April 26, 2005
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders ("Annual
Meeting") of NCRIC Group, Inc. (the "Company"), which will be held at 1055
Thomas Jefferson Street, N.W., Washington, D.C. 20007 at 4:00 PM Washington,
D.C. Time on Tuesday, May 31, 2005.
The enclosed Notice of Annual Meeting of Shareholders and Proxy Statement
describes the formal business to be transacted at the Annual Meeting. During the
Annual Meeting we will also report on the operations of the Company and its
subsidiaries. Directors and officers of the Company will be present to respond
to any questions that shareholders may have. Also enclosed for your review is
our 2004 Annual Report to Shareholders. This document contains detailed
information concerning the activities and operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the election of
four directors and the ratification of the appointment of the independent
registered public accountants. The Board of Directors unanimously recommends a
vote "FOR" the election of directors and "FOR" the ratification of the
appointment of Deloitte & Touche LLP as the Company's independent auditors.
A Special Meeting of Shareholders will be held at a later date, to be
determined, for the purpose of considering the merger with ProAssurance
Corporation.
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.
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
2005 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 31, 2005
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of NCRIC Group, Inc. (the "Company") will be held at 1055
Thomas Jefferson Street, N.W., Washington, D.C. 20007, on Tuesday, May 31, 2005,
at 4:00 PM, Washington, D.C. Time.
A proxy statement and a proxy card for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of four directors;
2. The ratification of the appointment of Deloitte & Touche LLP as
independent registered public accountants for the Company for the year
ending December 31, 2005; 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 April 26,
2005, are the shareholders entitled to vote at the Annual Meeting, and any
adjournments thereof. A list of shareholders entitled to vote at the Annual
Meeting will be available at 1115 30th Street, N.W., Washington, D.C. 20007 for
a period of ten days prior to the Annual Meeting and will also be available for
inspection at the Annual Meeting.
By Order of the Board of Directors
/s/ William E. Burgess
William E. Burgess
Secretary
Washington, D.C.
April 26, 2005
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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.
- --------------------------------------------------------------------------------
NCRIC Group, Inc.
1115 30th Street, N.W.
Washington, D.C. 20007
(202) 969-1866
-------------------------
PROXY STATEMENT
-------------------------
2005 ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2005
-------------------------
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. ("NCRIC Group"
or the "Company") to be used at the Annual Meeting of Shareholders ("Annual
Meeting") of NCRIC Group which will be held at 1055 Thomas Jefferson Street,
N.W., Washington, D.C. 20007, on Tuesday, May 31, 2005, at 4:00 PM Washington,
D.C. Time, 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 29, 2005.
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 and "FOR" the ratification of Deloitte &
Touche LLP as the Company's independent registered public accountants for the
year ending December 31, 2005.
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 judgment on such other business, if
any, which 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.
2
Proxies may be revoked at any time prior to exercise by sending written
notice of revocation to the secretary of NCRIC Group, at the address shown
above, or by delivering to NCRIC Group 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 Group prior to the voting of such proxy. 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.
NCRIC Group will pay the expenses of the preparation of proxy materials
and the solicitation of proxies for the Annual Meeting. In addition to the
solicitation of proxies by mail, solicitation may be made by certain directors,
officers or employees of NCRIC Group or its affiliates by telephone,
electronically or by other means of communication and by Georgeson Shareholder
Communications Inc., whom we have hired to assist in the solicitation and
distribution of proxies. Directors, officers and employees will receive no
additional compensation for such solicitation, and Georgeson Shareholder
Communications will receive a fee of $10,000 for its services. NCRIC Group 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 expense in doing so.
VOTING SECURITIES
Holders of record of shares of NCRIC Group's common stock, par value $0.01
per share, (the "Common Stock"), as of the close of business on April 26, 2005
(the "Record Date"), are entitled to one vote for each share held (except as
indicated below). As of the Record Date, NCRIC Group had 6,909,782 shares of
Common Stock issued and outstanding. The presence, in person or by proxy, of a
majority of the total number of issued and outstanding shares of Common Stock
entitled to vote is necessary to constitute a quorum at the 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.
In accordance with the provisions of the Certificate of Incorporation (the
"Certificate of Incorporation") of the Company, record holders of Common Stock
who beneficially own in excess of 10% of the outstanding shares of Common Stock
(the "Limit") are not entitled to any vote with respect to the shares held in
excess of the Limit. The Company's Certificate of Incorporation authorizes the
Board of Directors (i) to make all determinations necessary to implement and
apply the Limit, including determining whether persons or entities are acting in
concert, and (ii) to demand that any person who is reasonably believed to
beneficially own stock in excess of the Limit supply information to the Company
to enable the Board of Directors to implement and apply the Limit.
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 one or more
of the nominees. Directors are elected by a
3
plurality of votes cast, without regard to either broker non-votes, or proxies
as to which authority to vote for the nominees being proposed is withheld.
As to the ratification of Deloitte & Touche LLP as independent registered
public accountants, by checking the appropriate box, a shareholder may: (i) vote
"FOR" the item; (ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on
such item. Under the Company's Certificate of Incorporation and Bylaws, the
ratification of this matter shall be determined by a majority of the votes cast,
without regard to broker non-votes, or proxies marked "ABSTAIN."
Proxies will be returned to the Company, or an agent of the Company, and
will be tabulated by an inspector of election designated by the Board of
Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding each person known to
be the beneficial owner of more than 5% of the issued and outstanding shares of
the Common Stock on the Record Date.
Amount of Shares Percent of Shares of
Name and Address Owned and Nature Common Stock
of Beneficial Owner of Beneficial Ownership Outstanding
- ------------------------------- ----------------------- --------------------
Northaven Management, Inc. 432,400(1) 6.3%
200 Park Avenue 9th Floor
New York, NY 10166
Asamara Two, LLC 531,855(2) 7.7%
415 South Boston Avenue
9th Floor
Tulsa, OK 74013
Wellington Management Company, 391,000(3) 5.7%
LLP
75 State Street
Boston, MA 02109
NCRIC Group Inc. Employee Stock 483,119 7.0%
Ownership Trust
1115 30th Street, NW
Washington, DC 20007
- --------------------------
(1) According to a jointly filed Schedule 13G/A filed on January 26, 2005, the
shares are owned by Northaven Management, Inc., Northaven Partners, L.P.,
Northaven Partners II, L.P., Northaven Partners III, L.P., Northaven
Offshore, Ltd., and Northaven Associates, LLC.
