(6)
|
Restricted
stock that vests on January 6, 2009.
|
|
(7)
|
Restricted
stock that vests in equal amounts on January 4 of each of 2009, 2010 and
2011.
|
|
(8)
|
Restricted
stock that vests in equal amounts on January 8 of each of 2009 and
2010.
|
Option
Exercises and Stock Vested
The
following table contains information regarding exercises of stock options and
vesting of awards of restricted stock under our equity incentive and other plans
during 2008 by our executive officers.
Option Exercises and Stock
Vested
|
|
During the Year Ended December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
|
Acquired
|
|
Realized
|
|
Acquired
|
|
Realized
|
|
|
on Exercise
|
|
on Exercise
|
|
on Vesting
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
($)
|
|
|
(#)
|
|
($)
|
|
John R.
Byers
|
|
31,136
|
|
|
1,472,732.80
|
|
|
2,293
|
|
|
102,313.66
|
|
|
|
53,165
|
|
|
2,514,704.50
|
|
|
1,667
|
|
|
66,063.21
|
|
|
|
18,219
|
|
|
872,872.29
|
|
|
9,662
|
|
|
411,697.82
|
|
|
|
18,864
|
|
|
903,774.24
|
|
|
—
|
|
|
—
|
|
|
|
3,312
|
|
|
158,479.20
|
|
|
—
|
|
|
—
|
|
|
|
6,835
|
|
|
327,054.75
|
|
|
—
|
|
|
—
|
|
|
|
6,425
|
|
|
307,436.25
|
|
|
—
|
|
|
—
|
|
|
|
15,872
|
|
|
759,475.20
|
|
|
—
|
|
|
—
|
|
|
|
7,663
|
|
|
352,957.78
|
|
|
—
|
|
|
—
|
|
|
|
13,334
|
|
|
585,895.96
|
|
|
—
|
|
|
—
|
|
|
|
20,806
|
|
|
914,215.64
|
|
|
—
|
|
|
—
|
|
|
|
100
|
|
|
5,073.00
|
|
|
—
|
|
|
—
|
|
|
|
1,859
|
|
|
96,872.49
|
|
|
—
|
|
|
—
|
|
|
|
100
|
|
|
4,504.00
|
|
|
—
|
|
|
—
|
|
|
|
1,141
|
|
|
50,204.00
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Divita,
III
|
|
2,500
|
|
|
119,675.00
|
|
|
1,146
|
|
|
51,134.52
|
|
|
|
9,223
|
|
|
441,505.01
|
|
|
1,553
|
|
|
62,244.24
|
|
|
|
100
|
|
|
4,787.00
|
|
|
417
|
|
|
16,525.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert E. White,
Jr.
|
|
3,726
|
|
|
192,820.50
|
|
|
1,146
|
|
|
51,134.52
|
|
|
|
4,356
|
|
|
225,423.00
|
|
|
1,553
|
|
|
62,244.24
|
|
|
|
5,362
|
|
|
277,483.50
|
|
|
833
|
|
|
33,011.79
|
|
|
|
10,000
|
|
|
489,300.00
|
|
|
—
|
|
|
—
|
|
|
|
16,274
|
|
|
796,286.82
|
|
|
—
|
|
|
—
|
|
|
|
9,638
|
|
|
471,587.34
|
|
|
—
|
|
|
—
|
|
|
|
8,588
|
|
|
481,615.04
|
|
|
—
|
|
|
—
|
|
Pension
Benefits
The
following table contains information regarding our plans that provide for
payments or other benefits at, following, or in connection with retirement of
our executive officers.
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Payments
|
|
|
|
|
|
Years
Credited
|
|
|
Accumulated
|
|
|
During Last
|
|
Name
|
|
Plan Name
|
|
Service
|
|
|
Benefit
(1)
|
|
|
Fiscal Year
(2)
|
|
|
|
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
John R.
Byers
|
|
Defined Benefit
Plan
|
|
|
9.75
|
|
|
162,583
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Divita,
III
|
|
Defined Benefit
Plan
|
|
|
8.75
|
|
|
66,846
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert E. White,
Jr.
|
|
Defined Benefit
Plan
|
|
|
8.75
|
|
|
240,035
|
|
|
—
|
|
|
|
|
|
(1)
|
For
the assumptions used in calculating the present value of accumulated
benefits, see
Note 14,
Employee Benefits Plans
, to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31,
2008.
|
|
(2)
|
Does
not include contributions effective December 31, 2008 made to the
executives’ accounts in our Nonqualified Deferred Compensation Plan
pursuant to Deferred Compensation
Agreements.
|
Our
Defined Benefit Plan provides for payments to participants of benefits
following, or in connection with, retirement. We also maintain our
Nonqualified Deferred Compensation Plan, which is discussed below under the
heading
Nonqualified Deferred
Compensation
. In 2008 and prior years, we also maintained our
Excess Benefit Plan and SERP. Effective December 31, 2008, we
terminated these plans as to all active employees and entered into Deferred
Compensation Agreements with Messrs. Byers, Divita and White. These
Deferred Compensation Agreements replace the benefits previously provided to
these employees by our Excess Benefit Plan and SERP. For more
information, see
Compensation
Discussion and Analysis
above.
Defined Benefit Plan
.
Our
Defined Benefit Plan is a funded, tax-qualified, noncontributory plan that
covers the majority of our employees, including executive
officers. Under the Defined Benefit Plan, eligible employees,
including employees who are executive officers, are entitled to receive a
pension benefit based upon their years of service and their Average
Compensation. The term “Average Compensation” is generally defined to
be the average of the employee’s earnings, including base salary, annual
incentive awards and other cash amounts, for the highest five consecutive
calendar years during an employee’s last ten years of employment, subject to
applicable limitations provided by law. For 2008, the applicable
limitation on compensation was $230,000. The normal annual retirement
benefit provided under the Defined Benefit Plan (if a participant retires at or
after the later of achieving age 65 or five years after the participant
commenced participation in the plan) is generally .075 percent of each
employee’s Average Compensation not in excess of the applicable covered amount,
plus 1.4 percent of each employee’s Average Compensation in excess of the
applicable covered compensation, for each year of service, up to
15. In lieu of his normal annual retirement benefit, a participant
who has attained age 60 and has completed at least 10 years of eligible service
may generally elect to receive a monthly benefit equal to his accrued benefit as
of the retirement date, reduced by 6-2/3% for each year or portion thereof that
the participant’s early retirement date precedes his normal retirement
date. Furthermore, if a married plan participant dies during his
period of employment and is otherwise vested in benefits under the
plan,
his or her spouse will generally be entitled to receive the participant's
benefit under the plan. The covered compensation is derived from the 1988
social security tables and depends upon each individual’s year of
birth. For 2008, the maximum benefit was
$185,000. Eligible employees become vested in their pension benefits
as they complete years of service in the employ of the Company or its
subsidiaries, and are fully vested after five years of service with the Company
and its subsidiaries. Unless the participant elects an alternative
form of payment pursuant to the terms of the plan, benefits payable under the
plan are paid, for single participants, in the form of a monthly straight-life
annuity that terminates upon the death of the participant and, for married
participants, in the form of a 50% joint and survivor annuity that terminates
upon the death of the participant and his or her spouse. Each of our
executive officers participates in the Defined Benefit Plan.
