UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
NCRIC 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
April 9, 2002
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of NCRIC
Group, Inc. which will be held at 1115 30th Street, N.W., Washington, D.C. at
5:00 p.m. on Tuesday, May 14, 2002.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the meeting we will also report on the
operations of NCRIC and its subsidiaries. Directors and officers of NCRIC will
be present to respond to any questions that shareholders may have. Also enclosed
for your review is our 2001 Annual Report to Shareholders, which contains
detailed information concerning the activities and operating performance of
NCRIC.
The business to be conducted at the Annual Meeting consists of the election of
four directors. The NCRIC Board of Directors has determined that the election of
these directors is in the best interest of NCRIC and its shareholders, and the
Board of Directors unanimously recommends a vote "FOR" the matter to be
considered.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed Proxy Card as soon as possible. If you currently plan to attend the
Annual Meeting, this will not prevent you from voting in person, but will assure
that your vote is counted if you are unable to attend.
Sincerely,
/s/ R. Ray Pate, Jr.
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R. Ray Pate, Jr.
President and Chief Executive Officer
NCRIC Group, Inc.
1115 30th Street, N.W.
Washington, D.C. 20007
(202) 969-1866
NOTICE OF
2002 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 14, 2002
Notice is hereby given that the Annual Meeting of Shareholders of NCRIC
Group, Inc. will be held at 1115 30th Street, N.W., Washington, D.C., on
Tuesday, May 14, 2002, at 5:00 p.m. (Eastern daylight time).
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed. The
Annual Meeting is for the purpose of considering and acting upon:
1. The election of four directors; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof.
Any action may be taken on the foregoing proposals at the Annual Meeting on
the date specified above, or on any date or dates to which the Annual Meeting
may be adjourned. Shareholders of record at the close of business on March 29,
2002, are the shareholders entitled to vote at the Annual Meeting, and any
adjournments thereof.
By Order of the Board of Directors
/s/ William E. Burgess
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William E. Burgess
Secretary
Washington, D.C.
April 9, 2002
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE ANNUAL MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED WITHIN THE UNITED STATES.
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NCRIC Group, Inc.
1115 30th Street, N.W.
Washington, D.C. 20007
(202) 969-1866
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 2002
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SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of NCRIC Group, Inc. to be used
at the Annual Meeting of Shareholders of NCRIC which will be held at 1115 30th
Street, N.W., Washington, D.C., on Tuesday, May 14, 2002, at 5:00 p.m., and at
all adjournments of the Annual Meeting. The accompanying Notice of Annual
Meeting of Shareholders and this Proxy Statement are first being mailed to
shareholders on or about April 9, 2002.
Regardless of the number of shares of common stock owned, it is
important that shareholders be represented by proxy or be present in person at
the Annual Meeting. Shareholders are requested to vote by completing the
enclosed Proxy Card and returning it, signed and dated, in the enclosed
postage-paid envelope. Shareholders are urged to indicate the way they wish to
vote in the spaces provided on the Proxy Card. Proxies solicited by the Board of
Directors will be voted in accordance with the directions given therein. Where
no instructions are indicated, signed proxies will be voted "FOR" the election
of the nominees for director named in this Proxy Statement.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxyholders discretionary authority to vote
the shares in accordance with their best judgement on such other business, if
any, that may properly come before the Annual Meeting or any adjournments
thereof.
Shareholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors will
be voted in accordance with the directions given thereon. Where no instructions
are indicated, executed proxies will be voted "FOR" the election of the nominees
set forth in this Proxy Statement.
Proxies may be revoked at any time prior to exercise by sending written
notice of revocation to the Secretary of NCRIC, William E. Burgess, at the
address of NCRIC shown above, or by delivering to NCRIC a duly executed proxy
bearing a later date. The presence at the Annual Meeting of any shareholder who
has given a proxy shall not revoke such proxy unless the shareholder delivers
his or her ballot in person at the Annual Meeting or delivers a written
revocation to the Secretary of NCRIC prior to the voting of such proxy. However,
if you are a shareholder whose shares are not registered in your own name, you
will need appropriate documentation from your record holder to vote personally
at the Annual Meeting.
