UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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o Preliminary Proxy Statement
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þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Under §240.14a-12
Specialty Underwriters’ Alliance, Inc.
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Sincerely, | |
Chairman of the Board and Chief Executive Officer |
1. to elect seven directors for a term of one year (page 2); | |
2. to ratify the appointment of PricewaterhouseCoopers LLP as an independent registered public accounting firm of the Company for the fiscal year ending December 31, 2006 (page 4); and | |
3. to transact such other business as may properly come before the meeting, or any adjournment thereof. |
By order of the Board of Directors | |
Courtney C. Smith | |
Chairman of the Board |
Chicago, IL
Name | Age | Served as a Director Since | ||
Courtney C. Smith(4) | 58 | 2003 | ||
Peter E. Jokiel(4) | 58 | 2003 | ||
Robert E. Dean(1)(2) | 54 | 2004 | ||
Raymond C. Groth(2)(3) | 59 | 2004 | ||
Robert H. Whitehead(1)(4) | 72 | 2004 | ||
Russell E. Zimmermann(1)(3) | 65 | 2004 | ||
Paul A. Philp(2)(3) | 57 | 2005 |
(1) | Member of the Audit Committee |
(2) | Member of the Compensation Committee |
(3) | Member of the Nominating and Corporate Governance Committee |
(4) | Member of the Executive Committee |
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2005 | 2004 | |||||||
Actual Fees | Actual Fees | |||||||
Audit fees | $ | 694,155 | $ | 691,985 | ||||
Audit Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | $ | 1,500 | (1) | — | ||||
Total Fees | $ | 695,655 | $ | 691,985 | ||||
(1) | Represents fee paid to PricewaterhouseCoopers LLP for licensing of its software product. |
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Board of Directors Guidelines |
Code of Business Conduct and Ethics |
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Audit Committee |
• | to assist the Board in fulfilling its oversight responsibilities by reviewing: the financial reports and other financial information the Company provides to any governmental body or the public; the Company’s systems of internal controls, established by management and the Board, regarding finance, accounting, legal compliance and ethics; and the Company’s auditing, accounting and financial reporting processes generally; | |
• | to serve as an independent and objective body to monitor the Company’s financial reporting process and internal control system; | |
• | to select, evaluate and, when appropriate, replace the Company’s independent auditors; | |
• | to review and appraise the audit efforts of the Company’s independent auditors and internal auditing activities; and to provide an open avenue of communication among the independent auditors, financial and senior management, the internal auditing activities, and the Board; and | |
• | to approve all related party transactions. |
Compensation Committee |
• | to ensure the Company’s executive officers are compensated effectively in a manner consistent with the Company’s stated compensation strategy, internal equity considerations, competitive practice, and the requirements of the appropriate regulatory bodies; and | |
• | to communicate to stockholders the Company’s compensation policies and the reasoning behind such policies, as required by the Securities and Exchange Commission. |
Executive Committee |
• | to exercise the authority of the Board of Directors with respect to matters requiring action between meetings of the Board; and | |
• | to decide issues from time to time delegated by the Board. |
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Nominating and Corporate Governance Committee |
• | to recommend to the Board proposed nominees for election to the Board by the stockholders at annual meetings, including an annual review as to the renominations of incumbents and proposed nominees for election by the Board to fill vacancies which occur between stockholder meetings; | |
• | to develop and recommend to the Board of Directors a code of business conduct and ethics and to review the code at least annually; | |
• | to make recommendations to the Board regarding corporate governance matters and practices and to oversee an annual evaluation of the performance of the Board and management; and | |
• | to annually evaluate this committee’s performance and charter. |