(2) According to a jointly filed Schedule 13D filed on March 18, 2005, the
shares are owned as follows: 331,555 held directly by Asamara Two, LLC,
and 200,300 held directly by Nadel and Gussman Energy, LLC. James F.
Adelson and Stephen J. Heyman are managers of each of the two entities and
joined in the filing as Reporting Persons.
(3) According to a Schedule 13G filed on February 14, 2005, the shares are
owned by clients of Wellington Management Company, LLP, a registered
investment adviser, and no individual client owns more than 5% of the
Company's shares.
4
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PROPOSAL I - ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Bylaws provide that the Board of Directors shall be divided
into three classes, with one class elected at each annual meeting. Four
directors will be elected at the Annual Meeting to serve for a three-year period
and until their successors have been elected and qualified. The Board of
Directors has nominated Vincent C. Burke, III, Prudence P. Kline, J. Paul
McNamara and Frank K. Ross for election as directors, each of whom has agreed to
serve as a director if so elected.
The table below lists certain information regarding the nominees and the
other members of the Board of Directors who will continue in office following
the Annual Meeting. 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 would be unable to serve, if elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE NOMINEES.
Shares of
Positions Common Stock
Held in the Director Term to Beneficially Percent
Name Age(1) Company Since(2) Expire Owned(3) Of Class
---- ------ ----------- -------- ------- ------------ --------
NOMINEES
Vincent C. Burke, III 53 Director 1998 2008 21,293(4) *
Prudence P. Kline 53 Director 1995 2008 20,580(5) *
J. Paul McNamara 55 Director 1998 2008 55,895(4) *
Frank K. Ross 61 Director 2004 2008 -- *
DIRECTORS CONTINUING IN OFFICE
Leonard M. Glassman 58 Director 1993 2006 65,138(6) *
Stuart A. McFarland 57 Director 2003 2006 10,208(5) *
R. Ray Pate, Jr. 45 President, Chief 1996 2006 222,363(7) 3.1%
Executive Officer and
Vice Chairman of the Board
David M. Seitzman 75 Director 1980 2006 28,907(4) *
Luther W. Gray, Jr. 64 Director 1984 2007 28,100(4) *
Leonard M. Parver 60 Director 1998 2007 43,971(6) *
Nelson P. Trujillo 67 Chairman of the Board 1980 2007 122,815(8) 1.7%
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Rebecca B. Crunk 53 Senior Vice President and n/a n/a 115,418(9) 1.6%
Chief Financial Officer
William E. Burgess 49 Senior Vice President and n/a n/a 90,410(9) 1.2%
Secretary
All Directors and Executive
Officers as a Group (14 persons) 848,610(10) 11.7%
(footnotes begin on following page)
5
* Less than 1%.
(1) As of March 31, 2005.
(2) With respect to years prior to 1998, includes service as a governor of
National Capital Reciprocal Insurance Company, or as a director of its
attorney-in-fact.
(3) Includes shares of common stock held directly, by spouses or minor
children and in trust and other indirect ownership, as well as shares
owned by the named individuals under NCRIC, Inc.'s 401(k) Plan and
employee stock ownership plan.
(4) Includes 12,776 shares of Common Stock that can be acquired pursuant to
presently exercisable stock options.
(5) Includes 9,323 shares of Common Stock that can be acquired pursuant to
presently exercisable stock options.
(6) Includes 19,683 shares of Common Stock that can be acquired pursuant to
presently exercisable stock options.
(7) Includes 97,377 shares of Common Stock that can be acquired pursuant to
presently exercisable stock options.
(8) Includes 27,971 shares of Common Stock that can be acquired pursuant to
presently exercisable stock options.
(9) Includes 51,106 shares of Common Stock that can be acquired pursuant to
presently exercisable stock options.
(10) Includes shares owned by one director whose term of office will expire at
the Annual Meeting, and 340,129 shares of Common Stock that can be
acquired pursuant to presently exercisable stock options.
Directors
The principal occupation during the past five years of each director and
executive officer of NCRIC Group is set forth below. All directors have held
their present positions for five years unless otherwise stated.
Nelson P. Trujillo, M.D. is chairman of the Board of Directors of NCRIC
Group and its subsidiaries. He was a governor and chairman of the board of
National Capital Reciprocal Insurance Company from 1980 until its mutual holding
company reorganization in 1998. Dr. Trujillo is currently president of
Metropolitan Gastroenterology Group, where he is a physician.
R. Ray Pate, Jr. is president and chief executive officer of NCRIC Group
and NCRIC, Inc. and chief executive officer of ConsiCare, Inc. He 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 the National Capital Reciprocal Insurance Company, from
1996 until the mutual holding company reorganization in 1998. Since June 2000 he
has served as vice chairman of the Board of Directors.
Vincent C. Burke, III has been a director of NCRIC Group and subsidiaries
since the mutual holding company reorganization in 1998. He currently is
chairman of the Compensation Committee. Mr. Burke is a partner with the firm of
Furey, Doolan & Abell, LLP. His law practice is focused in the areas of
corporate, business, real estate and closely-held businesses. He practices in
the District of Columbia and Maryland.
Luther W. Gray, Jr., M.D. was a governor of National Capital Reciprocal
Insurance Company from 1984 until the mutual holding company reorganization in
1998 and has been a director of NCRIC Group and subsidiaries since the mutual
holding company reorganization. He is currently the chairman of the Underwriting
Committee for NCRIC, Inc. 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 mutual holding company reorganization in 1998 and has
been a director of NCRIC
6
Group and subsidiaries since the mutual holding company reorganization. He is
currently the chair of the Nominating and Corporate Governance Committee and
served as chairman of the Board of Directors of NCRIC, Inc. from 1998 until
2000. 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 mutual holding company reorganization in 1998 and has
been a director of NCRIC Group and subsidiaries since the mutual holding company
reorganization. Dr. Kline has been a physician in private practice in the
District of Columbia since 1986.
Stuart A. McFarland was elected to serve on the Board of Directors of
NCRIC Group in 2003. Since April 2005, Mr. McFarland has served as chairman and
chief executive officer of Federal City Bancorp and its subsidiary, Assurance
Partners Bank. Mr. McFarland is the co-founder and since 1997 the managing
partner of Federal City Capital Advisors, a merchant banking and financial
advisory business. From 1999 to 2001 he was president and chief executive
officer of Pedestal, Inc., an internet-enabled mortgage and mortgage securities
trading exchange. Mr. McFarland also serves as a director for the following
companies: Newcastle Investment Corp., a real estate investment trust; the
Brandywine Funds, a mutual fund; and Sterling Eagle Investment Company, a
specialty finance company.
