<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.
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[SCPIE LOGO]
Mitchell S. Karlan, M.D.
Chairman
March 29, 1999
Dear Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of SCPIE Holdings Inc., which will be held at the Los Angeles Marriott Downtown
(formerly Sheraton Grande Hotel), located at 333 South Figueroa Street, Los
Angeles, California, on May 13, 1999, at 3:00 p.m., Pacific time.
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,
/s/ Mitchell S. Karlan, M.D.
-------------------------------
Mitchell S. Karlan, M.D.
Chairman
<PAGE> 3
SCPIE HOLDINGS INC.
1888 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1999
------------------------
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of SCPIE Holdings Inc. (the "Company") will be held at the Los
Angeles Marriott Downtown (formerly Sheraton Grande Hotel), 333 South Figueroa
Street, Los Angeles, California, on May 13, 1999, 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 2002 and until their successors
are duly elected and qualified;
2. To consider and vote upon a proposal to approve the adoption of The
Senior Executive Incentive Bonus Plan of the Company;
3. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company for the fiscal year ending December 31, 1999; and
4. 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 15, 1999, 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
LOGO
Joseph P. Henkes
Secretary
March 29, 1999
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED OR BY FACSIMILE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING. ALTERNATIVELY, YOU MAY VOTE BY TELEPHONE, AS EXPLAINED ON THE
PROXY. 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 13, 1999
------------------------
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 13, 1999, 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 2002 and until
their successors are duly elected and qualified, (2) the approval of the
adoption of the Senior Executive Incentive Bonus Plan of the Company and (3) the
ratification of the appointment of Ernst & Young LLP as independent auditors for
the Company for the fiscal year ending December 31, 1999. 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 1888 Century
Park East, Los Angeles, California 90067. The telephone number is (310)
551-5900.
This Proxy Statement is first being mailed to the Company's stockholders on
or about March 29, 1999. The costs of preparing, assembling and mailing the
Notice of Annual Meeting, Proxy Statement and proxy will be borne by the
Company.
RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES
The Company's Board of Directors has fixed the close of business on March
15, 1999, 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
11,800,891 shares of Common Stock issued, outstanding and entitled to be voted
at the Annual Meeting. These shares are held by approximately 7,326 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,
"FOR" THE APPROVAL OF THE ADOPTION OF THE SENIOR EXECUTIVE INCENTIVE BONUS PLAN
OF THE COMPANY, AND "FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER
31, 1999.
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.,
1888 Century Park East, Los Angeles, California 90067, Attention: Joseph P.
Henkes, Secretary.
<PAGE> 5
The 1998 Annual Report to Stockholders, including consolidated financial
statements for the year ended December 31, 1998, accompanies this Proxy
Statement.
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 approval of the adoption of the Senior Executive
Incentive Bonus Plan of the Company, the affirmative vote of a majority of the
votes cast is required for the approval of the Senior Executive Incentive Bonus
Plan of 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.
With respect to the ratification of auditors, the affirmative vote of a
majority of the votes cast is required for the ratification of Ernst & Young LLP
as independent auditors 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.
With respect to each matter set forth above, shares may be voted by
telephone. Stockholders with shares registered directly with ChaseMellon
Shareholder Services, LLC, the Company's transfer agent, may vote by telephone
by calling 1-800-840-1208. A number of brokerage firms and banks are
participating in a program for shares held in "street name" that offers
telephone voting options. This program is different from the program provided by
ChaseMellon Shareholder Services, LLC for shares registered in the name of the
stockholder. If your shares are held in an account at a brokerage firm or bank
participating in the program, you may vote those shares by calling the telephone
number referenced on your voting form. The giving of such a proxy will not
affect your right to vote in person should you decide to attend the Annual
Meeting. The telephone voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly. The Company has been advised by counsel that the telephone voting
procedures that have been made available through ChaseMellon Shareholder
Services, LLC are consistent with the requirements of applicable law.
REORGANIZATION OF THE EXCHANGE
The Company began operation 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
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the insurance subsidiaries of the Company pursuant to management agreements.
SCPIE Management Company is a wholly owned subsidiary of the Company.
