<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SCPIE Holdings Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
(LOGO)
Mitchell S. Karlan, M.D.
Chairman
March 28, 1997
Dear Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of SCPIE Holdings Inc., which will be held at the Sheraton Grande Hotel, located
at 333 South Figueroa Street, Los Angeles, California, on May 8, 1997, at 3:00
p.m., Pacific time.
We are excited about our first annual meeting and our first year as a
publicly held company. The business to be considered and voted upon at the
meeting is explained in the accompanying Notice of Annual Meeting and Proxy
Statement.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE, EVEN IF YOU CURRENTLY PLAN TO
ATTEND THE MEETING. Your vote is important, regardless of the number of shares
you own. Returning the enclosed proxy will not prevent you from voting in person
but will assure that your vote is counted if you are unable to attend the
meeting.
Thank you for your support of our Company.
Sincerely,
(SIGNATURE)
Mitchell S. Karlan, M.D.
Chairman
<PAGE> 3
SCPIE HOLDINGS INC.
9441 W. OLYMPIC BOULEVARD
BEVERLY HILLS, CALIFORNIA 90212
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1997
------------------------
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of SCPIE Holdings Inc. (the "Company") will be held at the
Sheraton Grande Hotel, 333 South Figueroa Street, Los Angeles, California, on
May 8, 1997, at 3:00 p.m., Pacific time, for the following purposes:
1. To consider and vote upon the election of four directors to serve until
the Annual Meeting of Stockholders in 2000 and until their successors
are duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the fiscal year ending December 31,
1997; and
3. To transact such other business as may come properly before the Annual
Meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 17, 1997 are
entitled to receive notice of and to vote at the Annual Meeting or any
adjournments thereof. All stockholders, whether or not they expect to attend the
Annual Meeting in person, are requested to complete, date, sign and return the
enclosed proxy in the accompanying envelope. The proxy may be revoked by the
person who executed it by filing with the Secretary of the Company an instrument
of revocation or a duly executed proxy bearing a later date, or by voting in
person at the Annual Meeting.
By order of the Board of Directors
(SIGNATURE)
Joseph P. Henkes
Secretary
March 28, 1997
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF
YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON IF YOU WISH, EVEN IF
YOU PREVIOUSLY RETURNED YOUR PROXY.
<PAGE> 4
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF
SCPIE HOLDINGS INC.
TO BE HELD ON MAY 8, 1997
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the stockholders of SCPIE
Holdings Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors from holders of the
outstanding shares of $.0001 par value common stock of the Company ("Common
Stock"), for use at the Annual Meeting of Stockholders of the Company to be held
on May 8, 1997, and any adjournments thereof (the "Annual Meeting"). The Annual
Meeting is being held to consider and vote upon (1) the election of four
directors to serve until the Annual Meeting of Stockholders in 2000 and until
their successors are duly elected and qualified, and (2) the ratification of the
appointment of Ernst & Young LLP as independent accountants for the Company for
the fiscal year ending December 31, 1997. The Company's Board of Directors knows
of no other business that will be presented for consideration at the Annual
Meeting.
The principal executive offices of the Company are located at 9441 W.
Olympic Boulevard, Beverly Hills, California 90212. The telephone number of the
Company at such offices is (310) 551-5900.
This Proxy Statement is first being mailed to the Company's stockholders on
or about March 28, 1997.
RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES
The Company's Board of Directors has fixed the close of business on March
17, 1997 as the record date (the "Record Date") for the determination of the
stockholders entitled to receive notice of and to vote at the Annual Meeting.
Only holders of record of shares of Common Stock as of the Record Date will be
entitled to vote at the Annual Meeting. As of the Record Date, there were
12,294,652 shares of Common Stock issued, outstanding and entitled to be voted
at the Annual Meeting. These shares are held by approximately 10,000
stockholders of record. An additional 500,000 shares of Common Stock have been
issued to a wholly owned subsidiary of the Company. These shares are neither
voted nor counted for purposes of a quorum under applicable provisions of the
Delaware General Corporation Law.
Holders of Common Stock are entitled to one vote on each matter considered
and voted upon at the Annual Meeting for each share of Common Stock held of
record as of the Record Date. Shares of Common Stock represented by a properly
executed proxy, if such proxy is received in time and not revoked, will be voted
at the Annual Meeting in accordance with the instructions indicated in such
proxy. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES WILL BE VOTED "FOR" THE
ELECTION, AS DIRECTORS OF THE COMPANY, OF THE FOUR NOMINEES NAMED IN THE PROXY
AND "FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
1997.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by either (1) giving written notice of revocation
to the Secretary of the Company, (2) properly submitting to the Company a duly
executed proxy bearing a later date, or (3) voting in person at the Annual
Meeting. All written notices of revocation or other communications with respect
to revocation of proxies should be addressed as follows: SCPIE Holdings Inc., P.