J. Paul McNamara has been a director of NCRIC Group and subsidiaries since
the mutual holding company reorganization in 1998. He is vice chairman of United
Bank, a subsidiary of United Bankshares, Inc., a bank holding company. From 1988
through 2003, he was president and chief operating officer of SequoiaBank.
Leonard M. Parver, M.D. has been a director of NCRIC Group and
subsidiaries since the mutual holding company reorganization in 1998. He was
chairman of the Board of Directors of NCRIC MSO, Inc. from 1998 until 2000. He
has practiced medicine in the District of Columbia for the past 24 years.
Frank K. Ross was appointed a director of NCRIC Group in March 2004. Mr.
Ross recently retired as the Midatlantic Area Managing Partner for Audit and
Risk Advisory services and the managing partner of the Washington, DC offices of
KPMG LLP. He served three terms on the KPMG US and KPMG Americas Boards of
Directors. Mr. Ross also serves as a director of Pepco Holdings, Inc., and Cohen
& Steers Funds, a group of mutual funds. Mr. Ross is a certified public
accountant and is a member of the American Institute of Certified Public
Accountants.
David M. Seitzman, M.D. was a member of the Board of Directors of National
Capital Underwriters, Inc. from 1980 until the mutual holding company
reorganization in 1998 and has been a director of NCRIC Group and subsidiaries
since the mutual holding company reorganization. He currently is chairman of the
Audit Committee. Dr. Seitzman is retired from the practice of medicine. He
served on the boards of Blue Cross and Blue Shield of the National Capital Area
and the Medical Society of the District of Columbia and served as president and
co-founder of the Center for Ambulatory Surgery, Inc.
7
Executive Officers Who Are Not Directors
Rebecca B. Crunk was the chief financial officer of National Capital
Underwriters, Inc. from April 1998 until the mutual holding company
reorganization in 1998. Since the mutual holding company reorganization, she has
been senior vice president, chief financial officer and treasurer of NCRIC Group
and 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 mutual holding
company reorganization in 1998. From 1993 to August 1997, he was a vice
president of National Capital Underwriters, Inc. Since the mutual holding
company reorganization, he has been senior vice president and secretary of NCRIC
Group and NCRIC, Inc.
Director Compensation
Fees. Each non-employee director of NCRIC Group (other than the chairman)
receives an annual retainer of $45,000. The chairman of the Board receives an
annual retainer of $150,000. Directors who are also officers or employees of
NCRIC Group do not receive any additional compensation for serving as directors.
Directors who serve on the Audit Committee receive a fee of $600 for each
committee meeting attended ($750 for the chairman of the committee). Directors
who serve on the Governance and Nominating or Compensation Committee receive a
fee of $300 for each committee meeting attended ($350 for the chairman of the
committee). Directors who serve on the Executive Committee do not receive
additional compensation for committee meetings attended. All directors are
reimbursed for out-of-pocket expenses in connection with attendance at any
meeting of the Board of Directors or any committee.
Stock Benefits. Directors of NCRIC Group are eligible to participate in
certain stock benefit plans and have received awards of stock options and
restricted stock. No stock options or stock awards were granted to directors
during 2004.
Board Independence
The Board has determined that, except as to Mr. Pate, each member of the
Board is an "independent director" within the meaning of the Nasdaq corporate
governance listing standards. Mr. Pate is not considered independent because he
is an executive officer of the Company.
Committees and Meetings of the Board of Directors
The business of NCRIC Group is conducted through regular and special
meetings of the Board of Directors and its committees. The Board of Directors
met seven (7) times during 2004. No director attended fewer than 75% of the
total meetings held by the Board of Directors and the committees on which such
director served. Executive sessions of the Board are held on a regular
8
basis. The Company does not require, but encourages, Board attendance at the
annual meeting of shareholders. Seven directors attended the 2004 annual meeting
of shareholders.
The Executive Committee. The Executive Committee generally has the power
and authority to act on behalf of the Board of Directors when the Board is not
in session, except as otherwise provided by law and subject at all times to the
direction of the Board of Directors. The Executive Committee is comprised of
directors Trujillo (chairman), Burke, Glassman, Pate and Seitzman, and met three
times during 2004.
The Compensation Committee. The Compensation Committee is responsible for
recommending to the full Board the compensation of the chief executive officer
and senior management, reviewing and administering overall compensation policy,
including setting performance measures and goals, administering stock-based
compensation plans, approving benefit programs, establishing compensation of the
Board of Directors and other matters of personnel policy and practice. Directors
Burke (chairman), Kline, Seitzman, Parver and Trujillo comprise the current
membership of the Compensation Committee. Each member of the Compensation
Committee is considered "independent" as defined in the Nasdaq corporate
governance listing standards. The Compensation Committee met five times during
2004. The report of the Compensation Committee is included elsewhere in the
proxy statement.
The Governance and Nominating Committee. The Governance and Nominating
Committee consists of directors Glassman (chairman), Burke, Gray, Trujillo and
Ross. Each member of the Governance and Nominating Committee is considered
"independent" as defined in the Nasdaq corporate governance listing standards.
The Company's Board of Directors has adopted a written charter for the
Committee, which is available at the Company's website at www.ncric.com. The
Committee met six times during 2004.
The functions of the Governance and Nominating Committee include the
following:
o to make recommendations to the Board regarding the size and
composition of the board and develop and recommend to the Board
criteria for the selection of individuals to be considered for
election or re-election to the Board;
o to lead the search for individuals qualified to become members of
the Board and to select director nominees to be presented for
shareholder approval;
o to review and monitor compliance with the requirements for Board
independence;
o to review the committee structure and make recommendations to the
Board regarding committee membership;
o to develop and recommend to the Board for its approval a set of
corporate governance guidelines; and
9
o to develop and recommend to the Board for its approval a
self-evaluation process for the Board and its committees.