The cost of solicitation of proxies in the form enclosed herewith will
be borne by NCRIC. Proxies may also be solicited personally or by mail and
telephone by NCRIC's Directors, officers and regular employees, without
additional compensation therefor. NCRIC will also request persons, firms and
corporations holding shares in their names, or in the name of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners, and will reimburse such holders for their
reasonable expenses in doing so.
VOTING SECURITIES
Holders of record of NCRIC's common stock, par value $.01 per share,
the Common Stock, as of the close of business on March 29, 2002, the Record
Date, are entitled to one vote for each share then held. As of the Record Date,
NCRIC had 3,711,427 shares of Common Stock issued and outstanding. The presence,
in person or by proxy, of one-third of the total number of shares of Common
Stock outstanding and entitled to vote is necessary to constitute a quorum at
this Annual Meeting. In the event there are not sufficient votes for a quorum,
or to approve or ratify any matter being presented at the time of this Annual
Meeting, the Annual Meeting may be adjourned in order to permit the further
solicitation of proxies.
VOTING PROCEDURES AND METHOD OF COUNTING VOTES
As to the election of Directors, the Proxy Card being provided by the
Board of Directors enables a shareholder to vote FOR the election of the four
nominees proposed by the Board, or to WITHHOLD AUTHORITY to vote for the
nominees being proposed. Under NCRIC's Bylaws, Directors are elected by a
plurality of the shares voted at the Annual Meeting, in person or by proxy,
without regard to either broker non-votes, or proxies as to which authority to
vote for the nominees being proposed is withheld. Proxies solicited hereby will
be returned to Registrar and Transfer Company and will be tabulated by an
inspector of election designated by the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Persons and groups who beneficially own in excess of 5% of the Common
Stock are required to file certain reports with NCRIC and with the Securities
and Exchange Commission, the SEC, regarding such ownership pursuant to the
Securities Exchange Act of 1934. The following table sets forth information
regarding each person known to be the beneficial owner of more than 5% of
NCRIC's outstanding shares of Common Stock on the Record Date.
2
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owner Ownership Outstanding
NCRIC, A Mutual Holding Company 2,220,000(1) 59.8%
1115 30th Street, N.W.
Washington, D.C. 20007
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(1) The shares are held by NCRIC Holdings, Inc., a wholly-owned subsidiary of
NCRIC, A Mutual Holding Company.
PROPOSAL 1--ELECTION OF DIRECTORS
Directors of NCRIC are generally elected to serve for a three-year
period or until their respective successors shall have been elected and shall
qualify. Four directors will be elected at the Annual Meeting to serve for a
three-year period and until a successor has been elected and qualified. The
Board of Directors has nominated Vincent C. Burke, III, Pamela W. Coleman, M.D.,
Prudence P. Kline, M.D., and J. Paul McNamara to serve as directors.
The table below lists certain information regarding NCRIC's Board of
Directors, including the terms of office of Board members. It is intended that
the proxies solicited on behalf of the Board of Directors will be voted at the
Annual Meeting for the election of the nominees identified below (unless
otherwise directed on the Proxy Card). If a nominee is unable to serve, the
shares represented by all such proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why the nominees might be unable to serve, if
elected.