Information in this proxy statement referring to 1996 and 1997 relates
principally to the operations of the Exchange prior to the Reorganization.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL
OWNERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 15, 1999, by (i) each
stockholder known by the Company to be a beneficial owner of more than 5% of any
class of the Company's voting securities, (ii) each director of the Company,
(iii) the Chief Executive Officer and each additional executive officer named in
the summary compensation table under "Executive Compensation," and (iv) 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.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED(1) OF TOTAL
---- --------------------- --------
<S> <C> <C>
FMR Corp.(2)............................................... 628,700 5.3%
Mitchell S. Karlan, M.D. .................................. 20,377 *
Donald J. Zuk.............................................. 51,067 *
Patrick S. Grant........................................... 8,233(3) *
Joseph P. Henkes........................................... 10,467 *
Patrick T. Lo.............................................. 8,000(4) *
Jack E. McCleary, M.D. .................................... 2,653 *
Wendell L. Moseley, M.D. .................................. 5,137 *
Allan K. Briney, M.D. ..................................... 7,238 *
Willis T. King, Jr. ....................................... 9,667 *
Charles B. McElwee, M.D. .................................. 4,907 *
Donald P. Newell........................................... 2,167 *
Harriet M. Opfell, M.D. ................................... 3,112 *
William A. Renert, M.D. ................................... 3,562 *
Henry L. Stoutz, M.D. ..................................... 3,262 *
Reinhold A. Ullrich, M.D. ................................. 6,068 *
All directors and executive officers as a group (15
persons)................................................. 145,917 1.2%
</TABLE>
- ---------------
* Less than 1%.
(1) As to each person or group in the table, the table includes the following
shares issuable upon exercise of options which are exerciseable within 60
days from March 20, 1999: Mitchell S. Karlan, M.D., 1,666.67; Jack E.
McCleary, M.D., 1,666.67; Wendell L. Moseley, M.D., 1,666.67; Allan K.
Briney, M.D., 1,666.67; Willis T. King, 1,666.67; Charles B. McElwee, M.D.,
1,666.67; Donald P. Newell, 1,666.67; Harriet M. Opfell, M.D., 1,666.67;
William A. Renert, M.D., 1,666.67; Henry L. Stoutz, M.D., 1,666.67; Reinhold
A. Ullrich, M.D., 1,666.67; Donald J. Zuk, 21,066.67; Patrick S. Grant,
7,733.33; Joseph P. Henkes, 8,466.67; and Patrick T. Lo, 6,000.
(2) FMR Corp. has sole or shared power to vote no shares and sole power to
dispose or to direct the disposition of 628,700 shares.
(3) Includes five hundred (500) shares held jointly with Mr. Grant's spouse.
(4) Includes three hundred (300) shares held by Mr. Lo's spouse.
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<PAGE> 7
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 2002. The Board's nominees are Dr. Charles B. McElwee, Dr. William
A. Renert, Dr. Henry L. Stoutz and Mr. Donald J. Zuk, 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.
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. All of the current directors of the Company
were first elected to their positions during 1996, while the Company was a
subsidiary of the Exchange.
NOMINEES FOR ELECTION AS DIRECTORS TO BE ELECTED FOR A TERM OF THREE YEARS
ENDING AT THE ANNUAL MEETING OF STOCKHOLDERS IN 2002
Charles B. McElwee, M.D., 68, 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 the Los Angeles County
Medical Association ("LACMA"), a former Chairman of the Board of Trustees of
LACMA, and is a member of the Board of Trustees of the California Medical
Association ("CMA"). He is also Chairman of the California Medical Association
Political Action Committee, the legislative arm of the CMA.
William A. Renert, M.D., 59, 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. He is currently Chairman of the Board of Directors of Grossmont Hospital.
Dr. Renert is a past President of the San Diego County Medical Society.
Henry L. Stoutz, M.D., 66, Director, was a member of the Board of Governors
of the Exchange from 1976 until the time of the Reorganization. He was a
board-certified urologist in Ventura, California, for more than five years prior
to his retirement in 1997, 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, 62, 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.
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DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
TERMS EXPIRING AT 2000 ANNUAL MEETING OF STOCKHOLDERS
Allan K. Briney, M.D., 77, 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 LACMA, and is a former Chairman of LACMA's Board of
Trustees. He is a former Chief of Staff of Presbyterian Intercommunity Hospital
of Whittier.
Willis T. King, Jr., 54, Director, has been a director and officer of J&H
Marsh McLennan, insurance brokers, since March 1997. From 1986 to 1997, Mr. King
served as Chairman and Chief Executive Officer of Willcox Incorporated
Reinsurance Intermediaries. Mr. King currently serves as Vice Chairman, Guy
Carpenter & Company, Inc., a subsidiary of J&H Marsh McLennan engaged in
reinsurance.
Harriet M. Opfell, M.D., 74, 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., 71, 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 CMA Board of
Trustees from 1989 to 1995. He was an alternate delegate to the American Medical
Association ("AMA") from 1990-1997.
