<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
SUMMIT HOLDING SOUTHEAST, INC.
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(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.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[Summit Holding Southeast Letterhead]
September 12, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Summit Holding Southeast, Inc. (the "Company") to be held at
the Tampa Airport Marriott Hotel in Tampa, Florida on Wednesday, October 15,
1997 at 9:30 a.m., local time.
The enclosed Notice of Annual Meeting and Proxy Statement describes
the formal business to be transacted at the Annual Meeting. During the meeting,
we also will report on the current operations of the Company, and the directors
and officers of the Company will be present to respond to appropriate questions
from shareholders.
In addition, enclosed for your information is the Company's 1997
Annual Report to Shareholders, which consists of the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997.
I hope that you will be able to attend the Annual Meeting. If you plan
to attend, please mark the appropriate box at the bottom of your proxy card so
that we can make appropriate arrangements for the anticipated number of guests.
Whether or not you plan to attend the Annual Meeting, please sign, date and
return your proxy card in the enclosed envelope at your earliest convenience.
This will ensure that your shares will be represented and voted at the Annual
Meeting even if you are unable to attend.
Sincerely,
Greg C. Branch
Chairman of the Board
<PAGE> 3
SUMMIT HOLDING SOUTHEAST, INC.
NOTICE OF
1997 ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE> 4
SUMMIT HOLDING SOUTHEAST, INC.
2310 A-Z PARK ROAD
LAKELAND, FLORIDA 33801
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 15, 1997
NOTICE HEREBY IS GIVEN that the 1997 Annual Meeting of Shareholders of
Summit Holding Southeast, Inc. ("the Company") will be held at the Tampa
Airport Marriott Hotel in Tampa, Florida, on Wednesday, October 15, 1997 at
9:30 a.m., local time, for the purposes of:
1. Electing three directors to serve until the 2000 Annual
Meeting of Shareholders;
2. Ratifying the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31,
1997; and
3. Transacting such other business as properly may come before
the Annual Meeting or any adjournments thereof.
Information relating to the foregoing matters is set forth in the
attached Proxy Statement. Shareholders of record at the close of business on
August 29, 1997 are entitled to receive notice of and to vote at the Annual
Meeting and any adjournments thereof. A list of shareholders of the Company as
of the close of business on August 29, 1997 will be available for inspection at
the Annual Meeting and during normal business hours from October 3, 1997
through October 14, 1997 at the headquarters of the Company at 2310 A-Z Park
Road, Lakeland, Florida 33801.
By Order of the Board of Directors.
Russell L. Wall
Secretary
Lakeland, Florida
September 12, 1997
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE
AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE.
YOU CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATION BY
RETURNING YOUR PROXY CARD PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY
REVOKE THE PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
<PAGE> 5
SUMMIT HOLDING SOUTHEAST, INC.
____________
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 15, 1997
_____________
This Proxy Statement is furnished to the shareholders of Summit Holding
Southeast, Inc., a Florida corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
1997 Annual Meeting of Shareholders of the Company and at any adjournments
thereof (the "Annual Meeting"). The Annual Meeting will be held on Wednesday,
October 15, 1997 at 9:30 a.m., local time, at the Tampa Airport Marriott Hotel
in Tampa, Florida.
The approximate date on which this Proxy Statement and the accompanying
proxy card are first being sent or given to shareholders is September 15, 1997.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of Common
Stock of the Company, $.01 par value per share, with each share entitling its
owner to one vote on each matter submitted to the shareholders. The record
date for determining the holders of Common Stock who are entitled to receive
notice of and to vote at the Annual Meeting is August 29, 1997. On the record
date, 5,791,100 shares of Common Stock were outstanding and eligible to be
voted at the Annual Meeting.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. In counting the votes to determine whether a quorum exists at the
Annual Meeting, the proposal receiving the greatest number of all votes cast
"for" or "against" as well as any abstentions (including instructions to
withhold authority to vote) will be used.