• | whether or not the person has any relationships that might impair his or her independence, such as any business, financial or family relationships with the Company, its management or their affiliates; | |
• | whether or not the person serves on boards of, or is otherwise affiliated with, competing companies; | |
• | whether or not the person is willing to serve as, and willing and able to commit the time necessary for the performance of the duties of, a director of the Company; | |
• | the contribution which the person can make to the Board and the Company, with consideration being given to the person’s business and professional experience, education and such other factors as the Nominating and Corporate Governance Committee may consider relevant, and | |
• | the character and integrity of the person. |
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• | forward the communication to the director or directors to whom it is addressed; | |
• | attempt to handle the inquiry directly, as might be the case if you request information about the Company or it is a stockholder related matter; or | |
• | not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. |
Annual Compensation | Long-Term Compensation | ||||||||||||||||||||||||||||||||
Awards | Payouts | ||||||||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||||||||
Other Annual | Restricted | Underlying | LTIP | All Other | |||||||||||||||||||||||||||||
Salary | Bonus | Compensation | Stock | Options/SARs | Payouts | Compensation | |||||||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($) | ($) | Award(s) | (#) | ($) | ($) | |||||||||||||||||||||||||
Courtney C. Smith | 2005 | 400,000 | 100,000 | (2) | 71,432 | (3) | — | — | — | 6,154 | (5) | ||||||||||||||||||||||
President and Chief | 2004 | 50,769 | (1) | 100,000 | (2) | — | — | 190,000 | — | — | |||||||||||||||||||||||
Executive Officer | 2003 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Peter E. Jokiel | 2005 | 350,000 | 87,500 | (2) | — | — | — | — | 7,000 | (5) | |||||||||||||||||||||||
Executive Vice President | 2004 | 44,423 | (1) | 87,500 | (2) | — | — | 136,000 | — | — | |||||||||||||||||||||||
and Chief Financial | 2003 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Officer | |||||||||||||||||||||||||||||||||
William S. Loder | 2005 | 250,000 | 62,500 | (2) | 61,507 | (3) | — | — | — | 7,202 | (5) | ||||||||||||||||||||||
Senior Vice President and | 2004 | 31,731 | (1) | 62,500 | (2) | 30,000 | (4) | — | 64,000 | — | — | ||||||||||||||||||||||
Chief Underwriting Officer | 2003 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Gary Ferguson | 2005 | 250,000 | 62,500 | (2) | 20,025 | (3) | — | — | — | 6,923 | (5) | ||||||||||||||||||||||
Senior Vice President and | 2004 | 31,731 | (1) | 62,500 | (2) | — | — | 64,000 | — | — | |||||||||||||||||||||||
Chief Claims Officer | 2003 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Scott Goodreau | 2005 | 250,000 | 1,000 | 68,755 | (3) | — | — | — | 6,923 | (5) | |||||||||||||||||||||||
Vice President, General | 2004 | 31,731 | (1) | — | 324,450 | (4) | — | 30,000 | — | — | |||||||||||||||||||||||
Counsel, Administration | 2003 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
and Corporate Relations |
(1) | Beginning November 17, 2004 |
(2) | Guaranteed bonus as required under employment agreement |
(3) | Reimbursement for relocation expenses including a 25%gross-up for taxes |
(4) | Consulting fees prior to employment |
(5) | Company contributions under the Company’s 401(k) plan |
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Number of Securities | Value of Unexercised | |||||||||||||||||||||||
Underlying Unexercised | In-The-Money | |||||||||||||||||||||||
Options at | Options at | |||||||||||||||||||||||
December 31, 2005 (#) | December 31, 2005 ($) | |||||||||||||||||||||||
Shares Acquired | Value | (d) | (e) | |||||||||||||||||||||
Name | on Exercise (#) | Realized ($) | ||||||||||||||||||||||
(a) | (b) | (c) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Courtney C. Smith | — | — | 63,333 | 126,667 | — | — | ||||||||||||||||||
Peter E. Jokiel | — | — | 45,333 | 90,667 | — | — | ||||||||||||||||||
William S. Loder | — | — | 21,333 | 42,667 | — | — | ||||||||||||||||||
Gary J. Ferguson | — | — | 21,333 | 42,667 | — | — | ||||||||||||||||||
Scott Goodreau | — | — | 10,000 | 20,000 | — | — |