Shares of
Positions Common Stock
Held in the Director Term to Beneficially Percent
Name Age(1) Company Since(2) Expire Owned (3) Of Class
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NOMINEES
Vincent C. Burke, III 50 Director 1998 2005 3,753 *
Pamela W. Coleman 45 Director 1989 2005 10,204 *
Prudence P. Kline 50 Director 1995 2005 3,720 *
J. Paul McNamara 52 Director 1998 2005 20,218 *
DIRECTORS CONTINUING IN OFFICE
Martin W. Dukes, Jr. 56 Director 1997 2004 2,620 *
Leonard M. Glassman 55 Director 1993 2003 20,920 *
Luther W. Gray, Jr. 61 Director 1984 2004 7,024 *
Edward G. Koch 59 Director 1996 2004 3,020 *
Leonard M. Parver 57 Director 1998 2004 13,062 *
R. Ray Pate, Jr. 42 President, Chief 1996 2003 55,753 1.5%
Executive Officer and
Vice Chairman of the Board
Raymond Scalettar 72 Director 1980 2003 7,025 *
David M. Seitzman 72 Director 1980 2003 7,028 *
Robert L. Simmons 69 Director 1984 2003 9,220 *
Nelson P. Trujillo 63 Chairman of the Board 1980 2004 43,370 1.2%
(footnotes on next page)
3
Shares of
Positions Common Stock
Held in the Director Term to Beneficially Percent
Name Age(1) Company Since(2) Expire Owned (3) Of Class
----- ------ ------- -------- ------ --------- --------
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Stephen S. Fargis 42 Senior Vice President and n/a n/a 32,247 *
Chief Operating Officer
Rebecca B. Crunk 50 Senior Vice President and n/a n/a 28,606 *
Chief Financial Officer
William E. Burgess 46 Senior Vice President and n/a n/a 16,426 *
Secretary
All Directors and Executive
Officers as a Group (17 persons) 284,216 7.6%
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* Less than 1%.
(1) As of March 5, 2002.
(2) Reflects the initial appointment as a director of NCRIC Group, Inc. or as a
governor of National Capital Reciprocal Insurance Company, or a director of
its attorney-in-fact, or its subsidiary Commonwealth Medical Liability
Insurance Company. Except as otherwise indicated, each nominee and
continuing director has served on the Board of Directors of NCRIC since the
reorganization of National Capital Reciprocal Insurance Company and the
formation of NCRIC in December 1998.
(3) Includes shares of common stock held directly and by spouses or minor
children and in trust and other indirect ownership, as well as shares owned
under NCRIC, Inc.'s 401(k) Plan, ESOP, and Stock Award Plan and vested
stock options.
Directors
The principal occupation during the past five years of each director and
executive officer of NCRIC is set forth below. All directors have held their
present positions for five years unless otherwise stated.
Nelson P. Trujillo, M.D. was a governor and Chairman of the Board of
National Capital Reciprocal Insurance Company from 1980 until its reorganization
on December 31, 1998. Dr. Trujillo is currently President of Metropolitan
Gastroenterology Group where he is a physician.
R. Ray Pate, Jr. was the Treasurer of National Capital Reciprocal Insurance
Company and President, Chief Executive Officer and Director of National Capital
Underwriters, Inc., attorney-in-fact for National Capital Reciprocal Insurance
Company, from 1996 until the reorganization. Since the reorganization he has
also been President and Chief Executive Office of NCRIC, Inc. Since June 2000 he
has served as Vice Chairman of the Board of Directors.
Vincent C. Burke, III has been a partner with the firm of Furey, Doolan &
Abell, LLP since June 1, 1998. From April 1992 to May 1998, he was counsel to
the law firm of Reed Smith Shaw & McClay. Mr. Burke's practice is in the areas
of corporate, business, real estate and closely-held businesses. He practices in
the District of Columbia and Maryland.
Pamela W. Coleman, M.D. was a governor of National Capital Reciprocal
Insurance Company from 1989 until the reorganization. Dr. Coleman is a urologist
in private practice.
4
Martin W. Dukes, Jr., M.D. was a director of National Capital Underwriters
from 1997 until the Reorganization, a director of NCRIC, Inc. from the
reorganization until May 2000, and a Director of NCRIC since May 2001. Dr. Dukes
is a physician in private practice in the District of Columbia.