In accordance with Florida law and the Company's Articles of Incorporation,
the election of a director (Proposal 1) is approved if the votes cast favoring
the election of a director exceed the votes cast opposing the election of a
director, provided a quorum is present. As a result, shares that are withheld
from voting on the proposal and any broker non-votes will have no effect on the
outcome of the vote. In accordance with Florida law and the Company's Bylaws,
if a quorum is present and the votes cast at the Annual Meeting favoring the
approval of the proposal to ratify the Board of Directors' appointment of
independent auditors for the Company (Proposal 2) exceed the votes cast opposing
such action, Proposal 2 will be adopted. As a result, shares that are withheld
from voting on the proposal and any broker non-votes will have no effect on the
outcome of the vote.
PROXIES
The accompanying proxy card is for use at the Annual Meeting if a
shareholder is unable to attend in person or is able to attend but does not wish
to vote in person. Shareholders should specify their choices with regard to the
two proposals on the enclosed proxy card. All properly executed and dated proxy
cards
<PAGE> 6
delivered by shareholders to the Company in time to be voted at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the instructions given. If no specific instructions are given, the shares
represented by a signed and dated proxy card will be voted "FOR" the election of
the three director nominees named in Proposal 1 and "FOR" the ratification of
the directors' selection of independent auditors described in Proposal 2. If
any other matters properly come before the Annual Meeting, the persons named as
proxies will vote upon such matters according to their judgment. The Board of
Directors is not aware of any other business to be presented to a vote of the
shareholders at the Annual Meeting.
The giving of a proxy does not affect the right to vote in person should
the shareholder attend the Annual Meeting. Any shareholder who has given a
proxy has the power to revoke it at any time before it is voted by giving
written notice of revocation to Russell L. Wall, the Secretary of the Company,
at 2310 A-Z Park Road, Lakeland, Florida 33801, by executing and delivering a
proxy card bearing a later date to Mr. Wall, or by voting in person at the
Annual Meeting.
In addition to soliciting proxies directly, the Company has requested
brokerage firms, nominees, custodians and fiduciaries to forward proxy
materials to the beneficial owners of shares held of record by them. The
Company also may solicit proxies through its directors, officers and employees
in person and by telephone and facsimile, without payment of additional
compensation to such persons. All expenses incurred in connection with the
solicitation of proxies will be borne by the Company.
STOCK OWNERSHIP
The following table sets forth certain information, as of August 8, 1997,
regarding the beneficial ownership of the Company's Common Stock and Series A
Preferred Stock, par value $10 per share (the "Series A Preferred Stock"), by:
(i) each person who is known by the Company to own more than 5% of the
outstanding shares of Common Stock or Series A Preferred Stock, (ii) each
director and nominee for director, (iii) each executive officer named in the
Summary Compensation Table and (iv) all directors and officers as a group.
Except as otherwise noted, each shareholder has (i) sole voting and investment
power with respect to such shareholder's shares of stock, except to the extent
that authority is shared by spouses under applicable law, and (ii) record and
beneficial ownership with respect to such shareholder's shares of stock.
<TABLE>
<CAPTION>
COMMON STOCK SERIES A PREFERRED STOCK
------------------------ -------------------------
SHARES SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED(1) OWNED(1) OWNED(1) OWNED(1)
- ------------------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Alfred Partners, L.L.C. 561,000(2) 9.69% 0 0
Gotham Capital III, L.P.
Joel M. Greenblatt
Daniel L. Nir
100 Jericho Quadrangle,
Suite 212
Jericho, New York 11753
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
COMMON STOCK SERIES A PREFERRED STOCK
------------------------ -------------------------
SHARES SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED(1) OWNED(1) OWNED(1) OWNED(1)
- ------------------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Greenlight Capital, L.L.C. 499,000(3) 8.62% 0 0
David Einhorn
Jeffrey A. Keswin
120 Broadway, Suite 901
New York, New York 10271
Third Point Management 447,700(4) 7.73% 0 0
Company L.L.C.
Third Point Partners L.P.