• | until December 31, 2007 for each of the first three full fiscal years after November 23, 2004, each executive will (1) receive a guaranteed non-performance related bonus equal to 25% of the executive’s base salary for such fiscal year provided the executive is employed by us at the end of such fiscal year and (2) be eligible to receive a performance based bonus of up to 75% of the executive’s base salary, if the performance goals for the executive determined by our Compensation Committee for the respective full fiscal year are achieved. |
• | base salary up to and including the effective date of termination, prorated on a daily basis; | |
• | payment for any accrued, unused vacation as of the effective date of termination; | |
• | in the event of termination due to the executive’s death or disability, any performance-based bonus previously earned but not paid; | |
• | a prorated amount of any guaranteed bonus, if termination occurs during the first three fiscal years after the commencement of the agreement; and | |
• | any other benefits (if any) payable upon the executive’s death or disability. |
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• | a lump sum payment of an amount equal to the amount of the executive’s base salary that would have been paid to the executive through the date on which the term otherwise would have ended (or through the date on which the initial term otherwise would have ended); provided, however, that if such termination occurs within 18 months before the date on which the initial term otherwise would have ended, or as a result of our failure to extend the initial term to the full extent of the three one-year extension periods, or during any extension period, then the executive will instead receive a lump sum payment of an amount equal to 150% of the annual amount of the executive’s base salary calculated at the rate in effect at the date of such termination; | |
• | a lump sum payment of an amount equal to 50% of the amount of the executive’s base salary paid pursuant to the employment agreement; | |
• | any performance-based bonus previously earned but not paid; and | |
• | any payment for any accrued, unused vacation as of the date of termination. |
• | engage in any activity that competes with us in the business of insurance; | |
• | solicit any person or entity which is then a customer or party to any insurance-related contract with us or has been a customer or supplier or such a party or solicited by us in the preceding two-year period, to divert their business to any entity other than us; | |
• | solicit for employment, engage and/or hire any person who is then employed by us or engaged by us as an independent contractor or consultant; and/or | |
• | encourage or induce any person who is then employed by us or engaged by us as an independent contractor or consultant to end his/her business relationship with us. |
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• | any person or group of persons acting in concert (other than any person who, prior to our initial public offering, is a holder of our voting securities) that holds or becomes entitled to more than 50% of the combined voting power of our outstanding voting securities; | |
• | our Board of Directors approves our merger or consolidation with any other corporation, other than a merger or consolidation that would result in all or substantially all of the holders of our voting securities immediately prior thereto continuing to hold at least 50% of the combined voting power of our outstanding voting securities or the surviving entity immediately after such merger or consolidation; or | |
• | our Board of Directors approves a plan of our complete liquidation or an agreement for the sale or disposition by us of all or substantially all of our assets, other than any such sale or disposition where all or substantially all of the holders of our voting securities immediately prior thereto continue to hold at least 50% of the combined voting power of the outstanding voting securities of the acquiror or transferee entity immediately after such sale or disposition. |
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Future Issuance under | ||||||||||||
Number of Securities to be | Weighted Average Exercise | Equity Compensation | ||||||||||
Issued upon Exercise of | Price of Outstanding | Plans (Excluding | ||||||||||
Outstanding Options, | Options, Warrants and | Securities Reflected in | ||||||||||
Plan Category | Warrants and Rights(#) (a) | Rights($) (b) | Column (a))(#) (c) | |||||||||