Luther W. Gray, Jr., M.D. was a governor of National Capital Reciprocal
Insurance Company from 1984 until the reorganization. He was a member of the
executive committee of the board and is Chair of the underwriting committee. Dr.
Gray is a physician and general surgeon with Luther W. Gray, Jr., M.D., PC and
is Chair of the Department of Surgery at Sibley Memorial Hospital.
Leonard M. Glassman, M.D. was a Director of National Capital Underwriters,
Inc. from 1993 until the reorganization. Dr. Glassman is a physician with
Washington Radiology Associates, P.C. He is a past member of the Finance
Committee of the Medical Society of the District of Columbia and was Chief of
Radiology of Columbia Hospital for Women Medical Center from 1984 to 1999.
Prudence P. Kline, M.D. was a Director of National Capital Underwriters,
Inc. from 1995 until the reorganization and has been a Director of NCRIC, Inc.
since the reorganization. Dr. Kline has been a physician in private practice in
Washington, D.C. since 1986.
Edward G. Koch, M.D. has served as a Director of Commonwealth Medical
Liability Insurance Company since 1996. Dr. Koch is a gynecological physician in
private practice in Arlington, Virginia and Washington, D.C. Since 1997 he has
been President of the Arlington County Medical Society Foundation. Sponsored by
the Medical Society of Virginia, he is an alternate delegate to the AMA from
Virginia.
J. Paul McNamara has been President and Chief Operating Officer of Sequoia
National Bank/Sequoia Bancshares, Inc. since 1988. From 1976 to 1988, Mr.
McNamara was employed by the National Bank of Washington in several senior
management positions.
Leonard M. Parver, M.D. was Chairman of the Board of Directors of NCRIC
MSO, Inc. from 1998 until 2000. He has practiced medicine in Washington, D.C.
for the past 22 years.
Raymond Scalettar, M.D., D.Sc., was Vice Chairman of the Board of Directors
of National Capital Underwriters, Inc. from 1980 until the reorganization. He is
a founder of the Washington Internal Medicine Group, a health policy consultant,
a past trustee and Chair of the Board of Trustees of the AMA, and a past
Commissioner and Senior Consultant to the Joint Commission on Accreditation of
HealthCare Organizations. As President of the Medical Society of the District of
Columbia in 1977, he commissioned the study that led to the formation of NCRIC
in 1980.
David M. Seitzman, M.D. was a member of the Board of Directors of National
Capital Underwriters, Inc. from 1980 until the reorganization. Dr. Seitzman is
now retired from the practice of medicine. He served on the boards of Blue Cross
and Blue Shield of the National Capital Area
5
and the Medical Society of the District of Columbia and served as President and
co-founder of the Center for Ambulatory Surgery, Inc. Since 1993, Dr. Seitzman
has been a trustee of portfolios of The 59 Wall Street Fund, Inc., which is
advised by Brown Brothers Harriman & Co., one of NCRIC, Inc.'s investment
advisors until January 1, 2000.
Robert L. Simmons, M.D. was a member of the Board of Directors of National
Capital Underwriters, Inc. from 1984 until the reorganization. Dr. Simmons is
Vice President of Medical Affairs at Providence Hospital in Washington, D.C. and
is a thoracic and cardiovascular surgeon.
Executive Officers Who Are Not Directors
Stephen S. Fargis was Senior Vice President - Business Development of
National Capital Underwriters, Inc. from 1995 until the reorganization. Since
the reorganization he has also been Senior Vice President and Chief Operating
Officer of NCRIC, Inc. and in 2001 was named President of NCRIC MSO, Inc.
Rebecca B. Crunk was the Chief Financial Officer of National Capital
Underwriters, Inc. from April 1998 until the reorganization. Since the
reorganization she has also been Senior Vice President, Chief Financial Officer
and Treasurer of NCRIC, Inc. Ms. Crunk is a certified public accountant and is a
member of the American Institute of Certified Public Accountants. From 1995 to
1998, she was Vice President, Treasurer and Controller of ReliaStar United
Services Life Insurance Company.