Daniel S. Loeb
277 Park Avenue, 26th Floor
New York, New York 10172
Greg C. Branch 268,377(5) 4.55% 287 *
C.C. Dockery 220,920(6) 3.76% 39 *
William B. Bull 218,564(7) 3.74% 22 *
Russell L. Wall 95,969(8) 1.65% 0 0
Thomas R. Petcoff 55,165(9) * 11 *
John A. Gray 43,405(10) * 0 0
Robert Siegel 38,628(11) * 175 *
Robert L. Noojin, Sr. 37,131(12) * 0 0
All directors and officers
as a group (8 persons) 988,159(13) 15.92% 534 *
</TABLE>
- ------------------------
* Less than one percent.
(1) Each named person is deemed to be the beneficial owner of securities
which may be acquired within 60 days after August 8, 1997 through the
exercise of options, warrants and rights, if any, and such securities are
deemed to be outstanding for the purpose of computing the percentage of
the class beneficially owned by such person. However, any such shares are
not deemed to be outstanding for the purpose of computing the percentage
of the class beneficially owned by any other person.
(2) Such persons possess shared voting and investment power with respect to
the shares shown, expect for 1,000 shares for which Mr. Greenblatt
possesses sole investment and voting power.
(3) Such persons possess shared voting power and investment power with
respect to the shares shown.
(4) Such persons possess shared voting power and investment power with
respect to the shares shown, except for 82,000 shares for which only Third
Point Management Company L.L.C. and Mr. Loeb share voting and investment
power.
(5) Includes 109,627 shares issuable upon exercise of currently exercisable
stock options and 4,545 shares held by trusts for which Mr. Branch is the
trustee.
3
<PAGE> 8
(6) Includes 85,170 shares issuable upon exercise of currently exercisable
stock options.
(7) Includes 54,814 shares issuable upon exercise of currently exercisable
stock options.
(8) Includes 29,219 shares issuable upon exercise of currently exercisable
stock options.
(9) Includes 36,564 shares issuable upon exercise of currently exercisable
stock options.
(10) Includes 34,860 shares issuable upon exercise of currently exercisable
stock options.
(11) Includes 33,128 shares issuable upon exercise of currently exercisable
stock options.
(12) Includes 32,586 shares issuable upon exercise of currently exercisable
stock options.
(13) Includes 415,968 shares issuable upon exercise of currently exercisable
stock options.
PROPOSAL 1 ELECTION OF DIRECTORS
NOMINEES
Pursuant to the Company's Articles of Incorporation and Bylaws, the Board
of Directors of the Company consists of seven members who are divided into
three classes as nearly equal in number as possible. The directors in each
class are elected by the shareholders for a term of three years and until their
successors are elected and qualified. The term of office of one of the
classes of directors expires each year at the Annual Meeting of Shareholders,
and a new class of either two or three directors is elected by the shareholders
each year at that time.
At the Annual Meeting, the terms of William B. Bull, John A. Gray and
Thomas S. Petcoff will expire, and the Board of Directors has nominated each of
these three individuals to stand for re-election as directors at the Annual
Meeting. If elected by the shareholders, each of the nominees will serve a
three-year term which will expire at the 2000 Annual Meeting of Shareholders.
If any of the nominees should be unavailable to serve for any reason (which is
not anticipated), the Board of Directors may designate a substitute nominee or
nominees (in which case the persons named as proxies on the enclosed proxy card
will vote the shares represented by all valid proxy cards for the election of
such substitute nominee or nominees), allow the vacancy or vacancies to remain
open until a suitable candidate or candidates are located, or by resolution
provide for a lesser number of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO RE-ELECT WILLIAM B. BULL, JOHN A. GRAY AND THOMAS S. PETCOFF AS
DIRECTORS OF THE COMPANY FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL
MEETING OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND
QUALIFIED.
INFORMATION REGARDING NOMINEES AND CONTINUING DIRECTORS
The following table sets forth certain information regarding the three
nominees for director as well as the four incumbent directors whose terms as
directors will continue following the Annual Meeting. Except as otherwise
indicated, each of the named persons has been engaged in his or her present
principal occupation for more than five years.