TERMS EXPIRING AT 2001 ANNUAL MEETING OF STOCKHOLDERS
Mitchell S. Karlan, M.D., 71, 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 a past 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. He currently is a member of the Board of Trustees of the American
Society of General Surgeons. Dr. Karlan is Chairman-Elect of the Surgical Caucus
of the AMA.
Jack E. McCleary, M.D., 71, Director and Treasurer, was a member of the
Board of Governors of the Exchange from 1982 until the time of the
Reorganization. He was a board-certified dermatologist in Sherman Oaks,
California, for more than five years prior to his retirement in 1997. He is a
former CMA and LACMA President and Speaker of the CMA House of Delegates.
Wendell L. Moseley, M.D., 71, Director, was a member of the Board of
Governors of the Exchange from 1983 until the time of the Reorganization. He was
a board-certified family practitioner in San Bernardino, California, for more
than five years prior to his retirement in 1992, 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 served as a CMA
delegate for 27 years.
Donald P. Newell, 61, 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE
DIRECTOR NAMED ABOVE.
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<PAGE> 9
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were five meetings of the Company's Board of Directors during the
year ended December 31, 1998. During 1998, no incumbent director attended less
than 75% of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings of committees of the Board of
Directors.
The Board of Directors has four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee, and the Stock Option
and Incentive Bonus 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 Amended and
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
Drs. Karlan (Chairman), McCleary, Moseley and Mr. Zuk. The Executive Committee
held 12 meetings in 1998.
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent auditors, reviews the scope of audit engagements,
reviews comment letters of such auditors and management's response thereto,
approves professional services provided by such accountants, reviews the
independence of such auditors, 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 Drs. Moseley (Chairman), Karlan and McCleary. The Audit
Committee held two meetings in 1998.
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, certain 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 Drs. Karlan (Chairman) and Moseley
and Mr. King. The Compensation Committee held two meetings in 1998.
Stock Option and Incentive Bonus Committee. The Stock Option and Incentive
Bonus Committee was established by the Board on January 28, 1999, to establish
criteria and standards for incentive compensation awarded to senior executives
of the Company, to administer the stock option program of the Company and to
ensure compliance with Section 162(m) of the Internal Revenue Code. The Stock
Option and Incentive Bonus Committee consists of two members, Drs. Stoutz and
Opfell.
SUMMARY OF DIRECTORS' COMPENSATION
Each non-employee Director currently receives an annual retainer of
$30,000. 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.
In addition, pursuant to The 1997 Equity Participation Plan of the Company,
each person who, as of the date of the 1998 Annual Meeting of Stockholders, was
a non-employee director, was granted an option to purchase 5,000 shares of
Common Stock at the fair market value on the date of grant. Any person who,
during the term of the Equity Plan is initially elected to the Board of
Directors of the Company or a subsidiary and is a non-employee director at the
time of such initial election, automatically will similarly be granted an option
to purchase 5,000 shares of Common Stock. During the term of the Plan, each
non-employee director will
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automatically be granted an option to purchase 1,000 shares of Common Stock on
the date of each subsequent Annual Meeting of Stockholders at the fair market
value on such date. Directors who are employees of the Company or a subsidiary
who subsequently terminate employment with the Company or such subsidiary and
remain a director will not receive an initial option grant as a non-employee
director, but to the extent they are otherwise eligible, will receive options as
described in the preceding sentence after such termination of employment.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is principally administered by
the Compensation Committee of the Board of Directors (the "Committee"). The
Committee consists of three non-employee Directors, who are appointed by the
Board.
COMPENSATION PHILOSOPHY
The general philosophy 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
consideration and adoption, specific responsibility for the compensation of the
Chief Executive Officer, Chief Financial Officer and Senior Vice Presidents, the
award of equity incentives 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 consistent with the Company's strategic business objectives and provide
incentives for the attainment of these objectives. The compensation program
includes three components:
- Base salary, 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 the individual executive.
- 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 other companies in the
industry, and that is equitable within the Company. The Committee believes that
compensation programs must be structured to attract and retain talented
executives.
BASE SALARY
It is the Committee's policy to position base executive salaries annually
at levels that are competitive within the industry, with consideration for
industry standards, individual performance and scope of responsibility in
relation to other officers and key executives within the Company. These factors
are considered subjectively in the aggregate and none of the factors is accorded
a specific weight. In selected cases, other factors may also be considered.