Excess Benefit Plan.
Our Excess Benefit Plan,
which was terminated as to active employees as of December 31, 2008, was an
unfunded, nonqualified plan that provided benefits similar to our Defined
Benefit Plan, but without the Code’s earnings limitations. This plan
was designed to provide retirement benefits to participants in our Defined
Benefit Plan (other than those who participate in the SERP) as a replacement for
those retirement benefits reduced by regulations under the
Code. Together, the Defined Benefit Plan and Excess Benefit Plan were
intended to provide the executive officers with retirement benefits equivalent
to those provided to participants in the Defined Benefit Plan whose benefits are
not limited. Messrs. Divita and White, but not Mr. Byers, were
participants in the Excess Benefit Plan.
SERP.
Our SERP,
which was terminated as to active employees as of December 31, 2008, was an
unfunded, nonqualified plan. The SERP provided participants selected
by the Compensation Committee with income at retirement. Mr. Byers
was the only active employee who had been selected to participate. A
participant in the SERP was 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 equaled 60% of pre-retirement
compensation (averaged over the highest three consecutive years of service),
less Defined Benefit Plan and all predecessor plans’ benefits and Social
Security benefits, multiplied by the percentage of benefits
vested. Vesting occurred over 20 years. Compensation for
purposes of the SERP included the salary of a participant but did not include
annual incentive awards.
Nonqualified
Deferred Compensation
The following table contains
information regarding participation by our executive officers in our
Nonqualified Deferred Compensation Plan during 2008.
Nonqualified Deferred
Compensation
|
|
During the Year Ended December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
in Last
|
|
|
in Last
|
|
|
in Last
|
|
|
Withdrawals/
|
|
|
Last
|
|
Name
|
|
Fiscal Year
|
|
|
Fiscal Year
(1)
|
|
|
Fiscal Year
|
|
|
Distributions
|
|
|
Fiscal Year
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
John R.
Byers
|
|
|
—
|
|
|
|
1,276,433
|
|
|
|
(24,672
|
)
|
|
|
—
|
|
|
|
1,311,947
|
|
Charles Divita,
III
|
|
|
37,883
|
|
|
|
137,947
|
|
|
|
(7,125
|
)
|
|
|
—
|
|
|
|
183,953
|
|
Robert E. White,
Jr.
|
|
|
—
|
|
|
|
535,430
|
|
|
|
—
|
|
|
|
—
|
|
|
|
535,430
|
|
|
|
|
|
(1)
|
Includes
the initial contributions under the Deferred Compensation Agreements
discussed below.
|
Our Nonqualified Deferred Compensation
Plan is offered to key employees selected by the Board of
Directors. During 2008, each member of our Board of Directors and
Messrs. Divita and White and certain other members of our management team were
selected to participate in this plan. Under this plan, prior to the
commencement of a calendar year, each participant may make an irrevocable
election to defer all or a portion of his or her cash compensation for the
subsequent year or years. In addition, we, at the discretion of the
Board of Directors, may match amounts deferred by participants and may also make
discretionary incentive awards to participants.
Effective
December 31, 2008, we terminated our Excess Benefit Plan and SERP as to all
active employees and entered into Deferred Compensation Agreements with Messrs.
Byers, Divita and White. The Deferred Compensation Agreements replace
the benefits previously provided to these employees by our Excess Benefit Plan
and SERP with the benefits described below. Among other things, the
Deferred Compensation Agreements require initial and annual contributions to the
accounts of Messrs. Byers, Divita and White under our Deferred Compensation
Plan. The table below shows the initial amounts contributed in
January 2009 to the accounts of these executives under our Deferred Compensation
Plan pursuant to the Deferred Compensation Agreements:
John
R. Byers
|
$1,276,433
|
Charles
Divita, III
|
$ 137,947
|
Robert
E. White, Jr.
|
$ 535,430
|
For
a more information concerning the terms of the Deferred Compensation Agreements,
see
Compensation Discussion
and Analysis
above.
Amounts
deferred by or awarded to a participant may be invested in investment
alternatives similar to those available under our 401(k)
Plan. Participants’ account balances generally will be paid, as
adjusted for investment gains or losses, following termination of employment or
Board membership, as the case may be, or at such other times as participants may
elect in accordance with the terms of this plan. During 2008, we did
not make any matching or discretionary contributions to this plan.
Potential
Payments Upon Termination or Change in Control
Employment Agreements
.
We have entered into
employment agreements with our executive officers that provide that if these
agreements are not extended by the end of any year, the affected executive
officer may terminate his employment by providing at least 90 days’ written
notice of such termination. Upon such termination, or upon
termination of employment by us without cause, the executive officer would
continue to receive his annual salary and benefits for the remaining term of the
employment agreement or until the executive directly or indirectly engages in or
acts as an employee or consultant for any trade or occupation that is in
competition with us. The executive officers may also terminate their
employment in the event of a constructive discharge and continue to receive
annual salary and benefits for the remaining term of the employment
agreement. In the case of Mr. Byers, in the event that payments or
benefits under the agreement are subject to the excise tax imposed by Section
4999 of the Code or any interest, penalty or addition to tax with respect to
such excise tax, the agreement provides for cash gross up payments intended to
put him in the same position as though no excise tax, penalty or interest had
been imposed upon or incurred as a result of any payment or
benefits.
Change in Control Severance
Agreements
.