O. Box 4015, Beverly Hills, California 90213, Attention: Joseph P. Henkes,
Secretary.
The 1996 Annual Report to Stockholders, including consolidated financial
statements for the year ended December 31, 1996, accompanies this Proxy
Statement.
1
<PAGE> 5
QUORUM AND VOTING REQUIREMENTS
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting will constitute a
quorum to conduct business at the Annual Meeting. A plurality of the votes cast
by the holders of shares of Common Stock represented and entitled to vote at the
Annual Meeting, at which a quorum must be present, is required for the election
of the directors identified in this Proxy Statement. With respect to the
election of directors, stockholders may (1) vote "for" all four nominees, (2)
"withhold" authority to vote for all such nominees, or (3) withhold authority to
vote for any individual nominee or nominees but vote for all other nominees.
Because directors are elected by a plurality of the votes cast, votes to
withhold authority with respect to one or more nominees will have no effect on
the outcome of the election. Similarly, any "broker non-votes" (which occur when
shares held by brokers or nominees for beneficial owners are voted on some
matters but not on others) would have no effect on the outcome of the election
of directors, although they would be counted as present for purposes of
determining the existence of a quorum.
With respect to the ratification of accountants, the affirmative vote of a
majority of the votes cast is required for the ratification of Ernst & Young LLP
as independent accountants for the Company. Abstentions will be considered
shares entitled to vote in the tabulation of votes cast or proposals presented
to the stockholders and will have the same effect as negative votes. Broker
non-votes are not counted for any purpose in determining whether a matter has
been approved.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
REORGANIZATION OF THE EXCHANGE
The Company began operating as an independent publicly held company on
January 29, 1997, as the result of a merger of Southern California Physicians
Insurance Exchange (the "Exchange") into SCPIE Indemnity Company, a subsidiary
of the Company, and the issuance of 9,994,652 shares of Common Stock of the
Company to approximately 10,400 members of the Exchange and an additional
500,000 shares to SCPIE Indemnity Company (the "Reorganization"). Concurrent
with the Reorganization, the Company sold an additional 2,300,000 shares in a
public offering of its Common Stock.
Prior to the Reorganization, the operations of the Exchange were conducted
by SCPIE Management Company, which acted as the Exchange's attorney-in-fact.
Executives were employed by SCPIE Management Company during 1996, and SCPIE
Management Company continues to provide management services to the insurance
subsidiaries of the Company pursuant to management agreements. SCPIE Management
Company is a wholly owned subsidiary of the Company.
The Annual Meeting is the first annual meeting of stockholders of the
Company. Information in this proxy statement referring to 1996 relates
principally to the operations of the Exchange prior to the Reorganization. All
of the current directors of the Company were elected to their positions by the
Exchange during 1996, while the Company was a subsidiary of the Exchange.
PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors is divided into three classes, with the
terms of office of the respective classes ending in successive years. Four
directors are to be elected at the Annual Meeting for full three-year terms
expiring in 2000. The Board's nominees are Dr. Allan K. Briney, Mr. Willis T.
King, Jr., Dr. Harriet M. Opfell and Dr. Reinhold A. Ullrich, all of whom are
currently directors of the Company. The terms of the other eight directors
continue after the Annual Meeting. Directors hold office until the annual
meeting for the year in which their respective terms expire and until their
successors are elected and qualified unless, prior to that time, they have
resigned, retired, or otherwise left office.
2
<PAGE> 6
All shares of Common Stock represented by valid proxies received pursuant
to this solicitation, and not revoked before they are exercised, will be voted
in the manner specified. If no specification is made, the proxies will be voted
for the election of the four directors identified below. If any nominee is
unable to serve (which is not anticipated), the persons designated as proxies
will cast votes for the remaining nominees and for such other persons as they
may select.
Set forth below is certain information regarding each nominee or director
continuing in office, including a description of his or her positions and
offices with the Company (other than as a director) and with the Exchange prior
to the Reorganization, if any; a brief description of his or her principal
occupation and business experience during at least the last five years;
directorships presently held by him or her in certain other companies or
associations; and his or her age. Each of the directors was first elected to the
Board in 1996.