The Company became publicly held in January 1997, and the then current
salary levels had been established by the governing board of the Company's
predecessor. The Committee retained an independent consultant experienced in
executive compensation programs to evaluate, among other things, the base salary
levels of the Company's executives. The compensation levels in general were
determined to approximate market, and no adjustments were made in 1998 salaries
during 1998. In November 1998, the Committee approved salary increases,
averaging approximately 7.5%, for the Chief Executive Officer, the Chief
Financial
7
<PAGE> 11
Officer and the two other Senior Vice Presidents. The Chief Executive Officer
increased the annual base salaries for the other executives. These increases
averaged 4.6%. All salary increases were effective January 1, 1999.
ANNUAL INCENTIVE (BONUS) PLAN
The Company has adopted an Annual Incentive Plan for the payment of cash
bonuses based on a combination of Company performance in relation to
predetermined objectives and individual executive performance during the year.
During the early months of each year, the Committee, together with the
Chief Executive Officer, establishes target objectives for operating income and
revenue for the year and individual bonus opportunities based on industry
comparisons. Plan payouts in relation to targeted amounts are adjusted upward or
downward based on the Company's performance in relation to targeted operating
income and revenues. The greater weight is placed on actual operating income.
Individual awards are then subject to increase or decrease by 50% based on the
individual performance of the executive during the year. Individual targeted
bonus opportunities (before adjustment for Company and individual performance)
ranged from approximately 15% to 50% of base salary during 1998.
At year end, both Company and individual performance are assessed. During
1998, the Company slightly exceeded both targeted revenues and operating income,
and incentive awards were increased by approximately 1.0% based on the
performance of the Company in relation to the targeted objectives. The Committee
then increased the individual awards for the Chief Executive Officer, Chief
Financial Officer and the two other Senior Vice Presidents by 50%, based on
their extremely high level of performance during 1998. The Chief Executive
Officer determined the personal performance levels of the other key executives
of the Company.
LONG-TERM INCENTIVES
The Committee is committed to a long-term incentive program for executives,
which will encourage participants to promote the long-term growth of the
Company. The Committee believes that the management employees should be rewarded
with a proprietary interest in the Company for continued outstanding long-term
performance and to attract, motivate and retain qualified and capable
executives.
The Company had no equity incentive plan in place when it completed its
initial public offering of Common Stock in January 1997. The senior executives
and other employees, therefore, received no stock options or similar equity
incentives in connection with the initial public offering. The Committee
believes that the absence of an incentive equity program placed the Company's
executives at somewhat of a disadvantage in relation to executives at many other
newly public companies, for which such options are frequently granted. In lieu
of stock options, the Committee recommended, and the Board adopted, a special
one-time deferred cash compensation award for executives in the aggregate amount
of approximately $960,000. Of the total awards, each key executive received
one-third of his or her award in December 1997 and 1998, and a final installment
will be paid in December 1999. The 1999 payment is conditioned upon the
executive remaining in the employment of the Company.
In November 1997, the Board of Directors adopted The 1997 Equity
Participation Plan of the Company, which was approved by stockholders at the
1998 Annual Meeting. Under this Plan, the governing committee of the Board of
Directors may grant, at its discretion, awards to participants in the form of
non-qualified stock options, incentive stock options, a combination thereof or
other equity incentives. The maximum number of shares subject to the Plan are
1,250,000 shares. This Plan was administered by the Committee during 1998. In
February 1998, the Committee granted options to purchase an aggregate of 207,590
shares of Common Stock. These options were granted at an exercise price equal to
the fair market value of the Common Stock on the date of grant and become
exercisable in three cumulative annual installments commencing one year after
the date of grant.
In January 1999, the Board of Directors formed a committee, the Stock
Option and Incentive Bonus Committee of the Board of Directors (the "Bonus
Committee") to administer, among other things, the grant
8
<PAGE> 12
of options under the Plan. The Bonus Committee is comprised of two outside
directors. In February 1999, the Bonus Committee granted options to the
executives of the Company to purchase an aggregate of 175,200 shares of Common
Stock. These options were granted at the exercise price equal to the fair market
value of the Common Stock on the date of grant and on the same terms as the
options granted by the Committee in 1998.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Zuk's base salary is set by the terms of his Employment Agreement with
the Company, which has been in effect for a number of years and renewed annually
by the directors to adjust his then current salary and to extend the term for an
additional year. During 1998, the base annual salary was $482,834, which the
Committee and the Board of Directors of the Company have increased to $501,000
for 1999. The base salary is also subject to an annual increase based on
increases in the cost of living index during the five-year term of the
Agreement.