We have also entered
into change in control severance agreements with certain members of our
management, including our executive officers, which provide that during the
three-year coverage period (as defined) after a change of control of the Company
if the employment of an executive officer is terminated by us for any reason
other than cause, death or disability, or by that executive officer for good
reason, we will pay severance in a lump sum cash amount equal to three times, in
the case of Mr. Byers, or two times, in the case of Messrs. Divita or White, the
sum of the affected executive officer’s (i) annual salary and (ii) the greater
of the target incentive award opportunity for the current calendar year or the
average of the annual incentive awards for the three prior calendar
years. In addition, the affected executive officer’s stock options,
restricted stock and other long-term incentives would immediately vest, and the
executive officer would receive benefits for a two-year period. In
the case of Mr. Byers, in the event that payments or benefits under the
severance agreement are subject to the excise tax imposed by Section 4999 of the
Code or any interest, penalty or addition to tax with respect to such excise
tax, the severance agreement provides for cash gross up payments intended to put
him in the same position as though no excise tax, penalty or interest had been
imposed upon or incurred as a result of any payment or benefits.
Involuntary Termination of
Employment
.
The tables below summarize
the executive benefits and payments due to each of our executive officers upon
termination by us of his employment for any reason other than cause, disability,
or death, or if the executive officer terminates his employment for good reason
(i) either before a change in control or after the expiration of the three-year
coverage period after a change in control, and (ii) within the three-year
coverage period after a change in control. The tables do not include
benefits under our retirement plans (see the
Pension Benefits
and
Nonqualified Deferred Compensation
tables above and the related discussion) and assume that termination
occurred on December 31, 2008.
Mr.
Byers:
|
Executive
Benefits and
Payments
upon Termination
|
|
Not
in connection with
change
in control
|
|
In
connection with
a
change of control
|
|
|
Base
salary
(1)
|
|
$
|
1,504,000
|
(2)
|
$
|
2,256,000
|
(3)
|
|
Continuation
of benefits
|
|
$
|
531,163
|
(4)
|
$
|
531,163
|
(5)
|
|
Value
of stock options, performance units and restricted stock
|
|
$
|
—
|
|
$
|
1,858,558
|
(6)
|
|
Cash
award under Annual Incentive Plan
|
|
$
|
—
|
(7)
|
$
|
2,256,000
|
(8)
|
|
Tax
gross-up
|
|
$
|
—
|
|
$
|
2,100,476
|
(9)
|
|
Total
|
|
$
|
2,035,163
|
|
$
|
9,002,197
|
|
|
|
|
|
(1)
|
Assumes
annual salary effective January 1, 2009.
|
|
(2)
|
Under
Mr. Byers’ employment agreement, Mr. Byers would receive continuation of
annual salary for the remaining term of his employment. This
would be for two years, assuming the employment agreement was not renewed
and Mr. Byers’ employment was terminated on December 31,
2008.
|
|
(3)
|
Under
Mr. Byers’ change in control severance agreement, Mr. Byers would receive
a lump sum payment equal to three times his base salary then in
effect.
|
|
(4)
|
As
provided under Mr. Byers’ employment agreement, Mr. Byers would receive
continuation of, or payment of cost of, benefits for the remaining
two-year term of employment, assuming the employment agreement was not
renewed and Mr. Byers’ employment was terminated on December 31,
2008. These benefits (“benefits”) include life, health and
disability insurance; benefits under our Defined Benefit Plan and Deferred
Compensation Agreement; employer contributions to our 401(k) Plan; and
perquisites.
|
|
(5)
|
Under
Mr. Byers’ change in control severance agreement, he would receive
continuation of, or payment of the cost of, “benefits” for 24
months.
|
|
(6)
|
As
provided in our Omnibus Incentive Plan, in the case of stock options, this
sum includes “in-the-money” amount (based on the closing price of FPIC
common stock) of all previously unexercisable options at December 31,
2008. In the case of restricted stock, this sum includes the
number of previously unvested shares multiplied by the closing price of
FPIC common stock on December 31, 2008. In the case of
performance units, this sum includes the number of shares to be paid out
assuming achievement of target performance multiplied by the closing price
of FPIC common stock on December 31, 2008.
|
|
(7)
|
Payment
of any annual incentive award would be at the discretion of the
Compensation Committee.
|
|
(8)
|
As
provided under Mr. Byers’ change in control severance agreement, Mr. Byers
would receive a lump sum payment of three times the greater of his target
award for the current year or the average annual award for the three prior
years. The amount shown is three times Mr. Byers’ 2009 target
award.
|
|
(9)
|
Upon
a change in control of the Company, Mr. Byers may be subject to certain
excise taxes pursuant to Section 4999 of the Code. We have
agreed to reimburse Mr. Byers for all excise taxes that are imposed on him
under Section 4999 and any income and excise taxes that are payable by him
as a result of any reimbursements for Section 4999 excise taxes. The
calculation of the Section 4999 gross-up amount in the above tables is
based upon a Section 4999 excise tax rate of 20%, a 35% federal income tax
rate, and a 1.45% Medicare tax
rate.
|
Mr
.
Divita
:
|
Executive
Benefits and
Payments
upon Termination
|
|
Not
in connection with
change
in control
|
|
In
connection with
a
change of control
|
|
|
Base
salary
(1)
|
|
$
|
379,600
|
(2)
|
$
|
759,200
|
(3)
|
|
Continuation
of benefits
|
|
$
|
106,942
|
(4)
|
$
|
216,871
|
(5)
|
|
Value
of stock options, performance units and restricted stock
|
|
$
|
—
|
|
$
|
587,940
|
(6)
|
|
Cash
award under Annual Incentive Plan
|
|
$
|
—
|
(7)
|
$
|
379,600
|
(8)
|
|
Total
|
|
$
|
486,542
|
|
$
|
1,943,611
|
|
|
|
|
|
(1)
|
Assumes
annual salary effective January 1, 2009.
|
|
(2)
|
Under
Mr. Divita’s employment agreement, Mr. Divita would receive continuation
of annual salary for the remaining term of his employment. This
would be for one year, assuming the employment agreement was not renewed
and Mr. Divita’s employment was terminated on December 31,
2008.
|
|
(3)
|
Under
Mr. Divita’s change in control severance agreement, Mr. Divita would
receive a lump sum payment equal to two times his base salary then in
effect.
|
|
(4)
|
As
provided under Mr. Divita’s employment agreement, Mr. Divita would receive
continuation of, or payment of the cost of, benefits for the remaining one
year term of employment, assuming the employment agreement was not renewed
and Mr. Divita’s employment was terminated on December 31,
2008.
|
|
(5)
|
Under
Mr. Divita’s change in control severance agreement, he would receive
continuation of, or payment of the cost of, “benefits” for 24
months.
|
|
(6)
|
As
provided in our Omnibus Incentive Plan, in the case of stock options, this
sum includes “in-the-money” amount (based on the closing price of FPIC
common stock) of all previously unexercisable options at December 31,
2008. In the case of restricted stock, this sum includes the
number of previously unvested shares multiplied by the closing price of
FPIC common stock on December 31, 2008. In the case of
performance units, includes the number of shares to be paid out assuming
achievement of target performance multiplied by the closing price of FPIC
common stock on December 31, 2008.
|
|
(7)
|
Payment
of any annual incentive award would be at the discretion of the
Compensation Committee.
|
|
(8)
|
As
provided under Mr. Divita’s change in control severance agreement, Mr.