The Governance and Nominating Committee identifies nominees by first
evaluating the current members of the Board of Directors willing to continue in
service. Current members of the Board with skills and experience that are
relevant to the Company's business and who are willing to continue in service
are first considered for re-nomination, balancing the value of continuity of
service by existing members of the Board with that of obtaining a new
perspective. If any member of the Board does not wish to continue in service, or
if the Committee or the Board decides not to re-nominate a member for
re-election, or if the size of the Board is increased, the Committee would
solicit suggestions for director candidates from all Board members. In addition,
the Committee is authorized by its charter to engage a third party to assist in
the identification of director nominees. The Governance and Nominating Committee
would seek to identify a candidate who at a minimum satisfies the following
criteria:
o has the highest personal and professional ethics and integrity and
whose values are compatible with the Company's values;
o has had experiences and achievements that has given him or her the
ability to exercise and develop good business judgment;
o is willing to devote the necessary time to the work of the Board
and its committees, which includes being available for Board and
committee meetings;
o is involved in other activities or interests that do not create a
conflict with his or her responsibilities to the Company and its
shareholders; and
o has the capacity and desire to represent the balanced, best
interests of the shareholders of the Company as a group, and not
primarily a special interest group or constituency.
The Governance and Nominating Committee will also take into account
whether a candidate satisfies the criteria for "independence" under the Nasdaq
corporate governance standards, and if a nominee is sought for service on the
Audit Committee, the financial and accounting expertise of a candidate,
including whether an individual qualifies as an Audit Committee financial
expert.
The Board of Directors has accepted the Committee's recommendation that
the optimal Board size is ten directors. This goal is expected to be achieved by
the 2006 annual meeting of shareholders. (If the merger with ProAssurance is
consummated this will be unnecessary.) Because the success of the Company is
dependent upon the sale of medical professional liability insurance and other
services to individual physicians and groups of physicians, the Committee
believes that there should be a significant presence of physicians on the Board
because they have an intimate knowledge of the customer base and the needs and
concerns of the physician communities. Following this Annual Meeting, there will
be six physicians serving as directors, and the Board believes that when there
are ten members, five of the ten directors should be physicians.
10
Procedures For The Consideration Of Board Candidates Submitted By
Shareholders. The Governance and Nominating Committee has adopted procedures for
the submission of director nominees by shareholders for consideration by the
Committee. If a determination is made that an additional candidate is needed for
the Board, the Governance and Nominating Committee will consider candidates
submitted by the Company's shareholders. Shareholders can submit qualified names
of candidates for Director by writing to our Secretary, at 1115 30th Street,
N.W., Washington, D.C. 20007, Attention: Board Administration. The Secretary
must receive a submission not less than ninety (90) days prior to the date of
the Company's proxy materials for the preceding year's annual meeting. The
submission must include the following information:
o the name and address of the proposing shareholder as they appear on
the Company's books, and number of shares of Common Stock that are
owned beneficially by such shareholder (if the shareholder is not a
holder of record, appropriate evidence of the shareholder's ownership
will be required);
o the name, address and contact information for the candidate, and the
number of shares of Common Stock that are owned by the candidate (if
the candidate is not a holder of record, appropriate evidence of the
shareholder's ownership will be required);
o a statement of the candidate's business and educational experience;
o such other information regarding the candidate as would be required to
be included in the proxy statement pursuant to SEC Regulation 14A;
o a statement detailing any relationship between the candidate and NCRIC
Group, and between the candidate and any customer, supplier or
competitor of NCRIC Group;
o detailed information about any relationship or understanding between
the proposing shareholder and the candidate or any other shareholder
or group of shareholders; and
o a statement that the candidate is willing to be considered and willing
to serve as a director if nominated and elected.
Submissions that are received and that meet the criteria outlined above
are forwarded to the chairman of the Governance and Nominating Committee for
further review and consideration. A nomination submitted by a shareholder for
presentation by the shareholder at an annual meeting of shareholders must comply
with the procedural and informational requirements described in "Advance Notice
Of Business To Be Conducted At An Annual Meeting."
Shareholder Communications with the Board. A shareholder of the Company
who wants to communicate with the Board or with any individual director can
write to the Secretary of the Company, at 1115 30th Street, N.W., Washington,
D.C. 20007, Attention: Board Administration. The letter should indicate that the
author is a shareholder and if shares are not held of record, should include
appropriate evidence of stock ownership. Depending on the subject matter,
management will:
o forward the communication to the director(s) to whom it is addressed;
11
o attempt to handle the inquiry directly, for example where it is a
request for information about the Company or it is a stock-related
matter; or
o not forward the communication if it is primarily commercial in nature,
relates to an improper or irrelevant topic, or is unduly hostile,
threatening, illegal or otherwise inappropriate.
At each Board meeting, a summary of all communications received since the
last meeting that were not forwarded will be presented to the Board and those
communications will be made available to all Board members.
The Audit Committee. The Audit Committee currently consists of directors
Seitzman (chairman), Coleman, Gray, McFarland, McNamara, Parver and Ross. Each
member of the Audit Committee is considered "independent" as defined in the
Nasdaq corporate governance listing standards and under SEC Rule 10A-3. The
duties and responsibilities of the Audit Committee include, among other things:
o retaining, overseeing and evaluating a firm of independent
registered public accountants to audit the Company's annual
financial statements;
o in consultation with the independent registered public accountants
and the internal auditor, reviewing the integrity of the Company's
financial reporting processes, both internal and external;
o approving all engagements for audit and non-audit services by the
independent registered public accountants;
o reviewing the financial statements and the audit report with
management and the independent registered public accountants;
o considering whether the provision by the external auditors of
services not related to the annual audit and quarterly reviews is
consistent with maintaining the auditor's independence;
o reviewing earnings and financial releases and quarterly reports
filed with the SEC;
o consulting with the internal audit staff and reviewing
management's administration of the system of internal accounting
controls; and
o reviewing the adequacy of the audit committee charter.
The Audit Committee met five times during 2004. The Audit Committee
reports to the Board on its activities and findings. The Board of Directors
believes that Mr. Ross qualifies as an "audit committee financial expert" as
that term is used in the rules and regulations of the SEC.
12
Audit Committee Report
In accordance with current SEC rules, this report has been prepared by the
Audit Committee for inclusion in this Proxy Statement. Each member of the Audit
Committee is considered "independent" as defined in the Nasdaq corporate
governance standards and under SEC Rule 10A-3. The Board of Directors has
adopted a written charter for the Audit Committee, which is available on the
Company's website at www.ncric.com, and which is also attached to this Proxy
Statement as Appendix A.