4
<PAGE> 9
PERSONS NOMINATED FOR ELECTION TO SERVE AS DIRECTORS UNTIL THE 2000 ANNUAL
MEETING OF SHAREHOLDERS
William B. Bull Mr. Bull, age 49, has been President, Chief Executive Officer
and a director of the Company since the formation of the
Company in November 1996. Mr. Bull has also served as
President and Chief Executive Officer of the Company's wholly
owned subsidiary, Summit Holding Corporation ("SHC"), and its
predecessors since 1987. Mr. Bull joined Summit Consulting,
Inc. ("SCI"), a subsidiary of SHC, in 1984 as special
assistant to the President and subsequently became Executive
Vice President in 1986 with operating responsibilities for
such company. Mr. Bull is a member of various insurance
associations and serves on numerous boards, including the
Florida Association of Self-Insurance, Florida Retail
Federation Association, Florida Group Risk Administrators
Association and First Union National Bank of Polk County.
John A. Gray Mr. Gray, age 51, has served as a director of the Company
since November 1996. Mr. Gray served as a Trustee of
Employers Self Insurers Fund ("ESIF"), the predecessor of the
Company's wholly owned subsidiary Bridgefield Employers
Insurance Company ("Bridgefield"), and its predecessors from
1979 until 1997. Since 1992, Mr. Gray has served as
President of B.F. Deal, Inc., a yacht brokerage and charter
company, and since 1993 has served as Vice President of
Marine Resources Management, Inc., a supplier of marine
equipment. From 1975 until his retirement in 1992, Mr. Gray
was President of Dura-Stress, Inc., a manufacturer or
pre-stressed and precast concrete products located in
Leesburg, Florida.
Thomas S. Petcoff Mr. Petcoff, age 49, has served as a director of the Company
since November 1996. Mr. Petcoff was employed by and
involved with SCI from 1977 until 1986. Alexander &
Alexander Services, Inc. purchased SCI in 1984. Mr. Petcoff
served as a Trustee of ESIF and its predecessors from 1987
until 1997. Mr. Petcoff also serves on the Board of Trustees
of Florida Retail Federation Self Insurers Fund and the Board
of Directors of the Florida Retail Federation Association.
Since 1984, Mr. Petcoff has served as President of Centurion
Insurance Services, Inc., an insurance consulting firm and
sales agency.
DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING OF SHAREHOLDERS
C. C. Dockery Mr. Dockery, age 64, has been a director of the Company
since November 1996. Mr. Dockery founded and remained
involved with SCI from 1977 until 1986. Mr. Dockery served
as a Trustee of ESIF and its predecessors from 1987 until
1997. Since 1982, Mr. Dockery has been the President, Chief
Executive Officer and majority shareholder of Crossroads
Insurance Company, Ltd., a reinsurance company located in
Bermuda. For 21 years, Mr. Dockery served as a director of
Cotton States Mutual Insurance Company and its affiliate,
Cotton States Life Insurance Company, a publicly traded life
insurance provider located in Atlanta, Georgia.
5
<PAGE> 10
Robert Siegel Mr. Siegel, age 66, has served as a director of the
Company since November 1996 and served as a Trustee of
ESIF and its predecessors from 1978 until 1997. Mr.
Siegel is President of Siegel Gas & Oil Products, which
he founded in 1957 and which is located in Miami,
Florida.
DIRECTORS TO SERVE UNTIL THE 1998 ANNUAL MEETING OF SHAREHOLDERS
Greg C. Branch Mr. Branch, age 50, has been a director of the Company
since November 1996. Mr. Branch served as Chairman of
the Board of ESIF from 1994 until 1997 and as a Trustee
of ESIF and its predecessors from 1980 until 1997. Mr.
Branch has served as President of Branch Properties,
Inc., a manufacturer, wholesaler and retailer of animal
feeds and fertilizer located in Ocala, Florida, since
1973. Mr. Branch is Vice Chairman and a founding
director of American Feed Industry Insurance Company, a
property and casualty insurer.
Robert L. Noojin, Sr. Mr. Noojin, age 63, has been a director of the Company
since November 1996 and served as a Trustee of ESIF and
its predecessors from 1979 until 1997. Prior to his
retirement in 1994, Mr. Noojin was President of Eagle
Supply, Inc., a roofing supply company headquartered in
Tampa, Florida, and a subsidiary of TDA Industries, Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company conducts its business through
meetings of the full Board and through committees of the Board, including
standing Audit and Compensation Committees. From the incorporation of the
Company in November 1996 through the end of the Company's first fiscal year on
March 31, 1997, the Board of Directors held four meetings, the Compensation
Committee held one meeting and the Audit Committee did not meet formally during
such period. Each director attended at least 75% of all meetings of the full
Board of Directors and of each committee of the Board of which he is a member.
The Audit Committee is responsible for reviewing with the Company's
independent auditors their audit plan, the scope and results of their audit
engagement and the accompanying management letter, if any, reviewing the scope
and results of the Company's internal auditing procedures, consulting with the
independent auditors and management with regard to the Company's accounting
methods and the adequacy of its internal accounting controls, approving
professional services provided by the independent auditors, reviewing the
independence of the independent auditors, and reviewing the range of the
independent auditors' audit and non-audit fees. The Audit Committee is
comprised of John A. Gray, Robert L. Noojin, Sr. and Robert Siegel.
The Compensation Committee is responsible for making relevant compensation
decisions of the Company and for administering and interpreting the Company's
1996 Long-Term Incentive Plan (the "Incentive Plan") which includes, among
other things, determining which directors, officers and employees will receive
awards under the Incentive Plan, when the awards will be granted, the type of
awards to be granted, the number of shares or cash involved in each award, the
time or times when any options granted will become exercisable and, subject to
certain conditions, the price and duration of such options. The Compensation
Committee is comprised of Greg C. Branch, C.C. Dockery and Thomas S. Petcoff.
6
<PAGE> 11
The Board of Directors as a whole functions as a nominating committee to
select management's nominees for election as directors of the Company. The
Board of Directors will consider nominees recommended by shareholders if
submitted to the Company in accordance with the procedures set forth in Section
2.11 of the Bylaws of the Company. See "Shareholders' Proposals for 1998
Annual Meeting" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Greg C. Branch, C.C. Dockery
and Thomas S. Petcoff, each of whom was elected to such position upon the
formation of the Compensation Committee on November 20, 1996. No member of the
Compensation Committee is an employee of the Company.
Mr. Branch served as a Trustee of ESIF and its predecessors from 1980
until 1997 and Chairman of the Board of ESIF from 1994 until 1997, and has
served as Chairman of the Board and a director of the Company since November
15, 1996. Mr. Dockery founded SCI in 1977, served as a Trustee of ESIF and its
predecessors from 1987 until 1997 and was first elected as a director of the
Company on November 15, 1996. Mr. Petcoff was an employee of, and involved
with, SCI from 1977 to 1989, was a Trustee of ESIF and its predecessors from
1987 until 1997, and has been a director of the Company since November 15,
1996.
Messrs. Dockery and Petcoff own 80,000 square feet of office space in
Lakeland, Florida and lease such space to SCI. The property is currently
rented by SCI for approximately $90,000 per month under a lease which runs
through March 2000. During the fiscal years ended March 31, 1995, 1996 and
1997, SCI made rental payments of approximately $1.2 million, $1.1 million and
$1.1 million, respectively, for such property.
Mr. Dockery is also the President, Chief Executive Officer and majority
shareholder of Crossroads Insurance Company, Ltd. ("Crossroads"), which
provides excess reinsurance to ESIF and the four self-insurance funds to which
the Company provides administrative services (the "Funds"), consisting of the
Florida Retail Federation Self Insurers Fund ("FRF"), the Louisiana Employers
Safety Association Self Insurers Fund ("LESA"), the Louisiana Retailers
Association Self Insurers Fund and the Kentucky Retail Federation Self Insurers
Fund ("KRF"). During the fiscal years ended March 31, 1995, 1996 and 1997, the
Company paid Crossroads approximately $7.1 million, $9.6 million and $3.9
million, respectively, in premiums for reinsurance relating to ESIF and the
Funds. In addition, in each of the years 1988 through 1995, Crossroads ceded
50% of its underwriting risk to U.S. Employers Insurance Company, a wholly
owned subsidiary of ESIF.
Mr. Dockery is the Chairman of the Board of Dockery Management Corporation,
which subleases approximately 2,600 square feet of office space from the Company
pursuant to a sublease agreement which expires in March 2000 and provides for
rent of approximately $2,800 per month. During each of the fiscal years ended
March 31, 1995, 1996 and 1997, the Company received approximately $36,000 in
rental payments from such entity.
Mr. Dockery is the President and owner of Dockery Leasing Corporation
("Dockery Leasing") which provides aviation services for the Company. During
the fiscal years ended March 31, 1995, 1996 and 1997, the Company paid Dockery
Leasing approximately $43,000, $32,000 and $28,000, respectively, for such
services.
7
<PAGE> 12
Mr. Dockery was an underwriting member of Lloyds of London from 1984 to
1996. Greg C. Branch has been an underwriting member of Lloyds of London since
1986. Bridgefield and the four Funds have excess reinsurance agreements with
Lloyds of London from time to time.
Mr. Petcoff is President of Centurion Insurance Services, Inc.
("Centurion"). Pursuant to an agreement between SCI and Centurion dated
November 1995, and in connection with Centurion's involvement in the formation
of KRF, SCI pays Centurion an annual fee equal to 1% of KRF's premiums earned in
each year. During the fiscal years ended March 31, 1996 and 1997, SCI paid fees
of approximately $13,000 and $31,000, respectively, to Centurion.
In addition, for reinsurance policies placed by SCI on behalf of KRF,
which are brokered by Centurion, Centurion is entitled to brokerage
commissions. Through the end of each of the fiscal years ended March 31, 1996
(the first year in which Centurion brokered a policy for KRF) and March 31,
1997, the Company paid approximately $13,000 to Centurion for brokerage
commissions. SCI also pays Centurion agency commissions for policies placed
with the Funds, and through the end of the fiscal years ended March 31, 1995,
1996 and 1997, the Company paid approximately $6,000, $2,000 and $3,000,
respectively to Centurion for such agency commissions.
Mr. Petcoff is on the Board of one of the Funds, FRF, and is on the Board
of Directors of the Florida Retail Federation (the "Association"). Pursuant to
a written arrangement between SCI and the Association, the Association, as the
sponsoring party of FRF, is entitled to 1% of such Fund's premiums earned in
each year. During the fiscal years ended March 31, 1995, 1996 and 1997, the
Company paid approximately $1.0 million, $0.9 million and $0.8 million,
respectively, to the Association for such fees. In addition, during the fiscal
years ended March 31, 1995, 1996 and 1997, FRF paid SCI fees for administrative
services of approximately $30.5 million, $27.7 million and $24.5 million,
respectively.
DIRECTOR COMPENSATION
Each non-employee member of the Board of Directors of the Company receives
a fee of $10,000 per year and an additional $2,500 for attendance at each
meeting of the Board of Directors of the Company. In addition, non-employee
members of committees of the Board of Directors receive a fee of $2,500 for
attendance at each committee meeting. Directors who are employees of the
Company receive no directors' fees. All meetings of the Board of Directors of
the Company's insurance subsidiaries and the Company's administrative
subsidiaries are held in conjunction with meetings of the Board of Directors of
the Company, and no additional compensation is received for being a member of
the Board of Directors of any such subsidiaries.
Additionally, the Company's Incentive Plan provides for the issuance of up
to a total of 500,000 shares of Common Stock of the Company to the directors,
officers and employees of the Company. No shares were issued and no options,
warrants or other rights to purchase shares were issued under the Incentive Plan
during the fiscal year ended March 31, 1997 ("fiscal 1997"). For information
regarding stock options granted to the directors of the Company on May 28, 1997,
see "Executive Compensation -- Stock Options."
