NOMINEE AND STOCK OPTION AGREEMENTS WITH GREGORY NOONAN, DATED JANUARY 9, 2006 Nominee Agreement
EXHIBIT 5
NOMINEE AND STOCK
OPTION AGREEMENTS
WITH XXXXXXX XXXXXX,
DATED JANUARY 9, 2006
This Nominee Agreement is made this 9th day of January, 2006, among Xxxxxxxx Value Partners III, L.P. (“Xxxxxxxx Value Partners III”), having its offices at 00 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, and Xxxxxxx Xxxxxx, residing at 00 Xxxxxxxxx Xxxxx, Xxxxx Xxxxxx, XX 00000 (“Nominee”).
WHEREAS, Xxxxxxxx Value Partners III is the beneficial owner of in excess of 100,000 shares of common stock of SCPIE Holdings, Inc. (“SKP”) and may solicit proxies in order to nominate as many directors as permitted under the law to SKP’s Board of Directors at the 2006 annual shareholders meeting, such nomination being in opposition to SKP’s management’s slate of nominees;
WHEREAS, Xxxxxxxx desires to nominate Xxxxxx to SKP’s Board and Xxxxxx desires to sit on SKP’s Board;
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Nominee hereby agrees to have his name placed in nomination by Xxxxxxxx Value Partners III to sit as a director of SKP, and for that purpose, understands and agrees that Xxxxxxxx Value Partners III may solicit proxies from shareholders to enable Xxxxxxxx Value Partners III to vote their shares for Nominee. Simultaneous with the execution of this Agreement, Nominee shall deliver his written consent to be named in a Xxxxxxxx Group proxy statement and to serve as a director of SKP if elected, a copy of which is attached hereto as Exhibit A.
2. In consideration thereof, Xxxxxxxx Value Partners III, L.P. hereby grants Nominee an option to purchase up to thirty thousand (30,000) shares of SKP common stock on the terms set forth in the stock option agreement annexed hereto as Exhibit B. The exercise price shall be $22.50.
3. Xxxxxxxx Value Partners III shall reimburse all of Nominee’s actual expenses incurred in connection with the nomination process, including telephone, postage, and travel, however, it being understood that should Nominee be elected as a director, he shall request that SKP reimburse his expenses for attending meetings.
4. Xxxxxxxx Value Partners III hereby indemnifies and holds the Nominee harmless for all damages and expenses incurred in connection with agreeing to have his name placed in nomination and to have proxies solicited in order to elect him to the Board of Directors of SKP. In addition, Xxxxxxxx Value Partners III hereby indemnifies Nominee to the same extent and scope as he is entitled to indemnification pursuant to SKP’s corporate documents or otherwise by law, but Nominee shall first seek indemnification from SKP before he is entitled to be indemnified by Xxxxxxxx Value Partners III. If SKP fails or refuses to indemnify or to advance expenses to Nominee upon Nominee’s request for indemnification or reimbursement of expenses, Xxxxxxxx Value Partners III shall cover and advance payments to Nominee, but Nominee shall continue to make reasonable efforts to seek payment from SKP and, to the extent he recovers any amounts from SKP, shall reimburse Xxxxxxxx Value Partners III. Nominee shall give Xxxxxxxx Value Partners III notice of the occurrence of an event as to which he believes he is entitled to indemnification no later than 20 days after Nominee has knowledge of a claim which has been asserted or threatened. Xxxxxxxx Value Partners III retains the sole right to select and retain counsel for Nominee.
5. Nominee understands that this Agreement may be publicly disclosed by Xxxxxxxx Value Partners III.
6. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement.
| XXXXXXXX VALUE PARTNERS III, L.P. | |
By: Xxxxxxxx Value LLC General Partner | |
/s/ Xxxxxx Xxxxxxxx By: Xxxxxx Xxxxxxxx Managing and Sole Member | |
XXXXXXX XXXXXX | |
/s/ Xxxxxxx Xxxxxx Xxxxxxx Xxxxxx |
Exhibit A to Xxxxxx Nominee Agreement
Consent of Proposed Nominee
I, Xxxxxxx Xxxxxx, hereby consent to be named in the proxy statement of Xxxxxxxx Value Partners III, L.P. and its affiliates to be used in connection with its solicitation of proxies from the shareholders of SCPIE Holdings Inc. for use in voting at the 2006 Annual Meeting of Stockholders of SCPIE Holdings Inc., and I hereby consent and agree to serve as a director of SCPIE Holdings Inc. if elected at such Annual Meeting.
| /s/ Xxxxxxx Xxxxxx | |
| Xxxxxxx Xxxxxx |
Dated: 1-9-06
Exhibit B to Xxxxxx Nominee Agreement
Stock Option Agreement
THIS STOCK OPTION AGREEMENT (the “Agreement”) is made and entered into as of January 9, 2006, by and between Xxxxxxxx Value Partners III, L.P., a Delaware limited partnership with offices at 00 Xxxxxxxx, 00xx xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (“SVP”), and Xxxxxxx Xxxxxx, residing at 00 Xxxxxxxxx Xxxxx, Xxxxx Xxxxxx, XX 00000 (the “Optionee”).
