Elah (ELLH) DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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))

¨ Definitive Proxy Statement

x Definitive Additional Materials

¨ Soliciting Material Pursuant to §240.14a-12

SIGNATURE GROUP HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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	(1)	Title of each class of securities to which transaction applies:
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¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1)	Amount Previously Paid:
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May 20, 2013

Dear Stockholder:

Your Board of Directors of Signature Group Holdings, Inc., elected only nine months ago at the 2012 Annual Meeting of Shareholders, welcomes the opportunity to share our thoughts with you regarding yet another proxy contest for control of your Company’s Board of Directors. We greatly appreciate your investment of time to review and consider our accomplishments to date and our strategy to create value for you. We respect that you have a decision to make and value your stockholdings. It is a shame we have the distraction of yet another costly proxy fight, but your Board is committed to continuing its progress and growing our Company and creating value for all stockholders.

In nine short months, we have made significant progress in focusing the management of the Company on creating value for the stockholders as a whole. The enclosure to this letter and information you will receive in future communications should prove this reality to you.

On the other hand, we have deep concerns about what we believe to be a fantasy strategy, and the capabilities and intentions, of the slate of directors proposed by the dissident stockholders.

Our desire is to continue our efforts on your behalf and we ask you to return the WHITE proxy card in support of our recommended nominees.

Respectfully submitted,

G. Christopher Colville, Director

John Koral, Director

Patrick E. Lamb, Director

Philip Tinkler, Director

In support,

Peter Bynoe, Director Nominee

15303 Ventura Blvd., Ste 1600¡ Sherman Oaks, CA¡ 91403

Our Stockholders’

Choice: Reality Versus Fantasy

May 20, 2013

CAUTIONARY STATEMENT

This

presentation

may

contain

certain

“forward-looking

statements”

within

the

meaning

of

the

Private

Securities Litigation Reform Act of 1995, including statements with regard to the future performance of

Signature

Group

Holdings,

Inc.

(“Signature”

or

the

“Company”).

Words

such

as

“believes,”

“expects,”

“projects,”

“anticipates,”

and “future”

or similar expressions are intended to identify forward-looking

statements. These forward-looking statements are subject to the inherent uncertainties in predicting

future results and conditions.  Certain factors could cause actual results to differ materially from those

projected

in

these

forward-looking

statements,

and

such

factors

are

identified

from

time

to

time

in

our

filings with the Securities and Exchange Commission (“SEC”). Pursuant to the Private Securities Litigation

Reform Act of 1995, Signature undertakes no obligation to publicly update or revise any forward-looking

statements, whether as a result of new information, future events or otherwise. 

No

representation

or

warranty,

express

or

implied,

is

made

as

to

the

accuracy

or

completeness

of

the

information contained herein, and nothing shall be relied upon as a promise or representation as to the

future of the Company.

For more specific financial information please refer to the Company’s Annual Report on Form 10-K for

the year ended December 31, 2012, the Quarterly Report on Form 10-Q for the quarter ended March,

31, 2013 and other SEC filings.

2

NINE MONTHS OF PROGRESS

Increased stock price 104%

Strengthened management team adding acquisition experience and skills

Evaluated the strategic business plan of management and enacted changes such

as monetizing Special Situation assets for acquisition capital

Honed our acquisition strategy to focus on larger acquisitions

Driven growth at NABCO

Reduced

operating

costs

(eg

Q1

2013

SG&A

Costs

are

down

25%

year

over

year)

Prepared the Company to be able to execute non dilutive, pro rata rights

offerings

3

We have made meaningful changes while taking

stockholder feedback under advisement.

OUR EFFORTS REFLECTED IN 104% STOCK PRICE INCREASE

4

OUR BUSINESS PLAN

5

Executing Acquisitions with Least Dilutive Approach

Maximizing Value of NABCO

Further Cost Reductions

Preparing the Company for Large Acquisitions

Your

Board’s

Focus

Larger transactions ($20+MM EBITDA) preferable

Accretive deals with strong NOL utilization

Prepare for future pro rata rights offering(s)

Strengthen management team and sales staff

Invest in inventory

Expand market presence

Right sizing headcount

More efficient use of professionals

Tightly manage legal expenses

Increasing liquidity by monetizing Special

Situation assets

Ready for registration offerings, integration,

compliance

Seeking increase in authorized shares

SIGNATURE IS IMPLEMENTING AN EFFECTIVE STRATEGY

Seek to appoint seasoned CEO

Want “top notch”

Board of

Directors

Pursue meaningful acquisitions

Develop appropriate capital

structure

6

Signature Accomplishments

Charlestown’s “Plan”

Well Qualified CEO In Place

Experienced Board with Diverse Skills

Positioning Company for Optimal Capital Structure

CHARLESTOWN HAS NO

NEW IDEAS

Nearly 20 years of M&A experience

Public company operations and leadership

Knowledge of Signature and long-standing stockholder

Furthering corporate objective of reducing overhead

Actively engaged with management on Company matters

Skills sets include: M&A, Operations, Integrations, Governance,

Aligned incentives with stockholders

More than a dozen deals of this size evaluated in past 9 months

Engaged in detailed negotiations, diligence, and financing efforts 

Size

isn’t

only

factor

–

business

dynamics

to

fit

within

a

public

Focused on $20+MM EBITDA Opportunities

Preparing for registrations of pro rata rights offerings

Actively engaged with credit markets

Seeking to increase share count to have optimal flexibility to

make meaningful acquisitions

at the time Charlestown initiated the proxy contest

vehicle with large tax assets is critical

Compliance, and NOL Utilization

WE BELIEVE CHARLESTOWN’S STRATEGY IS FLAWED…

7

Reality

Covanta (NYSE: CVA) is a great model to follow…

Significant stockholder value creation from NOLs

Used pro rata, non dilutive rights offerings to raise equity

…two of our candidates have Board and/or executive

management experience at Covanta

Strong executive management is critical…

Operations, acquisition execution, integration

Recruiting new personnel is challenging and risky

…the Board has put in place highly skilled executive

management with performance incentives

Operations experience at Board level is needed…

Oversee management to develop and implement strategy

Only 2 of 5 Charlestown candidates are operators

…four of our candidates have Board and/or executive

management experience with large public companies

Fantasy

Large, highly profitable companies are readily

available at low multiples

Recruiting new CEO and management is easy, and

other quick fixes are available to create stockholder

value

Large deals can be magically financed with equity

raises without regard to authorized shares or

potential limitations on NOLs

CEO-experienced board and vision will raise stock

price significantly

Competition is fierce and multiples are rising…

Requires patience, planning, and right capital resources

We believe 6.5x multiple is highly unrealistic

…the Board has positioned the Company to execute and

is actively seeking out realistic acquisitions

…AND FANTASY BASED

CHARLESTOWN’S

GREAT

IDEA:

PURSUE

NON-EXISTENT

DEALS

8

Source: Thomson Reuters

Note: Based on U.S. deals and excludes

multiples below 0.0x and above 25.0x

Charlestown suggested

purchase multiple (6.5x)

Aside from valuation fantasies,

Charlestown’s other implausible

assumptions include:

•

50-150 million new shares issued even

though the Company does not have

sufficient authorized shares (and

Charlestown is opposing an increase)

•

Share issuance sizes that could result in a

change of control and limitation of NOL

usage

•

New equity capital is an immediately

available currency

transactions have exceeded 8.8x in 5 of last 6 years

9.2x

8.0x

6.9x

8.7x

9.1x

9.4x

10.1x

10.8x

7.2x

10.0x

8.9x

9.9x

12.0x

10.8x

9.9x

9.8x

10.3x

10.1x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2007

2008

2009

2010

2011

2012

Under $250 million

$250 to $500 million

Over $500 million

A large acquisition at 6.5x would be great, but…

…actual market data tells a different story

Median multiples for $250+ million enterprise value

Median EV / EBITDA Multiples

WHAT IS CHARLESTOWN’S REAL AGENDA?

Charlestown was aware, under a confidentiality agreement signed with the Company, that we were in

detailed discussions regarding a very sizable acquisition when they initiated this proxy fight

Stockholders

deserve

to

know

how

Charlestown’s

“Plan”

is

really

going

to

work

•

Their actions and materials bring into question their true objectives

•

They present an acquisition model that cannot be accomplished without additional share authorization (which

they oppose)

•

Assumptions about share issuance demonstrates an apparent lack of understanding of NOL preservation and

utilization rules

We believe Charlestown is not presenting all the facts

•

Net asset value calculations suggest that real liabilities do not really exist and even convert into assets

•

Former board member Steven Gidumal has failed to disclose the full reasons for not being renominated in 2012

9

Another New Board, Mystery CEO, Unknown Management, Unrealistic Strategy

Charlestown Cannot Guarantee Results. . . We Do Not Think You Should Take The Risk!