Management is responsible for the Company's internal controls and
financial reporting process. The independent registered public accountants are
responsible for performing an independent audit of the 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 Group's audited
consolidated financial statements for the year ended December 31,
2004;
o Discussed with the independent registered public accountants 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
registered public accountants 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 the Annual Report on Form 10-K for the year ended
December 31, 2004 and 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 Group specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
This report has been provided by the Audit Committee:
David M. Seitzman, M.D., Chairman Pamela W. Coleman, M.D.
Stuart A. McFarland Luther W. Gray, M.D.
J. Paul McNamara Leonard M. Parver, M.D.
Frank K. Ross
13
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 Group. 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 Group's overall
executive compensation program remains competitive and that executive pay
reflects both the individual's performance and the performance of NCRIC Group.
NCRIC Group has an annual incentive plan based on a combination of NCRIC
Group and individual executive performance in relation to established
objectives. Plan pay-outs vary based on NCRIC Group'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% to 25% of base pay, with actual
payments in a range of zero to 150% of the target percentage based on
performance levels. No incentive payouts were made to the Named Executive
Officers in 2004.
The Compensation 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. In prior years, stock options and
restricted stock awards have been granted to executive officers. However, no
stock options or stock awards were made to executive officers during 2004.
Mr. Pate is employed as president and chief executive officer pursuant to
a five-year employment agreement that was effective as of January 2001. In light
of the Company's performance in a difficult market environment for medical
professional liability insurance companies, as well as the Company's second step
conversion, which resulted in additional challenges and responsibilities, Mr.
Pate's base salary under the employment agreement was increased to $367,500
(from $350,000) for 2004. No bonus was paid to the chief executive officer with
respect to 2004 under the annual incentive plan.
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 Group specifically incorporates this
information by reference.
This report has been provided by the Compensation Committee
Vincent C. Burke, III, Chairman
Prudence P. Kline, M.D.
Leonard M. Parver, M.D.
David M. Seitzman, M.D.
Nelson P. Trujillo, M.D.
14
Code of Ethics
The Company has adopted a Code of Ethics that is applicable to the officers,
directors and employees of the Company, including the Company's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. The Code of Ethics is
available on the Company's website at www.ncric.com. Amendments to and waivers
from the Code of Ethics will also be disclosed on the Company's website.
Executive Compensation
The following table sets forth information for the years ended December
31, 2004, 2003 and 2002 as to compensation paid to the president and chief
executive officer and the other executive officers who earned over $100,000 in
salary and bonus during 2004 (collectively referred to as the "Named Executive
Officers").
- ----------------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
- ----------------------------------------------------------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation Awards
- --------------------------------------------------------------------------------------------------------
Other Restricted Options/
Name and Principal Annual Stock SARs All Other
Position Year Salary Bonus Compensation Award(1) (#) Compensation(2)
- ----------------------------------------------------------------------------------------------------------------------------
R. Ray Pate, Jr., 2004 $ 367,500 $ -0- -- $ -- -- $ 88,220
President and Chief 2003 350,000 -0- -- 374,595 72,515 45,589
Executive Officer 2002 290,000 -0- -- -- -- 26,208
- ----------------------------------------------------------------------------------------------------------------------------
Stephen S. Fargis,(3) 2004 $ 200,000 $ -0- -- $ -- -- $ 58,479
Senior Vice President & 2003 200,000 -0- -- 187,298 37,293 37,869
Chief Operating Officer 2002 170,000 -0- -- -- -- 24,339
- ----------------------------------------------------------------------------------------------------------------------------
Rebecca B. Crunk, 2004 $ 231,000 $ -0- -- $ -- -- $ 56,403
Senior Vice President & 2003 220,000 -0- -- 187,298 37,293 39,186
Chief Financial Officer 2002 170,000 -0- -- -- -- 26,500
- ----------------------------------------------------------------------------------------------------------------------------
William E. Burgess, 2004 $ 183,750 $ -0- -- $ -- -- $ 56,181
Senior Vice President and 2003 175,000 -0- -- 187,298 37,293 36,657
Secretary 2002 128,398 -0- -- -- -- 18,739
- ----------------------------------------------------------------------------------------------------------------------------
- -------------------
(1) Equals the market value of the stock award on the date of grant, which was
$11.30 per share.
(2) 2004 amounts include the following: (1) the contribution to the 401(k)
Plan of $19,773 for each of Messrs. Pate, Fargis and Burgess and Ms.
Crunk; (2) the market value of shares allocated to account of the
executives under the ESOP, which at December 31, 2004 was $7,784 for each
of Messrs. Pate, Fargis and Burgess and Ms. Crunk; (3) payment of accrued
but unused vacations in excess of carryover limits (due to a change in
vacation policy) of $40,646, $20,563, $18,375 and $15,953 for Messrs.
Pate, Fargis and Burgess and Ms. Crunk, respectively; (4) matching company
contribution under the deferred compensation plan of $19,777, $10,000,
$9,889 and $12,341 for Messrs. Pate, Fargis and Burgess and Ms. Crunk,
respectively, and (5) income imputed on group term life insurance of $240,
$360, $360 and $552 for Messrs. Pate, Fargis and Burgess and Ms. Crunk,
respectively.
(3) Mr. Fargis ceased his employment with the Company as of December 31, 2004.
He has agreed to serve as a Consultant to the Company, starting as of
January 1, 2005. The terms of his Consulting Agreement were filed with the
SEC in a current report on Form 8-K on January 6, 2005.
15
Employment Agreements. R. Ray Pate, Jr. serves as the president and chief
executive officer of NCRIC Group under an employment agreement between NCRIC
Group and Mr. Pate dated January 1, 2001. Under the terms of his employment
agreement, Mr. Pate is entitled to basic compensation of $385,875 for 2005 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 Group's
senior executives; to receive use of an automobile; and to be covered by both
term life insurance and disability insurance.
The term of the employment agreement is five years commencing January 1,
2001. NCRIC Group may terminate the employment agreement for cause or without
cause, at any time. Any dispute as to whether NCRIC Group had cause will be
determined by arbitration. If NCRIC Group terminates Mr. Pate's employment
agreement without cause, which includes a change of control, 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
his base compensation for two months.
NCRIC Group has an employment agreement with Rebecca B. Crunk, which
agreement has terms substantially similar to Mr. Pate's agreement, except that
it provides for two years severance in the event of a termination other than for
cause. The employment agreement with Ms. Crunk terminates December 31, 2006 and
provides for base compensation of $242,550 for 2005.