Equity compensation plans approved by securityholders | 727,466 | $ | 9.40 per share | 122,534 |
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• | incentive stock options, or | |
• | non-qualified stock options. |
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Number of Shares | Percent | ||||||||
Name and Address(1) | Beneficially Owned | of Stock | |||||||
Southpoint Capital Advisors LP | 1,428,500 | (2) | 9.73 | % | |||||
222 South Riverside Plaza Chicago, IL 60606 | |||||||||
Friedman, Billings, Ramsey Group, Inc. | 1,242,410 | (3) | 8.46 | % | |||||
1001 Nineteenth Street North, 18th Floor Arlington, VA 22209 | |||||||||
FMR Corp. | 1,112,330 | (4) | 7.577 | % | |||||
82 Devonshire Street Boston, MA 02109 | |||||||||
Endicott Management Company | 1,105,000 | (5) | 7.53 | % | |||||
623 Fifth Avenue, Suite 3104 New York, NY 10022 | |||||||||
Wells Fargo & Company | 930,500 | (6) | 6.34 | % | |||||
420 Montgomery Street San Francisco, CA 94105 | |||||||||
Dreman Value Management, LLC | 907,900 | (7) | 6.18 | % | |||||
520 East Cooper Avenue, Suite 230-4 Aspen, CO 81611 | |||||||||
Bares Capital Management | 814,356 | (8) | 5.55 | % | |||||
510 South Congress Avenue, Suite 306 Austin, TX 78704 | |||||||||
Eubel Brady & Suttman Asset Management, Inc. | 792,205 | (9) | 5.40 | % | |||||
7777 Washington Village Drive, Suite 210 Dayton, OH 45459 | |||||||||
Courtney Smith | 117,814 | (10) | * | ||||||
Peter E. Jokiel | 93,475 | (11) | * | ||||||
William S. Loder | 43,938 | (12) | * | ||||||
Gary J. Ferguson | 42,173 | (13) | * | ||||||
Scott W. Goodreau | 12,300 | (14) | * | ||||||
Robert E. Dean | 9,167 | (15) | * | ||||||
Raymond C. Groth | 7,667 | (16) | * | ||||||
Robert H. Whitehead | 7,667 | (17) | * | ||||||
Russell E. Zimmermann | 8,167 | (18) | * | ||||||
Paul A. Philp | 7,667 | (19) | * | ||||||
All executive officers and directors as a group | 364,661 | (20) | 2.48 | % |
(1) | All addresses are those of Specialty Underwriters’ Alliance, Inc., unless otherwise indicated. | |
(2) | This information is based upon a Schedule 13G filing with the SEC dated February 9, 2006 setting forth information as of December 31, 2005. Southpoint GP, LP, Southpoint Capital Advisors, LLC, Southpoint GP, LLC, Robert W. Butts, and John S. Clark II filed a Schedule 13G jointly to reflect ownership of these shares. | |
(3) | This information is based upon a Schedule 13G filing with the SEC dated February 14, 2006 made by Friedman, Billings, Ramsey Group Inc., or FBR, setting forth information as of December 31, |
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2005. We have entered into a voting agreement with FBR, pursuant to which it will vote all shares beneficially owned by it exceeding 5% of the outstanding shares of common stock in the same proportion as our other shares of common stock are voted. FBR is an affiliate of a broker-dealer. It purchased its shares in the ordinary course of business, and at the time of the purchase of the securities, FBR had no agreement, directly or indirectly, with any person to distribute the securities. | ||
(4) | This information is based upon a Schedule 13G filing with the SEC dated February 14, 2006 made by FMR Corp., setting forth information as of December 31, 2005. According to such filing, wholly-owned subsidiaries or affiliates of FMR Corp., or the Fidelity Funds, including a registered investment advisor, own these shares. FMR Corp. does not have the power to vote or direct the voting of shares owned by the Fidelity Funds, which power resides with Fidelity Funds’ Board of Trustees. | |
(5) | This information is based upon a Schedule 13G filing with the SEC dated February 14, 2006 made by Endicott Management Company setting forth information as of December 31, 2005. Wayne Goldstein and Robert Usdan are the beneficial owners of, and have shared voting and dispositive power over, 1,105,000 shares, by virtue of their ultimate voting and dispositive power over the following shares: (i) 204,900 shares held by W.R. Endicott, L.L.C., as general partner of Endicott Partners, L.P.; (ii) 438,200 shares held by W.R. Endicott II, L.L.C., as general partner of Endicott Partners, II, L.P.; (iii) 135,000 shares held by W.R.D. Endicott, L.L.C., as general partner of Endicott Opportunity Partners, L.P.; and (iv) 285,800 shares held by Endicott Offshore Investors, Ltd., and 41,100 shares held by two managed accounts. The shares referenced under (iv) are beneficially owned by Endicott Management Company. | |