8
<PAGE> 13
ADDITIONAL INFORMATION
For additional information that should be considered with regard to the
election of directors, see "Executive Compensation," "Certain Transactions" and
"Section 16(a) Beneficial Ownership Reporting Compliance" below.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table summarizes by various categories the total compensation
earned by the Company's two executive officers for services rendered by them to
the Company, ESIF and their subsidiaries during the fiscal year ended March 31,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY COMPENSATION COMPENSATION
- --------------------------- ------ ------------ ------------
<S> <C> <C> <C>
William B. Bull, $250,000 $12,000(1) $8,256(2)
President and
Chief Executive Officer
Russell L. Wall, $230,000 $12,000(1) $8,816(3)
Vice President and
Chief Financial Officer
</TABLE>
- -------------------
(1) Represents automobile allowance.
(2) Includes $1,131 for life insurance premiums paid by the Company and
$7,125 contributed by the Company to Mr. Bull's 401(k) plan account.
(3) Includes $1,691 for life insurance premiums paid by the Company and $7,125
contributed by the Company to Mr. Wall's 401(k) plan account.
EMPLOYMENT AGREEMENTS
Effective as of May 28, 1997, the effective date on which ESIF converted
from a Florida group self-insurance fund to a Florida stock insurance company
and became a wholly owned subsidiary of the Company (the "Conversion"), the
Company entered into an employment agreement with Mr. Bull pursuant to which he
is employed full-time as the Company's President and Chief Executive Officer.
The agreement, which expires on May 28, 2002, provides for an annual base
salary of $250,000 and grants Mr. Bull the right to receive a bonus in each
year of the agreement equal to 5% of the amount, if any, by which the Company's
consolidated net income after taxes exceeds $6.0 million. In addition to his
cash compensation, Mr. Bull receives additional benefits, including those
generally provided to other employees of the Company. The agreement also
provides, in the event of its expiration or termination, that: (i) Mr. Bull is
to be subject to a two-year confidentiality period and limitation on the use of
trade secrets and (ii) Mr. Bull is subject to up to a one-year non-competition
and non-solicitation arrangement with the Company for
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<PAGE> 14
which he would receive $8,333.33 per month as consideration for such
non-competition and non-solicitation arrangement.
The Company also entered into an employment agreement with Russell L. Wall
effective as of May 28, 1997, pursuant to which he is employed full-time as the
Company's Vice President and Chief Financial Officer. The agreement, which
expires on May 28, 2000, provides for an annual base salary of $230,000 and
grants Mr. Wall the right to receive a bonus in each year of the agreement
equal to 1.67% of the amount, if any, by which the Company's consolidated net
income after taxes exceeds $8.25 million in calendar year 1997 and $12.16
million in each of calendar years 1998 and 1999. In addition to his cash
compensation, Mr. Wall receives additional benefits, including those generally
provided to other employees of the Company. The agreement also provides, in
the event of its expiration or termination, that: (i) Mr. Wall is to be
subject to a two-year confidentiality period and limitation on the use of trade
secrets, as such term is defined therein, and (ii) Mr. Wall is subject to up to
a one year non-competition and non-solicitation arrangement with the Company.
The agreement further provides for a payment of $8,333.33 per month as
consideration for such non-competition and on-solicitation arrangement.
STOCK OPTIONS
The Board of Directors and shareholders of the Company have adopted the
Incentive Plan, pursuant to which certain directors, officers and other
employees of the Company and its subsidiaries can be granted a variety of
long-term incentives, including incentive stock options, non-qualified stock
options, grants of restricted and unrestricted stock, performance share awards,
stock appreciation rights, dividend equivalents and other stock-based awards.
The purpose of the Incentive Plan is to promote the success, and enhance the
value, of the Company and its subsidiaries by linking the personal interests of
the directors, officers and key employees to those of the Company's shareholders
and by providing the directors, officers and key employees with an incentive for
outstanding performance.