NCRIC Group has an employment agreement with William E. Burgess, with
substantially similar terms to Mr. Pate's agreement, except that it provides for
two years severance in the event of a termination other than for cause. The
employment agreement with Mr. Burgess terminates December 31, 2007 and provides
for base compensation of $192,938 for 2005.
Stock Option Plans. The Company has established stock option plans for its
directors, officers and key employees. The options have terms of ten years and
an exercise price equal to the fair market value of the common stock at the date
of grant. There were no stock options granted to any of the Named Executive
Officers in 2004.
16
Set forth below is information relative to options outstanding and held by
the Named Executive Officers at December 31, 2004. No options were exercised by
the Named Executive Officers during 2004.
- ---------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
- ---------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Fiscal Options at Fiscal
Year-End Year-End(1)(2)
Shares ---------------------------------------
Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------
R. Ray Pate, Jr. -- $ -- 97,377/0 $ 147,930/0
- ---------------------------------------------------------------------------------------------
Rebecca B. Crunk -- $ -- 51,105/0 $ 82,183/0
- ---------------------------------------------------------------------------------------------
Stephen S. Fargis -- $ -- 17,265/0 $ 102,729/0
- ---------------------------------------------------------------------------------------------
William E. Burgess -- $ -- 51,105/0 $ 82,183/0
- ---------------------------------------------------------------------------------------------
- -------------------
(1) Equals the difference between the aggregate exercise price of the
in-the-money 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, 2004, at which date the closing price of the
Common Stock as quoted on the Nasdaq National Market was $9.70.
(2) On July 7, 2004, the Board of Directors accelerated the vesting of the
stock options outstanding, which were granted in 2003. The options were
originally scheduled to vest during the period from August 2004 to August
2008. On the accelerated vesting date, the $10.00 per share market value
of NCRIC stock was less than the strike price of the options, which ranges
from $10.86 to $11.00 per share. The acceleration of vesting eliminates
future compensation expense the Company might otherwise recognize in its
future income statements under FASB Statement No. 123R, Share-Based
Payment.
Deferred Compensation Plan. Effective January 1, 2003, the Company
established a compensation deferral plan for officers and board members. The
compensation deferral plan is an unfunded plan with an annual Company match of
5% of total compensation for officers. Contributions credited for an officer's
deferral account and the earnings attributable to these contributions shall be
one hundred percent vested or nonforfeitable when the officer has five years of
service in his or her position. Under the compensation deferral plan, officers
may defer up to 15% of total compensation and board members may defer up to 100%
of fees. Contributions are credited with a 6% guaranteed rate of return.
Pursuant to the terms of the plan, a participant's account balance will be
paid in cash by (a) lump sum, or (b) annual installments over a 5, 10 or 15 year
period. The deferred compensation liability is recorded at the full accumulation
value of the accumulated contributions and interest and is included in accrued
expenses.
Ownership Reports by Officers and Directors
The Common Stock is registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934. The officers and directors of the Company and beneficial
owners of greater than 10% of the Common Stock ("10% beneficial owners") are
required to file reports on Forms 3, 4 and 5 with the SEC disclosing changes in
beneficial ownership of the Common Stock. SEC rules require disclosure in the
Company's Proxy Statement and Annual Report on Form 10-K of the failure of an
officer, director or 10% beneficial owner of the Common Stock to file a Form 3,
4 or 5 on a timely basis.
17
During 2004, the Named Executive Officers of the Company each failed to file a
Form 4 on a timely basis with respect to the withholding for taxes on shares of
common stock upon the vesting of restricted stock awards in August and September
2004. The Forms were filed on December 15, 2004.
STOCK PERFORMANCE
The following graph compares the cumulative total return for the Common
Stock, the Russell 2000 index, and a peer group of medical professional
liability insurance companies, for the period December 31, 1999 through December
31, 2004. The graph assumes an investment on December 31, 1999 of $100 in each
of the Common Stock, the stocks comprising the Russell 2000 index, and the
common stocks of the peer group companies. The graph further assumes that all
paid dividends were reinvested. The peer group and the Russell 2000 index are
weighted by market capitalization. The calculations for the information below
were prepared by SNL Securities, LC of Charlottesville, Virginia.
Cumulative Total Return
NCRIC Group, Inc.
[STOCK PERFORMANCE GRAPH OMITTED]
Period Ending
----------------------------------------------------------------
Index 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
- ----------------------------------------------------------------------------------------------
NCRIC Group, Inc. 100.00 91.43 125.71 125.71 227.18 206.91
Russell 2000 100.00 96.98 99.39 79.03 116.38 137.71
NCRIC Peer Group* 100.00 71.18 92.05 73.23 115.44 153.13
* The NCRIC Group Peer Index consists of FPIC Insurance Group, SCPIE
Holdings, ProAssurance Corporation, and American Physicians Capital.
18
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The Company's independent registered public accountants for the year ended
December 31, 2004 were Deloitte & Touche LLP. The Audit Committee of the Board
of Directors has approved the engagement of Deloitte & Touche LLP to be the
Company's independent registered public accountants for the year ending December
31, 2005, subject to the ratification of the engagement by the shareholders at
this Annual Meeting. Representatives of Deloitte & Touche LLP are expected to
attend the Annual Meeting, will have an opportunity to make a statement if they
so desire, and will be available to respond to appropriate questions.
Shareholder ratification of the selection of Deloitte & Touche LLP is not
required by the Company's bylaws or otherwise. However, the Board is submitting
the selection of the independent registered public accountants to the
shareholders for ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection of Deloitte & Touche LLP, the Audit
Committee will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee in its discretion may direct the
appointment of a different independent registered public accountant firm at any
time during the year if it determines that such change is in the best interests
of the Company and its shareholders.
Fees Paid to Deloitte & Touche LLP
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by Deloitte & Touche LLP during 2004 and
2003:
Audit Fees. The aggregate fees billed to the Company by Deloitte & Touche
LLP for professional services rendered by Deloitte & Touche LLP for the audit of
the Company's annual financial statements, review of the financial statements
included in the Company's Quarterly Reports on Form 10-Q and services that are
normally provided by Deloitte & Touche LLP in connection with statutory and
regulatory filings and engagements were $466,000 and $586,000 during the years
ended December 31, 2004 and 2003, respectively.