Mr. Zuk is eligible to participate in all of the Company's annual and
long-term incentive programs. The Committee considers industry standards and
annual performance with respect to goals established by the Committee in
determining awards to Mr. Zuk under these programs. In establishing the 1998
bonus for Mr. Zuk, the Committee considered (i) his oversight of operating
performance of the Company, (ii) his strengthening of the organization structure
and management team, and (iii) and his leadership in expanding the operations of
the Company to new geographical areas and through greater reliance on
independent brokers. On the criteria of leadership, management and governance,
it is the Committee's judgment that Mr. Zuk's 1998 performance was above
expectations. In addition, premiums earned, total revenues and net income for
1998 increased over 1997 by 18.0%, 14.3% and 14.9%, respectively. The amount of
the Annual Incentive Plan bonus and the special 1997 long-term cash incentive
plan award reflect the Committee's evaluation of these factors.
INTERNAL REVENUE CODE 162(M)
The Committee has considered the potential impact of Section 162(m)
("Section 162(m)") of the Internal Revenue Code adopted under the federal
Revenue Reconciliation Act of 1993. Section 162(m) disallows a tax deduction for
any publicly-held corporation for individual compensation exceeding $1 million
in any taxable year for the Chief Executive Officer and the other senior
executive officers, other than compensation that is performance-based under a
plan which is approved by the stockholders of the corporation and which meets
certain other technical requirements. To appropriately recognize the
contribution of the Company's executive officers to the Company and its
stockholders and to exempt bonuses paid to such officers from the $1 million
limit of Section 162(m), the Committee is recommending the adoption by the Board
of a performance-based incentive bonus plan for 1999 which would base bonus
compensation on objective performance criteria and the presentation of such plan
to the stockholders for approval. Such bonus plan would be in lieu of the annual
incentive bonuses discussed above for executive officers covered by the Plan.
The Committee believes that the 1997 Equity Participation Plan, as administered
by the Bonus Committee, qualifies as "performance based" under Section 162(m).
February 24, 1999
COMPENSATION COMMITTEE
Mitchell S. Karlan, M.D. (Chairman)
Wendell L. Moseley, M.D.
Willis T. King, Jr.
9
<PAGE> 13
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,
1996, 1997 and 1998. 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 year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION(S) YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION(3)
--------------------- ---- ------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Donald J. Zuk........................... 1998 482,834 473,706 6,985 34,613
President and Chief Executive Officer 1997 435,122 476,453 4,331 34,713
1996 416,262 100,000 4,012 31,777
Joseph P. Henkes........................ 1998 240,000 188,706 -- 14,400
Senior Vice President, Operations and 1997 217,861 190,931 -- 13,072
Actuarial Services and Secretary 1996 200,000 65,000 -- 12,000
Patrick S. Grant........................ 1998 225,000 176,037 -- 13,500
Senior Vice President, Marketing 1997 199,846 175,166 -- 11,991
1996 180,000 65,000 -- 10,800
Patrick T. Lo........................... 1998 185,000 142,685 -- 11,100
Senior Vice President and 1997 163,538 140,233 -- 9,812
Chief Financial Officer 1996 146,879 40,000 -- 8,813
</TABLE>
- ---------------
(1) The Company did not issue any equity incentives to its executive officers
during 1997. In lieu of such equity incentives, the Company made a special
one-time cash award to its key executive officers. The award vests in three
equal installments on December 31, 1997, 1998 and 1999, provided that the
key executive officer to whom such award was made is still employed by the
Company on such dates. The initial installment paid in 1997 and the second
installment paid in 1998 are included in the "Bonus" column and are each
$108,800, $43,600, $40,000 and $30,833 for Messrs. Zuk, Henkes, Grant and
Lo, respectively.
(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, 2003, at a
current salary of $508,014 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.
10
<PAGE> 14
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.
In April 1998, the Company purchased a 34.2% investment interest in
Homeowners Holding Company, a newly organized insurance holding company engaged
in the personal lines insurance business in Florida ("Homeowners"), for
approximately $2,000,000. Certain officers and directors of the Company also
made investments in the capital stock of Homeowners at the same time. Willis T.
King, Jr., a director of the Company, is Chairman of the Board of Directors of
Homeowners and one of its founders. He purchased a 17.1% interest in Homeowners
in April 1998 for approximately $1,000,000, and was granted stock options in
connection with the organization of Homeowners. Mr. Zuk is a director of
Homeowners and purchased a 1.7% interest in the company for approximately
$100,000.
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
shares of Common Stock of the Company for the period from January 30, 1997,
through December 31, 1998, with the cumulative total return on the Standard and
Poor's 500 Index (the "S&P 500 Index") and the SNL All Property & Casualty
Insurance Index (the "SNL Index") over the same period (assuming the investment
of $100 in the Company's Common Stock, the S&P 500 Index and the SNL Index on
January 30, 1997, and the reinvestment of all dividends).
<TABLE>
<CAPTION>
SNL ALL PROPERTY &
SCPIE HOLDINGS INC. S&P 500 CASUALTY INSURANCE INDEX
------------------- ------- ------------------------
<S> <C> <C> <C>
1/30/97 100.00 100.00 100.00
3/31/97 99.01 96.89 98.72
6/30/97 134.63 113.80 117.72
9/30/97 149.12 122.33 131.88
12/31/97 140.58 125.85 139.93
3/31/98 150.90 143.40 150.86
6/30/98 165.17 148.14 150.66
9/30/98 152.07 133.41 122.93
12/31/98 148.39 161.81 135.22
</TABLE>
11
<PAGE> 15
PROPOSAL 2
APPROVAL OF THE ADOPTION OF THE
COMPANY'S SENIOR EXECUTIVE
INCENTIVE BONUS PLAN
The following description of the Company's Senior Executive Incentive Bonus
Plan (the "Senior Plan") is qualified in its entirety by reference to the Senior
Plan itself, a copy of which is attached hereto as Annex A. Copies of the Senior
Plan can also be obtained by making written request to the Company's Secretary.
GENERAL
On February 24, 1999, the Company's Board of Directors (the "Board")
adopted, subject to stockholder approval, the Senior Plan, a performance-based
incentive bonus plan under which key executive officers of the Company who are
designated by the Committee administering the Plan ("Covered Executives") are
eligible to receive bonus payments. The Senior Plan is intended to provide an
incentive for superior work, to motivate Covered Executives toward even higher
achievement and business results, to tie their goals and interests to those of
the Company and its stockholders and to enable the Company to attract and retain
highly qualified senior executives. The Senior Plan has been adopted and is
being submitted to the Company's stockholders for approval so that bonuses
payable by the Company to its senior executives are fully deductible for federal
income tax purposes. The Senior Plan and its performance goals are subject to
stockholder approval before any bonuses will be paid thereunder.
ADMINISTRATION
The Senior Plan will be administered by a committee (the "Bonus Committee")
which is appointed by the Board and which consists of at least two members of
the Board who qualify as "outside directors" under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations and
interpretations promulgated thereunder. Initially, the Board's Stock Option and
Incentive Bonus Committee will serve as the Bonus Committee. The Bonus Committee
will have the sole discretion and authority to administer and interpret the
Senior Plan.
BONUS DETERMINATION
A Covered Executive may receive a bonus payment under the Senior Plan based
upon the attainment of performance objectives established by the Bonus Committee
and related to one or more of the following corporate performance criteria: the
Company's underwriting results, net premiums written, net premiums earned,
investment income, miscellaneous revenue, pre-tax income, operating income, cash
flow, earnings per share, return on equity, return on invested capital or
assets, funds from operations, cost reductions and savings, appreciation in the
fair market value of the Company's stock, or earnings before any one or more of
the following items: interest, taxes, depreciation or amortization.
The actual amount of future bonus payments under the Senior Plan is not
presently determinable. However, the Senior Plan provides that the maximum bonus
for any Covered Executive shall not exceed $1,000,000 with respect to any fiscal
year of the Company.
The Senior Plan is designed to ensure that annual bonuses paid thereunder
to Covered Executives of the Company are deductible by the Company, without
limit under Section 162(m) of the Code. Section 162(m), which was added to the
Code in 1993, places a limit of $1,000,000 on the amount of compensation that
may be deducted by the Company in any taxable year with respect to each "covered
employee," within the meaning of Section 162(m). However, certain
performance-based compensation is not subject to the deduction limit. The Senior
Plan is designed to provide this type of performance-based compensation to
Covered Executives.
Bonuses paid to Covered Executives under the Senior Plan will be based upon
bonus formulas that tie the bonuses to one or more objective performance
standards. Bonus formulas for Covered Executives will be adopted in each
performance period by the Bonus Committee no later than the latest time
permitted by
12
<PAGE> 16
Section 162(m) of the Code (generally, for performance periods of one year or
more, no later than 90 days after the commencement of the performance period).
No bonuses will be paid to Covered Executives unless and until the Bonus
Committee makes a certification in writing with respect to the attainment of the
objective performance standards as required by Section 162(m) of the Code; and,
although the Bonus Committee may in its sole discretion reduce a bonus payable
to a Covered Executive, the Bonus Committee has no discretion to increase the
amount of a Covered Executive's bonus.
The effective date of the Senior Plan is January 1, 1999. The Bonus
Committee has (i) designated the Company's 1999 fiscal year (calendar year 1999)
as the first performance period under the Senior Plan, (ii) designated the
Company's Chief Executive Officer as the only Covered Executive for such
performance period and (iii) established objective bonus formulas relating to
the Company's results of operations during 1999 for such Covered Executive for
such performance period.
REASONS FOR ADOPTION OF THE SENIOR PLAN
The Board believes the Senior Plan will provide an incentive for superior
work and motivate Covered Executives toward even higher achievement and business
results. The Board also believes the Senior Plan will further tie the Covered
Executives' goals and interests to those of the Company and its stockholders,
and will enable the Company to attract and retain highly qualified Senior
Executives. Payment of bonuses under the Senior Plan will also provide for their
deductibility under the Code without regard to Section 162(m) thereof.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting is required to approve the adoption of the
Senior Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE ADOPTION OF THE SENIOR PLAN AND ITS PERFORMANCE GOALS.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Ernst & Young LLP as independent auditors for the Company and its
subsidiaries for the current fiscal year ending December 31, 1999.
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 AUDITORS FOR
THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Securities and Exchange Commission ("SEC"). The
Company became subject to the requirements of Section 16(a) on January 29, 1997.
Regulations promulgated by the SEC require the Company to disclose in this Proxy
Statement any reporting violations with respect to the 1998 fiscal year, which
came to the Company's attention based on a review of the applicable filings
required by the SEC to report such status as an officer or director or such
changes in beneficial ownership as submitted to the Company. Based solely on
review of such forms received by it, Patrick S. Grant, Senior Vice President,
Marketing, is the only reporting person to have made a late filing under Section
16(a). Mr. Grant filed a
13
<PAGE> 17
Form 5 on February 10, 1999, to report an acquisition of shares of the Company's
Common Stock in August 1998, which should have been reported on a Form 4 by
September 10, 1998. These statements are based solely on a review of the copies
of such reports furnished to the Company by its officers, directors and security
holders and their written representations that such reports accurately reflect
all reportable transactions and holdings.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Proposals and nominations which stockholders intend to present at the next
Annual Meeting of Stockholders pursuant to Rule 14a-8 of the Proxy Rules of the
SEC must be received by November 30, 1999 to be eligible for inclusion in the
proxy material of that meeting. Proposals submitted outside the processes of
Rule 14a-8 must be received by February 12, 2000 to be timely.
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, 1998, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS MAY BE
MADE TO SCPIE HOLDINGS INC., 1888 CENTURY PARK EAST, LOS ANGELES, CALIFORNIA
90067, ATTENTION: PATRICK LO.
By order of the Board of Directors.
/s/ Joseph P. Henkes
-----------------------------
Joseph P. Henkes
Secretary
1888 Century Park East, Los Angeles, California 90067
March 29, 1999
14
<PAGE> 18
ANNEX A
SCPIE HOLDINGS INC. SENIOR EXECUTIVE INCENTIVE BONUS PLAN
1. Purpose
This Senior Executive Incentive Bonus Plan (the "Senior Plan") is intended
to provide an incentive for superior work and to motivate eligible executives of
SCPIE Holdings Inc. ("SCPIE Holdings," and together with its subsidiaries, the
"Company") and its subsidiaries toward even higher achievement and business
results, to tie their goals and interests to those of the Company and its
stockholders and to enable the Company to attract and retain highly qualified
executives. The Senior Plan is for the benefit of Covered Executives (as defined
below). The Senior Plan is designed to ensure the bonuses paid hereunder to
Covered Executives are deductible without limit under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations and
interpretations promulgated thereunder.
2. Covered Executives
From time to time, the Bonus Committee (as described below) may select
certain key executives who are or who at some future date may be "covered
employees" as defined in Section 162(m)(3) of the Code (the "Covered
Executives") to be eligible to receive bonuses hereunder.
3. The Bonus Committee
The "Bonus Committee" shall be appointed by the Board of Directors of SCPIE
Holdings (the "Board") and shall consist of at least two members of the Board
who shall qualify as "outside directors" under Section 162(m) of the Code.
Initially, the Stock Option and Incentive Bonus Committee of the Board shall
constitute the Bonus Committee. The Bonus Committee shall have the sole
discretion and authority to administer and interpret the Senior Plan.
4. Bonus Determinations
A Covered Executive may receive a bonus payment under the Senior Plan based
upon the attainment of performance objectives which are established by the Bonus
Committee and relate to one or more of the following corporate business criteria
(the "Performance Goals"): the Company's underwriting results, net premiums
written, net premiums earned, investment income, miscellaneous revenue, pre-tax
income, operating income, cash flow, earnings per share, return on equity,
return on invested capital or assets, funds from operations, cost reductions and
savings, appreciation in the fair market value of the Company's stock, or
earnings before any one or more of the following items: interest, taxes,
depreciation or amortization.