William E. Burgess was Senior Vice President - Claims and Risk Management
of National Capital Underwriters, Inc. from August 1997 until the
reorganization. From 1993 to August 1997, he was a Vice President of National
Capital Underwriters, Inc. Since the reorganization he has also been Senior Vice
President and Secretary of NCRIC, Inc.
Committees and Meetings of the Board of Directors
The business of NCRIC is conducted through regular and special meetings of
the Board of Directors and its committees. The Board of Directors met nine times
during 2001. No director attended fewer than 75% of the total meetings held by
the Board of Directors and the committees on which such director served, except
for Dr. Leonard Parver.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board of Directors functions as the Nominating Committee.
The Audit Committee is comprised of Directors Burke, Coleman, McNamara and
Seitzman. The Audit Committee recommends the firm to be appointed as independent
accountants to audit the financial statements, reviews the scope and results of
the audit with the independent accountants, reviews with management and the
independent accountants NCRIC's year-end audit, and considers the adequacy of
NCRIC's internal accounting controls. The Audit Committee met six times in 2001.
6
The Compensation Committee is comprised of Directors Burke, Kline, Seitzman
and Trujillo. The Compensation Committee reviews and makes recommendations to
the Board of Directors concerning compensation, benefit policies and stock
ownership programs, as well as the compensation of the chief executive officer.
The Compensation Committee administers the stock option plan and the stock award
plan. The Compensation Committee met three times during 2001.
While the Board will consider nominees recommended by the shareholders, it
has not actively solicited recommendations from shareholders. Nominations by
shareholders must comply with certain procedural and informational requirements
set forth in NCRIC's Bylaws. See "Advance Notice of Business to be Conducted at
an Annual Meeting."
Audit Committee Report
In accordance with rules recently established by the SEC, this report has
been prepared by the Audit Committee for inclusion in this proxy statement. Each
member of the Audit Committee satisfies the definition of independent director
as established by the National Association of Securities Dealers. The Board of
Directors has adopted a written charter of the Audit Committee.
Management is responsible for NCRIC's internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of NCRIC's consolidated financial statements in accordance
with the auditing standards generally accepted in the United States and to issue
a report thereon. The Audit Committee's responsibility is to monitor and oversee
these processes.
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with management NCRIC's audited consolidated
financial statements for the year ended December 31, 2001;
o Discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications
with Audit Committees, as amended; and
o Received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No.1,
Independence Discussions with Audit Committees, and has discussed with
the independent auditors their independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in NCRIC's Annual Report on Form 10-K for the year ended
December 31, 2001 and be filed with the SEC.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that NCRIC specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
7
The Audit Committee
David M. Seitzman, M.D., Chair
Vincent C. Burke, III, Esq.
Pamela W. Coleman, M.D.
J. Paul McNamara
Director Compensation
NCRIC pays cash compensation to each of its non-employee directors of $30,000
per year. Directors who are officers or employees of NCRIC receive no cash
compensation for serving as directors. All directors are reimbursed for
out-of-pocket expenses in connection with attendance at any meeting of the Board
or any committee.
Executive Compensation
The following table sets forth information for the years ended December
31, 2001, 2000 and 1999 as to compensation paid to the President and Chief
Executive Officer and the other executive officers (collectively referred to as
"Named Executive Officers") who earned over $100,000 in salary and bonuses
during 2001.