WE BELIEVE OUR BOARD IS THE BEST CHOICE TO LEAD THE COMPANY

PLEASE VOTE THE WHITE PROXY CARD

10

APPENDIX

SIGNATURE’S BOARD CANDIDATES

11

Peter C.B. Bynoe (Age 62):  

Since February 2009, Mr. Bynoe has served as a partner and Chief Operating Officer of

Loop Capital LLC, a full-service investment banking firm based in Chicago, where he had been Managing Director

since February 2008. As Chief Operating Officer, Mr. Bynoe oversees the firm’s mergers and acquisitions practice in

the utility and power sector. Mr. Bynoe also currently serves as a Senior Counsel in the Chicago office of the

international law firm DLA Piper US LLP. From March 1995 until December 2007, Mr. Bynoe was a senior Partner at

DLA Piper US LLP and served on its Executive Committee. Mr. Bynoe has also been a principal of Telemat Ltd., a

consulting and project management firm, since 1982. Since 2004, Mr. Bynoe has been a director of Covanta Holding

Corporation, an internationally recognized owner of energy-from-waste and power generation projects. Since 2007,

Mr. Bynoe has been a director of Frontier Communications Corporation (formerly known as Citizens

Communication Corporation), a telephone, television and internet service provider, and was formerly a director of

Rewards Network Inc., a provider of credit card loyalty and rewards programs, from 2003 to May 2008. Mr. Bynoe

served as the Executive Director of the Illinois Sports Facilities Authority, a joint venture of the City of Chicago and

State of Illinois created to develop the new Comiskey Park for the Chicago White Sox and was Managing General

Partner of the National Basketball Association’s Denver Nuggets. Mr. Bynoe also served as a consultant to the

Atlanta Fulton County Recreation Authority and the Atlanta Committee to Organize the Olympic Games in

preparation for the 1996 Summer Olympic Games. Mr. Bynoe holds Juris Doctor and Master of Business

Administration degrees from Harvard University and is a member of the Illinois Bar and a registered real estate

broker. The Board will benefit from Mr. Bynoe’s extensive legal and financial expertise, his background in

infrastructure projects, his public sector service and his extensive knowledge of public policy issues. Mr. Bynoe’s

service as a board member for other public and private companies will also enable him to provide valuable insight

and perspective on governance matters, mergers and acquisitions activity and the utilization of net operating loss

carryforwards, of which Covanta reported approximately $392 million as of December 31, 2012.

:

:

SIGNATURE’S BOARD CANDIDATES

G.

Christopher

Colville

(Age

55)

Mr.

Colville

has

served

as

our

Chairman

of

the

Board

since

August

2012

and

as our

Chief

Executive

Officer

since

April

2013.

In

addition,

since

2007,

Mr.

Colville

has

served

as

a

strategic

advisor to various privately held enterprises, including, since 2008, KEG 1, LLC, a special-purpose acquisition

entity

focused

on

consolidating

segments

of

the

wholesale

beer

distribution

industry.

Mr.

Colville’s

principal

role as strategic advisor is to provide advice and counsel on mergers and acquisitions, capital structures,

including negotiation of bank credit facilities, corporate governance and organizational development. Prior to

that, Mr.

Colville served as an executive officer of Consolidated Graphics, Inc. (NYSE: CGX), one of North

America’s leading general commercial printing and print-related companies, from 1994 to 2000 and from

2002

to

2007.

From

2000

to

2002,

Mr.

Colville

served

as

Managing

Director

at

Murphy

Noell

Capital,

LLC,

an

investment

banking

firm.

Mr.

Colville

holds

Bachelor

of

Business

Administration

and

Master

in

Accounting

degrees from Texas Tech University and is a Certified Public Accountant.

John

Koral

(Age

54)

Mr.

Koral

has

served

as

a

director

of

Signature

since

2010

and

as

a

Developer/Managing

Partner

to

a

number

of

strategic

partnerships

focused

on

luxury

single-

and

multi-family

residential

construction projects in Colorado since 1999. In his work with the strategic partnerships, he maintains full

responsibility

for

all

aspects

of

the

projects,

from

land

purchase

to

approvals,

construction

and

sale.

