-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V1XLbyJP6IgChMfEAAAzonhW8ZWlwyo4zgtaAAnfxWffAvgze0ZA70Ui9sd10x8o HWBqHCkcL+y3OYev8/4/rQ== 0000908834-98-000116.txt : 19980504 0000908834-98-000116.hdr.sgml : 19980504 ACCESSION NUMBER: 0000908834-98-000116 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980618 FILED AS OF DATE: 19980430 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN GROUP INC CENTRAL INDEX KEY: 0000906609 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 222902315 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-13586 FILM NUMBER: 98606606 BUSINESS ADDRESS: STREET 1: 2746 OLD U S 20 W STREET 2: PO BOX 1168 CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192952200 DEF 14A 1 DEF 14A PROXY STATEMENT SCHEDULE 14A Information Required in Proxy Statement SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant: Yes. Filed by a Party other than the Registrant: No. Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 THE MORGAN GROUP, INC. (Name Of Registrant As Specified In Its Charter) THE MORGAN GROUP, INC. (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 (1) Title of each class of securities to which transaction applies: N/A (2) Aggregate number of securities to which transaction applies: N/A (3) 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): N/A (4) Proposed maximum aggregate value of transaction: N/A (5) Total fee paid: [ ] Fee paid previously with preliminary materials [ ] 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. N/A (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: [MORGAN LOGO] 2746 Old U.S. 20 West Elkhart, Indiana 46514-1168 (219) 295-2200 ---------------------------------------- NOTICE OF ANNUAL MEETING OF STOCKHOLDERS ---------------------------------------- To Be Held On June 18, 1998 Notice is hereby given that the Annual Meeting of Stockholders of The Morgan Group, Inc. (the "Company") will be held at the Varsity Club, 3800 Main Street, Mishawaka, Indiana on Thursday, June 18, 1998 at 3:00 P.M., Mishawaka Time. The Annual Meeting will be held for the following purposes: 1. Election of Directors. Election of one director of the Company by holders of shares of Class A Common Stock, voting separately as a class, and election of all remaining directors by holders of Class A Common Stock and Class B Common Stock, voting together as a single class. 2. Other Business. Such other matters as may properly come before the meeting or any adjournment thereof. Stockholders of record at the close of business on April 20, 1998, are entitled to vote at the meeting or any adjournment thereof. We urge you to read the enclosed Proxy Statement carefully so that you may be informed about the business to come before the meeting, or any adjournment thereof. At your earliest convenience, please sign and return the accompanying proxy in the postage-paid envelope furnished for that purpose. A copy of our Annual Report for the fiscal year ended December 31, 1997, is enclosed. The Annual Report is not a part of the proxy soliciting material enclosed with this letter. By Order of the Board of Directors /s/ Charles C. Baum Charles C. Baum, Chairman of the Board and Chief Executive Officer Elkhart, Indiana May 5, 1998 IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. [MORGAN LOGO] 2746 Old U.S. 20 West Elkhart, Indiana 46514-1168 (219) 295-2200 --------------- PROXY STATEMENT --------------- FOR ANNUAL MEETING OF STOCKHOLDERS June 18, 1998 This Proxy Statement is being furnished to the holders of Class A Common Stock, $0.015 par value per share (the "Class A Common Stock"), and Class B Common Stock, $0.015 par value per share (the "Class B Common Stock" and together with the Class A Common Stock, the "Common Stock"), of The Morgan Group, Inc. (the "Company"), a Delaware corporation, in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the Annual Meeting of Stockholders to be held at 3:00 P.M., Mishawaka Time, on June 18, 1998 at the Varsity Club, 3800 Main Street, Mishawaka, Indiana, and at any adjournment of such meeting. This Proxy Statement is expected to be mailed to stockholders on or about May 5, 1998. The proxy solicited hereby, if properly signed and returned to the Company and not revoked prior to its use, will be voted in accordance with the instructions contained therein. If no contrary instructions are given, each proxy received will be voted for each of the matters described below and, upon the transaction of such other business as may properly come before the meeting, in accordance with the best judgment of the persons appointed as proxies. Any stockholder giving a proxy has the power to revoke it at any time before it is exercised by (i) filing with the Company written notice thereof (Attention: Dennis R. Duerksen, 2746 Old U.S. 20 West, P.O. Box 1168, Elkhart, Indiana 46514-1168), (ii) submitting a duly executed proxy bearing a later date, or (iii) by appearing at the Annual Meeting and giving the Secretary notice of his or her intention to vote in person. Proxies solicited hereby may be exercised only at the Annual Meeting and any adjournment thereof and will not be used for any other meeting. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF Only stockholders of record at the close of business on April 20, 1998 ("Voting Record Date"), will be entitled to vote at the Annual Meeting. On the Voting Record Date, there were 1,433,910 shares of the Class A Common Stock issued and outstanding and 1,200,000 shares of the Class B Common Stock issued and outstanding. Each share of Class A Common Stock is entitled to one vote, and each share of Class B Common Stock is entitled to two votes on all matters properly presented at the Annual Meeting; provided, that holders of Class A Common Stock may vote together as a single class upon the election of one (1) director. The following table sets forth certain information regarding the beneficial ownership of the Class A Common Stock and Class B Common Stock as of March 25, 1998, by each person who is known by the Company to own beneficially 5% or more of the Class A Common Stock or the Class B Common Stock. Unless otherwise indicated, the named beneficial owner has sole voting and dispositive power with respect to the shares reported.
Number of Shares Number of Shares Name and Address of of Class A Common Stock Percent of of Class B Common Stock Percent of Beneficial Owner Beneficially Owned(1) Class (1) Beneficially Owned Class ---------------- --------------------- --------- ------------------ ----- Charles C. Baum (2) 187,300 (3) 12.83 % -- -- 2545 Wilkens Avenue Baltimore, Maryland 21223 Lynch Corporation 155,900 (4) 10.87 %(4) 1,200,000(4) 100%(4) 401 Theodore Fremd Avenue Rye, New York 10580-1430 United Holdings Co., Inc. (2) 118,518 8.26 % -- -- 2545 Wilkens Avenue Baltimore, Maryland 21223 John L. Keeley, Jr. 174,300 (5) 12.15 % -- -- 401 South LaSalle Street Suite 1201 Chicago, Illinois 60605 Virginia Retirement System 87,600 (6) 6.11 % -- -- 1200 East Main Street Richmond, Virginia 23219 Terence L. Russell 86,506 (7) 6.01 % -- -- 2746 Old U.S. 20 West Elkhart, Indiana 46514
- ----------------- (1) Based upon 1,434,810 shares of Class A Common Stock outstanding, which does not include stock options held by management and non-employee directors for 167,000 shares of Class A Common Stock, of which options for 113,375 shares have become exercisable. (2) Mr. Baum is a director, executive officer and minority shareholder of United Holdings Co., Inc. ("United Holdings"). (3) Includes 8,000 shares held of record by Mr. Baum's children, 2,153 shares held in the Company's 401(k) Plan, and unexercised options to acquire 25,000 shares. An additional 118,518 shares of Class A Common Stock (not included in Mr. Baum's holdings) are held by United Holdings Co., Inc. of which Mr. Baum is a director, executive officer and minority shareholder. (4) Lynch Corporation ("Lynch") owns 1,200,000 shares of Class B Common Stock. Class B Common Stock is automatically converted into Class A Common Stock upon transfer on a share-for-share basis. In addition, the Class B Common Stock is convertible at all times, at the option of the stockholder and without cost to the stockholder, into Class A Common Stock on a share-for-share basis. Upon conversion, such shares would represent 51.46% of the then outstanding shares of Class A Common Stock. The outstanding Class A Common Stock and Class B Common Stock held by Lynch represents 66.65% of the aggregate voting power of both classes of Common Stock of the Company. Lynch has pledged all 1,200,000 shares of Class B Common Stock to a bank ("Bank") as security for borrowings. In the unlikely event of a default by Lynch, the Bank could acquire ownership of the shares of Class B Common Stock, which would automatically convert to 1,200,000 shares of Class A Common Stock. In that event, Lynch may no longer hold voting control of the Company. Mr. Mario J. Gabelli is the Chairman of the Board and Chief Executive Officer of Lynch. Mr. Gabelli may be deemed to be a beneficial owner of 155,900 shares of Class A Common Stock and all of the Class B Common Stock owned by Lynch (shown in the above table) by virtue of his and certain affiliated parties' beneficial ownership of 23.0% of the shares of Common Stock of Lynch. Mr. Gabelli, however, specifically disclaims beneficial ownership of all shares of the Class A Common Stock and Class B Common Stock of the Company held by Lynch. (5) Includes (a) 2,000 shares held of record by Barbara G. Keeley, Mr. Keeley's spouse, (b) 87,300 shares held of record by Keeley Asset Management Corp., (c) 11,000 shares held of record by Keeley Investment Corp., (d) 19,000 shares held by Kamco Performance Limited Partnership, (e) 22,000 shares held of record by Kamco Limited Partnership No. 1 and (f) 2,200 shares held by the John L. Keeley, Jr. Foundation. (6) This information is as of February 11, 1998. (7) Includes 3,006 shares held by Mr. Russell's spouse and currently exercisable options to acquire 5,500 shares. See "Management Remuneration-- Stock Options." PROPOSAL I -- ELECTION OF DIRECTORS The Board of Directors has five members. The Company's By-Laws, as amended, provide that a plurality of the votes cast at the Annual Meeting of stockholders shall elect a Board of Directors. Directors are elected for one-year terms and serve until the next annual meeting of stockholders and until their successors are elected or until their death, resignation or removal. The Board of Directors' Nominating Committee has recommended to the Board of Directors that Charles C. Baum, Bradley J. Bell, Richard B. Black, Frank E. Grzelecki and Robert S. Prather, Jr. be nominated for election to the Board of Directors and that Mr. Prather be nominated for election by the holders of Class A Common Stock voting separately as a class. Unless otherwise directed, each proxy executed and returned by a stockholder will be voted for the election of the nominees listed below. If any person named as a nominee should be unable or unwilling to stand for election at the time of the Annual Meeting, the proxy holders will nominate and vote for a replacement nominee recommended by the Board of Directors. At this time, the Board of Directors knows of no reason why the nominees listed below may not be able to serve as directors if elected. The following table sets forth certain information regarding the nominees for election as a director including the number and percent of shares of Class A Common Stock beneficially owned by such persons as of the Voting Record Date. No nominee for director is related to any other nominee for director or executive officer of the Company by blood, marriage, or adoption, and there are no arrangements or understandings between any nominee and any other person pursuant to which such nominee was selected. The table also sets forth the number of shares of Company Class A Common Stock beneficially owned as of March 25, 1998 by each executive officer of the Company and by all directors and executive officers of the Company as a group.
Class A Common Director of Stock(1) Company Beneficially Percentage Name and Title Since Owned of Class Director Nominees: For Election By Holders of Class A and Class B Common Stock: Charles C. Baum 1992 187,300 (2) 12.83% Chairman and Chief Executive Officer Bradley J. Bell 1993 10,000 (3) * Director Richard B. Black 1993 8,000 (3) * Director Frank E. Grzelecki 1997 8,000 (3) * Director For Election By Holders of Class A Common Stock: Robert S. Prather, Jr. 1997 - 0 - * Director Other Executive Officers: Terence L. Russell 86,506 (4) 6.01% Vice President of the Company and President and Chief Executive Officer of Morgan Drive Away, Inc. Dennis R. Duerksen 5,000 (5) * Chief Financial Officer and Treasurer Paul D. Borghesani 5,993 (5)(6) * Vice President of Morgan Drive Away, Inc. All directors and executive officers as a group (8 persons) 310,799 20.74% - --------------
* Indicates less than 1% of Common Stock beneficially owned. (1) Based upon information furnished by the respective directors, director nominees and executive officers. Under applicable regulations, shares are deemed to be beneficially owned by a person if he directly or indirectly has or shares the power to vote or dispose of the shares and if he has the right to acquire such power with respect to shares within 60 days. Accordingly, shares subject to options are only included if exercisable within 60 days. Includes shares beneficially owned by members of the immediate families of the director nominees or executive officers residing in their homes. (2) Includes 8,000 shares held of record by Mr. Baum's children, 2,153 shares held in the Company's 401(k) Plan; and currently exercisable options to acquire 25,000 shares. An additional 118,518 shares of Class A Common Stock are held by United Holdings Co., Inc. of which Mr. Baum is a director, executive officer and minority shareholder. See "Voting Securities and Principal Holders Thereof" above. (3) Includes currently exercisable options to acquire 8,000 shares. See "Management Remuneration -- Compensation of Directors." (4) Includes 3,006 shares held of record by Mr. Russell's spouse and currently exercisable options to acquire 5,500 shares. See "Management Remuneration -- Stock Options." (5) Includes currently exercisable options to acquire 5,000 shares. See "Management Remuneration -- Stock Options." (6) Includes holdings under the Company's 401(k) Plan of 493 shares for Mr. Borghesani. The business experience of each director and director nominee, along with that of certain other officers, is set forth below. Mr. Baum (age 56) was appointed Chairman and Chief Executive Officer of the Company in 1992. Mr. Baum has also been Chief Financial Officer, Treasurer and Secretary of United Holdings Co., Inc. and its predecessors and affiliates since 1973. United Holdings Co., Inc. was involved in the metal business until 1990 when it shifted its focus to become a firm which invests in real estate and securities. Mr. Baum is also a director of United Holdings Co., Inc., Gabelli Funds, Inc. (a registered investment adviser under the Investment Advisers Act of 1940, as amended), Shapiro Robinson & Associates (a firm which represents professional athletes), and Municipal Mortgage and Equity Co. (a company engaged in the business of mortgage financing). Mr. Bell (age 45) became a director of the Company in 1993. He has served as the Vice President, Chief Financial Officer and Treasurer of Rohm and Haas Company, a chemical company, since 1997. Mr. Bell served as the Vice President and Treasurer of Whirlpool Corporation, a manufacturer and marketer of major appliances, from 1987 to 1997. Mr. Black (age 64) joined the Company's Board of Directors in 1993. He is President of Oak Technology, Inc., a worldwide semiconductor supplier for the personal computer and consumer electronics industries, since 1998 and has been a director since 1988. Mr. Black has been Chairman and a director of ECRM, Incorporated, a producer of electronic publishing equipment, since 1983. He is also a director of General Scanning, Inc., a manufacturer of laser-based position systems, testing equipment, and medical imaging systems, since 1993. Mr. Grzelecki (age 60) was appointed to the Board of Directors of the Company in 1997, to fill the vacancy created by the resignation of Mario J. Gabelli. He served as President and Chief Operating Officer of Handy & Harman, a diversified industrial manufacturing company, from 1992 until 1997 and served as Vice Chairman of Handy & Harman from 1997 to 1998. Mr. Grzelecki was a Corporate Executive Vice President and a member of the Board of Directors of Beatrice Companies from 1984 to 1986. Between 1981 and 1984, he was President and Chief Operating Officer and a member of the Board of Directors of Lenox, Inc. Prior to joining Lenox, Mr. Grzelecki spent 13 years at Textron, Inc. and six years with the Colgate Palmolive Co. Mr. Grzelecki is a director of Handy & Harman, Chartwell Re Corp., Spinnaker Industries Inc. and Barnes Group Inc. Mr. Prather (age 53 ) has been a director of the Company since 1997. He has served as the President and Chief Executive Officer of Bull Run Corporation, an investment holding company, since 1992 and as Executive Vice President of Gray Communications Systems, Inc., a media and communications company, since 1996. Mr. Prather is also a director of Bull Run Corporation and Gray Communications Systems, Inc. Mr. Russell (age 54) became President and Chief Executive Officer of the Company's primary subsidiary, Morgan Drive Away, Inc. ("Morgan Drive Away"), and Vice President of the Company in 1996. He served as President and Chief Executive Officer of the Ryder Automotive Carrier Division, a division of Ryder Systems, beginning in 1988 until 1992. In 1993, Mr. Russell became Chairman of Ryder Automotive Carrier Division, and President of Ryder International, both divisions of Ryder Systems. Mr. Borghesani (age 59) has been Vice President and Special Counsel of Morgan Drive Away since 1996. He served as Vice President of the Company and its predecessors from 1988 to 1996. Mr. Borghesani has also been Counsel to Baker & Daniels, a private law firm, since 1996. From 1980 to 1983, Mr. Borghesani was in private practice as an attorney specializing in transportation law and related matters. From 1968 to 1980, Mr. Borghesani served in various management capacities for Morgan Drive Away. Mr. Duerksen (age 57) was named Treasurer, Vice President and Chief Financial Officer of the Company and Treasurer, Senior Vice President and Chief Financial Officer of Morgan Drive Away in December, 1997. Prior to joining the Company, Mr. Duerksen was Manager -- Financial Systems and Reporting of CTS Corporation, a manufacturer of electronic components, from February 1996 to October 1997. He served as Financial Controller of CTS Corporation's subsidiary, CTS Singapore PTE. Ltd. from August, 1994 to February, 1996, and was a self-employed financial consultant from February 1994 to August 1994. Mr. Duerksen was Manager -- Corporate Accounting and Accounting Services for J & L Specialty Steel from January, 1993 to February, 1994. THE DIRECTORS, EXCEPT FOR MR. PRATHER, SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF ALL VOTES CAST BY HOLDERS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK AT THE ANNUAL MEETING OF STOCKHOLDERS. MR. PRATHER SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF VOTES CAST BY HOLDERS OF CLASS A COMMON STOCK AT THE ANNUAL MEETING OF STOCKHOLDERS. Meetings and Committees of the Board of Directors During the fiscal year ended December 31, 1997, the Board of Directors of the Company met five times in addition to taking a number of actions by unanimous written consent. During fiscal 1997, no incumbent director of the Company attended fewer than 75% of the aggregate of the total number of Board meetings and the total number of meetings held by the committees of the Board of Directors on which he served. The Company's Nominating Committee, which is responsible for recommending nominees for election to the Company's Board of Directors, is made up of directors Grzelecki and Baum. The committee met one time during the year ended December 31, 1997. The Company's Audit Committee is responsible for recommending the appointment of the Company's independent accountants and meeting with the independent accountants to outline the scope and review the results of the annual audit. The current members of this committee are directors Black and Bell, with Mr. Bell serving as chairman. The Committee held one meeting during the year ended December 31, 1997. The Compensation Committee of the Board of Directors is comprised of Mr. Black, as Chairman, and Mr. Bell. The Committee recommends employee compensation, benefits and personnel policies to the Board of Directors and establishes for Board approval salary and cash bonuses for senior officers. The committee met two times during the year ended December 31, 1997. Management Remuneration Report of the Compensation Committee The objectives of the Compensation Committee with respect to executive compensation are the following: (1) provide compensation opportunities generally competitive with those offered by other similarly situated companies to ensure the Company's ability to attract and retain talented executives who are essential to the Company's long-term success; (2) reward executive officers based upon their ability to achieve short-term and long-term strategic goals and objectives and to enhance stockholder value; and (3) align the interests of the executive officers with the long-term interests of stockholders by granting stock options which will become more valuable to the executives as the value of the Company's shares increases. At present, the Company's executive compensation program is comprised principally of base salary, annual incentive bonuses and long-term incentive opportunities provided in the form of stock options or similar stock purchase arrangements. The Company has an employment contract with Mr. Russell which helps the Company retain Mr. Russell as an executive officer and currently provides for his base salary. Annual incentive bonuses are expected to be tied to the Company's financial performance during the fiscal year and the executive's individual performance, and stock options have a direct relation to long-term enhancement of stockholder value. In years in which the Company's performance goals are met or exceeded, executive compensation should tend to be higher than in years in which performance is below expectations. Mr. Baum. Mr. Baum does not have an employment agreement with the Company. His annual salary for fiscal 1997 was $113,500, the same as his salary for the last two years. Mr. Baum's salary was determined by the Compensation Committee after negotiation with Mr. Baum in consideration of Mr. Baum's knowledge and experience and the level of time (though less than full time) Mr. Baum expends giving attention to the Company's affairs. Mr. Russell. Mr. Russell was not employed by Morgan Drive Away until 1996. Consequently, no data is set forth below respecting his compensation for years prior to 1996. The basic terms of Mr. Russell's compensation are provided for in an employment agreement with Morgan Drive Away. The initial term of the agreement ended in February, 1998, but the agreement continues until terminated by the Company or Mr. Russell upon 60 days prior notice. Under the terms of the agreement, Mr. Russell received a base salary of $240,000 for the first two years (subject to review in the second year by the Compensation Committee). His base salary for fiscal 1998 is unchanged. Mr. Russell is also entitled to participate in other benefits made available to management. The Company may at its option terminate Mr. Russell's employment for "just cause" (as defined in the agreement), upon 30 days written notice, or without cause upon 60 days notice. Also, in connection with Mr. Russell's initial engagement, Morgan Drive Away adopted a Special Employee Stock Purchase Plan under which Mr. Russell purchased 70,000 shares of Class A Common Stock at an aggregate price of $560,000. Mr. Russell paid $56,000 and delivered a promissory note in the amount of $504,000 bearing an interest rate of five (5%) percent per annum due in 2003. Interest for 1997 was forgiven. Mr. Russell has the right to repay the note using shares at $8.00 per share. Mr. Borghesani. Mr. Borghesani and Morgan Drive Away entered into a consulting agreement effective April 1, 1996 which replaced Mr. Borghesani's former employment agreement. Under such agreement, Mr. Borghesani will remain available to the Company on a substantially continuous basis (though less than full time) for basic compensation of $100,000 per year. Mr. Borghesani's basic compensation was reduced to $98,000 effective November 1, 1997 in consideration of a larger automobile allowance. If his employment is terminated other than for just cause (as defined) he is entitled to a three-month severance benefit of $8,333 per month. Mr. Borghesani remains eligible to participate in benefit plans and programs available to Morgan Drive Away's executive officers. The base salary of Mr. Baum was approved by the Compensation Committee. The base salaries of the other executive officers are based on the recommendations of Mr. Baum, taking into account personal performance and experience. Annual Incentive Bonuses. Under the Company's Bonus Plan, a bonus pool is made available to approximately 65 management and administrative employees. The bonus pool is generally equal to 4% of operating income with additional incentives of 9% of incremental operating income over business plan levels. No bonuses were paid under such plan for 1997. Under the Company's Executive Bonus Plan and a similar arrangement established under Mr. Russell's employment agreement, Mr. Baum and Mr. Russell can obtain up to 50% of their base salary in bonus based upon exceeding the prior year's results and/or the current year's business plan. The applicable formulas include such planned items as (i) Operating Income, (ii) Earnings Before Interest, Taxes, Depreciation and Amortization, (iii) Cash Flow, (iv) Earnings Per Share, and (v) Return on Managed Assets. No bonuses were paid under such plan for 1997. Allocations of bonuses under the Bonus Plan and Executive Bonus Plan are made from the bonus pools by the Compensation Committee in its discretion, generally based on its assessment of the executive's performance and level of responsibility for achieving business plan and other operating objectives. Stock Options. The Morgan Group, Inc. Incentive Stock Plan ("Stock Plan") is the Company's principal long-term incentive plan for directors, executive officers and other key employees. The objectives of the Stock Plan are to align executive and stockholder long-term interests by creating a strong and direct link between executive compensation and stockholder return, and to enable executive officers and other key employees to develop and maintain a significant long-term ownership position in the Company's Class A Common Stock. The Stock Plan authorizes the Compensation Committee to award executive officers and other key employees stock options, shares of restricted stock or certain cash awards. See "-- Incentive Stock Plan" below. The Stock Plan was approved by the stockholders of the Company in June 1993. A total of 200,000 shares have been reserved for issuance under the Plan, of which options for 167,000 shares were outstanding at December 31, 1997. Options for 41,000 shares of Class A Common Stock have been granted to the named executive officers as follows: 25,000 to Mr. Baum, 11,000 to Mr. Russell, and 5,000 to Mr. Borghesani. Mr. Baum already had a significant equity interest in the Company in addition to these option grants. Such grants were deemed appropriate to reward Mr. Baum for past performance, especially for successful completion of the initial public offering, and to enhance his equity incentive. Mr. Baum's options are nonqualified stock options with an exercise price of $8.75 per share and became fully exercisable in 1997. Stock options are generally granted with exercise prices at the prevailing market price and will only have a value to the executives if the stock price increases. Additional options for 29,000 shares have been granted to other executive officers. The Compensation Committee believes that the combination of the performance bonus plan and option plan helps to link executive compensation to corporate performance. This should result in better alignment of compensation with corporate goals and the interests of the Company's stockholders. As performance goals are met or exceeded, most probably resulting in increased value to stockholders, executives are appropriately rewarded. The Compensation Committee believes that compensation levels during fiscal 1997 for executive officers adequately reflect the Company's compensation goals and policies. Compensation Committee Members Richard B. Black, Chairman Bradley J. Bell Remuneration of Named Executive Officers. The following table sets forth, for each of the Company's last three fiscal years, information with respect to the Chief Executive Officer and each of the executive officers of the Company whose aggregate salary and bonus paid for fiscal 1997 exceeded $100,000.
Summary Compensation Table Long Term Compensation Annual Compensation Awards Name and Principal Position Year Salary Bonus (1) (options/warrants) All Other Compensation (2) - ------------------------------------------------------------------------ ---------------- -------------------------- Charles C. Baum 1997 113,500 --- --- 2,413 Chairman and 1996 113,500 --- --- 2,189 Chief Executive Officer 1995 113,500 7,025 --- 1,666 Terence L. Russell 1997 240,000 --- --- 28,886 President and Chief Executive 1996 230,769 25,200 11,000 1,152 Officer of Morgan Drive Away 1995 --- --- --- --- Paul D. Borghesani 1997 99,731 --- --- 6,410 Vice President of 1996 100,000 --- --- 9,927 Morgan Drive Away 1995 149,000 15,707 --- 6,374 - ---------------
(1) Amounts paid to the executives are from a bonus pool established for distribution to approximately 65 management and administrative employees. See "-- Annual Incentive Bonuses" above. (2) Amounts shown for Mr. Baum and Mr. Borghesani for 1995, 1996 and 1997 include $200 matching contributions under the Company's 401(k) Plan. Amount shown for Mr. Russell includes $25,200 for interest forgiven on the promissory note under the Special Employee Stock Purchase Plan. Amount shown for Mr. Borghesani includes $2,692 in automobile allowance. Remaining amounts shown for Mr. Baum, Mr. Russell and Mr. Borghesani are annual premiums paid by the Company for health, life and disability insurance. Incentive Stock Plan The purpose of the Stock Plan is to provide to certain directors, officers (including officers who are members of the Board of Directors) and other key employees of the Company who are materially responsible for the management or operations of the Company and have provided valuable services to the Company a favorable opportunity to acquire Class A Common Stock of the Company, thereby providing them with an increased incentive to work for the success of the Company and better enabling the Company to attract and retain capable directors and executive personnel. No options were granted to named executive officers in 1997. The following table includes the number of shares covered by both exercisable and unexercisable stock options or warrants held by the named executive officers as of December 31, 1997. Also reported are the values for "in-the-money" options (options whose exercise prices are lower than the market value of the shares at fiscal year end) which represent the spread between the exercise price of any such existing stock options and the fiscal year-end market price of such stock.
Outstanding Stock Option Grants and Value Realized as of December 31, 1997 Value of Number of Unexercised Options In-the-Money Options at Fiscal Year End at Fiscal Year End(2) -------------------------------- ---------------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- Charles C. Baum 25,000 - 0 - $ 12,500 $ -0- (3) Terence L. Russell (1) 2,750 8,250 $ 1,547 $ 4,641 Paul D. Borghesani 10,000 - 0 - $ 5,000 $ -0- (3)
(1) The options granted to Mr. Russell under the Stock Plan become exercisable over a four year period with 25% becoming exercisable on each of March 19, 1997, March 19, 1998, March 19, 1999 and March 19, 2000. (2) Based on market value of the Class A Common Stock of $9.25 per share at December 31, 1997. (3) Since the fair market value of the shares subject to the options was below the exercise price of the options at fiscal year end, such options were not "in-the-money." Defined Benefit Plans 401(k) Plan. The Company adopted The Morgan Group, Inc. Deferred Compensation 401(k) Plan (the "401(k) Plan") effective June 1, 1993. All employees of the Company and its subsidiaries are eligible to participate in the 401(k) Plan after having satisfied eligibility requirements including age, employment term and hours of service, as specified in the 401(k) Plan. Employees began participating in the 401(k) Plan in January, 1994. The 401(k) Plan permits employees to make contributions by deferring a portion of their compensation. Participating employees also share in contributions made by their respective employers. The annual employer contribution to each participant's account is equal to 25% of the first $800 of the participant's contribution, provided the employer has net income or retained earnings. The Company has discretion to, and may consider, increasing the annual matching contribution in the future. A participant's interest in both employee and employer matching contributions and earnings thereon are fully vested at all times. The Company also has discretion to make profit-sharing contributions to the 401(k) Plan which would vest over six years. Employee and employer contributions may be invested in the Company's Class A Common Stock or in one or more guaranteed income or equity funds or insurance contracts offered under the Plan from time to time. Except in certain cases of financial hardship, a participant (or his or her beneficiary) receives distributions from the 401(k) Plan only at retirement, termination of employment, total permanent disability, death, or termination of the 401(k)Plan. At that time, the value of the participant's interest in the 401(k) Plan is distributed to the participant (or his or her beneficiary). The Company offers no other post-termination benefit plans. Other Benefits The Company pays annual premiums for health, life and disability insurance for executive officers. Compensation of Directors Directors of the Company who are salaried employees of the Company do not receive any additional compensation for serving as directors. Non-employee directors of the Company receive $1,000 per year for serving on the Board of Directors and $1,000 for each Board of Directors meeting attended. In addition, the Chairmen of the Compensation, Audit and Nomination Committees each receive $5,000 annually. The Stock Plan contains a formula providing for the grant of non-qualified options to each non-employee director. Under this formula, Mr. Bell and Mr. Black were each granted options for 4,000 shares effective July 29, 1993 at an exercise price equal to the initial public offering price of $9.00 per share and they were also each granted options for 4,000 shares, effective May 4, 1994, at an exercise price equal to $6.80 per share upon their re-election to the Board of Directors at the 1994 annual meeting of stockholders. Mr. Grzelecki was granted an option for 8,000 shares at an exercise price of $6.20 per share upon his election to the Board of Directors in January 1997. Non-employee directors first elected to the Board of Directors after the 1997 annual meeting of stockholders may be granted options to purchase up to 8,000 shares of Class A Common Stock at an exercise price of not less than 80% of the fair market value of Class A Common Stock on the date of grant, if and to the extent determined by the Board of Directors. All options presently granted have terms of 10 years and one day and are exercisable 6 months after grant. To date, options for 49,000 shares have been granted to non-employee directors as a group under these provisions. Performance Graph The graph shows the performance of the Company's Class A Common Stock since July 22, 1993, in comparison to the American Stock Exchange Market Value Index, the New Peer Group(1) and the Old Peer Group.(2) The Company has constructed a new peer group that includes companies which better reflect its strategic focus on providing a complete package of transportation and related financial services. The performance of the old peer group is displayed here for comparative purposes as required by SEC Reg. S-K, Item 402(l)(4) and will not be provided in the future. The Class A Common Stock was listed on The American Stock Exchange effective February 9, 1995. [graph omitted] THE MORGAN GROUP OLD PEER GROUP NEW PEER GROUP AMEX MARKET INDEX ---------------- -------------- -------------- ----------------- 7/22/93 100.00 100.00 100.00 100.00 9/93 86.49 115.03 107.32 106.28 12/93 84.01 115.67 117.11 113.65 3/94 86.91 107.46 105.88 103.69 6/94 89.86 113.87 96.42 96.76 9/94 81.91 119.59 107.18 106.85 12/94 78.04 115.54 97.44 101.46 3/95 94.69 143.35 110.67 108.42 6/95 88.05 143.10 101.92 117.09 9/95 102.71 169.47 113.94 127.17 12/95 92.60 167.40 133.03 127.64 3/96 92.60 198.15 134.66 133.31 6/96 103.22 199.67 145.06 134.81 9/96 80.76 222.87 144.79 132.86 12/96 83.54 212.32 122.40 134.94 3/97 92.14 190.60 116.78 134.57 6/97 96.56 208.85 132.48 147.80 9/97 113.62 257.54 153.95 166.56 12/97 104.23 200.10 169.31 163.67 - ---------------- 1. The new peer group is composed of Clayton Homes, Inc., Fleetwood Enterprises, Inc., JB Hunt Transport Services, Inc., Kevco, Inc., Landstar System, Inc., Patrick Industries, Inc. and Skyline Corporation. The Company arranges for delivery for the manufactured housing, commercial and recreational vehicle industries as well as provides financial and insurance services. Accordingly, the new peer group includes manufactured housing and recreational vehicle manufacturers and companies who arrange for delivery services and provide for financial and insurance services. 2. The old peer group is composed of Fleetwood Enterprises, Inc., Green Tree Financial Corporation, JB Hunt Transport Services, Inc., Landstar System, Inc., Patrick Industries, Inc., Shelter Components Corporation, Skyline Corporation and Starcraft Corporation. Certain Transactions with Related Persons The Company was formed by Lynch in 1988 to acquire the shares of Morgan Drive Away. Lynch is a diversified company listed on the American Stock Exchange with subsidiaries in multimedia, services and manufacturing. Lynch currently owns all 1.2 million shares of the Company's outstanding Class B Common Stock and 150,000 shares of Class A Common Stock, which together represent approximately 66% of the combined voting power of all outstanding Common Stock. By virtue of its relationship with Lynch, the Company receives certain benefits and services from Lynch such as directors and officers errors and omissions insurance placement, strategic consultation from time to time and similar items. The Board of Directors has approved a services agreement providing for the payment of reasonable compensation to Lynch for these benefits and services. Such payments in 1997 were $116,000. INDEPENDENT AUDITORS Effective March 19, 1996, the Company replaced Arthur Andersen LLP ("Arthur Andersen") and retained Ernst & Young LLP ("Ernst & Young") as its public accountants. Arthur Andersen's report on the Company's financial statements during the 1994 and 1995 fiscal years prior to its replacement contained no adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. The decision to change auditors was approved by the Company's Board of Directors. During the 1994 and 1995 fiscal years and until its replacement there were no disagreements between the Company and Arthur Andersen on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Arthur Andersen, would have caused it to make a reference to the subject matter of the disagreement in connection with its reports. Representatives of Ernst & Young, the Company's auditors for 1996 and 1997, are expected to be available at the Annual Meeting with the opportunity to make a statement if they desire to do so and to answer appropriate questions. The Board of Directors of the Company has not yet completed the process of selecting a principal auditor for 1998. STOCKHOLDER PROPOSALS Any proposal that a stockholder wishes to have presented at the next Annual Meeting of the Company to be held in May 1999 must be received at the main office of the Company for inclusion in the proxy statement no later than 120 days in advance of May 5, 1999. Any such proposal should be sent to the attention of the Secretary of the Company at 2746 Old U.S. 20 West, Elkhart, Indiana 46514-1168. FILINGS UNDER SECTION 16(a) OF THE 1934 ACT Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that the Company's officers and directors and persons who own more than 10% of the Company's Class A Common Stock file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC"). Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file. Based solely on its review of the copies of such forms received by it, and/or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that during the fiscal year ended December 31, 1997, all filing requirements applicable to its officers and directors with respect to Section 16(a) of the 1934 Act were complied with, except that one report on Form 3 was filed late by Dennis R. Duerksen. OTHER MATTERS Management is not aware of any business to come before the Annual Meeting other than those matters described in the Proxy Statement. However, if any other matters should properly come before the Annual Meeting, it is intended that the proxies solicited hereby will be voted with respect to those other matters in accordance with the judgment of the persons voting the proxies. The solicitation of proxies is made on behalf of the Board of Directors of the Company, and the cost thereof will be borne by the Company. The Company has employed Corporate Investor Communications, Inc., 111 Commerce Road, Carlsadt, New Jersey, 07072 to assist in this solicitation at a cost of $850 plus out of pocket expenses. The Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material to the beneficial owners of the Class A Common Stock. In addition to solicitation by mail, directors, officers, and employees of the Company may solicit proxies personally or by telephone without additional compensation. Each stockholder is urged to complete, date and sign the proxy and return it promptly in the enclosed return envelope. Insofar as any of the information in this Proxy Statement may rest peculiarly within the knowledge of persons other than the Company, the Company relies upon information furnished by others for the accuracy and completeness thereof. By Order of the Board of Directors /s/ Charles C. Baum Charles C. Baum, Chairman of the Board and Chief Executive Officer May 5, 1998 THE MORGAN GROUP, INC. Proxy For Annual Meeting of Shareholders to be held June 18, 1998 The undersigned hereby appoints Charles C. Baum or Terence L. Russell, such as the proxy of the undersigned, with full power of substitution, to vote all shares of Common stock of The Morgan Group, Inc. (the "Company"), which the undersigned is entitled to vote at the annual Meeting of Shareholders of the Company to be held June 18, 1998, or at any adjournment thereof, as follows (CONTINUED AND TO BE SIGNED ON THE OTHER SIDE) Please detach and mail in the Envelope Provided A |X| Please mark your votes as in this example. For all nominees Withhold listed at right Authority except as marked to to vote for all nominees (a) ELECTION OF the contrary below listed at right FOUR DIRECTORS BY ALL STOCKHOLDERS Nominees: I. ELECTION [ ] [ ] Richard Black OF Charles Baum DIRECTORS Frank Grzelecki Bradley Bell (INSTRUCTION: to withhold authority to (b) ELECTION OF vote for an individual nominees, write DIRECTOR BY that nominee on the space provided below). HOLDERS OF CLASS A COMMON STOCK Nominee: ___________________________________________________ Robert Prather, Jr. 2. The parties are authorized to vote in their discretion on any other Matters which may properly come before the Annual Meeting to the extent set forth in the proxy statement. This proxy when properly executed will be voted in the manner directed herein by the undersigned Shareholder(s). If no direction is made, this Proxy will be voted FOR Proposals 1 (a) and (b). Your vote is important. If you do not expect to attend the Annual Meeting, or if you do plan to attend but wish to vote by proxy, please date, sign and mail this proxy. A return envelope is provided for this purpose. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY. (Signature)__________________________________________________ (Signature)__________________________________________________ (SIGNATURE (OF JOINTLY OWNED) Date_____________, 1998 NOTE: Please date this proxy. Please sign exactly as you name appears on the accompanying. If shares are held jointly, both joint owners should sign. If signing as attorney, executor, administrator, guardian or in any other representative capacity, please give your full title as such. -----END PRIVACY-ENHANCED MESSAGE-----