WHEREAS, SVP owns in excess of 100,000 shares of the Common Stock (the "Common Stock"), of SCPIE Holdings Inc. ("SKP"); and
WHEREAS, SVP and certain other parties, acting as a group (the "Xxxxxxxx Group"), may solicit proxies for a person or persons nominated by SVP and its affiliates for election to the Board of Directors of SKP (the "Board"); and
WHEREAS, Optionee has consented to his nomination by the Xxxxxxxx Group to the Board and has concurrently with the execution of this Stock Option Agreement entered into a Nominee Agreement with the Xxxxxxxx Group (the "Nominee Agreement"); and
WHEREAS, in consideration of the agreements of Optionee in the Nominee Agreement to stand for election to the Board and to serve if elected, SVP considers it desirable and in its best interests that the Optionee be granted the option to purchase up to an aggregate of Thirty Thousand (30,000) shares of the Common Stock owned by SVP (the "Option Shares"), upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the adequacy of which is hereby acknowledged, and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:
1. Grant of Option. SVP hereby grants to the Optionee the right and option (the "Option") to purchase all or any part of the Option Shares on the terms and conditions set forth herein. The Option shall vest and become exercisable as set forth in Section 4, and the number of shares may be adjusted pursuant to Section 6 hereunder.
2. Purchase Price. The purchase price per share of the Option Shares covered by the Option shall be equal to $22.50 per Option Share (subject to adjustment as provided in Section 9 below) (the "Purchase Price").
3. Certain Defined Terms. As used in this Option Agreement, the following terms shall have the following meanings:
| (a) Closing Sale Price shall mean on any particular date the closing sale price per share of Common Stock on such date on the NYSE, or if there is no such price on such date, then the closing sale price on the NYSE on the date nearest preceding such date. |
| (b) Expiration Date shall mean the date which is five years after the Vesting Date, or such earlier date on which this Option may terminate in accordance with Section 7, or such other date as the parties mutually agree in writing. |
| (c) Vesting Date shall mean the date on which the Optionee is seated on the Board. |
4. Vesting and Exercisability of the Option. The Option shall vest and become exercisable at the Vesting Date, and thereafter shall be exercisable at any time or from time to time in whole or in part on or prior to the Expiration Date.
5. Method of Exercising Option.
| (a) The Optionee may exercise the Option in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice to SVP, specifying therein the number of Option Shares which the Optionee then elects to purchase or with respect to which the Option is being exercised, accompanied by payment of the full Purchase Price for the Option Shares being purchased. The notice of exercise, accompanied by such payment, shall be delivered to SVP at its principal business office. The date on which the notice is given to SVP is hereinafter referred to as the "Date of Exercise." In no event may the Option granted hereunder be exercised for a fraction of an Option Share. |
| (b) The Optionee may pay the Purchase Price in one of the following manners: |
| (i) Cash Exercise. The Optionee shall deliver the Purchase Price to SVP in cash or by certified check or bank check or wire transfer of immediately available funds. |
| (ii) Cashless Exercise. The Optionee shall surrender this Option to SVP together with a notice of cashless exercise, in which event SVP shall issue to the Optionee the number of Option Shares determined as follows: |
| X = (Y* (A-B))/A |
| where: |
| X = the number of Option Shares to be issued to the Optionee; |
| Y = the number of Option Shares with respect to which this Option is being exercised; |
| A = the average of the Closing Sale Prices of the Common Stock for the five (5) trading days immediately prior to (but not including) the Date of Exercise. |
| B = the Purchase Price (as adjusted to the date of such calculation). |
| (c) As soon as practicable after receipt by SVP of a notice of exercise and of payment in full of the Purchase Price of all the Option Shares with respect to which the Option has been exercised, SVP shall transfer the Option Shares being purchased to the Optionee. |
6. Adjusted Option Shares. The number of Option Shares granted hereunder shall be reduced by an amount equal to fifty percent (50%) of the value of all common stock options and common stock grants received by Nominee from SKP prior to the Exercise Date, including any stock options that were exercised prior to the Exercise Date (the "Grant Shares"); the number of Option Shares resulting after computing the foregoing reduction shall be referred to hereinafter as
the "Adjusted Option Shares". By way of illustration, the Adjusted Option Shares is calculated as follows: Assume (for ease of illustration) the Purchase Price hereunder is $10.00 and the option exercise price on Grant Shares received from SKP is $14.00. Assume (for ease of illustration) the number of Option Shares hereunder is 2,000 and the number of Grant Shares covered by options granted by SKP is 1,000. Assume the value of "A" used in the equation in Section 5(b)(ii) above is $20.00. Under this illustration, the adjustment value ("Adjustment Value") shall equal 50% of $6.00 ($6.00 being the value of the options received from SKP as of the Exercise Date based on the spread between "A" and the option exercise price), or $3.00 per share. To further calculate the Adjusted Option Shares, subtract the product of the Adjustment Value and the number of Grant Shares from the product of the Purchase Price hereunder and the number of Option Shares granted hereunder. Thus,
| ($10*2,000) - ($3*1,000) = $20,000 - $3,000 = $17,000. |
Divide the resulting figure by the Purchase Price hereunder to yield the number of Adjusted Option Shares:
| $17,000/$10 = 1,700 shares |
To determine the Adjusted Option Shares with respect to Grant Shares subject to stock grants (as opposed to options) received by the Optionee from SKP, use the above formula except that the Adjustment Value shall equal 50% of the market price of such Grant Shares as of the Exercise Date.