NOMINEES FOR ELECTION AS DIRECTORS TO BE ELECTED
FOR A TERM OF THREE YEARS ENDING AT THE ANNUAL MEETING OF STOCKHOLDERS IN 2000
Allan K. Briney, M.D., 75, Director, was Chairman of the Board of Governors
of the Exchange from 1976 until the time of the Reorganization. He has been a
board-certified radiologist in Whittier, California, for more than five years.
He is a past President of the Los Angeles County Medical Association ("LACMA"),
and is a former Chairman of LACMA's Board of Trustees.
Willis T. King, Jr., 52, Director, has been a director and officer of
Johnson & Higgins, insurance brokers, for more than five years, and since 1986
has been Chairman and Chief Executive Officer of Willcox Incorporated
Reinsurance Intermediaries, a subsidiary of Johnson & Higgins engaged in
reinsurance.
Harriet M. Opfell, M.D., 72, Director, was a member of the Board of
Governors of the Exchange from 1981 until the time of the Reorganization. She
has been a board-certified pediatrician in Orange, California, for more than
five years, and is a clinical professor of pediatrics at the University of
California at Irvine. Dr. Opfell is a former President of the Orange County
Medical Association and served as President of the medical staff at Children's
Hospital of Orange County.
Reinhold A. Ullrich, M.D., 69, Director, was a member of the Board of
Governors of the Exchange from 1991 until the time of the Reorganization. He has
been a board-certified obstetrician and gynecologist in Torrance, California,
for more than five years, and has been on the clinical faculty at the UCLA
School of Medicine since 1954. Dr. Ullrich is a former President of LACMA, and
is a past Chairman of its Board of Trustees. He served on the California Medical
Association's ("CMA") Board of Trustees from 1989 to 1995. He has been an
alternate delegate to the American Medical Association ("AMA") since 1990.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE
DIRECTOR NAMED ABOVE.
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
TERMS EXPIRING AT 1998 ANNUAL MEETING OF STOCKHOLDERS
Mitchell S. Karlan, M.D., 69, Chairman of the Board, was a member of the
Board of Governors of the Exchange from 1986 until the time of the
Reorganization. He has been a board-certified general surgeon in Beverly Hills,
California, for more than five years. Dr. Karlan is Chairman of the AMA Council
on Scientific Affairs. He is a former President of LACMA, a former Chairman of
LACMA's Board of Trustees and a recent past member of the CMA Board of Trustees.
Jack E. McCleary, M.D., 69, Director, was a member of the Board of
Governors of the Exchange from 1982 until the time of the Reorganization. He has
been a board-certified dermatologist in Sherman Oaks, California, for more than
five years. Dr. McCleary is the immediate past President of the CMA. He is a
former LACMA President and Speaker of the CMA House of Delegates.
Wendell L. Moseley, M.D., 69, Director, was a member of the Board of
Governors of the Exchange from 1983 until the time of the Reorganization. He has
been a board-certified family practitioner in San
3
<PAGE> 7
Bernardino, California, for more than five years, and is on the clinical faculty
of the Loma Linda University School of Medicine. Dr. Moseley is a past President
of the San Bernardino County Medical Society. Dr. Moseley has served as a CMA
delegate for 26 years.
Donald P. Newell, 59, Director, has been a partner at the law firm of
Latham & Watkins in San Diego, California, for more than five years. Mr. Newell
is also a director of Mercury General Corporation, an insurance holding company.
TERMS EXPIRING AT 1999 ANNUAL MEETING OF STOCKHOLDERS
Charles B. McElwee, M.D., 66, Director, was a member of the Board of
Governors of the Exchange from 1995 until the time of the Reorganization. He has
been a board-certified orthopedic surgeon in Covina, California, for more than
five years, and is also affiliated with the University of Southern California
School of Medicine. Dr. McElwee is a former President of LACMA, a former
Chairman of the Board of Trustees of LACMA, and is a member of the Board of
Trustees of the CMA. He is also Vice Chairman of California Medical Association
Political Action Committee, the legislative arm of the CMA.
William A. Renert, M.D., 57, Director, was a member of the Board of
Governors of the Exchange from 1990 until the time of the Reorganization. He has
been a board-certified radiologist in La Mesa, California, for more than five
years. Dr. Renert is a past President of the San Diego County Medical Society.
Henry L. Stoutz, M.D., 64, Director, was a member of the Board of Governors
of the Exchange from 1976 until the time of the Reorganization. He has been a
board-certified urologist in Ventura, California, for more than five years, and
is a former clinical instructor, Department of Urology, at the UCLA School of
Medicine. He is Chairman of the Ventura County Medical Society Professional
Liability Committee.
Donald J. Zuk, 60, Director, President and Chief Executive Officer. Mr. Zuk
has been President and Chief Executive Officer of SCPIE Management Company since
1989. Prior to joining SCPIE Management Company, he served 22 years with Johnson
& Higgins, insurance brokers. His last position there was Senior Vice President
in charge of its Los Angeles Health Care operations, which included the
operations of SCPIE under a contract that then existed with SCPIE Management
Company. Since 1993, Mr. Zuk has served on the Board of Directors of GCR
Holdings Limited, a catastrophe property reinsurance company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were four meetings of the Company's Board of Directors during the
year ended December 31, 1996. During 1996, all incumbent directors attended at
least 75% of the meetings of the Board of Directors. There were no formal
meetings of Committees of the Board of Directors prior to completion of the
Reorganization.
The Board of Directors has three standing committees: the Executive
Committee, the Audit Committee and the Compensation Committee. The Board of
Directors does not have a nominating committee. The functions normally performed
by a nominating committee are performed by the Board of Directors.
Executive Committee. The Executive Committee has the authority to exercise
all powers of the Board of Directors between meetings of the Board, except in
cases where action of the entire Board is required by the Company's Restated
Certificate of Incorporation, the Bylaws or applicable law. The Executive
Committee consists of four members, one of whom is required to be the Chairman
of the Board of Directors. The members of the Executive Committee are Messrs.
Karlan (Chairman), Briney, Moseley and Zuk.
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews the scope of audit
engagements, reviews comment letters of such accountants and management's
response thereto, approves professional services provided by such accountants,
reviews the independence of such accountants, reviews any major accounting
changes made or contemplated, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal accounting controls. The
Audit Committee consists of three members, all of whom are independent
directors. The members of the Audit Committee are Messrs. Moseley (Chairman),
Karlan and McCleary.
4
<PAGE> 8
Compensation Committee. The Compensation Committee establishes remuneration
levels for the Chief Executive Officer, Chief Financial Officer and Senior Vice
Presidents of the Company, reviews significant employee benefit programs and
establishes, as it deems appropriate, and administers executive compensation
programs, including bonus plans, stock option and other equity-based programs,
deferred compensation plans and any other such cash or stock incentive programs.
The Chief Executive Officer of the Company establishes remuneration levels for
other employees of the Company. The Compensation Committee consists of three
members. The members of the Compensation Committee are Messrs. Karlan
(Chairman), Moseley and King.
SUMMARY OF DIRECTOR'S COMPENSATION
Each non-employee Director receives an annual retainer of $25,000. The
Chairman of the Board of Directors is paid $1,500 per Board meeting and each
other non-employee Director is paid $1,000 per Board meeting. Fees to
non-employee Directors for participation on committees of the Board of Directors
are $1,000 per meeting. The Chairman of the Executive Committee receives an
additional annual retainer of $24,000. All non-employee Directors will be
reimbursed for reasonable travel and other expenses incurred to attend meetings
of the Company and committees thereof.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act generally requires the Company's
executive officers and directors, and persons who own more than ten percent of
the Common Stock, to file reports of beneficial ownership and changes in
beneficial ownership with the SEC. The Company became subject to the
requirements of Section 16(a) on January 29, 1997.
5
<PAGE> 9
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the number of
shares of Common Stock beneficially owned by (i) each director of the Company,
and (ii) the Chief Executive Officer and each additional executive officer named
in the summary compensation table under "Executive Compensation," and (iii) all
directors and executive officers of the Company as a group. The Company believes
that except as otherwise noted, each individual named has sole investment and
voting power with respect to the shares of Common Stock indicated as
beneficially owned by such individual. The information set forth below is
reported as of March 10, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED OF TOTAL
----------------------------------------------------------- ------------------ --------
<S> <C> <C>
Mitchell S. Karlan, M.D.................................... 12,710 *
Donald J. Zuk.............................................. 10,100 *
Patrick S. Grant........................................... 100 *
Joseph P. Henkes........................................... 500 *
Patrick T. Lo.............................................. 500(1) *
Jack E. McCleary, M.D...................................... 986 *
Wendell L. Moseley, M.D.................................... 2,470 *
Allan K. Briney, M.D. ..................................... 5,571 *
Willis T. King, Jr. ....................................... 3,000 *
Charles B. McElwee, M.D.................................... 3,240 *
Donald P. Newell........................................... -- --
Harriet M. Opfell, M.D. ................................... 1,445 *
William A. Renert, M.D. ................................... 1,895 *
Henry L. Stoutz, M.D. ..................................... 1,595 *
Reinhold A. Ullrich, M.D. ................................. 4,401 *
All directors and executive officers as a group (15
persons)................................................. 48,370 *
</TABLE>
- ---------------
* Less than 1%.
(1) Includes three hundred (300) shares held by Mr. Lo's spouse.
As of March 10, 1997, no person was known by the Company to be the
"beneficial owner," as defined in rules of the Securities and Exchange
Commission (the "SEC"), of five percent or more of the outstanding shares of
Common Stock.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
As discussed elsewhere in this Proxy Statement, during 1996 the Company
operated as a wholly owned subsidiary of the Exchange. Accordingly, decisions
regarding 1996 compensation of Company executives were made by the management
company of the Exchange and this report does not describe the bases for that
compensation or the relationship of the Company's performance to such
compensation. Instead this report is intended to describe the current intent of
the Compensation Committee (the "Committee") regarding the formulation,
development and the establishment of policies concerning executive compensation
which will become applicable during the next year.
The general objective of the Committee is to provide executive compensation
programs, including salary, bonus and equity incentive programs, that will
enhance the profitability of the Company and its stockholder value by aligning
the financial interests of the Company's executives with those of its
stockholders. The Committee is responsible for the formulation of appropriate
compensation plans and incentives for executives of the Company, the
recommendation of such plans and incentives to the Board of Directors for its
6
<PAGE> 10
consideration and adoption, continuing oversight of the compensation of the
Chief Executive Officer, Chief Financial Officer and Senior Vice Presidents, and
the ongoing administration of various compensation programs as may be authorized
or directed by the Board.
The overall goal of the Committee is to ensure that compensation policies
are established that are consistent with the Company's strategic business
objectives and that provide incentives for the attainment of these objectives.
This will be done in the context of a compensation program that should include
three components:
- Base pay, which is intended to provide a stable annual salary at a level
consistent with individual contributions.
- Variable pay, which links bonus and other short-term incentives to the
performance of the Company and its individual units.
- Stock ownership and similar long-term incentives, which encourage actions
to maximize stockholder value.
Another goal of the Committee is to ensure that the Chief Executive Officer
and other executives are compensated in a manner that is consistent with the
Company's compensation strategy, that is competitive with identified peer
companies, and that is equitable within the Company. The Committee believes that
compensation programs must be structured to attract and retain talented
executives.
During 1997, the Committee will formulate and develop compensation programs
consistent with the foregoing policies and objectives with a view to
implementation of these programs during 1997 and 1998. As part of this project,
the Compensation Committee plans to retain independent consultants experienced
in executive compensation programs to provide data to the Committee with respect
to a full range of available alternative and complementary compensation plans
and components and to advise the Committee generally with respect to such
matters.
The Committee recognizes that the Revenue Reconciliation Act of 1993 placed
certain limits on the tax deductibility of non-performance-based compensation.
The Committee intends, to the extent practicable, that executive compensation be
deductible for federal income tax purposes, provided that doing so would be
consistent with other compensation objectives.
The Committee believes that the successful design and administration of
executive compensation programs that meet the foregoing policies and objectives
will enhance the performance of the company, its executives and stockholder
values.
March 4, 1997 COMPENSATION COMMITTEE
Mitchell S. Karlan, M.D. (Chairman)
Wendell L. Moseley, M.D.
Willis T. King, Jr.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
the compensation of (i) the Company's President and Chief Executive Officer and
(ii) the three other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers"), for the years ended December 31,
1995 and 1996. During such time periods, the Named Executive Officers were
compensated by SCPIE Management Company, which is now a subsidiary of the
Company and currently employs all executives of the Company and its
subsidiaries. The Company was organized as a Delaware corporation in February
1996 and consequently did not pay any cash compensation to its executive
officers for the years ended December 31, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION(S) YEAR(1) SALARY BONUS COMPENSATION(2) COMPENSATION(3)
- -------------------------------------- ------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Donald J. Zuk 1995 $391,378 $ 52,085 $ 1,581 $28,970
President and Chief Executive Officer 1996 416,262 100,000 4,012 31,777
Joseph P. Henkes 1995 $190,000 $ 5,000 -- $11,400
Senior Vice President, Operations and 1996 200,000 65,000 -- 12,000
Actuarial Services and Secretary
Patrick S. Grant 1995 $165,000 $ 15,000 -- $ 9,990
Senior Vice President, Marketing 1996 180,000 65,000 -- 10,800
Patrick T. Lo 1995 $131,000 $ 10,000 -- $ 7,860
Vice President and Chief Financial 1996 146,879 40,000 -- 8,813
Officer
</TABLE>
- ---------------
(1) Under the rules promulgated by the SEC, since the Company was not a
reporting company during the three immediately preceding fiscal years, only
the information with respect to the two most recent completed fiscal years
is reported in the Summary Compensation Table.
(2) Other Annual Compensation for Mr. Zuk consists of payments for medical
expenses that are in addition to those covered by the Company's medical
benefit plans.
(3) All Other Compensation consists of Company contributions to the SMC Cash
Accumulation Plan of SCPIE (the "401(k) Plan") for each Named Executive
Officer and expenses related to a vehicle provided to Mr. Zuk by the
Company.
EMPLOYMENT AGREEMENT
SCPIE Management Company has in effect an employment agreement (the
"Employment Agreement") with Mr. Zuk, which is guaranteed by the Company. The
Employment Agreement provides for a term expiring on December 31, 2001, at a
current salary of $435,200 per annum, with annual increases indexed to increases
in the Consumer Price Index for the preceding calendar year. The Employment
Agreement also provides for payment of bonuses at the discretion of the Board of
Directors of SCPIE Management Company, subject to the approval of the Company.
In the event of termination of the Employment Agreement by SCPIE Management
Company, severance pay of up to two years' salary is due under certain
circumstances. Mr. Zuk may also terminate the Employment Agreement at any time,
with or without cause, upon 90 days' written notice to SCPIE Management Company.
No other employment agreements currently exist.
COMPENSATION PLANS
401(k) Plan. Following the Reorganization, the Company has assumed the
401(k) Plan of the Exchange. The 401(k) Plan offers eligible employees of SCPIE
Management Company an opportunity to contribute to the 401(k) Plan on a regular
basis through payroll deductions in amounts equal to but not
8
<PAGE> 12
greater than 15% of their compensation. The 401(k) Plan's benefits are based on
amounts contributed and individual account investment performance. All full-time
employees of SCPIE Management Company (defined as employees whose work week
constitutes at least 38 3/4 hours) who are over age 21 years are eligible to
participate in the 401(k) Plan.
The Company matches 100% of an employee's contribution to the 401(k) Plan
up to 6% of such employee's compensation. The amount of matching contributions
made by the Company for the fiscal years ended December 31, 1996, 1995 and 1994
were $418,000, $389,000 and $350,000, respectively. In addition, the Company may
make discretionary contributions to the 401(k) Plan to be allocated among the
employees' accounts on the basis of their relative levels of compensation.
Pension Benefits. Following the Reorganization, the Company has assumed two
retirement plans that provide pensions for employees of the Company. The SCPIE
Management Company Retirement Income Plan (the "Retirement Plan") is an employee
non-contributory tax qualified defined benefit plan that provides each employee
with a basic annual benefit at normal retirement (age 65) equal to 1.15% of the
employee's earnings for each year of service after 1989 (subject to applicable
law limitations on the amount of earnings which may be considered for benefit
accrual purposes under tax qualified plans) while with the Company and the
employee's benefit accrued under a prior plan of SCPIE Management Company.
Employees attaining age 35 or attaining age 21 and having completed one year of
service are eligible to participate in the Retirement Plan. Benefits vest after
five years of service. The Supplemental Retirement Plan for Selected Employees
of SCPIE Management Company (the "Supplemental Plan") enhances the benefits
under the Retirement Plan for selected employees of the Company (currently all
15 Vice Presidents and the President of SCPIE Management Company). The enhanced
benefit under the Supplemental Plan provides an annual benefit at normal
retirement age (age 65) equal to 1.5% of the average annual rate of earnings
during the employee's 36 highest consecutive months in his or her last ten years
of service immediately prior to retirement, multiplied by the employee's years
of service with the Company or SCPIE Management Company, less the employee's
benefits under the Retirement Plan and under a predecessor plan. In addition,
the Supplemental Plan provides for a lump sum payment equal to the difference
between (i) the amount of the benefits that the employee would have accrued
under the 401(k) Plan if the Company's contribution allocated to the employee's
account had not been limited by certain provisions of the Code that limit the
amount which can be allocated to the employee's account under the 401(k) Plan
and the amount of each employee's annual compensation which can be taken into
account under the 401(k) Plan and (ii) the amount of the benefits accrued by the
employee under the 401(k) Plan. The period of service under both the Retirement
Plan and the Supplemental Plan includes any period of service with Johnson &
Higgins, which formerly managed the business of the Company.
