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
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under §240.14a-12
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Specialty Underwriters Alliance, 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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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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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)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials:
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
April
[
]
, 2009
Dear Stockholders:
It is my pleasure to invite you to our 2009 annual stockholders meeting. The meeting will be
held on May 5, 2009 at 9:00 a.m. local time at 222 South Riverside Plaza, 19
th
Floor, in the Lake County
Room, Chicago, IL 60606.
On the following pages you will find the formal notice of the annual meeting and proxy
materials. Only stockholders of record of the Companys common stock, $.01 par value per share, or
the Common Stock, at the close of business on March 25, 2009 are entitled to notice of, and to vote
at, the meeting and any adjournment thereof. Holders of the Companys Class B common stock, $.01
par value per share, or the Class B Shares, are not entitled to vote on the matters to be presented
at the meeting. The vote of each stockholder entitled to vote at the meeting is important. Please
be sure to mark, sign and return the enclosed
WHITE
proxy card so that your shares will be
represented. Even if you have executed a proxy, you may still attend the annual meeting and vote
your shares in person. In addition to casting your ballot for the items to be voted upon, you will
be afforded an opportunity to ask questions and express your views on our operations.
I appreciate the continuing interest and support of our stockholders and look forward to
seeing many of you at the annual meeting.
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Sincerely,
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Courtney C. Smith
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President, Chief Executive Officer and
Chairman of the Board of Directors
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
SPECIALTY UNDERWRITERS ALLIANCE, INC.
Notice of Annual Meeting of Stockholders
to be held On May 5, 2009
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Specialty Underwriters
Alliance, Inc. (the Company) will be held on May 5, 2009 at 222 South Riverside Plaza,
19
th
Floor, in the Lake County Room, Chicago, IL 60606 at 9:00 a.m. local time for the
following purposes:
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to elect seven directors for a term of one year (see page 2 of the proxy statement);
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2.
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to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered
public accounting firm of the Company for the fiscal year ending December 31, 2009 (see
page 5 of the proxy statement); and
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3.
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to transact such other business as may properly come before the meeting, or any
adjournment thereof.
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The foregoing items of business are more fully described in the proxy statement accompanying
this notice. Only stockholders of record of the Companys common stock, $.01 par value per share
(Common Stock), at the close of business on March 25, 2009 are entitled to notice of, and to vote
at, the meeting and any adjournment thereof. Holders of the Companys Class B common stock, $.01
par value per share (Class B Shares), are not entitled to vote on the matters to be presented at
the meeting.
Our Board of Directors intends to nominate for election as directors the seven (7) persons
named in Proposal No. 1 in the proxy statement accompanying this Notice, each of whom is currently
serving as a director of the Company. We believe that the Companys current Board of Directors has
the independence, knowledge and commitment to navigate the Company during the current financial
turmoil and to deliver value for its stockholders. Please note that Hallmark Financial Services,
Inc. and certain affiliated entities (the Hallmark Entities) have provided notice that they
intend to nominate their own slate of three (3) nominees for election as directors at the annual
meeting and solicit proxies for use at the annual meeting to vote in favor of their own slate in
opposition to some of the nominees named in Proposal No. 1. We do not endorse the election of any
of the Hallmark Entities nominees as director. You may receive proxy solicitation materials from
the Hallmark Entities or other persons or entities affiliated with them, including an opposition
proxy statement and proxy card. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF ALL OF THE BOARDS NOMINEES ON THE ENCLOSED
WHITE
PROXY CARD AND URGES YOU NOT TO SIGN
OR RETURN ANY PROXY CARD SENT TO YOU BY THE HALLMARK ENTITIES. Even if you have previously signed
a proxy card sent by the Hallmark Entities, you have the right to change your vote by using the
enclosed
WHITE
proxy card to vote by signing, dating and returning the enclosed
WHITE
proxy card in
the postage-paid envelope provided. Only the latest dated proxy you submit will be counted. We
urge you to disregard any proxy card sent to you by the Hallmark Entities or any person other than
Specialty Underwriters Alliance, Inc.
If you have any questions or require any assistance with voting your shares, please contact:
THE ALTMAN GROUP
1200 Wall Street West, 3rd Fl.
Lyndhurst, NJ 07071
Call Toll-Free (866) 620-5668
Banks or Brokers Call Collect (201) 806-7300
Email: proxyinfo@altmangroup.com
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By order of the Board of Directors
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/s/ Courtney C. Smith
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Chairman of the Board
of Directors
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Dated: April
[
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, 2009
Chicago, IL
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IMPORTANT:
REGARDLESS OF HOW MANY SHARES OF COMMON STOCK YOU OWN AS OF THE RECORD DATE, PLEASE COMPLETE, DATE,
SIGN AND MAIL PROMPTLY THE ENCLOSED WHITE PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED TO
ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING.
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
SPECIALTY UNDERWRITERS ALLIANCE, INC.
222 SOUTH RIVERSIDE PLAZA
CHICAGO, IL 60606
PROXY STATEMENT
Your Proxy is being solicited by the Board of Directors (the Board) of Specialty
Underwriters Alliance, Inc., a Delaware corporation (the Company), for use at the upcoming
Annual Meeting of Stockholders (the Annual Meeting) to be held on May 5, 2009, at 222 South
Riverside Plaza, 19
th
Floor, in the Lake County Room, Chicago, IL 60606 at 9:00 a.m.
local time, or any adjournment thereof.
Each of the Companys stockholders of record will receive a copy of the Companys Annual
Report to Stockholders for the fiscal year ended December 31, 2008 (the Annual Report), which
includes the Companys Annual Report on Form 10-K (excluding exhibits) as filed with the Securities and Exchange
Commission, or the SEC. It is intended that this Proxy Statement, the enclosed
WHITE
proxy card
and the Companys Annual Report will first be sent or given to stockholders on or about April
[ ]
,
2009. Additionally, you can access a copy of the Annual Report to Stockholders and this Proxy
Statement, including form of proxy card, on the Companys website at www.suainsurance.com.
The Company has received notice from Hallmark Financial Services, Inc., and certain affiliated
entities (collectively, the Hallmark Entities) of their intention to nominate three (3) nominees
(collectively, the Hallmark Nominees) for election to the Companys Board of Directors at the
Annual Meeting. The Hallmark Nominees are not endorsed by our Board of Directors. We urge
stockholders NOT to vote any proxy card that you may receive from the Hallmark Entities. Our Board
of Directors urges you to vote FOR ALL of our nominees for director: Robert E. Dean, Raymond C.
Groth, Peter E. Jokiel, Paul A. Philp, Courtney C. Smith, Robert H. Whitehead and Russell E.
Zimmermann.
Although we are responsible for the accuracy of information contained in this Proxy Statement, we are not responsible for the accuracy of any information
provided by or relating to the
Hallmark Entities contained in any proxy solicitation materials filed or disseminated by, or on
behalf of, the Hallmark Entities or any other statements that the Hallmark Entities may otherwise
make. The Hallmark Entities choose which stockholders receive their proxy solicitation materials.
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on May 5, 2009:
The notice and Proxy Statement and Annual Report are available at www.suainsurance.com.
How to request a copy of materials for this Annual Meeting or future stockholder meetings:
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By internet www.suainsurance.com
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By telephone (888) 782-4672
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By e-mail InvestorRelations@suainsurance.com
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To obtain directions to the Annual Meeting, please contact Investor Relations at (312) 277-1600.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND
OUR 2009 ANNUAL MEETING OF STOCKHOLDERS
Q:
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Why am I receiving these materials?
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A:
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The Board of Directors of Specialty Underwriters Alliance is providing these proxy materials to you in connection with our
Annual Meeting, which will take place on May 5, 2009. As a stockholder, you are invited to attend the Annual Meeting and
are entitled to, and requested to, vote on the proposals described in this proxy statement.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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What information is contained in these materials?
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A:
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The information included in this proxy statement relates to the proposals to be voted on at the Annual Meeting, the voting
process, the compensation of directors and our most highly paid executive officers, and certain other required information.
The 2008 Annual Report, which includes the Companys audited consolidated financial statements, is also enclosed.
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Q:
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What proposals will be voted on at the Annual Meeting?
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A:
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Stockholders will vote on two proposals at the Annual Meeting:
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the election of seven (7) directors to serve on our Board of Directors for a one-year term (Proposal No. 1);
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the ratification of the appointment of PricewaterhouseCoopers LLP as the independent
registered public accounting firm of the Company for the fiscal year ending December
31, 2009 (Proposal No. 2); and
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we will also consider other business that may properly come before the Annual
Meeting, or any adjournment thereof.
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How many directors can I vote for?
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A:
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Our Board consists of seven (7) directors. Stockholders can vote for up to seven (7) nominees for election
to the Board.
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Q:
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How does the Board recommend I vote on these proposals?
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A:
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The Companys Board of Directors recommends that you vote your shares:
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FOR ALL of the Boards nominees for director (Proposal No. 1); and
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FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our
independent registered public accounting firm (Proposal No. 2).
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What should I do if I receive a proxy card from the Hallmark Entities?
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A:
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The Hallmark Entities have provided notice that they intend to
nominate their own slate of three (3) nominees for election as
directors at the Annual Meeting and solicit proxies for use at the
Annual Meeting to vote in favor of their own slate in opposition to
some of the nominees named in Proposal No. 1. You may receive proxy
solicitation materials from the Hallmark Entities, including an
opposition proxy statement and proxy card.
OUR BOARD OF DIRECTORS
URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE
HALLMARK ENTITIES.
Even if you have previously signed a proxy card
sent by the Hallmark Entities, you have the right to change your vote
by following the instructions on the
WHITE
proxy card to vote by
signing, dating and mailing the enclosed
WHITE
proxy card in the
provided envelope with postage prepaid. Only the latest dated proxy
you submit will be counted. We urge you to disregard any gold proxy card
sent to you by the Hallmark Entities or any person other than the
Company.
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Q:
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Who is entitled to vote?
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A:
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Stockholders of record as of the close of business on March 25, 2009,
(the Record Date), are entitled to notice of and to vote at the
Annual Meeting.
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Q:
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How many shares can vote?
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A:
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At the close of business on the Record Date, 14,437,355 shares of
common stock, $.01 par value per share, (the Common Stock), were
outstanding and entitled to vote. As of the Record Date, the Company
also had issued and outstanding
[1,368,562]
shares of Class B common
stock, $.01 par value per share, (the Class B Shares). Holders of
Common Stock are entitled to one vote per share on all matters to be
presented at the Annual Meeting. Holders of Class B Shares are not
entitled to vote on the matters to be presented at the Annual Meeting.
All references to you, your, yours or other words of similar
import in this proxy statement refers to the holders of Common Stock
and all references to shares in this proxy statement refers to
shares of our Common Stock. To our knowledge, no person owned
beneficially more than 5% of the outstanding common shares except as
otherwise noted on page 28.
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2
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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What shares can I vote?
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A:
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You may vote all shares of the Companys Common Stock owned by you as
of the close of business on the record date of March 25, 2009. You
may cast one vote per share that you held as of the close of business
on the Record Date. A list of stockholders entitled to vote at the
Annual Meeting will be available during ordinary business hours at
Specialty Underwriters Alliance, Inc. offices at 222 South Riverside
Plaza, Suite 1600, Chicago, Illinois, 60606 for a period of at least
10 days prior to the annual meeting.
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Q:
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How can I vote my shares at the annual meeting?
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A:
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If your shares are registered directly in your name with our transfer
agent, American Stock Transfer & Trust Company, LLC, you are
considered the stockholder of record with respect to those shares,
and the proxy materials and
WHITE
proxy card are being sent directly
to you by the Company. As the stockholder of record, you have the
right to vote in person at the Annual Meeting. If you choose to do
so, you can bring the enclosed
WHITE
proxy card or vote using the
ballot provided at the Annual Meeting. Most stockholders of the
Company hold their shares through a broker, bank or other nominee
(that is, in street name) rather than directly in their own name. If you hold your shares in street name, you are a beneficial holder, and the proxy materials are
being forwarded to you by your broker, bank or other nominee together with a
WHITE
voting instruction card. Because a beneficial
holder is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a legal proxy
from the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the meeting.
Even if you
plan to attend the annual meeting, we recommend that you vote your shares in advance as described below to ensure that your shares
are represented at the Annual Meeting.
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Q:
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How do I obtain directions to attend the Annual Meeting in person?
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A:
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You may contact Investor Relations at (312) 277-1600 or contact InvestorRelations@SUAInsurance.com to
obtain directions to the Annual Meeting.
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Q:
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What do I need for admission to the Annual Meeting?
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A:
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You are entitled to attend the Annual Meeting only if you are a stockholder of record or a beneficial
owner as of the close of business on March 25, 2009, or you hold a valid proxy for the Annual Meeting.
If
you are the stockholder of record, your name will be verified against the list of stockholders of record
prior to your admittance to the Annual Meeting. You should be prepared to present photo identification
for admission. If you hold your shares in street name, you should provide proof of beneficial ownership
on the Record Date, such as a brokerage account statement showing that you owned the Companys Common
stock as of the Record Date, a copy of the WHITE voting instruction card provided by your broker, bank or
other nominee, or other similar evidence of ownership as of the Record Date, as well as your photo
identification, for admission. If you do not provide photo identification or comply with the other
procedures outlined above upon request, you will not be admitted to the Annual Meeting.
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Q:
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How can I vote my shares without attending the Annual Meeting?
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A:
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Whether you are the stockholder of record or hold your shares in street name, you may direct your vote
without attending the Annual Meeting by completing and mailing your
WHITE
proxy card or
WHITE
voting
instruction card in the enclosed pre-paid envelope. If your shares are held in street name, your
WHITE
voting instruction card may contain instructions from your broker, bank or nominee that allow you to vote
your shares using the Internet or by telephone. Please consult with your broker, bank or nominee if you
have any questions regarding the electronic voting of shares held in street name. The granting of proxies
electronically is allowed by Section 212(c)(2) of the Delaware General Corporation Law.
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Q:
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What does it mean if I receive more than one proxy or voting instruction card?
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A:
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If your shares are registered differently or are held in more than one account, you will receive a
WHITE
proxy card or
WHITE
voting instruction card for each account. To ensure that all of your shares are
voted, please use all the
WHITE
proxy cards and
WHITE
voting instruction cards you receive to vote your
shares by signing, dating and returning the enclosed
WHITE
proxy card or
WHITE
voting instruction card for
each account in the postage-paid envelope provided. As previously noted, the Hallmark Entities have
provided notice that they intend to nominate their own slate of three (3) nominees for election as
directors at the Annual Meeting and solicit proxies for use at the Annual Meeting to vote in favor of
their own slate in opposition to some of the
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2009 Proxy Statement
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3
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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nominees named in Proposal No. 1. As a result, you may
receive proxy cards from both the Hallmark Entities and the Company. Only the latest dated proxy you
submit will be counted.
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OUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE
HALLMARK ENTITIES.