Audit Related Fees. Fees billed to the Company by Deloitte & Touche LLP
for assurance and related services that are reasonably related to the
performance of the audit and review of the financial statements and that are not
already reported in "Audit Fees," above, were $7,000 and zero during the years
ended December 31, 2004 and 2003, respectively.
Tax Fees. The aggregate fees billed to the Company by Deloitte & Touche
LLP for professional services rendered for tax compliance, tax advice and tax
planning were $93,000 and $70,000 during the years ended December 31, 2004 and
2003, respectively. The compliance services included the preparation of federal
and state income tax returns and the preparation and review of quarterly tax
estimates.
All Other Fees. During the years ended December 31, 2004 and 2003, there
were no fees billed to the Company by Deloitte & Touche LLP for services that
are not described above.
19
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Registered Public Accountants
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent registered public accountants. These
services may include audit services, audit-related services, tax services and
other services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to particular service or category of services and is
generally subject to a specific budget. The Audit Committee has delegated
pre-approval authority to its Chairman when expedition of services is necessary.
The independent registered public accountants and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent auditors in accordance with this pre-approval, and
the fees for the services performed to date.
Required Vote and Recommendation of the Board of Directors
In order to ratify the appointment of Deloitte & Touche LLP as independent
registered public accountants for the year ending December 31, 2005, the
proposal must receive the affirmative vote of at least a majority of the votes
cast at the Annual Meeting, either in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF DELOITTE & TOUCHE LLP AS INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED
AT AN ANNUAL MEETING
The Bylaws of NCRIC Group 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, including to propose a nominee to the Board, the shareholder
must give written notice to the secretary of NCRIC Group 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 of Directors, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
NCRIC Group 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.
In accordance with the foregoing, advance written notice of business or
nominations to the Board of Directors to be brought before the 2006 Annual
Meeting of Shareholders must be given to NCRIC Group no later than January 26,
2006. If notice is received after January 26, 2006, it will be considered
untimely, and NCRIC Group will not be required to present the matter at the
shareholders meeting.
20
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in NCRIC Group'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 Group's office, 1115 30th
Street, N.W., Washington, D.C. 20007, no later than December 27, 2005. Nothing
in this paragraph shall be deemed to require NCRIC Group to include in its proxy
statement and proxy relating to an annual meeting any shareholder proposal that
does not meet all of the requirements for inclusion established by the SEC.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William E. Burgess
William E. Burgess
Secretary
Washington, D.C.
April 26, 2005
A COPY OF NCRIC GROUP'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 2004 WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS UPON THE WRITTEN
REQUEST TO THE SECRETARY, NCRIC GROUP, INC., 1115 30th STREET, N.W., WASHINGTON,
D.C. 20007.
21
Appendix A
NCRIC GROUP, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The Audit Committee of NCRIC Group, Inc. (NCRIC) is established by and amongst
the Board of Directors for the primary purpose of assisting the Board in:
o overseeing the integrity of NCRIC's financial statements,
o overseeing NCRIC's compliance with legal and regulatory requirements,
o overseeing the independent auditor's qualifications and independence,
o overseeing the performance of NCRIC's internal audit function and
independent auditor, and
o overseeing NCRIC's system of disclosure controls and system of
internal controls regarding finance, accounting, and legal compliance.
Consistent with this function, the Audit Committee should encourage continuous
improvement of, and should foster adherence to, NCRIC's policies, procedures and
practices at all levels. The Audit Committee should also provide an open avenue
of communication among the independent auditors, financial and senior
management, the internal auditing function, and the Board of Directors.
The Audit Committee has the authority to obtain advice and assistance from
outside legal, accounting, or other advisors as deemed appropriate to perform
its duties and responsibilities.
NCRIC shall provide appropriate funding, as determined by the Audit Committee,
for compensation to the independent auditor and to any advisers that the audit
committee chooses to engage.
The Audit Committee will primarily fulfill its responsibilities by carrying out
the activities enumerated in Section III of this Charter. The Audit Committee
will report regularly to the Board of Directors regarding the execution of its
duties and responsibilities.
II. COMPOSITION AND MEETINGS
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent director (as defined by all
applicable rules and regulations, including the listing standards of the
Nasdaq), and free from any relationship (including disallowed compensatory
arrangements) that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. All
members of the Committee shall be able to read and understand fundamental
financial statements, including a company's balance sheet, income statement, and
cash flow statement, and one person shall have past employment experience in
finance or accounting, requisite professional certification in accounting, or
other comparable experience. The Board shall determine whether at least one
member of the Committee qualifies as an "audit committee financial expert" in
compliance with the criteria established by the SEC and other relevant
regulations. The existence of such member, including his or her name and whether
or not he or she is independent, shall be disclosed in periodic filings as
required by the SEC.
The members of the Committee shall be elected by the Board and shall serve until
their successors shall be duly elected and qualified. Unless a Chair is elected
by the full Board, the members for the Committee may designate a Chair by
majority vote of the full Committee membership.
A-1
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. Each regularly scheduled meeting shall conclude with an
executive session of the Committee absent members of management and on such
terms and conditions as the Committee may elect. As part of its job to foster
open communication, the Committee should meet periodically with management, the
director of the internal auditing function and the independent auditors in
separate executive sessions to discuss any matters that the Committee or each of
these groups believe should be discussed privately. In addition, the Committee
should meet quarterly with the independent auditors and management to discuss
the annual audited financial statements or quarterly financial statements,
including NCRIC's disclosure under "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
III.RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports/Accounting Information Review
1. Review this Charter periodically, at least annually, and recommend to the
Board of Directors any necessary amendments as conditions dictate.
2. Review and discuss with management NCRIC's annual financial statement,
quarterly financial statements, and all internal controls reports (or summaries
thereof). Review other relevant reports or financial information submitted by
NCRIC to any governmental body, or the public, including management
certifications as required by the Sarbanes-Oxley Act of 2002 (Sections 302 and
906) and relevant reports rendered by the independent auditors (or summaries
thereof).
3. Recommend to the Board whether the financial statements should be included in
the Annual Report on Form 10-K. Review with financial management and the
independent auditors the 10-Q prior to its filing (or prior to the release of
earnings).
4. Review earnings press releases with management, including review of
"pro-forma" or "adjusted" non-GAAP information.