========================================================================================================================
Summary Compensation Table
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Annual Compensation(1) Long-Term Compensation
Awards
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Restricted
Name and Principal Other Stock Options/
Position Fiscal Annual Award(2) SARs All Other
Year(1) Salary Bonus Compensation (#) Compensation
- ------------------------------------------------------------------------------------------------------------------------
R. Ray Pate, Jr., 2001 $290,000 $ -0- -- -- -- $22,346
President and Chief 2000 240,000 60,000 -- $104,895 -- 22,528
Executive Officer 1999 240,000 90,000 -- -- 13,320 22,410
- ------------------------------------------------------------------------------------------------------------------------
Stephen S. Fargis, 2001 $170,000 $ -0- -- -- -- $22,130
Senior Vice President & 2000 151,667 30,308 -- $ 69,930 -- 22,312
Chief Operating Officer 1999 150,000 42,000 -- -- 9,250 21,253
- ------------------------------------------------------------------------------------------------------------------------
Rebecca B. Crunk, 2001 $170,000 $ -0- -- -- -- $22,453
Senior Vice President & 2000 135,000 27,000 -- $ 69,930 -- 22,414
Chief Financial Officer 1999 135,000 40,250 -- -- 7,400 21,339
- ------------------------------------------------------------------------------------------------------------------------
William E. Burgess, 2001 $120,000 $ -0- -- -- -- $20,690
Senior Vice President and 2000 120,000 24,000 -- $ 58,275 -- 20,249
Secretary 1999 120,000 28,600 -- -- 7,400 18,579
========================================================================================================================
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(1) For the fiscal years ended December 31.
(2) Equals the market value of the stock award on the date of the grant, which
was $7.875 per share. The total number and dollar value of unvested shares
of stock awarded to Mr. Pate, Mr. Fargis, Ms. Crunk and Mr. Burgess as of
December 31, 2001, based on the market value of the common stock on
December 31, 2001 ($11.00 per share), was 10,656, 7,104, 7,104 and 5,920
shares, and $117,216, $78,144, $78,144 and $65,120, respectively.
8
Employment Agreements. R. Ray Pate, Jr. serves as the President and Chief
Executive Officer of NCRIC under an employment agreement between NCRIC and Mr.
Pate dated January 1, 2001. Under the terms of his employment agreement, Mr.
Pate is entitled to basic compensation of $290,000 per year and is reimbursed
for all reasonable and proper business expenses incurred by him in the
performance of his duties. The terms of the employment agreement also provide
that Mr. Pate is entitled to participate in any retirement and/or pension plans
or health and medical insurance plans offered to NCRIC's senior executives;
receive use of an automobile; and be covered by both term life insurance and
disability insurance.
The term of the employment agreement is five years commencing January 1,
2001. NCRIC may terminate the employment agreement for cause or without cause,
at any time. Any dispute as to whether NCRIC had cause will be determined by
arbitration. If NCRIC terminates Mr. Pate's employment agreement without cause,
Mr. Pate is entitled to receive, as severance pay, an amount equal to three
years base compensation at the level in effect on the date of the termination.
Mr. Pate may voluntarily terminate his employment provided that he gives 60 days
prior notice of his voluntary termination or pays liquidated damages equal to
the amount of two months base compensation.
NCRIC entered into an employment agreement commencing December 1, 2000 with
Stephen S. Fargis on substantially similar terms except that Mr. Fargis'
employment agreement terminates November 30, 2003, and provides for basic
compensation of $170,000 per year.
NCRIC entered into an employment agreement commencing January 1, 2001 with
Rebecca B. Crunk on substantially similar terms to Mr. Pate's, except Ms.
Crunk's agreement terminates December 31, 2003, and provides for basic
compensation of $170,000 per year.
NCRIC entered into an employment agreement commencing January 1, 2002 with
William E. Burgess on substantially similar terms to Mr. Pate's, except Mr.
Burgess' employment agreement terminates December 31, 2004, and provides for
basic compensation of $128,398 per year.
Stock Option Plan. The Company has established a stock option plan for its
directors, officers and key employees. Set forth below is certain information
concerning options outstanding to the Named Executive Officers at December 31,
2001. No options were granted to or exercised by the Named Executive Officers
during 2001.