Unvested Grant Shares shall not be considered in determining the Adjusted Option Shares. Additionally, in no case shall the calculation of Adjusted Option Shares result in a negative figure whereby Nominee would owe anything to SVP.
7. Termination of Option. Except as otherwise stated herein, the Option, to the extent not theretofore exercised, shall terminate on the Expiration Date or, if earlier, upon the first of the occurrence of any of the following events, unless SVP otherwise elects in writing:
| (a) In the event of Optionee's withdrawal from the election for the Board; |
| (b) In the event of Optionee becoming ineligible to be elected to the Board for any reason; or |
| (c) In the event of Optionee's resignation from the Board or removal from the Board. |
8. Adjustments. If prior to the exercise of any portion of the Option SKP shall have effected one or more stock splits, reverse stock splits, stock dividends, stock combinations, reclassifications, recapitalizations or similar events, the number of Option Shares subject to this Option and the Purchase Price shall be equitably adjusted as determined by SVP in good faith. SVP shall give notice of each adjustment or readjustment of the Purchase Price or the number of Option Shares to the Optionee.
9. Restrictions. The holder of this Option, by acceptance hereof, represents, warrants and covenants that this Option and the right to purchase the Option Shares is personal to the holder and shall not be transferred to any other person, other than by will or the laws of descent and distribution. Notwithstanding the foregoing, the Optionee may, at any time and from time to time, transfer all or any part of his rights under this Option and the right to purchase the Option Shares in accordance with the terms of this Option Agreement to his spouse or children, or to a trust created by the Optionee for the benefit of the Optionee or his immediate family or to a corporation or other entity controlled by the Optionee and in which the Optionee or members of his immediate family beneficially own all of the economic interests.
10. No Rights as Optionee. Nothing contained herein shall be construed to confer upon the Optionee any right to be nominated by the Xxxxxxxx Group to the Board or, if elected, to continue to serve on the Board.
11. Withholding. In the event that the Optionee elects to exercise this Option or any part thereof, and if SVP shall be required to withhold any amounts by reason of any federal, state or local tax laws, rules or regulations in respect of the issuance of Option Shares to the Optionee pursuant to the Option, SVP shall be entitled to deduct and withhold such amounts from any payments to be made to the Optionee. In any event, the Optionee shall make available to SVP promptly when requested by SVP sufficient funds to meet the requirements of such withholding; and SVP shall be entitled to take and authorize such steps as it may deem advisable in order to have such funds available to SVP out of any funds or property due or to become due to the Optionee. Notwithstanding the foregoing, the Optionee may request SVP not to withhold any or all of the amounts otherwise required to be withheld; provided that the Optionee provides SVP with sufficient documentation as may be required by federal, state or local tax laws, rules or regulations supporting his request that such amount is not required to be withheld, in which case SVP may, in its reasonable discretion, reduce such withholding amounts to the extent permitted by applicable laws, rules and regulations.
12. Validity and Construction. This Option shall be governed by and construed and enforced in accordance with the laws of the State of New York.
13. Amendment: This Agreement may be amended only in a writing signed on behalf of SVP and the Optionee.
14. Notices. Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, or overnight courier, addressed as follows: if to SVP, at its office address set forth at the beginning of this Agreement, Attention: Xx. Xxxxxx Xxxxxxxx, or at such other address as SVP by notice to the Optionee may designate in writing from time to time; and if to the Optionee, at his address set forth at the beginning of this Agreement, or at such other address as the Optionee by notice to SVP may designate in writing from time to time. Notices shall be effective upon receipt.
15. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successor, assigns and representatives. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities.
16. Reservation and Ownership of Option Shares. At all times during the period the Option is exercisable SVP shall own and make available for transfer on exercise of the Option a number of shares of Common Stock necessary to satisfy its obligations under the terms of this Option Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option Agreement as of the date set forth above.
| XXXXXXXX VALUE PARTNERS III, L.P. | |
By: Xxxxxxxx Value LLC | |
By /s/ Xxxxxx Xxxxxxxx Xxxxxx Xxxxxxxx Managing Member |
ACCEPTED:
/s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx
