The
following statement constitutes the Schedule 13D filed by the undersigned (the
“Statement”).
Item
1.
Security and
Issuer
.
This
Statement relates to the common stock, par value $.01 per share (“Common
Stock”), of Specialty Underwriters’ Alliance Inc. (the “Company”),
whose principal executive offices are located at 222 South Riverside Plaza,
Chicago,
IL 60606.
Item
2.
Identity and
Background
.
Items
2(a), 2(b) and
2(c) This Statement
is jointly filed by Hallmark Financial Services, Inc., a Nevada corporation
(“Hallmark”), American Hallmark Insurance Company of Texas, a Texas corporation
(“AHIC”), and Hallmark Specialty Insurance Company, an Oklahoma corporation
(“HSIC”) (collectively, the “Reporting Persons”). Because AHIC and HSIC are
wholly-owned subsidiaries of
Hallmark, Hallmark may be deemed, pursuant to
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
“Act”), to be the beneficial owner of all
the shares of Common Stock of the Company held by AHIC and
HSIC. The Reporting Persons are filing this joint statement, as they
may be considered a "group" under Section 13(d)(3) of the
Act. However, neither the fact of this filing nor anything contained
herein shall be deemed an admission by the Reporting Persons that such a group
exists. Set forth on Schedule A annexed hereto is the name and present principal
occupation or employment and the name, principal business and address of any
corporation or organization in which such employment is conducted of each of the
Reporting Persons’ directors and executive officers, as of the date
hereof.
The
principal business of the Reporting Persons is marketing, distributing,
underwriting, and servicing of property and casualty insurance products for
businesses and individuals in the United States. The principal place
of business for the Reporting Persons is 777 Main Street, Suite 1000, Fort
Worth, TX 76102.
Item
2(d) During the last five
years, none of the Reporting Persons or the persons listed in Schedule A annexed
hereto has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors).
Item
2(e) During the last
five years, none of the Reporting Persons or the persons listed in Schedule A
annexed hereto has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction, and as a result of such
proceeding, was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such
laws.
Item
2(f) Hallmark,
AHIC and HSIC are organized under the laws of Nevada, Texas and Oklahoma,
respectively.
Item
3.
Source and Amount of Funds
or Other Consideration
.
The net investment cost (including
commissions, if any) of the shares of Common Stock held by the Reporting Persons
was approximately $6,945,216.80 in the aggregate, all of which was obtained from
cash on hand of the applicable Reporting Person. The net investment
cost of AHIC was approximately $6,452,714.80 and the net investment cost of HSIC
was $492,502.00.
Item
4.
Purpose of
Transaction
.
The Reporting Persons purchased the
shares of Common Stock based on the belief that the Common Stock, when
purchased, was undervalued and represented an attractive investment opportunity.
Depending upon overall market conditions, other investment opportunities, and
the availability of shares of Common Stock at desirable prices, the Reporting
Persons may endeavor to increase their position in the Company through, among
other things, the purchase of shares of Common Stock in open market or private
transactions, on such terms and at such times as the Reporting Persons deem
advisable.
Hallmark has pursued discussions with
the Company with respect to a potential business combination between Hallmark
and the Company. On June 16, 2008, Hallmark delivered to the Company’s board of
directors a proposal with respect to a transaction pursuant to which each
outstanding share of the Common Stock would be converted into Hallmark common
stock at a pre-determined formula. The Company has acknowledged
receipt of such proposal but has not responded to Hallmark as of the present
date. Hallmark expects to seek to continue to pursue discussions with
the Company regarding a potential business combination or similar transaction or
other strategic alternatives it believes will maximize shareholder
value.
Depending on various factors, the
Reporting Persons may take such actions as they deem appropriate including,
without limitation, engaging in discussions with management and the Board of
Directors of the Company, including with respect to the existing operations and
future plans of the Company, communicating with other shareholders, seeking
board representation, making proposals to the Company concerning the
capitalization and operations of the Company, purchasing additional shares of
Common Stock, selling some or all of their shares of Common Stock, engaging in
short selling of or hedging or similar transactions with respect to their shares
of Common Stock or changing their intention with respect to any and
all matters referred to in this Item 4.
Except as set forth herein or such as
would occur upon completion of any of the actions discussed above, no Reporting
Person has any present plan or proposal which would relate to or result in any
of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule
13D.
Item
5.
Interest in Securities of
the Issuer
.
(a) The
aggregate percentage of shares of Common Stock reported to be owned by the
Reporting Persons is based upon 14,697,355 shares outstanding, which is the
total number of shares of Common Stock outstanding as reported in the Company’s
Form 10-Q for the quarter ended March 31, 2008 as filed with the Securities and
Exchange Commission on May 12, 2008.
As of the
filing date of this Statement, AHIC beneficially owned 1,308,615 shares of
Common Stock, representing approximately 8.9% of the Company’s issued and
outstanding Common Stock.
As of the
filing date of this Statement, HSIC beneficially owned 100,000 shares of Common
Stock, representing approximately 0.7% of the Company’s issued and outstanding
Common Stock.
Hallmark,
as the parent of AHIC and HSIC, may be deemed to beneficially own the 1,308,615
shares of Common Stock owned by AHIC and the 100,000 shares of Common Stock
owned by HSIC, representing an aggregate of 1,408,615 shares of Common Stock or
approximately 9.6% of the issued and outstanding Common Stock.
(b) Each
of the Reporting Persons has the sole power to vote and dispose of the shares of
Common Stock reported as beneficially owned by them in this
Statement.
(c) Schedule
B annexed hereto lists all the transactions in the Company’s Common Stock by the
Reporting Persons during the past 60 days. Such transactions in the
Common Stock were effected in the open market.
(d) No
person other than the Reporting Persons is known to have the right to receive,
or the power to direct the receipt of dividends from, or proceeds from the sale
of, such shares of the Common Stock.
(e) Not
applicable.
Item
6.
Contracts,
Arrangements, Understandings or Relationships With Respect to Securities of the
Issuer
.
Other
than as described herein, there are no contracts, arrangements, understandings
or relationships among the Reporting Persons, or between the Reporting Persons
and any other person, with respect to the securities of the
Company.
Item
7.
Materials to be Filed as
Exhibits
.
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99.1
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Joint
Filing Agreement dated as of June 23, 2008 by and among Hallmark Financial
Services, Inc., American Hallmark Insurance Company of Texas and Hallmark
Specialty Insurance Company.
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SIGNATURES
After due
inquiry and to the best of his knowledge and belief, each of the undersigned
certifies that the information set forth in this statement is true, complete and
correct.
Dated:
June 23, 2008
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Hallmark
Financial Services, Inc.
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By:
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/s/
Mark E. Schwarz
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Name:
Mark E. Schwarz
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Title:
Executive Chairman
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American
Hallmark Insurance Company of Texas
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By:
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/s/
Mark E. Schwarz
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Name:
Mark E. Schwarz
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Title: Director
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Hallmark
Specialty Insurance Company
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By:
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/s/
Mark E. Schwarz
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Name:
Mark E. Schwarz
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Title:
Director
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SCHEDULE
A
Directors and Executive
Officers of Hallmark Financial Services, Inc.
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Name and Position
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Present Principal
Occupation
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Business Address
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Mark
E. Schwarz,
Director
& Executive Chairman
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Insurance
Company Executive (Hallmark Financial Services) and Principal, Newcastle
Capital Management, L.P., a private investment management
firm
|
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Newcastle
Capital Management, L.P.
200
Crescent Ct., Ste. 1400
Dallas,
TX 75201
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Scott
T. Berlin,
Director
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Managing
Director,
Brown
Gibbons Lang & Company, LLC, an investment banking firm serving middle
market companies
|
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Brown
Gibbons Lang & Company, LLC
1111
Superior Ave.,
Ste.
900
Cleveland,
OH 44114
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George
R. Manser,
Director
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Retired
Insurance Company Executive
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707
S. Gulfstream Ave., #1102
Sarasota,
FL 34236
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James
H. Graves,
Director
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Partner,
Erwin, Graves & Associates, L.P., a management consulting
firm
|
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Erwin,
Graves & Associates, L.P.
8201
Preston Rd, Suite 200
Dallas,
TX 75225
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Mark
J. Morrison,
President
& CEO
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Jeffrey
R. Passmore,
Senior
Vice President and Chief Accounting Officer
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Kevin
T. Kasitz,
Executive
Vice President and Chief Operating Officer
|
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Insurance
Company Executive with Hallmark Financial Services, Inc.
|
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Brookland
F. Davis,
Executive
Vice President
|
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Donald
E. Meyer,
President
of Operating Unit
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Curtis
R. Donnell
President
of Operating Unit
|
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Insurance
Company Executive with Hallmark Financial Services, Inc.
|
|
Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Directors and Executive
Officers of American Hallmark Insurance Company of Texas
|
Name and Position
|
Present Principal
Occupation
|
Business Address
|
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Mark
E. Schwarz,
Director
|
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Insurance
Company Executive (Hallmark Financial Services) and Principal, Newcastle
Capital Management, L.P., a private investment management
firm
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Newcastle
Capital Management, L.P.
200
Crescent Ct., Ste. 1400
Dallas,
TX 75201
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Mark
J. Morrison,
Director
& Executive Vice President
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Brookland
F. Davis,
Director
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Kevin
T. Kasitz,
Director
& President
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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|
Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Jeffrey
R. Passmore,
Director,
CFO & Treasurer
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Insurance
Company Executive with Hallmark Financial Services, Inc.
|
|
Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Cecil
R. Wise,
Director
& Secretary
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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|
Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Christopher
J. Kenney,
Director
& Vice President
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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|
Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Directors and Executive
Officers of Hallmark Specialty Insurance Company
|
Name and Position
|
Present Principal
Occupation
|
Business Address
|
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Mark
E. Schwarz,
Director
|
|
Insurance
Company Executive (Hallmark Financial Services) and Principal, Newcastle
Capital Management, L.P., a private investment management
firm
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Newcastle
Capital Management, L.P.
200
Crescent Ct., Ste. 1400
Dallas,
TX 75201
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Mark
J. Morrison,
Director
& Vice President
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Donald
E. Meyer,
Director
& President
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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TGA
Insurance Managers, Inc.
7411
John Smith Dr.,
Ste.
1400
San
Antonio, TX 78229
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Jeffrey
R. Passmore,
Director
& Chief Financial Officer
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Kevin
T. Kasitz,
Director
& Vice President
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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Marcelo
A. Borrego,
Treasurer
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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TGA
Insurance Managers, Inc.
7411
John Smith Dr.
Ste.
1400
San
Antonio, TX 78229
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Cecil
R. Wise,
Secretary
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Insurance
Company Executive with Hallmark Financial Services, Inc.
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Hallmark
Financial Services, Inc.
777
Main St., Ste. 1000
Ft.
Worth, TX 76102
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SCHEDULE
B
Transactions in the Common
Stock During the Past 60 Days
Shares
of Common Stock Purchased
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|
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American
Hallmark Insurance Company of Texas
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7,011
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4.79
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6/3/08
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2,500
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4.80
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6/4/08
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100
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4.80
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6/5/08
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150,100
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4.85
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6/6/08
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304,900
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4.85
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6/9/08
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200,000
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4.85
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6/10/08
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291,400
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4.92
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6/12/08
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100
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4.90
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6/16/08
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10,724
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4.90
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6/18/08
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6,500
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4.99
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6/19/08
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318,980
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5.04
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6/20/08
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Hallmark
Specialty Insurance Company
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70,000
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4.85
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6/11/08
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30,000
|
5.04
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6/20/08
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