Even if you have previously signed a proxy card sent by the Hallmark
Entities, you have the right to change your vote by re-voting by signing, dating and returning
the enclosed
WHITE
proxy card in the postage-paid envelope provided. Only the latest dated
proxy you submit will be counted. We urge you to disregard any gold proxy card sent to you
by the Hallmark Entities.
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Q:
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How will my shares be voted if I return a blank WHITE proxy card?
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A:
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If you are a stockholder of record, and you sign and return a
WHITE
proxy card without giving specific voting instructions, your shares
will be voted as recommended by our Board of Directors on all matters
listed in the notice for the Annual Meeting, and as the proxy holders
may determine in their discretion with respect to any other matters
properly presented for a vote before the meeting. If you hold your
shares in street name and do not provide your broker with voting instructions (including by returning a blank
WHITE
voting instruction card), your shares may be
treated as broker non-votes and may not be counted in connection with certain matters (as described below).
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Q:
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Can I change my vote or revoke my proxy?
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A:
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You may change your vote or revoke your proxy at any time before your proxy is voted at the Annual
Meeting. If you are a stockholder of record, you may change your vote or revoke your proxy by: (1)
delivering to the Company (Attention: Corporate Secretary) at the address on the first page of this proxy
statement a written notice of revocation of your proxy; (2) delivering to the Company an authorized proxy
bearing a later date; or (3) attending the Annual Meeting and voting in person. Attendance at the meeting
in and of itself, without voting in person at the meeting, will not cause your previously granted proxy to
be revoked. For shares you hold in street name, you may change your vote by submitting new voting
instructions to your broker, bank or other nominee or, if you have obtained a legal proxy from your
broker, bank or other nominee giving you the right to vote your shares at the Annual Meeting, by attending
the meeting and voting in person.
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Q:
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How many shares must be present or represented to conduct business at the Annual Meeting?
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A:
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The quorum requirement for holding the Annual Meeting and transacting business is that holders of a
majority of the outstanding shares of Common Stock entitled to vote must be present in person or
represented by proxy. In accordance with Delaware law, abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction of business.
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Q:
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What if a quorum is not present at the meeting?
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A:
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If a quorum is not present at the scheduled time of the Annual Meeting, we may adjourn the meeting, either
with or without the vote of the stockholders. If we propose to have the stockholders vote whether to
adjourn the meeting, the proxy holders will vote all shares for which they have authority to vote in their
discretion with respect to such adjournment.
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Q:
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What vote is required to approve each of the proposals?
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A:
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The Companys bylaws provide that directors will be elected by a plurality of the votes cast at the annual
meeting, meaning that the seven (7) nominees receiving the most votes will be elected. Only votes cast
FOR a nominee will be counted. Instructions on the accompanying
WHITE
proxy card to withhold authority
to vote for one or more of the nominees will result in those nominees receiving fewer votes but will not
count as a vote AGAINST the nominees. Abstentions and broker non-votes will also result in those
nominees receiving fewer votes but will not count as a vote AGAINST the nominees. The proposal to
ratify the appointment of PricewaterhouseCoopers LLP requires the affirmative FOR vote of a majority of
those shares present in person or represented by proxy and entitled to vote on the proposal. Unless
indicated otherwise by your
WHITE
proxy card, your shares will be voted FOR ALL of the seven (7)
nominees named in Proposal No. 1 in this proxy statement and FOR Proposal No. 2.
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Q:
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What effect do abstentions and broker non-votes have on the proposals?
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A:
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In all matters other than the election of directors, abstentions have the same effect as votes AGAINST a
matter. A broker is entitled to vote shares held for a beneficial owner on routine matters, such as the
election of
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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directors and the ratification of the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm, without instructions from the beneficial owner of
those shares. However, in the event that the Hallmark Entities commence a proxy contest by mailing their
proxy statement and gold proxy card, a broker will not be entitled to vote shares held for a beneficial
owner on such items absent instructions from the beneficial owners of such shares. Thus, in the event of
a proxy contest, if you do not give your broker specific instructions, your shares will not be voted on
these matters and will not count for purposes of determining whether a quorum exists. We urge you to
provide instructions to your broker so that your votes may be counted on these matters. You should vote
your shares by following the instructions provided on the
WHITE
voting instruction card and returning your
WHITE
voting instruction card to your broker to ensure that your shares are voted on your behalf.
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Q:
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What happens if additional matters are presented at the Annual Meeting?
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A:
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If you grant a proxy on the
WHITE
proxy card, the persons named as proxy holders, Courtney C. Smith, Peter
E. Jokiel, and Scott W. Goodreau, will have the discretion to vote
your shares on any additional matters properly presented for a vote at the meeting. Other than the matters and proposals described above and elsewhere in this proxy
statement, we have not received notice of any other business to be acted upon at the Annual Meeting.
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Q:
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Who will count the votes?
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A:
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A representative of
[IVS Associates, Inc. OR Corporate Election Services, Inc.]
, an independent voting
services company, will tabulate the votes and act as Inspector of Elections.
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Q:
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Where can I find the voting results of the annual meeting?
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A:
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The Company will announce preliminary voting results at the Annual Meeting and publish final results in
the Companys quarterly report on Form 10-Q for the second quarter of fiscal 2009, if it has not published
a report containing such information at an earlier date.
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Q:
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Whats the cost of soliciting proxies for the annual meeting? Who will bear the cost of soliciting proxies
for the annual meeting?
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A:
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The Company is making this solicitation and will bear all related cost. The Company may use the services
of its directors, officers, employees and others to solicit proxies, personally or by telephone.
Arrangements also may be made with brokerage houses and other custodians, nominees, fiduciaries and
stockholders of record to forward solicitation material to the beneficial owners of stock held of record
by such persons. We have engaged The Altman Group, Inc., (the Proxy Solicitor), to distribute proxies
and assist in the solicitation of proxies. We will pay the Proxy Solicitor a fee of up to $50,000, plus
reasonable expenses, for these services. We have been advised that approximately 25 of the Proxy
Solicitors employees will be involved in the proxy solicitation. The total cost of this proxy solicitation is estimated to be $[ ].
To date, we have expended approximately $[ ] in furtherance of this solicitation.
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Q.
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Who are participants in the solicitation?
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A.
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Under applicable regulations of the SEC, each of our directors is a participant in this proxy
solicitation. Please refer to Annex A, Certain Information Regarding Participants in this
Solicitation for information about our directors.
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Other than the persons described above and our officers who have a title of at least Senior Vice
President, no employees of the Company will be employed to solicit stockholders. However, in the
course of their regular duties, employees may be asked to perform clerical or ministerial tasks in
furtherance of this solicitation.
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Q:
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May I propose actions for consideration at next years annual meeting or nominate individuals to serve as
directors?
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A:
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Yes. The following requirements apply to stockholder proposals, including director nominations, for the
2010 annual meeting of stockholders.
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Requirements for Stockholder Proposals to be considered for Inclusion in Proxy Materials:
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Stockholders interested in submitting a proposal (other than the nomination of directors) for
inclusion in the proxy materials to be distributed by us for the 2010 annual meeting of
stockholders may do so by following
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2009 Proxy Statement
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5
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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the procedures prescribed in Rule 14a-8 of the Securities
Exchange Act of 1934, as amended (the Exchange Act). To be eligible for inclusion, stockholder
proposals must be received at our principal executive offices no later than the close of
business on
[December 2]
, 2009, which is the 120th day prior to the first anniversary of the
date that we released the proxy statement to our stockholders for our 2009 Annual Meeting. Any
notice of stockholder proposals received after that date will be considered untimely. To be
included in our proxy materials, your proposal must also comply with the Companys bylaws and
SEC regulations under Rule 14a-8 of the Exchange Act regarding the inclusion of stockholder
proposals in company-sponsored proxy materials. If we change the date of the 2010 annual
meeting of stockholders by more than 30 days from the anniversary of this years Annual Meeting,
stockholder proposals must be received a reasonable time before we begin to print and mail our
proxy materials for the 2010 annual meeting of stockholders. Proposals should be sent to the
Companys Corporate Secretary at Specialty Underwriters Alliance, Inc., 222 South Riverside
Plaza, Suite 1600, Chicago, Illinois 60606.
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Copy of Bylaws:
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Stockholders of record may also nominate directors or make proposals at the 2010 Annual Meeting
if such nomination or proposal complies with the notice requirements of the Companys bylaws.
To obtain a copy of the Companys bylaws at no charge, you may write to the Companys Corporate
Secretary at the above address. A current copy of the bylaws is also available on our corporate
website at
www.suainsurance.com
. The bylaws may be found on our website as follows: from our
main web page, first highlight (point to) the tab labeled Investor Relations, then click on
the heading Corporate Governance which drops down. After the Corporate Governance page loads,
click on Bylaws under the Governance
Documents heading.
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Q:
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How do I obtain a separate set of proxy materials if I share an address with other stockholders?
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A:
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As permitted by applicable law, only one copy of the proxy materials, which include the proxy statement and the 2008 Annual
Report, is being delivered to stockholders residing at the same address, unless such stockholders
have notified us of their desire to receive multiple copies of the proxy materials. The Company will promptly deliver
within 30 days, upon oral or written request, a separate copy of the proxy materials to any stockholder residing at an
address to which only one copy was mailed. If you are a stockholder at a shared address to which we delivered a single
copy of the proxy materials and you desire to receive a separate copy of this proxy statement and/or the 2008 Annual Report
please submit your request by mail to Investor Relations, Specialty Underwriters Alliance, Inc., 222 South Riverside
Plaza, Suite 1600, Chicago, Illinois 60606 or by calling (312) 277-1600. If you desire to receive a separate proxy
statement and/or annual report in the future, or if you are a stockholder at a shared address to which we delivered
multiple copies of the proxy materials and you desire to receive one copy in the future, submit a request in writing to
American Stock Transfer & Trust Co., 59 Maiden Lane, New York, NY 10038 or by calling (712) 921-8200.
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If you are the beneficial owner, but not the record holder, of shares of our Common Stock, your
broker, bank or other nominee may only deliver one copy of this Proxy Statement and our 2008
Annual Report to multiple stockholders who share an address, unless that nominee has received
contrary instructions from one or more of the stockholders. We will deliver promptly, upon
written or oral request, a separate copy of this Proxy Statement and our 2008 Annual Report to a
beneficial holder at a shared address to which a single copy of the documents was delivered.
If you are a beneficial owner at a shared address to which only one copy of the proxy materials was delivered and you desire to receive a separate proxy statement and/or
annual report in the future, or if you are a beneficial owner at a shared address to which we
delivered multiple copies of the proxy materials and you desire to receive one copy in the
future you will need to contact your broker, bank or other nominee to request such change.
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Q:
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Are proxy materials for the 2008 Annual Meeting available electronically?
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A:
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Yes, this is an important notice regarding the availability of proxy materials for the stockholder meeting to be held on
May 5, 2009. This proxy statement and the Companys 2008 Annual Report are available electronically at
www.suainsurance.com.
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6
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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Q:
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Who can I contact if I have questions or need assistance in voting my shares?
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A:
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Please contact The Altman Group, the firm assisting the Company in the solicitation of proxies at:
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THE ALTMAN GROUP, INC.
1200 Wall Street West, 3rd Fl.
Lyndhurst, NJ 07071
Call Toll-Free (866) 620-5668
Banks or Brokers Call Collect (201) 806-7300
Email: proxyinfo@altmangroup.com
PROPOSAL ONE: ELECTION OF DIRECTORS
Pursuant to the Companys Amended and Restated Certificate of Incorporation and its Amended
and Restated Bylaws, the director nominees elected at this Annual Meeting will serve one-year terms
that expire upon the date of the next annual meeting or until such time as their respective
successors are duly elected and qualified. The authorized number of directors is presently seven.
Pursuant to its charter, a copy of which is available at www.suainsurance.com, the Nominating and
Corporate Governance Committee has recommended to the Board and the Board has nominated each of the
current directors to stand for re-election to the Board of Directors. Each of the nominated
Directors has agreed to serve as a nominee, has agreed to be named as
a nominee in this proxy statement and has agreed to serve for an additional term if elected. It is intended that the
accompanying form of Proxy will be voted for the nominees set forth below, each of whom is
presently a director of the Company. The Board is not aware of any facts or
circumstances that would prevent any of the nominees from serving as a director.
NOMINEES FOR ELECTION
The following table sets forth certain information with respect to each of the nominees:
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Served as a
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Name
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Age
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Director Since
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Robert E.
Dean
(1)(2)(5)
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57
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2004
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Raymond C. Groth
(2)(3)(5)
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62
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2004
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Peter E. Jokiel
(4)
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61
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2003
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Paul A. Philp
(2)(3)(5)
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60
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2005
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Courtney C. Smith
(4)
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61
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2003
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Robert H. Whitehead
(1)(4)
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75
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2004
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Russell E. Zimmermann
(1)(3)
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68
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2004
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(1)
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Member of the Audit Committee
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(2)
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Member of the Compensation Committee
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(3)
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Member of the Nominating and Corporate Governance Committee
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(4)
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Member of the Executive Committee
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(5)
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Member of the Strategic Review Committee
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All directors, if elected, will hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified.
Robert E. Dean
has served as a director of Specialty Underwriters Alliance, Inc. since May
2004. Mr. Dean has been self-employed as a private investor since January 2004. His principal business address is
12 Cedar Hill Drive, Asheville, North Carolina 28803. From October 2000 to December 2003, Mr. Dean was a Managing
Director of Ernst & Young Corporate Finance LLC, a wholly owned broker-dealer subsidiary of Ernst &
Young LLP, serving as member of the Board of Managers from December 2001 to December 2003. From
June 1976 to September 2000, Mr. Dean was employed by Gibson, Dunn & Crutcher LLP, where he
practiced corporate and securities law and represented numerous public and private companies and
investment banks. Mr. Dean was Partner-in-Charge of the Orange County, California office from 1993
to 1996, was a member of the law firms Executive Committee from
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2009 Proxy Statement
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7
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
1996 to 1999 and co-chaired its
financial institutions practice related to banks, thrifts, mortgage and insurance companies.
Raymond C. Groth
has served as a director of Specialty Underwriters Alliance, Inc. since May
2004. Since March 2001, he has been an Adjunct Professor of Business Administration at The Fuqua
School of Business, Duke University. His principal business address is 2035 Sherwood Avenue, Charlotte, North Carolina 28207. Mr. Groth
also served on the board of directors of CT Communications, Inc., Concord, North Carolina, from
January 2004 until August 2007. From June 1994 to March 2001, Mr. Groth was managing director
for First Union Securities, Inc., now called Wachovia Securities. Mr. Groth held several positions
in the investment banking department of The First Boston Corporation, now called Credit Suisse,
from September 1979 to March 1992. From June 1972 to August 1979, Mr. Groth was an associate with
Cravath, Swaine & Moore LLP.
Peter E. Jokiel
has served as Chief Financial Officer, Treasurer and a director since the
companys inception. He was appointed as an Executive Vice President in June 2004. Mr. Jokiel has
over 30 years experience in the insurance industry. From April 1997 to January 2001, Mr. Jokiel was President and Chief
Executive Officer of CNA Financial Corporations life operations. From November 1990 to April
1997, he was Chief Financial Officer of CNA Financial Corporation, or CNA. Prior to that time, Mr.
Jokiel served in various senior management positions at CNA and was an accountant at Touche Ross &
Co. in Chicago. He is a certified public accountant and is a member of the American Institute of
Certified Public Accountants and the Illinois Society of CPAs. Mr. Jokiel is a past member of the
FASB Emerging Issues Task Force and the AICPA Insurance Companies Committee.
Paul A. Philp
has served as a director of Specialty Underwriters Alliance, Inc. since
February 2005. Mr. Philp has been self-employed as a consultant since March 2003. His principal business address
is 10 Willowbrook Court, Bedford, New Hampshire 03110. He has over 30 years experience at the executive level in the insurance industry
within multiple disciplines, including finance, operations, claims, technology and administration.
Mr. Philp has served on the board of directors of various insurance related companies over the
course of his career. Mr. Philp is currently a principal of Willowbrook Innovation Associates, an
insurance consulting firm, and served as President, Chief Executive Officer and Chairman of the
Board of Directors of AscendantOne, Inc. until 2003. In 1997, Mr. Philp founded Amherst Innovation
Associates, an investment and technology consulting firm serving the insurance industry, and from
1992 until 1997 he served as President and Chief Financial Officer of AMS Services, an insurance
technology vendor. From 1970 until 1992, Mr. Philp served as a Vice President of various
subsidiaries of AIG.
Courtney C. Smith
has served as President, Chief Executive Officer and director since the
Companys inception. He was appointed as the Chairman of our board in May 2004. Mr. Smith has
over 30 years of experience in the property and casualty insurance industry. Prior to joining us,
from April 1999 to April 2002, Mr. Smith served as Chief Executive Officer and President of TIG
Specialty Insurance, or TIG, a leading specialty insurance underwriter. From January 1993 to March
1999, Mr. Smith was Chairman, Chief Executive Officer and President of Coregis Group, Inc., an
insurer specializing in program business consolidated from the various Crum & Forster companies.
Prior thereto, he served in various executive positions at Industrial Indemnity, American
International Group, or AIG, and Hartford Insurance Group. Mr. Smith is a member of the Society of
Chartered Property and Casualty Underwriters, served on the advisory board of Illinois State
Universitys Katie Insurance School, was a member of the Board of Directors of the Alliance of
American Insurers and was a trustee of American Institute of CPCU/ Insurance Institute of America.
Robert H. Whitehead
has served as a director of Specialty Underwriters Alliance, Inc. since
August 2004. Mr. Whitehead has been self-employed as a consultant, d/b/a Robert H. Whitehead Insurance
Industry Consultant, located at 65225 Canyon Drive, Tucson, Arizona 85739, since July 1995. Mr. Whitehead has over 40 years of experience in the insurance business. From 1994 to
1997, he was a director of FHP Financial Corporation, a California HMO. From June 1993 to June
1995, Mr. Whitehead was Chief Executive Officer and President of the Hawaiian Insurance Guaranty
Company, Ltd., where he successfully completed the rehabilitation and sale of that company on
behalf of the state. From December 1963 to June 1993, Mr. Whitehead worked at Industrial Indemnity
Company of San Francisco, California where he held a number of positions, including President and
Chief Operating Officer. In addition, from 1955 to 1963 he held numerous insurance and reinsurance
positions in London, New York, Montreal and Toronto. In the past he has been heavily involved in
insurance hearings and other legislative activities at the state level in California. Mr.
Whitehead has been an independent consultant since 1995.
Russell E. Zimmermann
has served as a director of Specialty Underwriters Alliance, Inc. since
May 2004. Mr. Zimmermann has been retired from his position as a partner of Deloitte & Touche LLP, or
Deloitte, since June 2000.
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8
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
Mr. Zimmermann was
employed by Deloitte from March 1965 to May 2000. Mr. Zimmermann has 35 years of experience
serving public and privately held companies in the insurance, manufacturing, banking, mutual fund
and retail industries, including nearly 28 years serving as lead client services partner. He is a
past member of the American Institute of Certified Public Accountants and the Illinois Society of
Certified Public Accountants.
Each of the nominees has served as a director during the fiscal year ended December 31, 2008.
If voting by proxy with respect to the election of directors, stockholders may vote in favor of all
nominees, withhold their votes as to all nominees or withhold their votes for specific nominees.
In the judgment of the Board of Directors, each of the following directors of the Company
meets the standards for independence required by NASDAQ: Robert E. Dean, Raymond C. Groth, Paul A.
Philp, Robert H. Whitehead and Russell E. Zimmermann.
The
Board of Directors Recommends a Vote For the Election of
Each Nominee Named Above.
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors of the Company has selected
PricewaterhouseCoopers LLP as the independent registered public accounting firm (Independent
Auditor) for the Company for the fiscal year ending December 31, 2009. In the event the
stockholders fail to ratify the appointment, the Audit Committee will reconsider this appointment.
Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the
appointment of a different independent registered public accounting firm at any time during the
year if it determines that such a change would be in the Companys and the stockholders best
interests. A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if such representative so desires and to respond
to appropriate questions.
AUDIT AND NON-AUDIT FEES
The following table presents the fees for professional audit services rendered by
PricewaterhouseCoopers LLP for the audit of the Companys financial statements for the years ended
December 31, 2008 and 2007 and fees billed for other services rendered by the firm during the
periods:
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Actual Fees
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2008
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2007
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Audit Fees
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$
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801,799
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$
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1,165,896
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Audit Related Fees
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Tax Fees
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All Other Fees
(1)
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1,620
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1,590
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Total Fees
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803,419
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1,167,486
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(1)
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Represents fee paid to PricewaterhouseCoopers LLP for licensing its software
product.
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Since becoming subject to the applicable independence rules, all audit related services, tax
services and other services were pre-approved by the Audit Committee, which concluded that the
provision of such services by the Companys auditors was compatible with the maintenance of that
firms independence in the conduct of its auditing functions. The policy of the Audit Committee
provides for pre-approval of the yearly audits and quarterly reviews. As individual engagements
arise, they are approved on a case-by-case basis. The Audit Committee may delegate to one or more
of its members pre-approval authority with respect to permitted services.
AUDIT COMMITTEE CONSIDERATION OF THESE FEES
The Companys Audit Committee has considered whether the provision of the services covered
under the categories of Audit Related Fees and All Other Fees are compatible with maintaining
the independence of PricewaterhouseCoopers LLP.
The Board of Directors of the Company Recommends a Vote For the
Ratification of the Appointment of PricewaterhouseCoopers LLP as the
Companys Independent Registered Public Accounting Firm.
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2009 Proxy Statement
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9
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Specialty Underwriters Alliance, Inc.
|
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
CORPORATE GOVERNANCE PRINCIPLES AND RELATED MATTERS
Our Board has adopted a comprehensive set of corporate governance principles to reflect its
commitment to corporate governance and the role of such principles in building and sustaining
stockholder value. These principles are discussed more fully below and are set forth in our
Corporate Governance Guidelines and Principles, our Code of Business Conduct and Ethics and the
committee charters for our Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee. Each of these documents, including each of the committee charters, is
available under the heading Corporate Governance in the Investor Relations section of our
website located at www.suainsurance.com or by written request to Specialty Underwriters Alliance,
Inc., Investor Relations, 222 South Riverside Plaza, Suite 1600, Chicago, IL 60606. Our Board
regularly reviews corporate governance
developments and modifies our Corporate Governance Guidelines and Principles, our Code of
Business Conduct and Ethics and the committee charters as warranted.
The Board has determined that each of its directors other than Messrs. Smith and Jokiel,
including all those serving on each of the above referenced committees, meets the standards for
independence as defined in the applicable SEC rules and applicable listing standards. The members
of the Audit Committee also meet the independence standards of Section 10A(m)(3) of the Securities
Exchange Act of 1934.
CORPORATE GOVERNANCE GUIDELINES AND PRINCIPLES
Our Corporate Governance Guidelines and Principles sets forth overall standards and policies
for the responsibilities and practices of our Board and its committees, including reviewing,
approving and monitoring fundamental financial and business strategies and major corporate actions;
ensuring processes are in place for maintaining our Companys integrity; assessing our major risks
and reviewing options for their mitigation; selecting, monitoring and evaluating the performance of
our board members and committees; selecting, evaluating and compensating our Chief Executive
Officer and overseeing succession planning; and providing counsel and oversight on the selection,
evaluation, development and compensation of senior management.
CODE OF BUSINESS CONDUCT AND ETHICS
All of our employees, including our Chief Executive Officer, Chief Financial Officer and
principal accounting officer, and our directors are required to comply with our Code of Business
Conduct and Ethics. It is our intention to disclose any amendments to, or waivers from, any
provisions of this code as it applies to our named executive officers and directors in a Form 8-K
within five days of such amendment or waiver.
BOARD COMMITTEES
The
Board has established an Audit Committee, a Compensation Committee,
an Executive Committee,
a Nominating and Corporate Governance Committee and a Strategic
Review Committee.
Audit Committee
Our current Audit Committee consists of Messrs. Zimmermann, Dean and Whitehead. The Board has
determined that Mr. Zimmermann is an audit committee financial expert as defined by the
applicable SEC rules. The Board has determined that all members of the Audit Committee are
independent and satisfy the relevant SEC and NASDAQ independence requirements for members of the
Audit Committee. We monitor the independence of members of the Audit Committee through the use of
annual questionnaires and a requirement for committee members to inform the Company of any changes
or developments during the year that may have a bearing on their independence. The principal
responsibilities of the Audit Committee are:
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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 Companys systems of internal controls,
established by management and the Board, regarding finance, accounting, legal
compliance and ethics; and the Companys auditing, accounting and financial reporting
processes generally;
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to serve as an independent and objective body to monitor the Companys financial
reporting process and internal control system;
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to select, evaluate and, when appropriate, replace the Companys independent
auditor; and
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10
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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to review and appraise the audit efforts of the Companys independent auditor and
internal auditors; and to provide an open avenue of communication among the independent
auditor, financial and senior management, the internal auditors, and the Board.
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At least annually, the Audit Committee reviews the Audit Committee Charter. The charter was
last amended in early 2008 and approved by the full board.
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Companys financial reporting process on behalf of the Board.
Management is responsible for the Companys internal controls and financial reporting process. The
independent auditor is responsible for performing an independent audit of the Companys
consolidated financial statements in accordance
with generally accepted auditing standards and to issue a report thereon. The Audit
Committees responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has met and held discussions with management and the
independent auditor. Management represented to the Audit Committee that its consolidated financial
statements were prepared in accordance with generally accepted accounting principles.
Additionally, the Audit Committee has reviewed and discussed the audited consolidated financial
statements, managements assessment of the effectiveness of the Companys internal controls over
financial reporting and the independent auditors evaluation of the Companys internal controls
over financial reporting with both management and the independent auditor. The Audit Committee
discussed with the independent auditor matters required to be discussed by the Statement on
Auditing Standards No. 61, as amended (Codification of Statements on Auditing Standards, AU § 380).
The Audit Committee has received the written disclosures and the letter from the independent
auditor required by applicable requirements of the Public Company Accounting Oversight Board
regarding the independent auditors communications with the Audit Committee concerning
independence, and has discussed with the independent auditor the independent auditors
independence. Based upon the Audit Committees discussion with management and the independent
auditor, the Audit Committees review of the representations of management and the report of the
independent auditor to the Audit Committee, the Audit Committee recommended that the Board include
the audited consolidated financial statements in the Companys Annual Report on Form 10-K for the
year ended December 31, 2008, filed with the Securities and Exchange Commission.
The Audit Committee
Russell E. Zimmermann (Chair)
Robert E. Dean
Robert H. Whitehead
Compensation Committee
Our current Compensation Committee consists of Messrs. Dean, Groth and Philp. Each member of
the Compensation Committee is an independent director under applicable listing standards, an
outside director as defined in Section 162(m) of the Internal Revenue Code and a non-employee
director as defined in Rule 16b-3 under the Securities Exchange Act of 1934. We monitor the
independence of members of the Compensation Committee through the use of annual questionnaires and
a requirement for committee members to inform the Company of any changes or developments during the
year that may have a bearing on their independence. The Board adopted a charter for the
Compensation Committee in 2004. The Compensation Committee reviews the Compensation Committee
Charter annually. The charter was last revised in 2007 and approved by the full board. The
principal responsibilities of the Compensation Committee are:
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to determine the level of compensation paid to our Chief Executive Officer;
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to approve the level of compensation paid to the Companys other executive officers;
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to determine award grants under, and administer, our equity incentive plans and
review and establish any and all other executive compensation plans adopted from time
to time by the Company;
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to ensure the Companys executive officers are compensated effectively in a manner
consistent with the Companys stated compensation strategy, internal equity
considerations, competitive practice and the requirements of the appropriate regulatory
bodies; and
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2009 Proxy Statement
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11
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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to communicate to stockholders the Companys compensation policies and the reasoning
behind such policies, as required by the SEC.
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Robert Dean, as Chairman of the Compensation Committee, schedules the meetings of the
committee and sets the agenda for each meeting. The Compensation Committee often invites members
of management to attend part of its meetings to provide information and feedback concerning
compensation issues. At each of the six meetings of the Compensation Committee in 2008, the
committee met in executive session, at which no members of management were present, for at least
part of the meeting. Although the Compensation Committee Charter allows the committee to delegate
some or all of its duties to sub-committees comprised of one or more of its members, the
Compensation Committee has never exercised this power. All actions of the committee have been
taken by the full Compensation Committee.
Role of Executives in Establishing Compensation
.
Members of management are regularly invited
to attend meetings of the Compensation Committee; however, members of management do not attend
executive sessions of the committee. Courtney Smith, our Chief Executive Officer, provides
recommendations directly to the Compensation Committee regarding the compensation to be paid to
other officers, including all the other executive officers of the Company. In addition, the
Companys General Counsel assists the committee in setting agendas, gathering information and
materials and drafting proposals, plans and memoranda.
Compensation Consultant
.
Pursuant to its charter, the Compensation Committee is vested with
the authority to retain advisors and approve such persons fees and terms. During 2008, the
Compensation Committee retained Frederic W. Cook & Co., Inc. to provide advice to the committee.
Frederic W. Cook consults directly with, and reports directly to, the Compensation Committee and
provides no other services to the Company. No other compensation consultants were retained by the
Compensation Committee, the Board or management during 2008.
Frederic W. Cook was retained in 2006 and 2007 principally to evaluate the Companys current
compensation programs and to make recommendations regarding potential changes to be implemented in
the future. It currently provides the Compensation Committee with competitive data and business
and technical considerations and provides information on industry and comparable company
compensation trends when requested by the Compensation Committee. Frederic W. Cook & Co., Inc.
does not recommend particular pay levels for particular executives, but does provide feedback to
the Compensation Committee when requested on compensation issues related to the Companys
executives.
Compensation Committee Interlocks and Insider Participation
.
Robert E. Dean, Raymond C. Groth
and Paul A. Philp are members of the Compensation Committee. No committee member (i) was, during
2008, an officer or employee of the Company, (ii) was formerly an officer of the Company, or (iii)
had any relationship requiring disclosure under the SECs rules governing disclosure of related
person transactions (Item 404 of Regulation S-K). No executive officer of the Company served as a
director or member of the compensation committee of another entity whose directors or executive
officers served as a member of our Board or the Compensation Committee.
COMPENSATION COMMITTEE REPORT
The Compensation Committee oversees the Companys compensation program on behalf of the Board.
In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed
with management the Compensation Discussion and Analysis set forth in this Proxy Statement.
In reliance on the review and discussions referred to above, the Compensation Committee
recommended to the Board that the Compensation Discussion and Analysis be included in the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and the Companys Proxy
Statement to be filed in connection with the Companys 2009 Annual Meeting of Stockholders, each of
which is filed with the SEC.
The Compensation Committee
Robert E. Dean (Chair)
Raymond C. Groth
Paul A. Philp
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
Executive Committee
Our Executive Committee consists of Messrs. Whitehead, Jokiel and Smith. The principal duties
of the Executive Committee are:
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to exercise certain authority of the Board with respect to matters requiring action
between meetings of the Board; and
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to decide issues from time to time delegated by the Board.
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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of Messrs. Groth, Philp and
Zimmermann. Each member of this committee is an independent director under applicable SEC rules
and applicable listing standards. We monitor the independence of members of the Nominating and
Corporate Governance Committee through the use of annual questionnaires and a requirement for
committee members to inform the Company of any changes or developments during the year that may
have a bearing on their independence. The Board adopted a charter for the Nominating and Corporate
Governance Committee in 2004. At least annually, the committee reviews is charter. The charter
was last revised in 2007. The principal duties of the Nominating and Corporate Governance
Committee are:
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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 re-nomination of
incumbents and proposed nominees for election by the Board to fill vacancies which
occur between stockholder meetings;
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to develop and recommend to the Board a Code of Business Conduct and Ethics and to
review the code at least annually;
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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;
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to annually evaluate this committees performance and charter; and
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to approve certain related person transactions.
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Strategic Review Committee
During 2009, the Board established a Strategic Review Committee to assist the Board in
fulfilling its responsibilities with respect to strategic planning. The members of the Strategic Review
Committee are Messrs. Raymond C. Groth (Chair), Robert E. Dean and Paul A. Philp. The Committees
responsibilities include:
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to review and evaluate long-range objectives and the strategic business plan for the
Company;
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to meet with, and provide guidance to management with respect to the strategic planning
process and initiatives to achieve the Companys long-term financial and strategic objectives;
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to review and consult with management regarding strategic options available to the
Company, including with respect to possible acquisitions, mergers, divestitures, financings and
changes in capital structure;
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to review, evaluate and discuss with management potential inquiries or proposals received by
the Company with respect to possible strategic transactions and the status thereof and the
development of procedures for responding to such potential inquires or proposals;
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to monitor and apprise the Board regarding significant developments and conditions in
the insurance industry and capital markets that may have an impact upon the Company; and
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to review and approve (or recommend approval by the full Board, as the case may be), any major
corporate transactions outside the ordinary course of business, including potential
debt equity financings, proposed mergers, acquisitions, divestitures or investments
that may arise from time to time.
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
NOMINATION OF DIRECTORS
The Board as a whole is responsible for nominating individuals for election to the Board by
the stockholders and for filling vacancies on the Board that may occur between annual meetings of
the stockholders. The Nominating and Corporate Governance Committee is responsible for
identifying, screening and recommending candidates to the entire Board based upon the appropriate
skills and characteristics required of Board members in the context of the current make-up of the
Board. The Committee may consider suggestions for potential directors from other directors and
stockholders.
Stockholders who wish to recommend a nominee to the Committee should send nominations directly
to the Secretary of the Company that include all information relating to such person that is
required to be disclosed in solicitations of proxies for the election of directors, including the
nominees name and business experience. The recommendation must be accompanied by a written
consent of the individual to stand for election if nominated by the Board and to serve if elected
by the stockholders. To recommend a nominee for the 2010 annual election of directors, the
Secretary of the Company must receive your recommendation no later than
[December 2]
, 2009.
We did not receive any recommended nominees for director from any of our stockholders,
non-management directors, executive officers or third-party search firms for this meeting. We do
not currently pay any fees to third parties to identify or evaluate or assist in identifying or
evaluating potential nominees for director.
In evaluating a person as a potential nominee to serve as a director of the Company, the
Nominating and Corporate Governance Committee considers, among other factors, the following:
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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;
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whether or not the person serves on boards of, or is otherwise affiliated with,
competing companies;
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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;
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the contribution which the person can make to the Board and the Company, with
consideration being given to the persons business and professional experience,
education and such other factors as the Nominating and Corporate Governance Committee
may consider relevant; and
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the character and integrity of the person.
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The Nominating and Corporate Governance Committee also considers such other relevant factors
as it deems appropriate, including the current composition of the Board, the balance of management
and independent directors, the need for Audit Committee expertise and the evaluations of other
prospective nominees. In connection with this evaluation, the Nominating and Corporate Governance
Committee determines whether to interview the prospective nominee, and if warranted, one or more
members of the Nominating and Corporate Governance Committee, and others as appropriate, interview
prospective nominees in person or by telephone. After completing this evaluation and interview,
the Nominating and Corporate Governance Committee makes a recommendation to the full Board as to
the persons who should be nominated by the Board, and the Board determines the nominees after
considering the recommendation and report of the Nominating and Corporate Governance Committee.
There are no differences in the manner in which the Nominating and Corporate Governance
Committee evaluates nominees for director based on whether the nominee is recommended by a
stockholder.
BOARD AND COMMITTEE MEETINGS
For the fiscal year ended December 31, 2008, there were nine meetings of the Board, four
meetings of the Audit Committee, six meetings of the Compensation Committee, four meetings of the
Nominating and Corporate Governance Committee and one meeting of the Executive Committee. All of
our directors attended, either in person or electronically, 100% of the meetings of the Board and
the committees on which they served in fiscal year 2008. The Board encourages interaction with
Company stockholders, and recognizes that annual stockholder meetings of the Company provide a
venue whereby stockholders can access and interact with members of the Board. Accordingly, all
members of the Board are encouraged to attend the Companys annual stockholder meeting. All Board
members attended the 2008 annual meeting.
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
The non-management directors of our Board meet in executive session several times during the
year, generally at regularly scheduled meetings of the Board or as considered necessary or
appropriate. A presiding director is chosen by the non-management directors to preside at each
meeting and does not need to be the same director at each meeting.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
The following table provides information on compensation for non-employee directors who served
during 2008:
2008 Non-Employee Director Compensation Table
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Fees Earned or
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Stock
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Option
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Name
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Paid in Cash($)
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Awards($)
(7)
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Awards($)
(1)
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Total($)
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Robert E. Dean
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$
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81,500
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$
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13,620
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$
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3,738
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(2)
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$
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98,858
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Russell E. Zimmermann
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78,250
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13,620
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3,738
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(3)
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$
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95,608
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Raymond C. Groth
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74,250
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13,620
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3,738
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(4)
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$
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91,608
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Robert H. Whitehead
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69,500
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13,620
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3,738
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(5)
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$
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86,858
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Paul A. Philp
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66,500
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13,620
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5,231
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(6)
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$
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85,351
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(1)
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The option award expense is based on grant date fair value of options which vested in 2008 using the
binomial lattice option pricing model under FAS 123R. See Note 7 to the financial
statements included in the Companys Annual Report on Form 10-K, filed with the SEC for
more information regarding the assumptions used to calculate grant date fair value.
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(2)
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Mr. Dean had 20,000 options outstanding as of December 31, 2008 of which 10,000
shares were granted on November 17, 2004 and 10,000 shares were granted on May 13, 2005
with each grant vesting equally on the first three anniversaries of the date of grant.
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(3)
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Mr. Zimmermann had 20,000 options outstanding as of December 31, 2008 of which
10,000 shares were granted on November 17, 2004 and 10,000 shares were granted on May
13, 2005 with each grant vesting equally on the first three anniversaries of the date
of grant.
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(4)
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Mr. Groth had 20,000 options outstanding as of December 31, 2008 of which
10,000 shares were granted on November 17, 2004 and 10,000 shares were granted on May
13, 2005 with each grant vesting equally on the first three anniversaries of the date
of grant.
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(5)
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Mr. Whitehead had 20,000 options outstanding as of December 31, 2008 of which
10,000 shares were granted on November 17, 2004 and 10,000 shares were granted on May
13, 2005 with each grant vesting equally on the first three anniversaries of the date
of grant.
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(6)
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Mr. Philp had 20,000 options outstanding as of December 31, 2008 of which
10,000 shares were granted on February 14, 2005 and 10,000 shares were granted on May
13, 2005 with each grant vesting equally on the first three anniversaries of the date
of grant.
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(7)
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Each director received a fully vested stock award of 3,000 shares of Common
Stock on May 7, 2008. The closing price of the Common Stock on May 7, 2008 was $4.54.
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Cash Compensation
Annual
Retainer.
We pay an annual retainer of $40,000 to each independent director
and $10,000 to the each independent director who chairs the Audit Committee, the Compensation
Committee or the Executive Committee
and $5,000 to each independent director who chairs the
Nominating and Corporate Governance Committee or the Strategic
Review Committee. The larger retainer paid to the chairs person of the
Audit, Compensation and Executive Committees is to compensate for the increased responsibility
levels and preparation time required for these roles.
Attendance Fee & Expenses.
We pay a fee of $2,500 per meeting to each independent director
who attends a Board meeting in person. Each independent director who chairs a committee receives
$2,000 for each meeting of a committee of the Board attended in
person. Finally, each other independent
director who serves on a committee receives $1,000 for each meeting of a committee of the Board
attended in person. With respect to telephonic meetings, including regular meetings attended
telephonically, we pay compensation at one-half the amount of regular Board and committee meetings.
We also reimburse our independent directors for all out of pocket business expenses incurred while
traveling to and from the Board and committee meetings.
Equity-Based Compensation
Each independent director who joined the Board prior to the 2006 Annual Meeting of the
Stockholders received a grant of an option to purchase 10,000 shares of Common Stock at an exercise
price equal to the then-current fair market value upon becoming a member of the Board. Each
independent director also received an annual grant of an option to purchase 10,000 shares of Common
Stock of the Company at an exercise price equal to the then-current
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2009 Proxy Statement
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
fair market value on the first
business day following each annual meeting of the stockholders of the Company under the 2004 Stock
Option Plan (the 2004 Plan). Each option vests cumulatively at a rate of 33.33% on each of the
first three anniversaries of the date of the grant. Upon re-election to the Board in 2006, all
independent directors waived their annual grant of an option following the 2006 annual meeting.
The 2004 Plan was replaced in 2007 and no further grants have been made pursuant to the 2004 Plan.
Under the 2007 Stock Incentive Plan (the 2007 Plan) which was approved by the stockholders
at the 2007 Annual Meeting and supersedes the 2004 Plan, each independent director who is reelected
at an Annual Meeting and has served as a director for at least six months prior to such meeting
receives an automatic annual grant of a restricted stock award for 3,000 shares of Common Stock.
COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTION
The goal of our executive compensation program is the same as our goal for operating the
company: to create long-term value for our stockholders. Our objective is to reward the executive
officers for sustained financial and operating performance and leadership excellence, to align
their interests with those of our stockholders and to encourage them to remain with the company for
long and productive careers. All of our compensation elements fulfill one or more of our
performance, alignment and retention objectives. These elements consist of base salary, a cash
bonus program that includes a non-equity incentive component, and equity incentive compensation.
The following discussion sets forth our compensation objectives, the various elements of
compensation and the amounts of compensation paid to our Chief Executive Officer, or CEO, Chief
Financial Officer, or CFO and our three most highly compensated officers (not including the CEO and
the CFO), collectively, the named executive officers.
OBJECTIVES OF OUR COMPENSATION PROGRAM
The goal of the Companys executive compensation policy is to ensure that an appropriate
relationship exists between executive pay and the creation of stockholder value, while at the same
time motivating individual performance and retaining our key employees. To achieve this goal, the
compensation of our named executive
officers is linked to the Companys financial performance and to each officers performance in
contributing to the Companys success.
Performance
. The amount of compensation paid to each named executive officer is determined in
part by his management experience and individual performance achievement. Key elements of
compensation in addition to base salary include:
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a discretionary cash bonus program that is primarily based on an assessment of
individual performance, but also may include an assessment of the Companys financial
performance during the year;
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a discretionary non-equity incentive program that measures Company performance
against pre-determined quantitative financial performance goals for the Company (i.e.,
after-tax return on equity for 2008); and
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equity incentive compensation in the form of stock awards, the value of which is
contingent upon the performance of the Companys share price and which is subject to
vesting schedules that require continued service with the company.
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Base salaries, individual bonuses and non-equity incentives are designed to retain management,
reward annual achievements and be commensurate with the executives scope of responsibilities,
demonstrated leadership abilities, and management experience and effectiveness. Equity incentive
compensation is designed to reward long term achievement. During the first three full fiscal years
of the Companys operation, three of our current executive officers had guaranteed cash bonuses
equal to 25% of their base salaries and had guaranteed 5% salary increases under their employment
agreements. Both such guarantees expired on December 31, 2007 and all bonuses and base salary
increases for officers are now discretionary and set by the Compensation Committee.
Alignment
. We seek to align the interests of the named executive officers with those of our
investors by evaluating executive performance both on individual performance and by linking our
non-equity incentive program
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
to after-tax return on equity, or ROE, which we believe to be a key
component of stockholder value. In addition, we believe that Company performance should be the
predominant basis for cash compensation beyond base salaries. Accordingly, for 2008, individual
cash bonuses for the named executive officers were limited to 25% of
salaries unless the Companys
after-tax ROE was 10% or above and in any case the individual performance portion could not exceed
33 1/3%.
Key elements of compensation that align the interests of the named executives with
stockholders include:
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equity incentive compensation, because the value of the grants or awards are based
on Company stock price;
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a cash bonus and non-equity incentive structure that is substantially determined by
Company performance based on after-tax ROE; and
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stock ownership and holding requirements, which require our senior executives to
accumulate and hold Company stock. See Stock Ownership/Retention Guidelines below.
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Retention
. We believe that retaining our named executive officers is essential for the
Companys long term performance. We also recognize that each of our executive officers has
significant experience and proven management ability and are therefore presented with other
professional opportunities, including ones at potentially higher compensation levels. We attempt
to retain our executives by using continued service as a determinant of total pay opportunity. Key
elements of compensation that require continued service to receive any, or maximum, payout include
the vesting terms on elements of equity incentive compensation, including stock options and stock
awards.
COMPENSATION POLICIES
We believe that this mix of short-term (salary, individual bonuses and non-equity incentives)
and long-term compensation (equity based compensation) in addition to providing the above
performance, alignment and retention goals also serve to balance our Companys short-term and
long-term financial goals. We also recognize that as a named executives level of responsibility
increases a greater portion of the total compensation should be leveraged with stock and other
performance incentives. Our Compensation Committee reviews executive compensation arrangements at
least annually in light of market competitiveness, and to ensure that the Company meets its
objective of providing executive pay packages with appropriate incentives.
Benchmarking
. During 2008 the Compensation Committee, pursuant to its charter, retained
Frederic W. Cook & Co. to provide compensation recommendations for 2008 by benchmarking and
analyzing comparable insurance companies. In reviewing base salaries and other compensation for
our named executive officers, we review the compensation information for our peer group of
companies, even though the Companys lines of business are not replicated at any of the companies
in our peer group. The companies considered to be peers for compensation benchmarking purposes, in
alphabetical order were 21
st
Century Holding Co., AmCOMP Incorporated, American
Physicians Capital, Inc., Amerisafe, Inc., Baldwin & Lyons, Inc., Darwin Professional Underwriters,
Inc., First Mercury Financial Corporation, Gainsco, Inc., Hallmark Financial Services, Inc.,
Meadowbrook Insurance Group, Inc., Mercer Insurance Group Inc., National Interstate Corporation,
North Pointe Holdings Corp., NYMagic, Inc., ProCentury Corp., SCPIE Holdings Inc., Seabright Insurance Holdings, Inc., Tower Group, Inc.
The criteria benchmarked include revenue, net income, market capitalization, revenue growth, total
stockholder return and return on equity. In evaluating executive compensation for the named
executive officers, we consider the relative performance of the Company to others in its peer group
and also take into account the operating histories of the peer companies and our Company.
Role of Executives in Establishing Compensation
. For more information regarding the role of
executives in establishing compensation, please see Corporate Governance Principles and Related
Matters beginning on page [7].
Stock Ownership/Retention Guideline
s
.
The board of directors approved amended stock ownership
guidelines for our executive officers and non-employee directors in November 2008. The guidelines
are intended to further align the interests and actions of the executive officers and non-employee
directors with the interests of the Companys stockholders. The CEO and CFO are expected to hold
an amount of Common Stock equal to the lesser of (a) fifty percent of all vested grants of equity
awards to the executive officer after March 2007, net of applicable taxes, or (b) an amount of
Common Stock with a market value equal to two times his or her base salary. All other executive
officers are expected to hold an amount of common stock equal to the lesser of (a) fifty percent of
all vested grants of equity awards to the executive officer after March 2007, net of applicable
taxes, or (b) an amount of
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
Common Stock with a market value equal to one times his or her base
salary. The non-employee directors are expected to hold an amount of common stock equal to the
lesser of (a) fifty percent of all vested grants of equity awards to the director after March 2007,
net of applicable taxes, or (b) an amount of Common Stock with a market value equal to two times
his or her annual retainer.
EVALUATION OF PROGRAM ACHIEVEMENT
We evaluate whether our compensation program achieves its goals in a number of ways. First,
we review whether our pay packages have achieved the result of retaining talented executives.
Second, we evaluate our success in attracting new executives to our company. Since beginning our
operations we have been successful in filling, either internally or externally, new positions as
they are created. Third, we review compensation packages in relation to our financial performance
and goal of creating long-term value for our stockholders. We believe that current levels of
compensation are commensurate with the Companys performance and this goal.
THE ELEMENTS OF OUR COMPENSATION PROGRAM
The primary components of the Companys executive compensation program are (a) base salaries
and annual base salary increases, (b) discretionary annual cash bonuses based upon individual
performance, but which may include an assessment of the Companys financial performance during the
year, (c) a discretionary non-equity incentive program that measures Company performance against
pre-determined quantitative financial performance goals for the Company (i.e., after-tax ROE for
2008) and (d) equity-based compensation.
Our executive compensation program is intended to provide our named executive officers with
overall levels of compensation that are competitive within the insurance industry, as well as
within a broader spectrum of companies of comparable size and complexity. During 2008, three of
our five named executive officers, the Companys CEO, CFO, and Chief Claims Officer, or CCO, had
employment agreements. These agreements, which supersede existing employment agreements executed
in November 2004, contractually set 2008 base salary for these executive officers and provide that
any base salary increases and bonuses shall be at the discretion of the Compensation Committee.
Below is a discussion of the types of compensation we pay our executive officers.
Base Salaries and Base Salary Increases
. In setting base pay for named executive officers and
in determining base salary increases, the Compensation Committee reviews the following quantitative
and qualitative factors: company performance (including performance relative to comparable
companies), market conditions, the executives individual performance and scope of responsibility,
competitive market pay information and practices, internal equity and recommendation from the
Companys CEO for each of the other executive officers.
In the second quarter of 2008, the Compensation Committee approved new employment agreements
for the CEO, CFO and CCO to replace their initial employment agreements, which had an initial
employment period ending December 31, 2007, but with yearly automatic extensions (subject to three
month notices) until December 31, 2010. The new employment agreements with our CEO and CFO provide
for terms ending on December 31, 2009, with automatic one-year extensions unless notice is given 15
months in advance. Since no notices were given on October 1, 2008, the agreement terms were
extended to December 31, 2010. Unlike the prior agreements, the current employment agreements do
not provide for severance payments to either officer in the event of
non-extension of the employment terms. Our CCOs new employment agreement provided for full-time employment for
Mr. Ferguson during 2008 and part-time employment during 2009 until his retirement at year-end.
The new employment agreements incorporate longer non-compete provisions (generally one to two
years) in the event that an executive leaves the employ of the Company. The non-compete term could
have been as little as three months under the prior employment agreements. In addition, as of
January 1, 2010, potential severance payments in the event of termination are reduced from 225% of
base salary to 150% of base salary and, in the case of a change in control, from three times base
salary to two times base salary.
The officers base salaries were set in these agreements equal to their base salaries as of
January 1, 2008, which had been set by the Compensation Committee. The Compensation Committee may,
at its discretion, provide for an annual raise but may not decrease the base salary of these three
officers below the amount initially established in the agreements.
Cash Bonuses
. Discretionary cash bonuses and non-equity incentive payments are determined
based on metrics set forth in the officer bonus program adopted by our Board during the first
quarter of each year. The officer bonus program adopted in 2008, or the 2008 Officers Bonus
Program, rewards the executive officers for both their
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
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individual achievement as well as their
contribution to the overall success of the Company, as measured by the Companys ROE. Although the
2008 Officers Bonus Program has set parameters, all bonuses, whether based upon individual or
Company performance, are entirely discretionary and may or may not be paid, based on whether any or
all of the applicable individual performance goals or Company performance parameters are met. The
2008 Officers Bonus Program provides that each named executive officer could achieve up to a
combined total of 100% of such named executive officers base salary. This amount would be
comprised of an individual based bonus of up to 33% of such named executives base salary
correlating to such named executive officers individual achievement and a non-equity incentive
payment of up to 67% of such named executive officers base salary, based upon the Companys
after-tax ROE in 2008. If after-tax ROE is less than 10%, then the maximum individual-based bonus
that a named executive officer would be eligible for would be 25%.
For the discretionary individual based bonus, the Compensation Committee takes into
consideration individual achievement as well as such individuals contribution to the overall goals
and performance of the Company. The CEO provides his assessment of each of the other named
executive officers performance and achievement to the Compensation Committee for their use in
determining the appropriate individual performance bonus. The named executive officers establish
individual performance goals annually, and the Compensation Committee reviews and approves such
performance goals for the Chief Executive Officer and other named executive officers. Annual
performance goals serve both to motivate executives as well as to increase stockholder returns by
focusing executive performance on the attainment of those annual goals identified as having a
positive impact on the Companys business results.
For the non-equity incentive portion of the officers bonus program, the Compensation Committee
considers, when establishing the after-tax ROE target amounts the current market conditions,
industry peer ROE data, prior year performance and expectations for the Companys upcoming year of
operations. Company ROE goals are established by the Compensation Committee with input from the
Chief Executive Officer.
For 2008, the Companys ROE is calculated by dividing the after-tax net income earned by the
Company in 2008 by its beginning equity of approximately $131 million at January 1, 2008. The
following table sets forth the ROE targets and the maximum performance bonus to be provided. The
percentage for each named executive officer was the same.
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|
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|
|
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|
2008 After-Tax ROE
|
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8%
|
|
9%
|
|
10%
|
|
11%
|
|
12%
|
|
13%
|
|
14%
|
|
15%
|
|
16%
|
|
17%
|
|
18%
|
Maximum Performance
Bonus
|
|
|
0
|
%
|
|
|
4
|
%
|
|
|
8
|
%
|
|
|
14
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
|
|
40
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
60
|
%
|
|
|
67
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%
|
The officer bonus program for 2009 approved by the Compensation Committee, or the 2009 Officer
Bonus Program, was established using the same considerations as the 2008 Officer Bonus Program.
The 2009 Officer Bonus Program provides that each named executive officer could achieve up to a
combined total of 100% of such
named executive officers base salary. This amount would be comprised of an individual based
bonus of up to 25% of such named executive officers base salary correlating to such named
executive officers individual achievement and a non-equity incentive portion of up to 75% of such
named executive officers base salary, based upon the Companys after-tax ROE for 2009.
Long-term Incentives.
Each of our named executive officers received a significant award of
stock options in connection with the Companys initial public offering, or IPO, in 2004 or upon
their date of hire if they joined the Company subsequent to the IPO. These awards vested over a
period of three years. Each of these prior awards, made pursuant to our 2004 Stock Option Plan, or
the 2004 Plan, fully vested on or before December 31, 2008. Other than awards to executives who
were hired in 2005 or 2006, the Company did not grant any additional stock options during this time
based on the limited pool of shares that were remaining and given the significant grants made as
part of the IPO.
In 2007, the Compensation Committee, with the assistance of Frederick W. Cook & Co., devised a
new equity compensation plan in order to give the Compensation Committee more flexibility in tying
executive compensation to the creation of stockholder value. The 2007 Stock Incentive Plan, or the
2007 Plan, was approved by the Board and subsequently approved by our stockholders. Because of new
accounting pronouncements which went into effect in 2006 relating to stock options, the
Compensation Committee revised their award strategy to focus on awards of restricted stock units.
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2009 Proxy Statement
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19
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Specialty Underwriters Alliance, Inc.
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|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
Our Compensation Committee determines in its sole discretion, subject to the terms and
conditions of the incentive plan, the size of a particular award based upon its subjective
assessment of an individuals performance, responsibility and functions and how this performance
may have contributed, or is expected to contribute, to the Companys performance. We believe
awards pursuant to our incentive plan, combined with our stock ownership guidelines, align the
interests of management with those of the Companys stockholders by emphasizing long-term stock
ownership and increases in stockholder value. The purpose of the incentive plan is to encourage
executives and others to acquire a larger proprietary interest in the Company, thereby further
stimulating their active interest in the development and financial success of the Company.
While the 2007 Plan was approved by stockholders in May of 2007 the Compensation Committee
decided not to grant stock awards in 2007 since these awards had not been included in the Companys
budget for 2007 and the Company was still amortizing expenses from stock option grants made to
officers in 2004. The Compensation Committee made its initial grants to executive officers under
the 2007 Plan in April of 2008. Since there had been no equity grants (stock options or stock
awards) to executive officers since 2004, the initial grants in April 2008 were somewhat larger
than expected later grants. In light of this, the Compensation Committee decided to provide for
five year vesting for most grants rather than the four year vesting schedule expected generally to
be used for grants under the 2007 Plan
SUMMARY COMPENSATION TABLE
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Non-Equity
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Incentive
|
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All Other
|
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|
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|
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|
|
|
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Stock
|
|
Option
|
|
Plan Comp-
|
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Comp-
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|
Name and
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|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
ensation
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|
ensation
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Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
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|
($)(1)
|
|
($)
|
|
($)
|
|
($)
|
Courtney C. Smith
(2)
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|
|
2008
|
|
|
$
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463,000
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|
|
$
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80,000
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|
|
$
|
72,669
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,200
|
|
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$
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624,869
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President and Chief
Executive Officer
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2007
|
|
|
|
441,000
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|
|
|
110,250
|
|
|
|
|
|
|
|
272,117
|
|
|
|
|
|
|
|
9,000
|
|
|
|
832,367
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|
|
|
2006
|
|
|
|
420,000
|
|
|
|
105,000
|
|
|
|
|
|
|
|
309,417
|
|
|
|
|
|
|
|
8,523
|
|
|
|
842,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
Peter E. Jokiel
(2)
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|
|
2008
|
|
|
|
405,000
|
|
|
|
70,000
|
|
|
|
50,868
|
|
|
|
|
|
|
|
|
|
|
|
9,200
|
|
|
|
535,068
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|
Executive VP and Chief
Financial Officer
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|
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2007
|
|
|
|
385,900
|
|
|
|
96,475
|
|
|
|
|
|
|
|
194,779
|
|
|
|
|
|
|
|
9,000
|
|
|
|
686,154
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|
|
|
2006
|
|
|
|
367,500
|
|
|
|
91,875
|
|
|
|
|
|
|
|
221,478
|
|
|
|
|
|
|
|
8,800
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|
|
|
689,653
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
Scott W. Goodreau
(3)
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|
|
2008
|
|
|
|
290,000
|
|
|
|
58,000
|
|
|
|
16,956
|
|
|
|
|
|
|
|
|
|
|
|
78,500
|
|
|
|
443,456
|
|
Senior VP, General
Counsel, and Secretary
|
|
|
2007
|
|
|
|
275,700
|
|
|
|
60,000
|
|
|
|
|
|
|
|
35,514
|
|
|
|
|
|
|
|
69,879
|
|
|
|
441,093
|
|
|
|
2006
|
|
|
|
262,500
|
|
|
|
30,000
|
|
|
|
|
|
|
|
43,793
|
|
|
|
|
|
|
|
13,800
|
|
|
|
350,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry G. Cordeiro
(4)
|
|
|
2008
|
|
|
|
290,000
|
|
|
|
50,000
|
|
|
|
21,580
|
|
|
|
47,576
|
|
|
|
|
|
|
|
9,200
|
|
|
|
418,356
|
|
Senior VP and Chief
Information Officer
|
|
|
2007
|
|
|
|
275,700
|
|
|
|
60,000
|
|
|
|
|
|
|
|
36,218
|
|
|
|
|
|
|
|
9,000
|
|
|
|
380,918
|
|
|
|
2006
|
|
|
|
262,500
|
|
|
|
30,000
|
|
|
|
|
|
|
|
36,218
|
|
|
|
|
|
|
|
8,800
|
|
|
|
337,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary J. Ferguson
(2)
|
|
|
2008
|
|
|
|
290,000
|
|
|
|
43,000
|
|
|
|
29,067
|
|
|
|
|
|
|
|
|
|
|
|
9,200
|
|
|
|
371,267
|
|
Senior VP and Chief
Claims Officer
|
|
|
2007
|
|
|
|
275,700
|
|
|
|
68,925
|
|
|
|
|
|
|
|
78,415
|
|
|
|
|
|
|
|
9,000
|
|
|
|
432,040
|
|
|
|
2006
|
|
|
|
262,500
|
|
|
|
65,625
|
|
|
|
|
|
|
|
89,163
|
|
|
|
|
|
|
|
8,800
|
|
|
|
426,088
|
|
|
|
|
(1)
|
|
Based on grant date fair value of options which vested in 2008, 2007 and 2006,
respectively, using the binomial lattice option pricing model under FAS 123R. See Note 7
to the financial statements included in the Companys Annual Report on Form 10-K filed with
the SEC for more information regarding the assumptions used to calculate grant date fair
value.
|
|
(2)
|
|
The bonus amount for 2007 and 2006 was set pursuant to employment agreement at 25% of
annual base salary. All Other Compensation reflects the Companys matching contributions
to the employees 401(k) plan.
|
|
(3)
|
|
All Other Compensation reflects the Companys matching contributions to the employees
401(k) plan as well as $69,300, $60,879 and $5,000 in 2008, 2007 and 2006, respectively,
for reimbursement for professional education. Mr. Goodreau was promoted to Senior Vice
President in February of 2007.
|
|
(4)
|
|
All Other Compensation reflects the Companys matching contributions to the employees
401(k) plan. Mr. Cordeiro was promoted to Senior Vice President in February of 2007.
|
COMPENSATION PAID IN 2008
Throughout 2008, the Compensation Committee reviewed the compensation being paid to the named
executive officers, including the individual components of each persons total pay package. The
committee determined that aggregate compensation paid to each named executive officer was
appropriate in light of the Companys overall performance and the individual performance of each
such officer. The Compensation Committee recognized the efforts made by our senior management in
building the Companys infrastructure and in maintaining underwriting, claims, investment and
expense discipline.
|
|
|
|
|
20
|
|
2009 Proxy Statement
|
|
|
|
|
Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
Based on the Compensation Committees review of the factors set forth in section Base
Salaries and Base Salary Increases above, each of the named executive officers received a 5% base
salary increase effective January 1, 2008. These increases were approved after receiving input
from our compensation consultant regarding salary trends and after input from our CEO and other
independent directors not on the Compensation Committee. For 2009, after reviewing Company
performance during 2008 and receiving similar input, the Compensation Committee determined that
there should be no increases in executive salaries for 2009. In addition, the Compensation
Committee did not make any non-equity cash incentive payments to officers relating to 2008 as our
after-tax ROE was approximately 5.7%, which was below the 8% minimum. Individual-based bonuses and
equity incentive compensation for 2008 for our named executive officers are discussed individually
below.
In 2008, Courtney Smith, our Chief Executive Officer, received a salary of $463,000, which
represented a 5% increase in his base salary from 2007, an discretionary individual bonus of
$80,000, which was paid in 2009, no non-equity incentive payments and a grant of 60,000 restricted
stock units, which vest in equal installments on each of the five subsequent grant date
anniversaries. Mr. Smith also received $9,200 in matching contributions by the Company to his
401(k) plan.
In 2008, Peter Jokiel, our Chief Financial Officer, received a salary of $405,000, which
represented a 5% increase in his base salary from 2007, an discretionary individual bonus of
$70,000, which was paid in 2009, no non-equity incentive payments and a grant of 42,000 restricted
stock units, which vest in equal installments on each of the five subsequent grant date
anniversaries. Mr. Jokiel also received $9,200 in matching contributions by the Company to his
401(k) plan.
In 2008, Scott Goodreau, our General Counsel, received a salary of $290,000 which represented
a 5% increase in his base salary from 2007, an individual discretionary individual bonus of
$58,000, which was paid in 2009, no non-equity incentive payments and a grant of 24,000 restricted
stock units, which vest in equal installments on each of the five subsequent grant date
anniversaries. Mr. Goodreau also received $9,200 in matching contributions by the Company to his
401(k) plan and $69,300 in reimbursement for professional education.
In 2008, Barry Cordeiro, our Chief Information Officer, received a salary of $290,000, which
represented a 5% increase in his base salary from 2007, an discretionary individual bonus of
$50,000, which was paid in 2009, no non-equity incentive payments and a grant of 24,000 restricted
stock units, which vest in equal installments on each of the five subsequent grant date
anniversaries. Mr. Cordeiro also received $9,200 in matching contributions by the Company to his
401(k) plan.
In 2008, Gary Ferguson, our Chief Claims Officer, received a salary of $290,000, which
represented a 5% increase in his base salary from 2007, an discretionary individual bonus of
$43,000, which was paid in 2009, no non-equity incentive payments and a grant of 24,000 restricted
stock units, which vest in equal installments on each of the five subsequent grant date
anniversaries. Mr. Ferguson also received $9,200 in matching contributions by the Company to his
401(k) plan.
The Compensation Committee reviewed each executives duties, history with the Company and
compensation history in establishing particular individual levels of stock grants and received
input from the Companys CEO and other independent directors not on the Compensation Committee.
The determination to make no non-equity cash incentive payments was made after reviewing the
Companys after-tax ROE for 2008. Determinations regarding 2008 individual discretionary bonuses
(other than the CEO) were made with input from the Companys CEO and other independent directors
not on the Compensation Committee regarding individual performance and after reviewing the
Companys financial performance in 2008 and receiving input from the Compensation Committees
advisor regarding compensation trends at similar companies relative to 2008 bonuses and setting
2009 objectives for non-equity cash incentives. The determination regarding the CEOs bonus was
made with similar input from our compensation advisor and with input from all independent directors
of the Company.
POLICY REGARDING RECOVERY OF CERTAIN PAYMENTS AND AWARDS
The Company believes that it is in the best interests of its stockholders to have a policy
regarding recovery of awards and payments made to executive officers under certain circumstances.
In general, those circumstances would involve certain types of misconduct or in connection with
certain restatements of our financial statements. Therefore, it is our policy that, subject to
applicable law, the Company should attempt to recover from any executive officer some or all of any
bonus, incentive payment, equity award or other compensation that had been awarded or received by
such executive officer if the Board, or a committee thereof, determines that such compensation was
based on any financial results or operating metrics that were satisfied as a result of such
executive officers knowing
|
|
|
|
|
|
|
2009 Proxy Statement
|
|
21
|
|
|
Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
or intentional fraudulent or illegal conduct. In determining whether
to recover a payment or award, and whether such recovery should be in whole or in part, the Board,
or a committee thereof, shall take into account such considerations as it deems appropriate,
including whether the assertion of a claim may violate applicable law or prejudice the interests of
the Company in any related proceeding or investigation. The Board, or a committee thereof, has
sole discretion in determining whether an executive officers conduct has or has not met any
particular standard of conduct under law or Company policy.
In addition, following a restatement of the Companys financial statements, the Company is
required to recover any compensation received by the Companys Chief Executive Officer and Chief
Financial Officer that is required to be recovered by Section 304 of the Sarbanes-Oxley Act of
2002.
IMPACT OF REGULATORY REQUIREMENTS ON COMPENSATION
In formulating and implementing its compensation policies, the Company continually reviews the
actual or potential effects of governmental and other regulation, weighing the costs and benefits
of a particular form of compensation in light of such regulation. For example, during 2006 we
adopted FAS 123R under which we recognize compensation expense for stock options. Our stockholders
approved a new equity incentive plan, the 2007 Stock Incentive Plan, at our 2007 annual meeting.
We believe the plan provides more flexibility and will provide us with additional forms of long
term equity incentives, some of which may allow for different amounts and timing of expense to the
Company.
The Internal Revenue Code of 1986, as amended, prohibits publicly held corporations such as
the Company from deducting compensation in excess of $1,000,000 per individual, other than
performance-based compensation. Based on the current levels of executive officer compensation, we
have not been affected by this restriction. Our Compensation Committee continually evaluates
maximizing the deductibility of executive compensation, while retaining the discretion it deems
necessary to compensate our executive officers.
In addition, Section 280G of the Internal Revenue Code provides that if an officer,
stockholder or highly compensated individual receives a payment which is in the nature of
compensation and which is contingent upon a change in control of the employer, and such payment
equals or exceeds three times his or her base amount (as defined in Section 280G), then any
amount received in excess of the base amount shall be considered an excess parachute payment.
Under certain circumstances, in addition to any income tax which would otherwise be owed in
connection with such payment, the individual will be subject to an excise tax equal to 20% of such
excess payment, and the Company will not be entitled to any tax deduction to which it would have
been entitled with respect to such excess parachute payment.
The Compensation Committee continues to monitor the implementation of the rules and
regulations pursuant to Section 409A of the Internal Revenue Code, which, among other things, could
cause certain types of deferred payments to be subject to additional taxes and penalties. While
the Company believes that its current employment arrangements and agreements do not give rise to
any negative consequences under Section 409A, the Company has structured its employment agreements
to reduce or eliminate any adverse effects of Section 409A.
POST TERMINATION COMPENSATION
Each of the Companys named executive officers is a party to either an employment agreement or
a change of control agreement. The following definitions apply to both forms of agreement:
Cause means that the executive: (1) has committed an act constituting a misdemeanor
involving moral turpitude or a felony under the laws of the United States or any state or political
subdivision thereof; (2) has committed an act constituting a breach of fiduciary duty, gross
negligence or willful misconduct; (3) has engaged in conduct that violated our then-existing
material internal policies or procedures and which is detrimental to the business, reputation,
character or standing of the Company or any of its affiliates; (4) has committed an act of fraud,
self dealing, conflict of interest, dishonesty or misrepresentation; or (5) in the case of the
employment agreements, has materially breached his obligations as set forth in his employment
agreement or in the case of the change of control agreement, has materially breach the duties of
his employment; provided, however, that the Company must provide the executive with notice
specifying the nature of the breach or behavior, and, if the breach or behavior is pursuant to (2),
(3) or (5) above, the executive will have ten days to correct the breach or behavior.
|
|
|
|
|
22
|
|
2009 Proxy Statement
|
|
|
|
|
Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
Good Reason will apply if the executive sends the Company, within 90 days of the initial
existence of the event or circumstances that constitute good reason, written notice setting forth
the alleged good reason and after a 60-day cure period there continues to be: (1) a material
adverse change in the executives title, position or responsibilities; and/or (2) in the case of
the employment agreement, a material breach by the Company of any material provision of the
employment agreement or in the case of the change of control agreements, a material reduction of
the employees base salary.
Change in Control is defined as:
|
|
|
any person or group of persons acquires direct or indirect beneficial ownership of
securities of the Company representing 50% or more of the combined voting power of the
then outstanding securities of the Company;
|
|
|
|
|
a 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 the
Companys voting securities immediately prior thereto continuing to hold at least 50%
of the combined voting power of the Companys outstanding voting securities or the
surviving entity immediately after such merger or consolidation;
|
|
|
|
|
the Companys Board approves a plan of complete liquidation or an agreement for the
sale or disposition of all or substantially all of its assets, other than any such sale
or disposition where all or substantially all of the holders of the Companys 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; or
|
|
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|
|
individuals, who are currently directors cease, for any reason to constitute a
majority of directors; provided, however, that if the appointment or election (or
nomination for election) of any new director was approved or recommended by a majority
vote of the current Board, the new director(s) will be considered a member of the
current Board, unless the new directors initial assumption of office occurs
as a result of or in connection with either an actual or threatened election contest or
other actual or threatened solicitation of proxies or consents by or on behalf of an
entity other than the current Board.
|
EMPLOYMENT AGREEMENTS
The Companys CEO, Courtney Smith, its CFO, Peter Jokiel and its CCO, Gary Ferguson, each a
named executive officer, has an employment agreement that contains post-termination provisions as
part of those agreements.
Each employment agreement provides that in the event of termination due to (1) termination for
cause by the Company, (2) resignation by the executive, or (3) disability or death, the executive
will be entitled to receive: (a) earned but unpaid base salary and any earned and unpaid bonus,
each prorated through the effective date of termination; (b) any unreimbursed business expenses or
other amounts due as of the termination date; and (c) all payments, rights and benefits due as of
the termination date under the terms of the Companys employee and fringe benefit plans, practices,
programs and arrangements. These entitlements are referred to within the employment agreements as
the accrued rights.
Further, each agreement (other than Mr. Ferguson) provides that in the event of termination by
(1) the Company without cause, or (2) the executive for good reason, the executive will be entitled
to receive, in addition to the accrued rights, a lump sum payment of an amount equal to 225% of the
annual amount of the executives base salary if such termination occurs on or before December 31,
2009, or 150% of the executives base salary if the termination occurs after December 31, 2009.
Upon a termination due to (1) termination without cause by the Company, or (2) by Mr. Ferguson for
good reason, Mr. Ferguson will be entitled to receive, in addition to the accrued rights, 150% of
his base salary if the termination occurs on or before December 31, 2009.
If an officer with an employment agreement (other than Mr. Ferguson) is terminated by the
Company without cause, or by the executive with good reason, within 24 months of a change in
control, then the officer will be entitled to receive, in addition to the accrued rights, 300% of
the officers base salary if the termination occurs on or before December 31, 2009, or 200% of the
officers base salary if the termination occurs after December 31, 2009. Upon a termination within
24 months of a change in control, Mr. Ferguson will be entitled to receive, in addition to the
accrued rights, 200% of his base salary if the termination occurs on or before December 31, 2009.
Moreover, upon a termination due to a change in control, all stock options, restricted stock awards
or other types of equity-
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2009 Proxy Statement
|
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23
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Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
based compensation then held by the executive which were not previously
vested or exercised shall become fully vested and/or
exercisable.
Each employment agreement also provides that if employment is terminated by the executive
other than for good reason, the executive has agreed not to compete with the Company for two years
following the termination date; unless the executive gives the Company at least nine months notice
of the resignation, in which case the executive has agreed not to compete with the Company for
fifteen months following the termination date. If the employment is terminated by the Company for
or without cause, or if employment is terminated by the executive for good reason, the executive
has agreed not to compete for one year following the termination of his employment. If the
employment is terminated due to a change in control, the executive has agreed not to compete for
two years.
CHANGE IN CONTROL AGREEMENTS
The Companys Chief Information Officer, Barry Cordeiro, and its General Counsel, Scott
Goodreau, each a named executives officer, entered into change in control agreements in 2008. Upon
a termination by the Company without cause, or by the executive with good reason, within 24 months
of a change in control, the executive will be entitled to receive
200% of his respective base
salary. Upon a termination due to a change in control, all stock options, restricted stock
awards or other types of equity-based compensation then held by the executive which were not
previously vested or exercised shall become fully vested and/or exercisable. The change in control
agreements also provide that if the employment of Messrs. Cordeiro or Goodreau is terminated as a
result of a change in control, each will not compete with the Company for a period of one year.
Notwithstanding the preceding, if these benefits and payments, either alone or together with
other benefits and payments that the executive has the right to receive either directly or
indirectly from the Company or any of our affiliates, would constitute an excess parachute payment,
or excess payment, under Section 280G of the Internal Revenue Code of 1986, as amended, or the
Internal Revenue Code, the executive hereby agrees that these benefits
and payments will be reduced (but not below zero) by the amount necessary to prevent any such
benefits and payments, to the executive from constituting an excess payment, as determined by our
independent auditor.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
In the event of termination due to (1) termination for cause by us, (2) resignation by the
executive, or (3) disability or death, as of December 31, 2008, each of the named executive
officers under employment agreement would receive a lump sum payment of the following: Courtney C.
Smith, $33,834; Peter E. Jokiel, $40,500; and Gary J. Ferguson, $52,423, which represents earned
but unpaid wages and vacation time. The Companys 2008 Officer Bonus Program was entirely at the
discretion of the Compensation Committee and therefore is not earned ratably during the year,
therefore these amounts do not include any previously earned but unpaid bonus.
In the event of termination by (1) us without cause, or (2) the executive for good reason, as
of December 31, 2008, each of the named executive officers under employment agreements would
receive a lump sum payment of the following: Courtney C. Smith, $1,075,585; Peter E. Jokiel,
$951,750; and Gary J, Ferguson, $487,423. After December 31, 2009 the above payments to Mr. Smith
and Mr. Jokiel would be reduced to 150% of their current base
salaries plus any accrued rights.
Finally, if the executives employment is terminated by us, other than due to the executives
death or disability or cause, or by the executive for good reason, in either case, upon or within
twenty-four months following a change in control, then, as of December 31, 2008, each of the
named executive officers under employment agreements would receive a lump sum payment of the
following: Courtney C. Smith, $1,580,635; Peter E. Jokiel, $1,365,960; and Gary J. Ferguson,
$695,543. After December 31, 2009 the above payments to Mr. Smith and Mr. Jokiel would be reduced
to 200% of their current base salaries plus any accrued rights. Each of the named executive officers
without employment agreements would receive a lump sum payment of the following: Barry G. Cordeiro,
$660,408 and Scott W. Goodreau, $674,908. These amounts include the value of restricted stock
units granted during 2008, which according to the terms of the employment and change in control
agreements of the named executive officers, immediately vest upon a termination due to a change in
control, but does not include the value of stock options which would immediately vest and become
exercisable as of December 31, 2008 using its intrinsic value, as this amount would be $0 for the
named executive officers. The Companys 2008 Officer Bonus Program was entirely at the discretion
of the Compensation Committee and therefore is not earned ratably during the year, therefore these
amounts do not include any previously earned but unpaid bonus.
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24
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2009 Proxy Statement
|
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Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
AWARDS
In 2008, the Compensation Committee awarded restricted stock awards pursuant to the 2007 Plan.
None of the named executive officers exercised any of their outstanding stock options in 2007.
EQUITY COMPENSATION PLAN INFORMATION
The 2004 Plan was cancelled upon the adoption and approval of the 2007 Plan. No more options
may be granted pursuant to the 2004 Plan. As of December 31, 2008, under the 2004 Plan, there were
718,066 options outstanding, of which 708,066 were exercisable and 10,000 have not yet vested.
There were no shares available for grant under the 2004 Plan. 800,000 shares of Common Stock were
authorized for grant pursuant to the 2007 Plan. Any outstanding options or awards, whether granted
under the 2004 Plan or the 2007 Plan, which have expired, terminated or been canceled or forfeited
are available for issuance or use in connection with future awards under the 2007 Plan. The
maximum number of shares of Common Stock that may be the subject of grants to any individual during
any calendar year shall not exceed 500,000. The 2004 Plan and the 2007 Plan provide that the term
of any option may not exceed ten years.
In addition, the 2007 Plan provides that on the first business day following each annual
meeting of stockholders (and on the date on which a non-employee director first becomes a member of
our Board, if appointed before the first annual meeting of the stockholders), each non-employee
director will receive an automatic restricted stock award for 3,000 shares of Common Stock that
shall be immediately vested.
The table below contains information about the Companys compensation plans as of December 31,
2008 under which equity securities of the Company are authorized for issuance.
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Number of securities remaining
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Number of securities to be
|
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Weighted-average
|
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available for future issuance under
|
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issued upon exercise of
|
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exercise price of
|
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equity compensation plans
|
|
|
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outstanding options,
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outstanding options,
|
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(excluding securities reflected in
|
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warrants and rights(#)
|
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warrants and rights($)
|
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column (a))(#)
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Plan category
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(a)
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(b)
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(c)
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Equity compensation plans
approved by security holders
|
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718,066
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$9.32
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535,650
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Equity compensation plans not
approved by security holders
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|
|
|
|
|
|
|
|
|
|
|
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|
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Total
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718,066
|
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$9.32
|
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535,650
|
|
|
|
|
|
|
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|
|
|
|
|
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|
2009 Proxy Statement
|
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25
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Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
The following equity awards were outstanding for the named executive officers as of December
31, 2008.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
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Option Awards
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Stock Awards
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Equity Incentive
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Equity Incentive
|
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Number of
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Plan Awards:
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Plan Awards:
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Securities
|
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|
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Number of
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Market or Payout
|
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Underlying
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Unearned Shares,
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Value of Unearned
|
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Unexercised
|
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Option
|
|
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Units or Other
|
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Shares, Units or
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Options
|
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Exercise
|
|
|
|
|
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Rights That Have
|
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Other Rights that
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(#)
|
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Price
|
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Option
|
|
Not Vested
|
|
Have Not Vested
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Name
|
|
Exercisable (1)
|
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($)
|
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Expiration Date
|
|
(#)
|
|
($) (2)
|
Courtney C. Smith
|
|
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190,000
|
|
|
$
|
9.50
|
|
|
|
11/17/2014
|
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|
|
60,000
|
|
|
$
|
157,800
|
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President and Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Peter E. Jokiel
|
|
|
136,000
|
|
|
|
9.50
|
|
|
|
11/17/2014
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|
|
42,000
|
|
|
|
110,460
|
|
Executive VP and
Chief Financial Officer
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
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Barry G. Cordeiro
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30,000
|
|
|
|
10.02
|
|
|
|
9/9/2015
|
|
|
|
24,000
|
|
|
|
63,120
|
|
Senior VP and
Chief Information Officer
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
|
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Scott W. Goodreau
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30,000
|
|
|
|
9.50
|
|
|
|
11/17/2014
|
|
|
|
24,000
|
|
|
|
63,120
|
|
Senior VP, General
Counsel and Secretary
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Gary J. Ferguson
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64,000
|
|
|
|
9.50
|
|
|
|
11/17/2014
|
|
|
|
24,000
|
|
|
|
63,120
|
|
Senior VP and
Chief Claims Officer
|
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|
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|
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(1)
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Each of these options vest in equal annual installments over the three-year
period following the date of grant. Options awarded to Messrs. Smith, Jokiel, Ferguson and
Goodreau were granted on 11/17/2004, and options awarded to Mr. Cordeiro were granted on
9/9/2005.
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(2)
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The closing price on 12/31/2008 was $2.63.
|
An increase in the number of shares issuable under the plan or a change in the class of
persons to whom options may be granted may be made by the Board or the Compensation Committee, but
is subject to the approval of the stockholders within one year of such amendment.
|
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26
|
|
2009 Proxy Statement
|
|
|
|
|
Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
The Company made the following grants of plan based awards during 2008.
GRANTS OF PLAN-BASED AWARDS
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|
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|
|
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All Other Stock
|
|
|
|
|
|
|
|
|
Awards: Number of
|
|
Grant Date Fair
|
|
|
|
|
|
|
Shares of Stocks or
|
|
Value of Stock
|
|
|
|
|
|
|
Units
|
|
and Option
|
Name
|
|
Grant Date
|
|
(#)
|
|
Awards
|
Courtney C. Smith
|
|
|
4/4/2008
|
|
|
|
60,000
|
|
|
$
|
4.71
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
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|
|
|
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Peter E. Jokiel
|
|
|
4/4/2008
|
|
|
|
42,000
|
|
|
|
4.71
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|
Executive VP and Chief Financial Officer
|
|
|
|
|
|
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|
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|
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|
|
|
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Gary J. Ferguson
|
|
|
4/4/2008
|
|
|
|
24,000
|
|
|
|
4.71
|
|
Senior VP and Chief Claims Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Barry Cordeiro
|
|
|
4/4/2008
|
|
|
|
24,000
|
|
|
|
4.71
|
|
Senior VP and Chief Information Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott W. Goodreau
|
|
|
4/4/2008
|
|
|
|
24,000
|
|
|
|
4.71
|
|
Senior VP, General Counsel and Secretary
|
|
|
|
|
|
|
|
|
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STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
Our stockholders who wish to communicate with the Board or any individual director can write
to:
Scott Goodreau
Senior Vice President, General Counsel,
Administration & Corporate Relations
Specialty Underwriters Alliance, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
Your letter should indicate that you are a stockholder of the Company. Depending on the
subject matter of your inquiry, management will:
|
|
|
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.
|
At each Board meeting, a member of management will present a summary of all communications
received since the last meeting that were not forwarded and make those communications available to
any requesting director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The
following table provides information as of March ___, 2009, with respect to ownership of
Common Stock by (i) each beneficial owner of five percent or more of the Companys Common Stock
known to the Company, (ii) each of the Companys most highly compensated executive officers in
fiscal 2008, (iii) each director of the Company and (iv) all directors and executive officers as a
group. Except as otherwise noted, each person named below has sole
|
|
|
|
|
|
|
2009 Proxy Statement
|
|
27
|
|
|
Specialty Underwriters Alliance, Inc.
|
|
|
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
investment and voting power
with respect to the securities shown. Also, unless otherwise indicated, the business address for
each person below is 222 South Riverside Plaza, Suite 1600, Chicago, Illinois 60606.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Percent of Stock
|
Name and Address
|
|
Beneficially Owned
|
|
Outstanding
|
Heartland Advisors, Inc.
|
|
|
1,926,300
|
(1)
|
|
|
13.34
|
%
|
Hallmark Financial Services, Inc.
|
|
|
1,429,615
|
(2)
|
|
|
9.90
|
%
|
Aegis Financial Corporation
|
|
|
1,421,838
|
(3)
|
|
|
9.85
|
%
|
North Run Capital, LP
|
|
|
1,327,300
|
(4)
|
|
|
9.19
|
%
|
The Philip Stephenson Revocable Living Trust
|
|
|
954,167
|
(5)
|
|
|
6.61
|
%
|
Wellington Management Company, LLP
|
|
|
772,102
|
(6)
|
|
|
5.35
|
%
|
Renaissance Technologies, LLC
|
|
|
770,400
|
(7)
|
|
|
5.34
|
%
|
Whitebox Advisors, LLC
|
|
|
759,996
|
(8)
|
|
|
5.26
|
%
|
Peter E. Jokiel
|
|
|
247,542
|
(9)
|
|
|
1.70
|
%
|
Courtney C. Smith
|
|
|
226,481
|
(10)
|
|
|
1.55
|
%
|
Gary J. Ferguson
|
|
|
89,640
|
(11)
|
|
|
*
|
|
Barry G. Cordeiro
|
|
|
77,710
|
(12)
|
|
|
*
|
|
Scott W. Goodreau
|
|
|
42,100
|
(13)
|
|
|
*
|
|
Robert E. Dean
|
|
|
28,500
|
(14)
|
|
|
*
|
|
Robert H. Whitehead
|
|
|
28,000
|
(15)
|
|
|
*
|
|
Russell E. Zimmermann
|
|
|
27,500
|
(16)
|
|
|
*
|
|
Raymond C. Groth
|
|
|
27,000
|
(17)
|
|
|
*
|
|
Paul A. Philp
|
|
|
27,000
|
(18)
|
|
|
*
|
|
All executive officers and directors as a group
|
|
|
884,013
|
(19)
|
|
|
5.86
|
%
|
|
|
|
(1)
|
|
This information is based upon a Schedule 13G/A filing with the SEC dated February 11, 2009
made by Heartland Advisors, Inc., setting forth information as of December 31, 2008 and
includes shares which may be deemed to be beneficially held by William J. Nasgovitz. The
address for Heartland Advisors, Inc. is 789 North Water Street, Milwaukee, WI, 53202. Of the
aggregate amount beneficially owned, the reporting persons have shared voting power as to
1,848,800 shares and shared dispositive power as to all shares reported.
|
|
(2)
|
|
This information is based upon a Schedule 13D/A filing with the SEC dated January 16, 2009
made by Hallmark Financial Services, Inc., setting forth information as of December 31, 2008
and includes shares which may be deemed to be beneficially held by American Hallmark
Insurance Company of Texas, Hallmark Specialty Insurance Company, C. Gregory Peters, Mark E.
Pape and Robert M. Fishman. The address for Hallmark Financial Services, Inc. is 777 Main
Street, Suite 1000, Fort Worth, TX 76102.
|
|
(3)
|
|
This information is based upon a Schedule 13G filing with the SEC dated February 12, 2009
made by Aegis Financial Corporation, setting forth information as of December 31, 2008 and
includes shares which may be deemed to be beneficially held by Scott L. Barbee. The address
for Aegis Financial Corporation is 1100 North Glebe Road, Suite 1040, Arlington, VA, 22201.
|
|
(4)
|
|
This information is based upon a Schedule 13G/A filing with the SEC dated February 17, 2009
made by North Run Capital, LP setting forth information as of December 31, 2008 and
represents shares held by North Run Master Fund, LP (NRM Fund), for which North Run
Capital, LP is the investment manager. North Run Advisors, LLC is the general partner of
North Run Capital, LP and of North Run GP, LP which is the special general partner of NRM
Fund. Todd B. Hammer and Thomas B. Ellis are the sole members of North Run Advisors, LLC.
Mr. Hammer, Mr. Ellis, North Run Capital, LP, North Run GP, LP and North Run Advisors, LLC
have shared voting and dispositive power with respect to the shares and, as sole members of
North Run Advisors, LLC, Messrs Hammer and Ellis may direct the vote and disposition of such
shares. The address of North Run Capital, LP is One International Place, Suite 2401, Boston,
MA 02110.
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28
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
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(5)
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This information is based upon a Schedule 13D/A filing with the SEC dated November 28, 2008
made by The Philip Stephenson Revocable Living Trust, and includes shares which may be deemed
to be held by George Philip Stephenson. The address of The Philip Stephenson Revocable
Living Trust is 99 Canal Center Plaza, Suite 420, Alexandria, VA 22314.
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(6)
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This information is based upon a Schedule 13G filing with the SEC dated February 17, 2009
made by Wellington Management Company, LLP, setting forth information as of December 31,
2008. The address for Wellington Management Company, LLP is 75 State Street, Boston MA
02109.
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(7)
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This information is based upon a Schedule 13G filing with the SEC dated February 13, 2009
made by Renaissance Technologies, LLC, setting forth information as of December 31, 2008 and
include shares that may be deemed to be beneficially held James H. Simons. The address for
Renaissance Technologies, LLC is 800 Third Avenue, New York, New York 10022.
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(8)
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This information is based upon a Schedule 13G filing with the SEC dated February 17, 2009
made by Whitebox Advisors, LLC, setting forth information as of December 31, 2008 and include
shares that may be deemed to be beneficially held by Whitebox Combined Advisors, LLC,
Whitebox Combined Partners, L.P., Whitebox Combined Fund, L.P., Whitebox Combined Fund, Ltd.,
Whitebox Intermarket Advisors, LLC, Whitebox Intermarket Partners, L.P., Whitebox Intermarket
Fund, L.P., and Whitebox Intermarket Fund, Ltd. The address for Whitebox Advisors, LLC is
3033 Excelsior Boulevard, Suite 300 Minneapolis, MN 55416.
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(9)
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Peter E. Jokiel is our Executive Vice President, Chief Financial Officer and Director. The
number of shares beneficially owned includes 136,000 shares issuable upon exercise of options
that are currently exercisable and 8,400 shares of restricted stock which vest within 60 days
of March 20, 2009.
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(10)
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Courtney C. Smith is our President, Chief Executive Officer and Chairman of the Board of
Directors. The number of shares beneficially owned includes 190,000 shares issuable upon
exercise of options that are currently exercisable and 12,000 shares of restricted stock
which vest within 60 days of March 20, 2009.
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(11)
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Gary J. Ferguson is a Senior Vice President and Chief Claims Officer. The number of shares
beneficially owned includes 64,000 shares issuable upon exercise of options that are
currently exercisable and 4,800 shares of restricted stock which vest within 60 days of March
20, 2009.
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(12)
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Barry G. Cordeiro a Senior Vice President and Chief Information Officer. The number of
shares beneficially owned includes 30,000 shares issuable upon exercise of options that are
currently exercisable and 4,800 shares of restricted stock which vest within 60 days of March
20, 2009.
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(13)
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Scott W. Goodreau is a Senior Vice President, General Counsel, Administration & Corporate
Relations and Secretary. The number of shares beneficially owned includes 30,000 shares
issuable upon exercise of options that are currently exercisable and 4,800 shares of
restricted stock which vest within 60 days of March 20, 2009.
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(14)
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Robert E. Dean is a Director. The number of shares beneficially owned includes 8,500
shares held in living trust as to which Mr. Dean has shared voting and dispositive power with
his wife. Also includes 20,000 shares issuable upon exercise of options that are currently
exercisable.
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(15)
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Robert H. Whitehead is a Director. The number of shares beneficially owned includes 20,000
shares issuable upon exercise of options that are currently exercisable.
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(16)
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Russell E. Zimmermann is a Director. The number of shares beneficially owned includes
20,000 shares issuable upon exercise of options that are currently exercisable.
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(17)
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Raymond C. Groth is a Director. The number of shares beneficially owned includes 20,000
shares issuable upon exercise of options that are currently exercisable.
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(18)
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Paul A. Philp is a Director. The number of shares beneficially owned includes 20,000
shares issuable upon exercise of options that are currently exercisable.
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(19)
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The total shares beneficially owned by all executive officers and directors as a group (13
people) includes 594,400 shares issuable upon exercise of options that are currently
exercisable and 44,340 shares of restricted stock which vest within 60 days of March 20,
2009. The only executive officers of the Company included in this total but not otherwise
shown on this table are Daniel A. Cacchione, Senior Vice President and Chief Underwriting
Officer; Scott K. Charbonneau, Vice President and Chief Actuary; and Daniel J. Rohan, Vice
President and Controller. Mr. Cacchione beneficially owned 13,000 shares, which includes
10,000 shares issuable upon exercise of options that are currently exercisable and 2,500
shares of restricted stock which vest within 60 days of March 20, 2009. Mr. Charbonneau
beneficially owned 29,940 shares, which includes 20,000 shares issuable upon exercise of
options that are currently exercisable and 3,840 shares of restricted stock which vest within
60 days of March 20, 2009. Mr. Rohan beneficially owned 19,600 shares, which includes 14,400
shares issuable upon exercise of options that are currently exercisable and 3,200 shares of
restricted stock which vest within 60 days of March 20,
2009.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have adopted written policies and procedures with respect to the approval of related person
transactions. Pursuant to this policy, subject to certain exceptions, the Nominating and Corporate
Governance Committee of our Board of Directors must approve any interested transaction between the
Company and any related person (as defined in the applicable SEC rules). Our policy defines an
interested transaction as any transaction, arrangement or relationship or series of similar
transactions, arrangements or relationships (including any indebtedness or guarantee of
indebtedness) in which:
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the aggregate amount involved will or may be expected to exceed $120,000 in any
calendar year,
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the Company is a participant, and
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any related person has or will have a direct or indirect interest (other than solely
as a result of being a director or a less than 10 percent beneficial owner of another
entity).
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2009 Proxy Statement
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29
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
In determining whether to approve an interested transaction, the Nominating and Corporate
Governance Committee takes into account, among other factors it deems appropriate, whether the
interested transaction is on terms no less favorable than terms generally available to an
unaffiliated third-party under the same or similar circumstances and the extent of the related
persons interest in the transaction. If an interested transaction will be ongoing, the Nominating
and Corporate Governance Committee may establish guidelines for the Companys management to follow
in its ongoing dealings with the related person. Thereafter, the Nominating and Corporate
Governance Committee, on at least an annual basis, reviews and assesses ongoing relationships with
the related person to see that they are in compliance with the guidelines and that the interested
transaction remains appropriate.
Our policy deems the following types of transactions to be pre-approved by the Nominating and
Corporate Governance Committee:
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employment agreements with executive officers that meet certain criteria,
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director compensation that meet certain criteria,
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any transaction with another company at which a related persons only relationship
is as an employee (other than an executive officer), director or beneficial owner of
less than 10% of that companys shares, if the aggregate amount involved does not
exceed the greater of $50,000, or 2 percent of that companys total annual revenues,
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transactions where all stockholders receive proportional benefits, and
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transactions involving competitive bids.
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In addition, our policy requires that our General Counsel institute and maintain specific
procedures, including but not limited to the use of questionnaires, to ensure that the Company
maintains records of related persons and interested transactions so that all related person
interested transactions that are required to be disclosed in our filings with the Securities and
Exchange Commission are disclosed in accordance with all applicable laws, rules and regulations.
Since the beginning of 2008, there have been no transactions in excess of $120,000 between the
Company and a related person in which the related person had a direct or indirect material
interest.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the U.S. securities laws, the Companys officers, directors and holders of more than 10%
of its Common Stock are required to report their initial ownership of Common Stock and any
subsequent changes in that ownership to the Securities and Exchange Commission. Due dates for
those reports are specified by those laws, and the Company is required to disclose in this document
any failure in the past year to file by the required due dates. Based solely on written
representations of its directors, officers and holders of more than 10% of the Companys Common
Stock and on copies of reports that have been filed with the Securities and Exchange Commission,
the Company believes all directors, officers and holders of more than
10% of the Companys Common Stock complied with all filing requirements applicable to them with respect
to transactions in its Common Stock during 2008, except as described below.
On May 4, 2008, each of the Companys executive officers, including Courtney C. Smith, Peter
E. Jokiel, Gary J. Ferguson, Barry G. Cordeiro, Scott W. Goodreau, Daniel A. Cacchione, Scott K.
Charbonneau and Daniel J. Rohan, were granted restricted stock units. Due to an inadvertent error
by the Company, the corresponding Form 4 statements were not filed with the Securities and Exchange
Commission within the proscribed time period. Upon discovery of the error, the Company immediately
filed Form 4 statements on behalf of each executive officer with the Securities and Exchange
Commission on May 27 and May 28, 2008.
LEGAL PROCEEDINGS
We are not currently involved in any litigation other than routine litigation arising in the
ordinary course of business that is either expected to be covered by liability insurance or to have
no material impact on our financial position and results of operations. None of the directors or
officers of the Company is an adverse party to us in these routine litigation matters.
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30
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2009 Proxy Statement
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board intends to present or
knows that others will present at the Meeting is that hereinabove set forth. If any other matter
or matters are properly brought before the meeting, or any adjournment thereof, it is the intention
of the persons named in the accompanying form of Proxy to vote the Proxy on such matters in
accordance with their judgment.
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/s/ Courtney C. Smith
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Chairman of the Board
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Dated: April
[
]
, 2009
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Your vote is important. Please sign, date and return
your WHITE proxy card today.
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2009 Proxy Statement
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31
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Specialty Underwriters Alliance, Inc.
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
Annex A
Certain Information Regarding Participants in this Solicitation
Under applicable SEC regulations, each of the Companys directors is a participant in the
solicitation of revocations of consents. The following sets forth certain information with respect
to these participants.
Directors
The principal occupations of the Companys directors who are participants in the solicitation are
set forth under Nominees for Election in this proxy statement. The principal business address of
each such person is c/o Specialty Underwriters Alliance, Inc., 222 South Riverside Plaza, Suite
1600, Chicago, Illinois 60606.
Information Regarding Ownership of the Companys Securities by Participants.
The number of shares of Common Stock held by directors is set forth under Security Ownership of
Certain Beneficial Owners and Management in this proxy statement.
Except as described in this Annex A or the proxy statement, none of the participants (i)
beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, any shares or other securities of our Company or any of our subsidiaries, (ii) owns any
securities of the Company of record but not beneficially, (iii) has purchased or sold any of such
securities within the past two years or (iv) is, or within the past year was, a party to any
contract, arrangement or understanding with any person with respect to any such securities.
Except as disclosed in this Annex A or the proxy statement, none of the participants associates
beneficially owns, directly or indirectly, any of our securities.
Other than as disclosed in this Annex A or the proxy statement, neither we nor any of the
participants has any substantial interests, direct or indirect, by security holding or otherwise,
in any matter to be acted upon pursuant to this proxy statement or is or has been within the past
year a party to any contract, arrangement or understanding with any person with respect to any of
our securities, including, but not limited to, joint ventures, loan or option agreements, puts or
calls, guarantees against loss or guarantees of profit, division of losses or profits or the giving
or withholding of proxies.
Other than as set forth in this Annex A or the proxy statement, none of us, the participants or any
of their associates has had or will have a direct or indirect material interest in any transaction
or series of similar transactions since the beginning of our last fiscal year or any currently
proposed transactions, or series of similar transactions, to which we or any of our subsidiaries
was or is to be a party in which the amount involved exceeds $120,000.
Other than as set forth in this Annex A or in the proxy statement, none of the participants or any
of their associates has any arrangements or understandings with any person with respect to any
future employment by us or our affiliates or with respect to any future transactions to which we or
any of our affiliates will or may be a party.
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED MARCH 27, 2009
The following is a list of the acquisitions of the Companys Common Stock made during the last two
years by participants in the Companys solicitation of proxies. No dispositions were made by any
of these participants during the last two years.
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Number of
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Participant
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Share Acquired
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Date
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Robert E. Dean
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3,000
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(1)
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5/2/2007
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Robert E. Dean
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3,000
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(1)
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5/7/2008
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Raymond C. Groth
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3,000
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(1)
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5/2/2007
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Raymond C. Groth
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3,000
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(1)
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5/7/2008
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Peter E. Jokiel
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42,000
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(3)
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4/4/2008
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Peter E. Jokiel
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20,000
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(2)
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5/14/2008
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Peter E. Jokiel
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7,000
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(2)
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11/11/2008
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Peter E. Jokiel
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6,000
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(2)
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11/12/2008
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Peter E. Jokiel
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12,000
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(2)
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11/13/2008
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Peter E. Jokiel
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21,000
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(4)
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1/14/2009
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Paul A. Philp
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3,000
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(1)
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5/2/2007
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Paul A. Philp
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3,000
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(1)
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5/7/2008
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Courtney C. Smith
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60,000
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(3)
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4/4/2008
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Courtney C. Smith
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30,000
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(4)
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1/14/2009
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Robert H. Whitehead
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3,000
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(1)
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5/2/2007
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Robert H. Whitehead
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3,000
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(1)
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5/7/2008
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Russell E. Zimmermann
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3,000
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(1)
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5/2/2007
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Russell E. Zimmermann
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3,000
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(1)
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5/7/2008
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(1)
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Represents the automatic annual grant of a restricted stock award upon re-election at the
annual meeting of the stockholders.
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(2)
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Represents open market purchases.
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(3)
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Represents a restricted stock unit grant which vests ratably
on the first five anniversaries
of the date of grant.
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(4)
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Represents a restricted stock unit grant which vests ratably on the first four anniversaries
of the date of grant.
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PRELIMINARY
COPY SUBJECT TO COMPLETION, DATED MARCH 27, 2009
SPECIALTY UNDERWRITERS ALLIANCE, INC.
2009 ANNUAL MEETNG OF STOCKHOLDERS MAY 5, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Specialty Underwriters Alliance, Inc., a Delaware corporation,
hereby appoints Courtney C. Smith, Peter E. Jokiel, and Scott W. Goodreau and each of them the
proxies of the undersigned with power to vote at the Annual Meeting of Stockholders of the Company
to be held at 9:00 a.m. local time on May 5, 2009 at 222 South Riverside Plaza, 19
th
Floor, in the Lake County Room, Chicago, IL 60606, and at any adjournment or postponement thereof
(the Meeting), with all the power which the undersigned would have if personally present, hereby
revoking any proxy heretofore given. The undersigned hereby acknowledges receipt of the proxy
statement for the Meeting and instructs the proxies to vote as directed on the reverse side.
(Continued and to be signed on the reverse side)
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be
held on May 5, 2009:
The notice and Proxy Statement and Annual Report are available at
www.suainsurance.com
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How to request a copy of materials for this Annual Meeting or future stockholder
meetings:
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1.
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By Internet
www.suainsurance.com
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2.
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By telephone (888) 782-4672
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3.
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By email
InvestorRelations@suainsurance.com
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To obtain directions to the Annual Meeting, please contact Investor Relations at (312)
277-1600.
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ANNUAL MEETING OF STOCKHOLDERS OF SPECIALTY UNDERWRITERS ALLIANCE, INC. May 5, 2009 Please
date, sign and mail your proxy card in the envelope provided as soon as possible. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES, FOR PROPOSAL 2 AND FOR PROPOSAL
3 WHEN PROPOSED BY THE COMPANY. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
T
FOR AGAINST ABSTAIN 1. To
elect the 7 nominees (Robert E. Dean, Raymond C. Groth, Peter E. Jokiel, Paul A. Philp, Courtney C.
Smith, Robert H. Whitehead and Russell E. Zimmermann) as Directors of the Company: 2. To ratify the
appointment of PricewaterhouseCoopers LLP as independent auditors for the fiscal year ending
December 31, 2009. For All Nominees Withhold Authority For All Nominees 3. With discretionary
authority upon such other matters as may properly come before the Meeting. For All Except (See
instructions below) THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL THE NOMINEES SET FORTH
HEREIN, FOR THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AND IN THE DISCRETION
OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark For All Except and
write in the name(s) of each nominee for which you wish to withhold authority in the space
provided. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
MARK X HERE IF YOU PLAN TO ATTEND THE MEETING. To change the address on your account, please
check the box at left 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. 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.
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