Projects

under these partnerships have resulted in over 100,000 square feet of construction and approximately $25

million

of

sales

value.

From

1996

to

2011,

Mr.

Koral

served

as

a

Senior

Vice

President,

responsible

for

co-

managing the lending operations and managing the construction development operations, of U.S. Capital

Inc.,

an

asset-based

private

lender,

closing

in

excess

of

$100

million

of

loans

and

development

projects.

He

also participated in all of the company’s efforts to raise capital, including private participations, general

capitalization,

subordinated

notes

and

institutional

lines

of

credit.

Mr.

Koral

previously

managed

and

was

President

of

Apex

Mechanical

Services,

a

full

service

mechanical

contracting

firm,

from

1982

to

1996,

expanding

annual

sales

from

$5

million

to

$10

million.

He

has

also

been

an

active

investor

in

asset-based

loans since 1994.

Mr. Koral holds an Associate’s degree in Mechanical Engineering from Alfred State

University with a minor in Business Administration.

12

SIGNATURE’S BOARD CANDIDATES

13

Officer for the Los Angeles Clippers of the National Basketball Association and has served in that capacity since

July 2007. Mr. Lamb has over 20 years of chief financial officer experience in various public and public

subsidiary entities, specifically in the financial services arena, including banking, commercial finance,

commercial and residential real estate, debt and equity capital markets and insurance. He also has extensive

experience in mergers, divestitures and acquisitions, financing and securitization structures as well as public

accounting. From 2004 to July 2007, Mr. Lamb served as the Senior Vice President, Treasurer, Chief Financial

Officer and Chief Accounting Officer of the Company, when it was known as Fremont General Corporation

(“Fremont”). Prior to that, Mr. Lamb served as Vice President-Finance for Fremont and as the Chief Financial

Officer of Fremont Financial Corporation, a subsidiary of the Company. Before joining Fremont, Mr. Lamb

worked at Ernst & Whinney (now Ernst & Young) in San Francisco, serving primarily in the financial services

industries in various audit and consulting engagements. Mr. Lamb holds Bachelor of Science and Master in

Accounting degrees from the Marriott School of Management at Brigham Young University. Mr. Lamb also

serves on two advisory boards for the Marriott School of Management at Brigham Young University.

Patrick E. Lamb (Age 53):

Mr.

Lamb

has

served

as

a

director

of

Signature

since

2011.

He

is

the

Chief

Financial

:

SIGNATURE’S BOARD CANDIDATES

14

the Chief Operating Officer and Chief Financial Officer at Equity Group Investments (“EGI”) and has served in

various leadership capacities for EGI and its affiliates since 1990. He has been the firm’s Chief Financial

Officer since 2002, and the Chief Operating Officer since 2006. In his role at EGI, he works closely with the

investment team on structuring transactions, due diligence, bank financings, and securities offerings. Since

2009, he has also been Chief Financial Officer for Chai Trust Company, LLC, an Illinois registered trust

company that is trustee for many of the Zell family trusts. Mr. Tinkler oversees EGI’s financial services group,

which houses EGI’s accounting, treasury, and tax functions. He also serves as Chief Operating Officer,

managing EGI’s human resources, administration and facilities functions. From 2003 to 2004, Mr. Tinkler

worked at the company that is known today as Covanta Holding Corporation (NYSE: CVA), an internationally

recognized owner/operator of energy-from-waste and power generation projects. During his tenure there,

Mr. Tinkler served as Chief Financial Officer while the company’s predecessor, Danielson, purchased Covanta,

emerged from bankruptcy, and underwent an integration. He also served on the board of directors of

Covanta’s wholly owned California-based insurance subsidiary. Earlier in his career, Mr. Tinkler served as the

Chief Executive Officer and Chief Financial Officer at First Capital Financial, L.L.C. and the Managing General

Partner of the First Capital real estate funds. He began his career at Ernst & Young. Mr. Tinkler serves on the

board of directors of another EGI investment company, WRS Holdings Company, an environmental

construction and remediation company. Mr. Tinkler holds a Bachelor of Science degree from Northern

Illinois University and a Master of Science degree in Taxation from DePaul University.

Philip

G.

Tinkler

(Age

48)

Mr.

Tinkler

has

served

as

a

director

of

Signature

since

August

2012.

Mr.

Tinkler

is