Any bonuses paid to Covered Executives under the Senior Plan shall be based
upon objectively determinable bonus formulas that tie such bonuses to one or
more objective performance objectives relating to the Performance Goals. Bonus
formulas for Covered Executives shall be adopted in each performance period by
the Bonus Committee no later than the latest time permitted by Section 162(m) of
the Code (generally, for performance periods of one year or more, no later than
90 days after the commencement of the performance period). No bonuses shall be
paid to Covered Executives unless and until the Bonus Committee makes a
certification in writing with respect to the attainment of the performance
objectives as required by Section 162(m) of the Code. Although the Bonus
Committee may in its sole discretion reduce a bonus payable to a Covered
Executive pursuant to the applicable bonus formula, the Bonus Committee shall
have no discretion to increase the amount of a Covered Executive's bonus as
determined under the applicable bonus formula.
The maximum bonus payable to a Covered Executive under the Senior Plan
shall not exceed $1,000,000 with respect to any fiscal year of the Company.
The payment of a bonus to a Covered Executive with respect to a performance
period shall be conditioned upon the Covered Executive's employment by the
Company on the last day of the performance
15
<PAGE> 19
period, provided, however, that the Bonus Committee may make exceptions to this
requirement, in its sole discretion, in the case of a Covered Executive's
retirement, death or disability.
5. Amendment and Termination
SCPIE Holdings reserves the right to amend or terminate the Senior Plan at
any time in its sole discretion. Any amendments to the Senior Plan shall require
stockholder approval only to the extent required by Section 162(m) of the Code.
6. Stockholder Approval
No bonuses shall be paid under the Senior Plan unless and until the
stockholders of SCPIE Holdings shall have approved the Senior Plan and the
Performance Goals as required by Section 162(m) of the Code. So long as the
Senior Plan shall not have been previously terminated by SCPIE Holdings, it
shall be resubmitted for approval by the stockholders of SCPIE Holdings in the
fifth year after it shall have first been approved by the stockholders of SCPIE
Holdings, and every fifth year thereafter. In addition, the Senior Plan shall be
resubmitted to the stockholders of SCPIE Holdings for approval if it is amended
in any way which changes the material terms of the Senior Plan's performance
goals, including materially modifying the Performance Goals, increasing the
maximum bonus payable under the Senior Plan, or changing the Senior Plan's
eligibility requirements.
16
<PAGE> 20
SCPIE HOLDINGS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 13, 1999
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 Los Angeles Marriott Downtown, 333 South Figueroa Street, Los Angeles,
California 90071 on May 13, 1999, 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, FOR PROPOSAL 2 AND FOR
PROPOSAL 3.
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 thereof.
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
YOUR VOTE IS IMPORTANT
You can vote in one of two ways:
1. Call toll-free 1-800-840-1208 on a Touch-Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
or
2. Mark, sign and fax to (201) 296-4142.
PLEASE VOTE
<PAGE> 21
Please mark
your votes as
indicated in [X]
this example.
THE BOARD OF DIRECTORS OF SCPIE HOLDINGS INC. RECOMMENDS THAT YOU VOTE FOR
PROPOSALS 1, 2 AND 3.
PROPOSAL 1: ELECTION OF DIRECTORS
FOR all nominees WITHHOLD EXCEPTIONS
listed to the right AUTHORITY
(except as marked to to vote for all nominees
the to contrary) listed to the right
[ ] [ ] [ ]
Nominees: 01 Charles B. McElwee, M.D.
02 William A. Renert, M.D.
03 Henry L. Stoutz, M.D.
04 Donald J. Zuk
(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.)
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PROPOSAL 2: To approve the adoption of the SCPIE Holdings Inc. Senior Executive
Incentive Bonus Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PROPOSAL 3: To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the fiscal year ending December 31, 1999.
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 partnership name, by an
authorized person. Each joint tenant should sign.
Dated: _____________________, 1999
__________________________________
Signature of stockholder
__________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY
CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.
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FOLD AND DETACH HERE
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24
hours a day, 7 days a week.
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
OPTION 1: To vote as the Board of Directors recommends on ALL proposals,
press 1.
When asked, please confirm by Pressing 1.
OPTION 2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
Proposal 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9; To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0 and listen to the
instructions.
Proposal 2 - to vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
When asked, please confirm by Pressing 1.
The instructions are the same for all remaining proposals.
or
2. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in
the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