The following table shows the estimated annual benefits payable under the
Supplemental Plan and the Retirement Plan to Company employees in the higher
salary classifications upon retirement:
<TABLE>
<CAPTION>
SUPPLEMENTAL PLAN
REMUNERATION
(AVERAGE OF 36 ESTIMATED ANNUAL BENEFIT ($)
HIGHEST --------------------------------------------------------------
CONSECUTIVE
MONTHS IN FINAL YEARS OF CREDITED SERVICE AT AGE 65
TEN YEARS OF --------------------------------------------------------------
SERVICE) 10 15 20 25 30 35
----------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500
$ 150,000 22,500 33,750 45,000 56,250 67,500 78,750
$ 200,000 30,000 45,000 60,000 75,000 90,000 105,000
$ 250,000 37,500 56,250 75,000 93,750 112,500 131,250
$ 300,000 45,000 67,500 90,000 112,500 135,000 157,500
$ 350,000 52,500 78,750 105,000 131,250 157,500 183,750
$ 400,000 60,000 90,000 120,000 150,000 180,000 210,000
$ 450,000 67,500 101,250 135,000 168,750 202,500 236,250
$ 500,000 75,000 112,500 150,000 187,500 225,000 262,500
</TABLE>
9
<PAGE> 13
The amounts shown in the table are straight life annuities payable under
the plans without reduction for the joint and survivor annuity. Retirement
benefits listed in the table are not subject to any deduction for Social
Security benefits, but are reduced by any pension amounts payable to the
employee under a Johnson & Higgins retirement plan.
The earnings subject to the retirement plans for each of the executive
officers in the Summary Compensation Table is determined from the compensation
amounts shown under "Salary," but not the amounts shown under "Bonus." As of
December 31, 1996, the years of service of Messrs. Zuk, Henkes, Grant and Lo are
30 years, 10 years, 25 years and 6 years, respectively.
Frozen Retirement Plan for Members of the SCPIE Board of Governors. The
Exchange has maintained the SCPIE Retirement Plan for Outside Governors and
Affiliated Directors (the "Board of Governors' Retirement Plan"), a nonqualified
supplemental retirement plan that provides a $12,000 annual retirement benefit
for members of the SCPIE Board of Governors and directors of affiliated entities
who have at least five years of service as defined in the Board of Governors'
Retirement Plan. After the Reorganization, the Exchange's obligations under the
Board of Governors' Retirement Plan have become the obligations of a subsidiary
of the Company. Participation in the Board of Governors' Retirement Plan was
frozen on December 31, 1996. Any persons receiving benefits on that date
continue to receive them. All other eligible persons under the Board of
Governors' Retirement Plan became 100% vested in the benefits accrued prior to
that date and no additional benefits will accrue after that date. No additional
individuals, including directors of SCPIE Indemnity or directors of the Company
or its subsidiaries, will be eligible to participate in the Board of Governors'
Retirement Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has employed in the past, and intends to employ in the future,
the law firm of Latham & Watkins to perform legal services. Donald P. Newell, a
director of the Company, is a partner of Latham & Watkins.
Certain members of the Board of Directors of the Company served as members
of the Underwriting, Claims and Investment Committees of the Exchange during
1996 and performed consulting services for the Exchange. In no case did the
compensation paid to any director for such services during 1996 exceed $60,000.
The Company expects that similar services will be performed during 1997 for the
insurance subsidiaries of the Company.
The Company has entered into in the past, and intends to enter into in the
future, certain contracts with the firms of Willcox Incorporated Reinsurance
Intermediaries and Johnson & Higgins, for whom Willis T. King, Jr., a director
of the Company, serves as a director and officer. Johnson & Higgins serves as an
insurance broker for the Company and received commissions for these services of
$43,630, $46,142 and $81,658, in 1996 1995, and 1994, respectively. The Company
has six reinsurance contracts that are placed by Willcox Incorporated
Reinsurance Intermediaries, which is the reinsurance division of Johnson &
Higgins. Willcox Incorporated Reinsurance Intermediaries received commissions on
the placement of these policies of $741,452, $679,825 and $571,613 in 1996, 1995
and 1994, respectively.
STOCK PERFORMANCE GRAPH
A stock price performance graph is not included herein because the Company
consummated its initial public offering of Common Stock on January 29, 1997 and
therefore the Common Stock was not publicly traded in 1996.