Divita would receive a lump sum payment of two times the greater of his
target award for the current year or the average annual award for the
three prior years. The amount shown is two times Mr. Divita’s 2009 target
award.
|
Mr.
White:
|
Executive
Benefits and
Payments
upon Termination
|
|
Not
in connection with change in control
|
|
In
connection with
a
change of control
|
|
|
Base
salary
(1)
|
|
$
|
454,272
|
(2)
|
$
|
908,544
|
(3)
|
|
Continuation
of benefits
|
|
$
|
205,470
|
(4)
|
$
|
419,676
|
(5)
|
|
Value
of stock options, performance units and restricted stock
|
|
$
|
—
|
|
$
|
587,940
|
(6)
|
|
Cash
award under Annual Incentive Plan
|
|
$
|
—
|
(7)
|
$
|
454,272
|
(8)
|
|
Total
|
|
$
|
659,742
|
|
$
|
2,370,432
|
|
|
|
|
|
(1)
|
Assumes
annual salary effective January 1, 2009.
|
|
(2)
|
Under
Mr. White’s employment agreement, Mr. White would receive continuation of
annual salary for the remaining term of his employment. This
would be for one year, assuming the employment agreement was not renewed
and Mr. White’s employment was terminated on December 31,
2008.
|
|
(3)
|
Under
Mr. White’s change in control severance agreement, Mr. White would receive
a lump sum payment equal to two times his base salary then in
effect.
|
|
(4)
|
As
provided under Mr. White’s employment agreement, Mr. White would receive
continuation of, or payment of the cost of, benefits for the remaining one
year term of employment, assuming the employment agreement was not renewed
and Mr. White’s employment was terminated on December 31,
2008.
|
|
(5)
|
Under
Mr. White’s change in control severance agreement, he would receive
continuation of, or payment of the cost of, “benefits” for 24
months.
|
|
(6)
|
As
provided in our Omnibus Incentive Plan, in the case of stock options, this
sum includes “in-the-money” amount (based on the closing price of FPIC
common stock) of all previously unexercisable options at December 31,
2008. In the case of restricted stock, this sum includes the
number of previously unvested shares multiplied by the closing price of
FPIC common stock on December 31, 2008. In the case of
performance units, includes number of shares to be paid out assuming
achievement of target performance multiplied by the closing price of FPIC
common stock on December 31, 2008.
|
|
(7)
|
Payment
of any annual incentive award would be at the discretion of the
Compensation Committee.
|
|
(8)
|
As
provided under Mr. White’s change in control severance agreement, Mr.
White would receive a lump sum payment of two times the greater of his
target award for the current year or the average annual award for the
three prior years. The amount shown is two times Mr. White’s 2009 target
award.
|
Death or Disability
.
In the event of Mr.
Byers’ death, Mr. Byers’ surviving spouse would be eligible to receive a death
benefit under our Defined Benefit Plan. Mr. Byers’ beneficiary would
also receive the $3,400,000 proceeds of executive life insurance policies paid
for by us. In addition, the shares of restricted stock held by Mr.
Byers (25,722 shares with an aggregate market value of $1,126,109 at December
31, 2008) would vest upon his death. In addition, performance units
held by Mr. Byers (12,316 performance units with a target payout of 12,316
shares with a market value of $539,194 at December 31, 2008) would vest upon his
death.
In the event of Mr. Byers’ disability,
Mr. Byers would receive $236,400 per year under a disability insurance policy
paid for by us. In addition, the shares of restricted stock held by
Mr. Byers (25,722 shares with an aggregate market value of $1,126,109 at
December 31, 2008) would vest upon his disability. In addition,
performance units held by Mr. Byers (12,316 performance units with a target
payout of 12,316 shares with a market value of $539,194 at December 31, 2008)
would vest upon his disability.
In the event of the death of either
Messrs. Divita or White, their surviving spouses would be eligible to receive a
death benefit under our Defined Benefit Plan. Their beneficiaries
would also receive the proceeds ($600,000 in the case of Mr. Divita and
$1,450,000 in the case of Mr. White) of executive life insurance policies paid
for by us. In addition, the shares of restricted stock held by
Messrs. Divita and White (6,303 shares each with an aggregate market value of
$275,945 at December 31, 2008) would vest upon their death. In
addition, performance units held by each of Messrs. Divita and White (6,158
performance units with a target payout of 6,158 shares with a market value of
$269,597 at December 31, 2008) would vest upon their death.
In the event of disability of either
Messrs. Divita or White, they would receive benefits ($240,000 per year in the
case of Mr. Divita and $186,696 in the case of Mr. White) under disability
insurance policies paid for by us. In addition, the shares of
restricted stock held by Messrs. Divita and White (6,303 shares each with an
aggregate market value of $275,945 at December 31, 2008) would vest upon their
disability. In addition, performance units held by each of Messrs.
Divita and White (6,158 performance units with a target payout of 6,158 shares
with a market value of $269,597 at December 31, 2008) would vest upon their
disability.
Payment of any amount under our Senior
Executive Annual Incentive Plan in the event of their death or disability would
be in the discretion of the Compensation Committee.
Other Change in Control
Benefits
.
Outstanding awards of
restricted stock, performance units or stock options made under our Omnibus
Incentive Plan vest immediately upon a change in control, regardless of whether
an executive’s employment is terminated. At December 31, 2008, the
value of shares of unvested restricted stock, performance units (valued assuming
a 100 percent payout percentage) and unexercisable stock options
was: $1,858,558 for Mr. Byers; $587,940 for Mr. Divita; and $587,940
for Mr. White.
Equity
Compensation Plan Information
Under our equity compensation plans, we
may grant incentive stock options, nonqualified stock options and restricted
stock to individuals. The number of securities remaining available
for future issuance under equity compensation plans includes stock option and
restricted stock grants. Information concerning our securities
authorized for issuance under equity compensation plans as of December 31, 2008
is provided below.
|
|
|
Number of
Securities
|
|
|
Weighted-
|
Remaining Available
for
|
|
Number of
Securities
|
Average
|
Future Issuance
Under
|
|
to be Issued
Upon
|
Exercise
Price
|
Equity
Compensation
|
|
Exercise of
|
of
Outstanding
|
Plans
(Excluding
|
|
Outstanding
Options,
|
Options,
|
Securities Reflected
in
|
Plan
Category
|
Warrants and
Rights
|
Warrants and Rights
(1)
|
Column
(a))
|
|
(a)
|
(b)
|
(c)
|
Equity compensation plans approved
by shareholders
|
526,562
|
$21.80
|
922,093
|
Equity compensation plans not
approved by security holders
|
—
|
—
|
—
|
Total
|
526,562
|
$21.80
|
922,093
|
|
|
|
|
(1)
|
Under
our equity compensation plans, we have granted shares in the form of
restricted stock awards, including performance-based awards. As of
December 31, 2008, there were 106,251 issued and outstanding shares of
such awards under these plans. Because there is no exercise price
associated with restricted share awards, which are granted to employees
and directors at no cost, such shares are not included in the weighted
average exercise price
calculation.
|
Compensation
Committee Interlocks and Insider Participation
During
2008, none of our executive officers 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 our Compensation Committee or otherwise as a member
of the Board of Directors.
Beneficial
Ownership of FPIC Common Stock
Principal
Shareholders
The
following table sets forth certain information with respect to the only persons
known to us that beneficially owned more than five percent of the outstanding
shares of FPIC common stock as of March 13, 2009.
|
Shares
|
|
|
|
Beneficially
|
|
Percentage
|
Name of Beneficial
Owner
|
Owned
|
|
of
Ownership
|
Dimensional Fund Advisors, LP
(1)
|
838,551
|
|
10.41%
|
Palisades West, Building
One
|
|
|
|
6300 Bee Cave
Road
|
|
|
|
Austin, Texas
78746
|
|
|
|
|
|
|
|
Davis Selected Advisers,
L.P.
(2)
|
423,894
|
|
5.26%
|
2949 East Elvira Road, Suite
101
|
|
|
|
Tuscon, Arizona
85756
|
|
|
|
|
|
|
|
Barclays Global Investors,
N.A.
(3)
|
461,146
|
|
5.72%
|
400 Howard
Street
|
|
|
|
San Francisco, California
94105
|
|
|
|
|
|
|
|
(1)
|
As
reported on a Statement on Schedule 13G filed with the SEC on February 9,
2009, Dimensional Fund Advisors LP (formerly, Dimensional Fund Advisors,
Inc.) (“Dimensional”) is an investment advisor registered under Section
203 of the Investment Advisors Act of 1940. In its role as
investment advisor or manager, Dimensional possesses shared power to vote
or to direct the vote of 827,798 shares and shared power to dispose or to
direct the disposition of 838,551 shares. All shares reported
are owned by advisory clients of Dimensional, no one of which, to the
knowledge of Dimensional, owns more than five percent of the
class. Dimensional disclaims beneficial ownership of such
shares.
|
|
(2)
|
As
reported on a Statement on Schedule 13G filed with the SEC on February 13,
2009.
|
|
(3)
|
As
reported on a Statement on Schedule 13G filed with the SEC on February 5,
2009, Barclays Global Investors, N.A. and Barclays Global Fund Advisors
(collectively “Barclays”), is a bank and an investment advisor,
respectively. In its role as bank and investment advisor,
Barclays possesses in the aggregate sole power to vote or to direct the
vote of 426,872 shares and sole power to dispose or direct the disposition
of 461,146 shares.
|
Beneficial
Ownership by Directors and Executive Officers
The following table sets forth as of
March 13, 2009, the beneficial ownership of FPIC common stock by each of our
directors, by each of our executive officers serving as such on December 31,
2008, and all of our directors and executive officers as a group.
|
Shares
|
|
|
|
Beneficially
|
|
Percentage
|
Name of Beneficial
Owner
|
Owned
(1)
|
|
of
Ownership
(2)
|
John K. Anderson, Jr.
(3)
|
34,800
|
|
*
|
Richard J. Bagby, M.D.
(3),
(4)
|
24,600
|
|
*
|
Robert O. Baratta, M.D.
(3),
(5)
|
55,625
|
|
*
|
John R. Byers
(6)
|
325,598
|
|
4.2%
|
M. C. Harden, III
(3)
|
39,800
|
|
*
|
Kenneth M. Kirschner
(3),
(7)
|
25,000
|
|
*
|
Terence P. McCoy, M.D.
(3),
(8)
|
40,713
|
|
*
|
John G. Rich
(3)
|
1,187
|
|
*
|
Joan D. Ruffier
(3)
|
30,990
|
|
*
|
David M. Shapiro, M.D.
(3)
|
29,500
|
|
*
|
Charles Divita, III
(9)
|
49,570
|
|
*
|
Robert E. White, Jr.
(10)
|
84,474
|
|
1.1%
|
All directors and executive
officers as of a group (12 persons)
(11)
|
741,857
|
|
9.7%
|
|
|
|
|
*
|
Less
than 1.0% of the total outstanding shares of FPIC common
stock.
|
|
(1)
|
Shares
beneficially owned include unvested restricted shares.
|
|
(2)
|
Based
on an aggregate of (i) the number of shares of FPIC common stock
outstanding at March 13, 2009 and (ii) options held by the person shown
that are exercisable as of March 13, 2009, or that are exercisable within
60 days of March 13, 2009.
|
|
(3)
|
Includes
shares that may be acquired upon exercise of vested nonqualified options,
as follows:
|
|
|
Mr.
Anderson
|
25,000
|
Dr.
McCoy
|
15,000
|
|
|
Dr.
Bagby
|
15,000
|
Mr.
Rich
|
—
|
|
|
Dr.
Baratta
|
—
|
Ms.
Ruffier
|
20,000
|
|
|
Mr.
Harden
|
25,000
|
Dr.
Shapiro
|
26,500
|
|
|
Mr.
Kirschner
|
20,000
|
|
|
|
(4)
|
Includes
5,175 shares held for Dr. Bagby’s grandson.
|
|
(5)
|
Includes
32,162 shares pledged to secure certain indebtedness.
|
|
(6)
|
Includes
(i) 231,166 shares that may be acquired upon the exercise of exercisable
options and (ii) 19,324 shares of unvested restricted stock, one-half of
which will vest on each of January 26, 2010 and 2012.
|
|
(7)
|
Includes
4,000 shares pledged in a brokerage margin account.
|
|
(8)
|
Excludes
9,200 shares held in trust for Dr. McCoy's son as to which Dr. McCoy
disclaims beneficial ownership.
|
|
(9)
|
Includes
26,127 shares that may be acquired upon exercise of exercisable
options. Includes 14,301 shares pledged in a brokerage margin
account.
|
|
(10)
|
Includes
26,256 shares that may be acquired upon exercise of exercisable
options.
|
|
(11)
|
Includes
an aggregate of 430,049 shares that may be acquired upon the exercise of
exercisable options. Excludes 9,200 shares held by or on behalf
of family members as to which beneficial ownership is
disclaimed. Includes an aggregate of 50,463 shares pledged to
secure indebtedness and in brokerage margin
accounts.
|
Section
16(a)
Beneficial
Ownership Reporting Compliance
Section
16(a) of the Exchange Act and related regulations require executive officers,
directors and persons who beneficially own more than 10% of the outstanding
shares of FPIC common stock:
|
—
|
to
file reports of their ownership and changes in ownership of common stock
with the SEC and NASDAQ; and
|
|
—
|
to
furnish us with copies of the
reports.
|
Based
solely on written representations from certain persons and on our review of the
reports filed, we believe that all filing requirements have been timely met
during 2008.
Certain
Relationships and Related Transactions
M.
C. Harden, III, a director of the Company, is also chairman of the board and
chief executive officer and a majority shareholder of Harden & Associates,
an insurance broker and risk management and employee benefits consultant located
in Jacksonville, Florida. Harden & Associates acts as an agent
for First Professionals and for Anesthesiologists Professional Assurance
Company. Harden & Associates earned approximately $413,620
of commission income
from us during 2008 as a result of this agency relationship. Harden
& Associates also acts as a broker for us in the procurement of various
business insurance coverages. Harden & Associates earned
approximately $61,390 during 2008 as a result of its brokerage relationship with
us.
We
paid a law firm located in Jacksonville, Florida, of which Kenneth M. Kirschner,
Chairman of our Board of Directors, is counsel, approximately $156,491 in
2008.
Policies
and Procedures Relating to Transactions with Related Persons
Transactions with related
persons are reviewed, approved or ratified in
accordance with the policies and procedures set forth in our Code of
Conduct
and
employee handbook, the procedures described below with
respect to director and officer
questionnaires, and the ot
her procedures described
below.
Our
C
ode of
Conduct and employee handbook
provide that conflicts of
interest are prohibited as a matter of Company policy, except
when reported to and
approved by our Board.
Any employee, officer or
d
irector
who becomes aware of a conflict
or
potential conflict
is required to
bring the matter to the attention of a
supervisor, manager or other appropriate personnel.
A conflict of interest exists when an
individual’s personal interest
, or that of a family member or other
related
party,
is adverse to or otherwise in conflict
with the interests of the Company.
Our
C
ode of
C
onduct
and employee handbook
set forth several examples of conflicts
of int
erest,
including:
|
—
|
engaging
in business in competition with the Company;
|
|
—
|
executive
officers’ serving on the boards of directors of other entities without
approval of our Board;
|
|
—
|
having
an interest in a company that transacts business with the
Company;
|
|
—
|
providing
or receiving special treatment to or from persons conducting business with
the Company; or
|
|
—
|
giving
or receiving gifts in excess of Company
guidelines.
|
Each year we require all our
d
irectors, nominees for director and
our executive
officers to complete and sign a
questionnaire in connection with the solicitation of proxies for use at our
annual
shareholders
meeting.
The purpose of the questionnaire is to
obtain information, including information regarding
transactions with related
persons
, for inclusion in
our pr
oxy statement or
annual report.
In addition, we annually review SEC
filings made by beneficial owners of more than five percent of any class of our
voting securities to determine whether information relating to transactions with
such persons needs to be included in our pr
oxy statement or annual
report.
Proposal
2
Ratification
of Appointment of
Independent
Registered Certified Public Accounting Firm
Our
Board of Directors has appointed PricewaterhouseCoopers LLP
(“PricewaterhouseCoopers”) to act as our independent registered certified public
accounting firm (“Independent Accounting Firm”) for 2009, subject to
satisfactory completion of fee negotiations later in
2009. PricewaterhouseCoopers was initially appointed and has served
as our Independent Accounting Firm since 2000. Representatives of
PricewaterhouseCoopers are expected to be present at the annual meeting and will
be available to respond to appropriate questions and will have the opportunity
to make a statement, if they desire.
The
Board of Directors recommends a vote
FOR
the ratification
of the
appointment
of PricewaterhouseCoopers LLP as the Company’s Independent
Registered
Certified Public Accounting Firm for 2009.
Principal Accountant Fees and
Ser
vices
Aggregate
fees for professional services rendered for us by PricewaterhouseCoopers for the
years ended December 31, 2008 and 2007, were:
|
|
2008
|
|
2008
Percentage of Total
Fees
|
|
|
2007
|
|
|
2007
Percentage of Total
Fees
|
|
Audit Fees
|
|
$
|
1,055,387
|
|
|
89
|
%
|
|
$
|
1,056,400
|
|
|
|
88
|
%
|
Audit-Related
Fees
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Tax Fees
|
|
|
121,360
|
|
|
10
|
%
|
|
|
137,100
|
|
|
|
11
|
%
|
All Other
Fees
|
|
|
7,500
|
|
|
1
|
%
|
|
|
10,175
|
|
|
|
1
|
%
|
Total Fees
|
|
$
|
1,184,247
|
|
|
100
|
%
|
|
$
|
1,203,675
|
|
|
|
100
|
%
|
Audit Fees
for the years ended
December 31, 2008 and 2007, respectively, were for professional services
rendered for the audits of our consolidated financial statements and subsidiary
audits, including internal control reviews, statutory audits, consents and
assistance with review of periodic reports and other documents filed with the
SEC, including registration statements. PricewaterhouseCoopers has
represented to us that no professional services of PricewaterhouseCoopers
relating to the audit of our financial statements for the most recent year were
performed by other than full-time, permanent employees of
PricewaterhouseCoopers.
Audit-Related Fees
for the
years ended December 31, 2008 and 2007, respectively, were for services related
to accounting consultations concerning financial accounting and reporting
standards.
Tax Fees
for the years ended
December 31, 2008 and 2007, respectively, were for services related to tax
compliance, including the preparation of tax returns, tax planning services and
tax advice services and assistance with Internal Revenue Service audits during
2008 and 2007.
All Other Fees
for the years
ended December 31, 2008 and 2007, respectively, were for software license fees
for a technical accounting research tool.
The
Audit Committee has considered the nonaudit services provided by
PricewaterhouseCoopers during 2008 and believes such services to be compatible
with maintaining PricewaterhouseCoopers’ independence.
All
decisions regarding selection of independent accounting firms and approval of
accounting services and fees are made by the Audit Committee in accordance with
the provisions of the Sarbanes-Oxley Act of 2002, the Exchange Act, and the
rules thereunder.
All
services to be performed for us by our Independent Accounting Firm must be
pre-approved by the Audit Committee or a designated member of the Audit
Committee pursuant to the committee’s pre-approval policy to ensure that the
provision of such services does not impair the independence of our Independent
Accounting Firm.
The
Audit Committee has adopted procedures for general and specific pre-approval of
audit and nonaudit services performed by our Independent Accounting
Firm. Any proposed service exceeding pre-approval levels, or not
contemplated by the pre-approval policy, requires specific pre-approval by the
Audit Committee.
Audit
services pre-approved for 2008 include financial and statutory audits, internal
control reviews, services associated with SEC filings and consultations
regarding the impact of final or proposed rules, standards and interpretations
by the SEC or other regulatory or standard setting bodies.
Audit
related services pre-approved for 2008 include due diligence services,
agreed-upon or expanded procedures, attestation services and consultations as to
accounting or disclosure treatment of transactions not otherwise included in
audit services.
Tax
services pre-approved for 2008 primarily include services related to federal and
state tax compliance and tax planning.
Prohibited
services identified by the Audit Committee include services relating to
preparation of accounting records or financial statements, information systems
design and implementation, appraisal or valuation, internal audit, management,
human resources, investment matters, legal issues and actuarial
calculations.
Report
of the Audit Committee
The
following Report of the Audit Committee does not constitute soliciting material
and shall not be deemed to be incorporated by reference into any other previous
or future filings by us under the Securities Act of 1933, as amended, or the
Exchange Act, except to the extent that we specifically incorporate this report
by reference therein.
The
Audit Committee of the Board of Directors of the Company is composed of four
directors, each of whom has been determined to be independent as defined in the
listing standards of NASDAQ. The Audit Committee has adopted, and
annually reviews, a charter outlining the practices it follows. The
charter complies with all current regulatory requirements. A copy of
the charter is available on the Corporate Governance page of our website at
www.fpic.com
.
The Audit Committee oversees the
Company’s accounting, financial reporting and related internal control processes
and the audits of the Company’s financial statements. The Audit
Committee also provides assistance to the Board of Directors with respect to its
oversight of the integrity of the Company’s financial statements and oversees
the Company’s compliance with legal and regulatory requirements, the
qualifications and independence of the Company’s Independent Accounting Firm,
and the performance of the Company’s internal audit function.
The effectiveness of the Audit
Committee is evaluated by the Board of Directors as required by the
Sarbanes-Oxley Act of 2002 and NASDAQ. The Board of Directors, after
review and consideration, acknowledged the effectiveness of the Audit Committee
during 2008.
As
set forth in the Audit Committee’s charter, management is responsible for the
preparation, presentation and integrity of the Company’s financial
statements. Management is also responsible for maintaining
appropriate accounting and financial reporting principles and policies and
internal controls and procedures designed to ensure compliance with accounting
standards and applicable laws and regulations.
The
Company’s Independent Accounting Firm is responsible for planning and carrying
out proper annual audits and quarterly reviews of the Company’s financial
statements. The Company’s Independent Accounting Firm expresses
opinions as to (i) the conformity of the annual financial statements with GAAP;
and (ii) the effectiveness of the Company’s internal control over financial
reporting.
Members
of the Audit Committee are not employees of the Company and, as such, it is not
the duty or responsibility of the Audit Committee or its members to conduct
auditing or accounting reviews or procedures. In performing their
oversight responsibility, members of the Audit Committee rely on information,
opinions, reports and statements, including financial statements and other
financial data, prepared or presented by officers or employees of the Company,
legal counsel, the Company’s Independent Accounting Firm or other persons with
professional or expert competence. Accordingly, the Audit Committee’s
oversight does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles, policies
or appropriate internal controls and procedures designed to ensure compliance
with accounting standards and applicable laws and regulations.
Furthermore,
the Audit Committee’s considerations and discussions referred to above do not
ensure that the audit of the Company’s financial statements by the Company’s
Independent Accounting Firm has been carried out in accordance with standards of
the Public Company Accounting Oversight Board (United States), that the
financial statements are presented in accordance with GAAP or that the Company’s
Independent Accounting Firm is in fact “independent.”
During
2008, the Audit Committee held six meetings, with members of the Company’s
senior management participating in all of its meetings and with the Independent
Accounting Firm participating in all of its meetings. The Audit
Committee’s agenda includes, when appropriate, separate private sessions with
the Company’s Independent Accounting Firm, independent actuary and internal
auditor, at which time candid discussions regarding financial management,
accounting and internal control issues take place with the Independent
Accounting Firm and internal auditor and discussions regarding actuarial
assumptions and related issues take place with the independent
actuary. During 2008 and through March 31, 2009, the Company’s
Independent Accounting Firm met in private sessions with the Audit Committee six
times; and the Company’s internal auditor met in a private session with the
Audit Committee six times. The Audit Committee’s chairman, together
with members of senior management of the Company, establishes the Audit
Committee’s agenda.
During
2008, in connection with its oversight of the Company’s financial reporting
process, the Audit Committee, among other things:
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Reviewed
and discussed with management and with representatives of
PricewaterhouseCoopers, the Company’s Independent Accounting Firm, the
Company’s internal control over financial reporting, including a review of
management’s and the Company’s Independent Accounting Firm’s assessment of
reports on the effectiveness of the Company’s internal controls over
financial reporting and any significant deficiencies or material
weaknesses;
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Considered,
reviewed and discussed the Company’s overall audit scope and audited
financial statements with management and the Company’s Independent
Accounting Firm, including a discussion of the quality of the accounting
principles, the reasonableness thereof, significant adjustments, if any,
and the clarity of disclosure in the financial statements, as well as
critical accounting policies;
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Reviewed
and discussed with management and with representatives of the Company’s
Independent Accounting Firm the Company’s unaudited quarterly financial
statements contained in its Quarterly Reports on Form 10-Q and its
quarterly earnings announcements;
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Discussed
with the Company’s Independent Accounting Firm the matters required to be
discussed by Statement on Auditing Standards No. 61,
Communications with Audit
Committees
, as amended by Statement of Auditing Standards No.
90,
Audit Committee
Communications
;
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Received
the written disclosures and the letter from the Independent Accounting
Firm required by Independence Standards Board Standard No. 1,
Independence Discussions with
Audit Committees
, as currently in effect, including disclosures
with respect to nonaudit services provided by the Independent Accounting
Firm;
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Considered
whether the provision of all nonaudit services by the Independent
Accounting Firm is compatible with maintaining the Independent Accounting
Firm’s independence and discussed such independence with the Company’s
Independent Accounting Firm;
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Recommended
to the Board of Directors the engagement of PricewaterhouseCoopers as the
Company’s Independent Accounting Firm for the year ended December 31,
2008; and
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In
reliance upon the reports, reviews and discussions described in this
report and subject to the limitations on the role and responsibilities of
the Audit Committee, certain of which are referred to above and are more
fully described in the Audit Committee’s written charter, the Audit
Committee further recommended to the Board of Directors and the Board of
Directors approved, inclusion of the audited financial statements in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008,
filed with the SEC.
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Audit
Committee
Report
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Submitted
by:
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John
K. Anderson, Jr., Chairman
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Terence
P. McCoy, M.D.
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John
G. Rich
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Joan
D. Ruffier
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Additional
Information
Other
Matters
Our
Board of Directors knows of no other matters that may properly be presented to
the annual meeting. If any other matters do properly come before the
annual meeting, however, the persons appointed in the accompanying proxy intend
to vote the shares represented by such proxy in accordance with their best
judgment.
Shareholder
Proposals and Nominations
We
must receive proposals of shareholders intended to be presented at the 2010
annual meeting of shareholders, on or before December 15, 2009, in order for the
proposals to be eligible for inclusion in our proxy statement and proxy
materials relating to that meeting. These proposals should be sent to
our principal executive office via facsimile transmission to (904) 633-9579, or
by mail to the Office of the Secretary, 225 Water Street, Suite 1400,
Jacksonville, Florida 32202, or by e-mail to
ir@fpic.com
,
Attention: Secretary. Any such proposals must comply with SEC Rule
14a-8.
In
addition, under Article I, Section 12 of our bylaws and pursuant to Rule
14a-5(e)(2) of the SEC, a proposal for action to be presented by any shareholder
at the annual meeting of shareholders is out of order and will not be acted upon
unless:
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the
proposal is specifically described in our notice to all shareholders of
the meeting and the matters to be acted upon at the meeting,
or
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the
proposal has been submitted in writing to the Secretary by fax, mail or
e-mail, has been received at our principal executive office before
December 15, 2009, and is an appropriate subject for shareholder action
under law.
|
To
be in proper form, a shareholder’s notice to the Secretary regarding nominations
for election as a director or business proposed to be brought before any
shareholder meeting must set forth the following:
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the
name and address of the shareholder who intends to make the nominations or
to propose the business and, if applicable, the name and address of the
person or persons to be nominated;
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a
representation that the shareholder is a holder of record of our common
stock entitled to vote at such meeting and, if applicable, intends to
appear in person or by proxy at the meeting to nominate the person or
persons or to propose the business specified in the
notice;
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if
applicable, a description of all arrangements or understandings between
the shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations
are to be made by the shareholder;
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such
other information regarding each nominee or each matter of business to be
proposed by such shareholder as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the SEC had the
nominee been nominated, or the matter been proposed, by the Board of
Directors; and
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if
applicable, the consent of each nominee to serve as director of the
Company if so elected.
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The
chairman of the meeting will refuse to acknowledge the nomination of any person
or the proposal of any business not made in compliance with the foregoing
procedure.
Shareholder
Communication with Directors
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Shareholders
who wish to communicate with the Board of Directors or with a particular
director may send a letter to the Secretary of the Company at 225 Water Street,
Suite 1400, Jacksonville, Florida 32202. The mailing envelope should
contain a clear notation indicating that the enclosed letter is a
“Shareholder-Board Communication” or “Shareholder-Director
Communication.” All such letters should identify the author as a
shareholder and clearly state whether the intended recipients are all members of
the Board of Directors or just certain specified individual
directors. The Secretary will make copies of all such letters and
circulate them to the appropriate director or directors.
Annual
Report on Form 10-K
A copy of our Annual Report on Form
10-K filed with the SEC for the year ended December 31, 2008, including
financial statements, financial statement schedules and a listing of all
exhibits, is contained in our 2008 annual report to shareholders, which is being
provided to each shareholder solicited
. We will also furnish
upon request 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 Investor Relations, FPIC Insurance Group, Inc., 225
Water Street, Suite 1400, Jacksonville,
Florida 32202. Requests may also be submitted through our
website at
www.fpic.com
,
via e-mail at
ir@fpic.com
or by calling Investor Relations at (904) 354-2482 ext. 3612.
Solicitation
of Proxies
The
cost of the solicitation of proxies, including preparing and mailing the notice
of annual meeting of shareholders, this Proxy Statement and the proxy/voting
instruction card, will be borne by us. Following the mailing of this
Proxy Statement, our directors, officers and employees may solicit proxies by
telephone, facsimile transmission or other personal contact, for which services
such persons will receive no additional compensation.
Brokerage
houses and other nominees, fiduciaries and custodians that are shareholders of
record will be requested to forward proxy soliciting material to the beneficial
owners of such shares and will be reimbursed by us for their charges and
expenses in connection therewith at customary and reasonable rates.
Jacksonville,
Florida
April
15, 2009
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