9
====================================================================================================================
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
====================================================================================================================
Number of Value of Unexercised
Options at In-The-Money Options at
Year-End Year-End(1)
------------------------- --------------------------
Shares Acquired Value Exercisable/Unexercisable Exercisable/Unexercisable
Name Upon Exercise Realized (#) ($)
- --------------------------------------------------------------------------------------------------------------------
R. Ray Pate, Jr. 0 $-- 8,880/4,440 $35,520/$17,760
Stephen S. Fargis 0 $-- 6,167/3,083 $24,667/$12,333
William E. Burgess 0 $-- 4,933/2,467 $19,733/$9,867
Rebecca B. Crunk 0 $-- 4,933/2,467 $19,733/$9,867
====================================================================================================================
- ----
(1) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of Common Stock that
would be received upon exercise, assuming such exercise occurred on
December 31, 2001, at which date the last trade price of the Common Stock
as quoted on the Nasdaq SmallCap Market was $11.00.
Compensation Committee Report on Executive Compensation
The Compensation Committee has adopted a compensation strategy that seeks
to provide competitive compensation that is strongly aligned with the business
objectives and financial and stock performance of NCRIC. The compensation
program has three key elements: base salary, annual incentives and long-term
incentives. The Compensation Committee periodically reviews salary levels and
other aspects of executive compensation to ensure that NCRIC's overall executive
compensation program remains competitive and that executive pay reflects both
the individual's performance and the performance of NCRIC.
NCRIC has an annual incentive plan based on a combination of NCRIC and
individual executive performance in relation to established objectives. Plan
pay-outs vary based on NCRIC's performance in relation to the targeted
objectives. Individual payments are then increased or decreased based on the
performance of the individual executive during the year. The target level of
incentive pay opportunities is 20% - 25% of base pay, with actual payments in a
range of zero to 150% of the target percentage based on performance levels. No
incentive pay-outs were made to the four executives in 2001 due to NCRIC's 2001
financial results.
The Committee believes that long-term incentives are an effective way of
aligning executive compensation with the creation of value for the shareholders
through stock appreciation. The Stock Option Plan and the Stock Award Plan were
established in connection with the Initial Public Offering. The stock options
were allocated in 1999 and the restricted stock awards were allocated in 2000.
In January 2001, NCRIC entered into a five-year employment agreement with
Mr. Pate. This employment agreement, with an annual base salary of $290,000 for
the Chief Executive Officer, was effective for the year 2001.
The Compensation Committee
Vincent C. Burke, III, Esq., Chair
Prudence P. Kline, M.D.
David M. Seitzman, M.D.
Nelson P. Trujillo, M.D.
10
STOCK PERFORMANCE
The following graph compares the cumulative total return for NCRIC's
common stock, the S&P 500 index, and a peer group comprised of American
Physicians Capital, Inc., ProAssurance Corporation, FPIC Insurance Group, Inc.,
The MIIX Group, Incorporated, and SCPIE Holdings, Inc. for the period July 29,
1999, the first day of public trading of NCRIC's common stock on the Nasdaq
SmallCap Market, through December 31, 2001. The graph assumes an investment on
July 29, 1999 of $100 in each of NCRIC's common stock, the stocks comprising the
S&P 500 index, and the common stocks of the peer group companies. The graph
further assumes that all paid dividends were reinvested. The peer group and the
S&P 500 index are weighted by market capitalization. The calculations for the
information below were prepared by SNL Securities, LC of Charlottesville,
Virginia.
Cumulative Total Return
[GRAPHIC-CHART-PLOTTED POINTS-LISTED (BELOW)]
Period Ending
--------------------------------------------------------------------------------------
Index 07/29/99 12/31/99 06/30/00 12/31/00 06/30/01 12/31/01
- -------------------------------------------------------------------------------------------------------------------
NCRIC Group, Inc. 100.00 115.70 97.52 105.79 145.45 145.45
S&P 500 100.00 110.16 109.69 100.12 93.42 88.23
Custom Peer Group 100.00 61.92 47.67 39.05 43.97 51.63
INDEPENDENT AUDITORS
NCRIC's independent auditors for the year ended December 31, 2001 were
Deloitte & Touche LLP. The Audit Committee's review of the impact of fees for
non-audit services in regard to auditor independence concluded that the
non-audit fees had no bearing on auditor independence. The expense incurred by
NCRIC for fees to Deloitte & Touche during 2001 was as follows:
11
Audit fees $209,000
Financial Information Systems
Design and Implementation fees 37,000
Audit Related fees 36,000
All other fees 130,000
--------
Total $412,000
Audit related services generally include fees for statutory and accounting
consultations. All other fees include for tax consulting, tax compliance
services and other finacial analysis consulting.