10
<PAGE> 14
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Ernst & Young LLP as independent accountants for the Company and its
subsidiaries for the current fiscal year ending December 31, 1997.
A representative of Ernst & Young LLP is expected to attend the Annual
Meeting and will have the opportunity to make a statement on behalf of the firm
if he or she desires to do so. The representative is also expected to be
available to respond to appropriate questions from stockholders.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS
FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Proposals and nominations which stockholders intend to present at the 1998
annual meeting of stockholders pursuant to Rule 14a-8 of the Proxy Rules of the
SEC must be received by November 28, 1997, to be eligible for inclusion in the
proxy material of that meeting.
OTHER INFORMATION
PROXY SOLICITATION
Officers and other employees of the Company and its subsidiaries may
solicit proxies by personal interview, telephone and telegram, in addition to
the use of the mails. None of these individuals will receive special
compensation for these services which will be performed in addition to their
regular duties. The Company has also made arrangements with brokerage firms,
banks, nominees and other fiduciaries to forward proxy solicitation materials
for shares held of record by them to the beneficial owners of such shares. The
Company will reimburse them for reasonable out-of-pocket expenses. The Company
will pay the cost of all proxy solicitation.
MISCELLANEOUS
The Company's management knows of no other matters that are to be brought
before the Annual Meeting. If any other matters come properly before the Annual
Meeting, the persons designated as proxies will vote on such matters in
accordance with their best judgment.
UPON THE WRITTEN REQUEST OF ANY PERSON WHOSE PROXY IS SOLICITED BY THIS
PROXY STATEMENT, THE COMPANY WILL FURNISH TO SUCH PERSON WITHOUT CHARGE (OTHER
THAN FOR EXHIBITS) A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1996, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO, AS FILED WITH THE SEC. REQUESTS MAY BE MADE TO SCPIE HOLDINGS INC.,
9441 W. OLYMPIC BOULEVARD, BEVERLY HILLS, CALIFORNIA 90212, ATTENTION: PATRICK
LO.
By order of the Board of Directors.
(SIGNATURE)
Joseph P. Henkes
Secretary
9441 W. Olympic Boulevard
Beverly Hills, California 90212
March 28, 1997
11
<PAGE> 15
SCPIE HOLDINGS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 8, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SCPIE HOLDINGS INC.
The undersigned Stockholder(s) of SCPIE HOLDINGS INC. (the "Company")
hereby constitutes and appoints Mitchell S. Karlan, M.D., Wendell L. Moseley,
M.D., and Donald J. Zuk, and each of them, attorneys and proxies of the
undersigned, each with full power of substitution, to attend, vote and act for
the undersigned at the Annual Meeting of Stockholders of the Company to be held
at the Sheraton Grande Hotel, 333 South Figueroa Street, Los Angeles, California
90071 on May 8, 1997, at 3:00 p.m., Pacific time, and at any adjournment or
postponement thereof, according to the number of shares of Common Stock of the
Company which the undersigned may be entitled to vote, and with all the powers
which the undersigned would possess if personally present, as indicated on the
reverse side.
THE PROXIES ARE DIRECTED TO VOTE AS SPECIFIED ON THE REVERSE SIDE.
EXCEPT AS SPECIFIED TO THE CONTRARY ON THE REVERSE SIDE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED AND FOR PROPOSAL 2.
The undersigned revokes any prior proxy at such meeting and ratifies
all said attorneys and proxies, or any of them, may lawfully do by virtue
hereof. Receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement is hereby acknowledged.
(Please sign and date on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 16
THE BOARD OF DIRECTORS OF SCPIE HOLDINGS INC. Please mark
RECOMMENDS THAT YOU VOTE FOR PROPOSALS 1 AND 2. your vote as
indicated in [X]
this sample
PROPOSAL 1: ELECTION OF DIRECTORS
FOR all nominees WITHHOLD EXCEPTIONS
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
[ ] [ ] [ ]
Nominees: Allan K. Briney, M.D., Willis T. King, Jr., Harriet M. Opfell, M.D.,
Reinhold A. Ulrich, M.D.
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
PROPOSAL 2: To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IMPORTANT: Please sign exactly as your name appears to
the left. If a corporation, please sign in full
corporate name by the president or other authorized
officer. If a partnership, please sign in the
partnership name, by an authorized person. Each joint
tenant should sign.
Dated: ______________________________________, 1997
___________________________________________________
Signature of Shareholder
___________________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD
PROMPTLY, USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