(6) | This information is based upon a Schedule 13G filing with the SEC dated March 2, 2006 made by Wells Fargo & Company setting forth information as of December 31, 2005 and includes shares held by Wells Capital Management Incorporated, a registered investment advisor. | |
(7) | This information is based upon a Schedule 13G filing with the SEC dated February 10, 2006 made by Dreman Value Management, LLC, setting forth information as of December 31, 2005. | |
(8) | This information is based upon a Schedule 13G filing with the SEC dated February 1, 2006 made by Bares Capital Management, Inc. setting forth information as of December 31, 2005. | |
(9) | This information is based upon a Schedule 13G filing with the SEC dated February 14, 2006 made by Eubel Brady & Suttman Asset Management, Inc., setting forth information as of December 31, 2005. Ronald L. Eubel, Mark E. Brady, Robert J. Suttman, William E. Hazel, and Bernard J. Holtgrieve have shared voting power and shared dispositive power over these shares. |
(10) | Courtney C. Smith is our President, Chief Executive Officer, and director. Includes 63,333 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(11) | Peter E. Jokiel is our Executive Vice President, Chief Financial Officer, and director. Includes 45,333 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(12) | William S. Loder is our Senior Vice President and Chief Underwriting Officer. Includes 21,333 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(13) | Gary J. Ferguson is our Senior Vice President and Chief Claims Officer. Includes 21,333 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(14) | Scott W. Goodreau is our Vice President, General Counsel, Administration and Corporate Relations. Includes 10,000 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(15) | Robert E. Dean is a director. Includes 2,500 shares held in living trust as to which Mr. Dean has shared voting and dispositive power with his wife. Also includes 6,667 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
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(16) | Raymond C. Groth is a director. Includes 6,667 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(17) | Robert H. Whitehead is a director. Includes 6,667 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(18) | Russell E. Zimmermann is a director. Includes 6,667 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(19) | Paul A. Philp is a director. Includes 6,667 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
(20) | The total shares beneficially owned includes 201,333 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. The only executive officers of the Company included in this total but not otherwise shown on this table are Barry G. Cordeiro, Vice President and Chief Information Officer, and Scott K. Charbonneau, Vice President and Chief Actuary. Mr. Cordeiro beneficially owned 3,960 shares. Mr. Charbonneau beneficially owned 10,667 shares, which includes 6,667 shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days of March 20, 2006. |
Courtney C. Smith | |
Chairman of the Board | |
Dated: April 3, 2006 |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
YOUR PROXY CARD IN THE
ENVELOPE PROVIDED AS SOON AS POSSIBLE.
- Please detach along perforated line and mail in the envelope provided. -
DIRECTORS AND “FOR” PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
1. To elect 7 nominees for Directors: | ||||||||||
NOMINEES: | ||||||||||
o | FOR ALL NOMINEES | o | Courtney C. Smith | |||||||
o | Peter E. Jokiel | |||||||||
o | WITHHOLD AUTHORITY | o | Robert E. Dean | |||||||
FOR ALL NOMINEES | o | Raymond C. Groth | ||||||||
o | Robert H. Whitehead | |||||||||
o | Russell E. Zimmermann | |||||||||
o | Paul A. Philp | |||||||||
o | FOR ALL EXCEPT | |||||||||
(see instructions below) |
INSTRUCTION: | To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as show here.x |
FOR | AGAINST | ABSTAIN | ||||||
2. | To ratify the appointment of PricewaterhouseCoopers LLP as independent auditors for the fiscal year ending December 31, 2006. | o | o | o | ||||
3. | With discretionary authority upon such other matters as may properly come before the Meeting | o | o | o |
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | o |
Signature of Stockholder | Date: | |||||
Signature of Stockholder | Date: | |||||
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |