After the closing of the PRIM acquisition, should it be completed, the Company may seek to boost the statutory capital of SNIC in order to pursue new business opportunities. On February 4, 1997, the Company announced the signing of a non-binding letter of intent to complete a private placement of Common Stock with Insurance Partners, L.P. ("IP Delaware") and Insurance Partners Offshore (Bermuda), L.P. ("IP Bermuda," and with IP Delaware, "IP"), parties providing the bulk of the equity investment in the PRIM transaction, of up to $32.5 million, at a price of $11.775 per share, and to issue rights to purchase Common Stock to shareholders and warrant holders of record as of the close of business on February 4, 1997 in order to raise a matching amount of capital of up to $32.5 million, in which rights offering IP would act as standby purchaser. The letter of intent contemplated that the funds would be used by the Company to participate in the rehabilitation of Golden Eagle Insurance Company. However, after the Company determined it would not participate in the rehabilitation, at least in the near term, it requested that IP keep the letter of intent in place should the Company desire to raise additional capital following the closing of the PRIM transaction, so as to provide the Company added financing flexibility. Additional capital could help the Company better compete in the turbulent market in California for provision of workers' compensation insurance, better position the Company with respect to review by insurance rating agencies, and permit growth in premium volume. The additional capital needs of the Company, if any, have yet to be determined and any transaction may be delayed to better gauge the business opportunities generated by the PRIM transaction and the reaction of rating agencies to the combination of the companies. Before proceeding with any transaction with IP under the letter of intent, the Board of Directors will consult with financial advisors as to fairness and, if necessary, based upon the number of shares to be issued and other factors, will seek shareholder approval to issue additional stock. To the extent consistent with the fiduciary duties of the Board of Directors, the Company has indicated to IP that it would offer IP the first opportunity to provide additional capital under the terms of the letter of intent, should the need for additional capital arise. The issuance of rights to purchase Common Stock, if it occurs, would be subject
BRADLEY E. COOPER became a director of the Company in May 1992. From 1988 to 1990, Mr. Cooper was an analyst at Salomon Brothers Inc. From May 1990 to February 1994, Mr. Cooper served as Vice President of IIA. From 1994 to the present, Mr. Cooper has been a Principal of Insurance Partners Advisors, L.P. Since January 1996, he has served as a director of Highlands Insurance Group, Inc.
WILLIAM GENTZ became a director of the Company in June 1994. Mr. Gentz has held the position of President and Chief Executive Officer since mid-1994. Mr. Gentz joined the Company after seventeen years at Zenith Insurance Company where he was responsible for marketing, underwriting, loss control, and field operations for Zenith's workers' compensation operations. Mr. Gentz began his insurance career in 1958, and from 1958 to 1968 worked in the marketing and underwriting departments of a variety of insurance companies in the mid-west and California.
KARL O. JOHNSON has been responsible for SNIC's Central California Operations since 1989. He was promoted to Senior Vice President in 1994. Mr. Johnson has served with various insurance organizations in loss control and marketing capacities since 1955; he joined the Company in 1987.
Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5s were required for those persons, the Company believes that its Insiders complied with all applicable Section 16(a) filing requirements for fiscal 1996, with the exception of (i) Douglas R. Roche, an executive officer of the Company, who filed a late Form 4 in November 1996 to report his purchase in July 1996 of shares of Common Stock, (ii) Matthew Natalizio, an executive officer of the Company, who filed a Form 5 in February 1997 to report the granting to him in May 1996 of shares of restricted stock under the Company's 1995 Plan (as hereafter defined), which grant was not timely reported on a Form 4, and (iii) TJS Partners, L.P., a direct ten percent beneficial owner of Common Stock, and Thomas J. Salvatore, TJS Management, L.P., and TJS Corporation, the indirect beneficial owners of all securities held by TJS, each of which filed a late Form 4 in July 1996 to report five separate purchases of shares of Common Stock by TJS in April and May 1996.
(2) Matthew Natalizio, Vice President, Finance and Treasurer. Mr. Natalizio's agreement is open-ended. His compensation and benefits are determined by the Board. If Mr. Natalizio's employment is terminated by the Company other than for cause, he is entitled to payments of his salary and benefits for one year from the date of the termination. Mr. Natalizio's agreement does not provide any special rights in the event of a change in control.
- --------------- (1) Represents the fair market value of the underlying shares of Common Stock at the time of the grant. (2) Unless the stock price increases, which will benefit all shareholders commensurately, an option holder will realize no gain.
COMPENSATION POLICY AND PROGRAMS. The Compensation Committee's responsibility is to provide a strong and direct link among shareholder values, Company performance, and executive compensation through its oversight of the design and implementation of a sound compensation program that will attract and retain highly qualified personnel. Compensation programs are intended to complement the Company's short and long-term business objectives and to focus executive efforts on the fulfillment of these objectives.
together with warrants to purchase approximately 1,616,886 shares of the Company's Common Stock. The Company redeemed all of those promissory notes with a prepayment, effective June 30, 1994, except for the Voting Notes, with respect to which prepayment is prohibited. The outstanding principal amount of the Voting Notes is $30,000. The number of votes attaching to the Voting Notes is equal to the number of shares of Common Stock that may be purchased upon exercise of the warrants that were issued in that March 31, 1992 transaction and remain outstanding and are unexercised as of the applicable record date for a shareholder vote. As of March 5, 1997, the number of votes held by the holder of the Voting Notes was equivalent to 1,566,465 shares of Common Stock. The Voting Notes are permitted to vote only in director elections, director removals, votes on amending that right to vote, and changes to the number of authorized directors. As a result of the cancellation of a portion of the relevant warrants, the number of common stock equivalent votes held by the Voting Notes has decreased somewhat since March 31, 1992. The specific voting rights of the Voting Notes are set forth in the Company's Amended and Restated Articles of Incorporation and Bylaws. This table does not reflect the 2,390,438 shares of Common Stock to be issued and sold by the Company pursuant to the Stock Purchase Agreement upon consummation of the PRIM transaction.
The following table sets forth certain information regarding the beneficial ownership of the Common Stock as of March 5, 1997 by (i) each director and certain executive officers of the Company, individually, and (ii) all directors and executive officers as a group. This table does not reflect the number of shares of Common Stock that may be issued and sold by the Company pursuant to the Stock Purchase Agreement, in which members of the Company's management have agreed to participate and in which several directors of the Company have certain interests.
Thomas J. Jamieson . . . . . . . . . . . . . 245,300(7) 7.12%
10.5 Aggregate Excess of Loss Cover entered into on the 30th day of August 1991, between Centre Reinsurance Limited (Centre Re) and the Company, as amended* 10.6 Multi-year Prospective Accident Year Stop Loss Reinsurance Contract effective the 1st of January 1993, between Centre Reinsurance International Company and the Company (the "1993 Centre Re Contract")* 10.7 Letter dated March 28, 1996 from the Company canceling the 1993 Centre Re Contract effective January 1, 1996*** 10.8 Workers' Compensation and Employers' Liability Quota Share Insurance Contract No. 30006A effective January 1, 1994, between the Company and Zurich Reinsurance Centre, as amended (the "ZRC Contract")* 10.9 Addendum No. 4 to the ZRC Contract effective as of January 1, 1996*** 10.10 Addendum No. 1 to the Retrocession Agreement (an ancillary agreement to the ZRC Contract) effective as of January 1, 1996*** 10.11 Lease, dated 27th day of October 1988, by and between Corporate Center at Malibu Canyon, a California Limited Partnership and the Company, relating to the lease of the Company's home office and Calabasas Branch Facilities* 10.12 Lease, dated 27th of July 1993, by and between TOMOE Investment and Development, Inc. and the Company, relating to the lease of its South San Francisco Facility* 10.13 Lease, dated 14th of November 1991, by and between Dean Witter Reynolds and the Company relating to the lease of its Fresno Facilities* 10.14 Lease, dated 23rd of February 1993, by and between Shaw Avenue Associates, a California Limited Partnership and the Company relating to the lease of its Fresno Facilities* 10.15 Lease, dated 14th of February 1994, by and between Contra Costa County Employees Retirement Association and the Company relating to its Sacramento Facility* 10.16 Bank Debt, $10 million loan agreement between Imperial Bank and the Company that was entered into on the 1st day of July 1994 (the "Imperial Loan")* 10.17 Amendment No. 1 to the Imperial Loan dated March 27, 1995** 10.18 Amendment No. 2 to the Imperial Loan dated October 16, 1995** 10.19 Credit Agreement between the Company and The Chase Manhattan Bank dated as of November 12, 1996, (the "1996 Credit Agreement"), and all material exhibits thereto 10.20 Agreement in Principle dated 29th of March 1994 by and between the Company and Centre, a Bermuda Corporation, or one of its affiliates* 10.21 Limited Partnership Agreement of Superior National Capital, L.P. (Capital) with certificate of Limited Partnership and Certificate of Exempted Partnership, all as filed on the 28th of June 1994, with the Registrar of Companies of Bermuda* 10.22 Preferred securities purchase agreement, dated 30th day of June 1994, by and between Capital, Superior National Capital Holding Corporation, the Company and Centre Reinsurance Services (Bermuda) III Limited* 10.23 Loan agreement, dated 30th of June 1994, whereby Capital agrees to loan $20,408,163 to the Company* 10.24 Liability Assumption Agreement, dated 30th of June 1994, by and between the Company and Capital* 10.25 Certificate dated 30th of June 1994, evidencing the issuance of 800,000 Preferred Securities of Capital to Centre Re* 10.26 Note made by the Company in favor of Capital dated 30th of June 1994, in the aggregate principal amount of $20,408,163* 10.27 Purchase warrant, dated as of the 30th of June 1994, entitles CentreLine Reinsurance Limited to purchase 2,317,426 shares of the Company's common stock* 10.28 Certificate of Limited Partnership of Superior National Capital, L.P.* 10.29 Warrant held by International Insurance Advisors, Inc. to purchase 6,097,130 shares at $1.00 per share dated March 31, 1992 and expiring April 1, 2002*