A representative of Deloitte & Touche, LLP will attend the Annual Meeting
and will be given the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions from shareholders
present at the Annual Meeting.
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED
AT AN ANNUAL MEETING
The Bylaws of NCRIC provide an advance notice procedure for certain
business, or nominations to the Board of Directors, to be brought before an
annual meeting. In order for a shareholder to properly bring business before an
annual meeting, or to propose a nominee to the Board, the shareholder must give
written notice to the Secretary of NCRIC not less than ninety (90) days before
the date of the proxy statement relating to the prior year's annual meeting. The
notice must include the shareholder's name, record address, and number of shares
owned by the shareholder, describe briefly the proposed business, the reasons
for bringing the business before the annual meeting, and any material interest
of the shareholder in the proposed business. In the case of nominations to the
Board, certain information regarding the nominee must be provided. Nothing in
this paragraph shall be deemed to require NCRIC to include in its proxy
statement and proxy relating to an annual meeting any shareholder proposal which
does not meet all of the requirements for inclusion established by the SEC in
effect at the time such proposal is received. Accordingly, in accordance with
the foregoing, advance written notice of business or nominations to the Board of
Directors to be brought before the 2003 Annual Meeting of Shareholders must be
given to NCRIC no later than January 9, 2003. If notice is received after
January 9, 2003, it will be considered untimely, and NCRIC will not be required
to present the matter at the shareholders meeting.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in NCRIC's proxy material for
next year's Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at NCRIC's office,1115 30th Street,
N.W., Washington, D.C. 20007, no later than December 10, 2002. Nothing in this
paragraph shall be deemed to require NCRIC to include in its proxy statement and
proxy relating to an annual meeting any shareholder proposal which does not meet
all of the requirements for inclusion established by the SEC.
12
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William E. Burgess
----------------------
William E. Burgess
Secretary
Washington, D.C.
April 9, 2002
13
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
NCRIC GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 2002
The undersigned appoints R. Ray Pate, Jr. and Leonard M. Glassman, M.D.,
and each of them, with full powers of substitution, as proxies to vote all
shares of the undersigned in NCRIC Group, Inc. at the Annual Meeting of
Stockholders to be held on May 14, 2002, at 5:00 p.m. and at any and all
adjournments, in the manner set forth herein.
1.To elect as directors the nominees listed below (except as
indicated to the contrary below):
Vincent C. Burke, III, Pamela W. Coleman, M.D., Prudence P. Kline,
M.D., J. PaulMcNamara
With- For All
For hold Except
[ _ ] [ _ ] [ _ ]
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING.------------------> [ _ ]
Such proxies are authorized to vote in their discretion on any other
business that may properly come before the meeting or any adjournments.
The Board of Directors recommends a vote "FOR" the above listed Nominees.
THIS SIGNED PROXY CARD WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARESPECIFIED, THIS PROXY CARD WILL BE VOTED FOR THE NOMINEESLISTED.
Please sign exactly as your name appears on this proxy card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Please be sure to sign and date this Proxy in the box below.
____________________________________________________
Date
____________________________________________________
Stockholder sign above
____________________________________________________
Co-holder (if any) sign above
=> Detach above card, sign, date and mail in postage paid envelope provided. =>
NCRIC GROUP, INC.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
____________________________________________________
____________________________________________________
____________________________________________________