5. Discuss with management financial information and earnings guidance provided
to analysts and rating agencies. Such discussions may be on general terms (i.e.
discussion of the types of information to be disclosed and the type of
presentation to be made).
6. Review the regular internal reports (or summaries thereof) to management
prepared by the internal auditing department and management's response.
Independent Auditors
7. Appoint, compensate, and oversee the work performed by the independent
auditor for the purpose of preparing or issuing an audit report or related work.
Review the performance of the independent auditors and remove the independent
auditors if circumstances warrant. The independent auditors shall report
directly to the audit committee and the audit committee shall oversee the
resolution of disagreements between management and the independent auditors in
the event that they arise. Consider whether the auditor's performance of
permissible nonaudit services is compatible with the auditor's independence.
8. Review with the independent auditor any problems or difficulties and
management's response, review the independent auditor's attestation and report
on management's internal control report, and hold timely discussions with the
independent auditors regarding the following:
o all critical accounting policies and practices;
o all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor;
o other material written communications between the independent auditor
and management including, but not limited to, the management letter
and schedule of unadjusted differences; and
o an analysis of the auditor's judgment as to the quality of NCRIC's
accounting principles, setting forth significant reporting issues and
judgments made in connection with the preparation of the financial
statements.
A-2
9. At least, annually, obtain and review a report by the independent auditor
describing:
o the firm's internal quality control procedures;
o any material issues raised by the most recent internal quality-control
review, peer review, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues; and
o to assess the auditor's independence, all relationships between the
independent auditor and NCRIC.
10. Review and preapprove both audit and nonaudit services to be provided by the
independent auditor (other than with respect to de minimus exceptions permitted
by the Sarbanes-Oxley Act of 2002). This duty may be delegated to one or more
designated members of the Audit Committee with any such preapproval reported to
the audit committee at its next regularly schedule meeting. The committee may
also adopt policies and procedures for the pre-approval of audit and permissible
nonaudit services. Approval of nonaudit services shall be disclosed to investors
in periodic reports required by Section 13(a) of the Securities Exchange Act of
1934.
11. Set clear hiring policies, compliant with governing laws or regulations, for
employees or former employees of the independent auditor.
Financial Reporting Processes and Accounting Policies
12. In consultation with the independent auditors and the internal auditors,
review the integrity of the organization's financial reporting processes (both
internal and external), and the internal control structure (including disclosure
controls).
13. Review with management major issues regarding accounting principles and
financial statement presentations, including any significant changes in NCRIC's
selection or application of accounting principles, and major issues as to the
adequacy of NCRIC's internal controls and any special audit steps adopted in
light of material control deficiencies.
14. Review analyses prepared by management (and the independent auditor as noted
in item 8 above) setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial statements,
including analyses of the effects of alternative GAAP methods on the financial
statements.
15. Review with management the effect of regulatory and accounting initiatives,
as well as off-balance sheet structures, on the financial statements of NCRIC.
16. Review and approve all related party transactions.
17. Establish and maintain procedures for the receipt, retention, and treatment
of complaints regarding accounting, internal accounting, or auditing matters.
18. Establish and maintain procedures for the confidential, anonymous submission
by Company employees regarding questionable accounting or auditing matters.
Internal Audit
19. Review and advise on the selection and removal of the internal auditor
director.
20. Review activities, organizational structure, and qualifications of the
internal audit function.
21. Annually, review and recommend changes (if any) to the internal audit
charter.
22. Periodically review with the internal audit director any significant
difficulties, disagreements with management, or scope restrictions encountered
in the course of the function's work.
23. Periodically review with the independent auditor, the budget, staffing, and
responsibilities of the internal audit function.
Legal Compliance and Risk Management
24. Review, with the organization's counsel, legal compliance matters including
corporate securities trading policies.
25. Review, with the organization's counsel, any legal matter that could have a
significant impact on the organization's financial statements.
26. Discuss policies with respect to risk assessment and risk management. Such
discussions should include NCRIC's major financial and accounting risk exposures
and the steps management has undertaken to control them.
A-3
Other Responsibilities
27. Review with the independent auditors, the internal auditing department and
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have been implemented.
This review should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the Committee.
28. Prepare the report that the SEC requires be include in NCRIC's annual proxy
statement.
29. Annually, perform a self-assessment relative to the Audit Committee's
purpose, duties and responsibilities outlined herein.
30. Perform any other activities consistent with this Charter, NCRIC's by-laws
and governing law, as the Committee or the Board deems necessary or appropriate.
A-4
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE NCRIC GROUP, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 31, 2005
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NCRIC Group, Inc.
The undersigned shareholder of NCRIC Group, Inc. (the "Company"), hereby
appoints the Board of Directors, with full powers of substitution, as
attorneys-in-fact and agents for and in the name of the undersigned, to cast
such votes as the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held at 1055 Thomas
Jefferson Street, N.W., Washington, D.C. 20007, at 4:00 p.m., Washington, D.C.
Time, on May 31, 2005, and at any and all adjournments thereof. The Board of
Directors is authorized to cast all votes to which the undersigned is entitled
as follows:
With- For All
For hold Except
1. The election of: [_] [_] [_]
Vincent C. Burke, III, Prudence P. Kline,
J. Paul McNamara and Frank K. Ross
to serve on the Company's Board of Directors for a three-year term.
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.
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For Against Abstain
2. The ratification of the the appointment of [_] [_] [_]
Deloitte & Touche LLP as independent registered
public accountants for the year ending December
31, 2005.
Such other business as may properly come before the Annual Meeting or any
adjournment thereof. NOTE: The Board of Directors is not aware of any
other matter that may come before the Annual Meeting.
The Board of Directors recommends a vote "FOR" the above listed
Propositions.
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Please be sure to sign and date | Date |
this Proxy in the box below. | |
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| |
| |
- -----------Shareholder sign above----------Co-holder (if any) sign above-------
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage-paid envelope provided.
NCRIC GROUP, INC.
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IF SIGNED, THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED ABOVE. IF ANY
OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY
THE BOARD OF DIRECTORS IN ITS BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
Votes will be cast in accordance with this proxy. Should the undersigned be
present and elect to vote at the Annual Meeting or at any adjournment thereof
and after notification to the Secretary of NCRIC Group, Inc., at said Annual
Meeting of the shareholder's decision to terminate this proxy, then the power of
said attorney-in-fact or agents shall be deemed terminated and of no further
force and effect.
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
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.
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