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. A total of 500,000 shares of Common Stock have been
reserved for issuance under the Incentive Plan. The Board of Directors or the
Compensation Committee has the right at any time to amend or discontinue the
Incentive Plan without the consent of the Company's shareholders or optionees,
provided that no such action may adversely affect awards previously granted
without the recipient's consent.
On May 28, 1997, the Company granted stock options to the following
directors and executive officers of the Company to purchase the following
number of shares of Common Stock at the initial public offering price of $11.00
per share: Greg C. Branch - 109,627; William B. Bull - 109,627; C.C. Dockery -
85,170; Russell L. Wall - 58,438; Thomas S. Petcoff - 36,564; John A. Gray -
34,860; Robert Siegel - 33,128: and Robert L. Noojin, Sr. - 32,586. The
options granted to Mr. Bull and Mr. Wall are incentive stock options, and 50%
of such options will vest 180 days following the date of the grant and the
remaining 50% of such options will vest on May 28, 1998, provided that such
officer remains employed by the Company. The options granted to the other
named persons are non-qualified stock options which vested on May 28, 1997.
The Incentive Plan provides that in the event of a "change of control" (as
defined in the Incentive Plan) of the Company, all awards granted under the
Incentive Plan that are in the nature of rights that may be exercised shall
automatically become fully exercisable. In addition, at any time prior to or
after a change of control, the Compensation Committee may accelerate awards and
waive conditions and restrictions on any other awards under the Incentive Plan
to the extent it may determine appropriate.
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<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee of the Board of Directors (the
"Committee") discusses the Committee's compensation objectives and policies
applicable generally to the Company's executive officers, as well as the
compensation specifically established for the Company's two executive officers,
William B. Bull and Russell L. Wall, for the fiscal year ended March 31, 1997
as reported in the Summary Compensation Table. The Committee is composed
entirely of non-employee directors of the Company.
The Company's compensation policies for its executive officers are
intended to create a direct relationship between the level of compensation paid
to executives and the Company's current and long-term level of performance.
The Committee believes that this relationship is best implemented by providing
a compensation package consisting of separate components, including base
salary, annual bonus compensation and, effective as of the Company's initial
public offering of Common Stock in May 1997, long-term incentive compensation
in the form of stock options.
The base salaries for the Company's two executive officers for fiscal 1997
were established subjectively by the trustees of ESIF prior to its conversion to
a stock insurance company in May 1997. The salaries of Messrs. Bull and Wall
were established at the beginning of fiscal 1997 based on the trustees'
evaluation of how well these two executive officers fulfilled their
responsibilities during the fiscal year ended March 31, 1996 ("fiscal 1996").
Based mainly on ESIF's fiscal 1996 performance in view of the difficult
competitive, industry and regulatory environment and upon the trustees' general
understanding of the salary levels paid to executive officers performing
equivalent functions at similar companies in the insurance industry, the
trustees determined that the base salaries of these two executive officers for
fiscal 1997 should be $250,000 for Mr. Bull and $230,000 for Mr. Wall.
Bonuses established for the executive officers are intended to provide an
incentive for improved performance in the coming year. Target bonus levels for
each executive officer are based on targeted levels of income for the Company.
Because ESIF did not meet the targeted income goals for 1996, no bonuses were
paid to Messrs. Bull and Wall.
In anticipation of the Company's initial public offering in May 1997, the
Board of Directors established the Committee, approved the employment
agreements with Messrs. Bull and Wall, and approved the Incentive Plan. The
base salaries established in the employment agreements with Messrs. Bull and
Wall maintain their fiscal 1997 base salaries for the next five years in the
case of Mr. Bull and the next three years in the case of Mr. Wall, effective in
each case as of May 28, 1997 (the date of the closing of the Company's initial
public offering), subject to such increases in base salary as may be approved
from time to time by the Committee.
To directly tie the potential for significant increases in annual
compensation to significant improvement in the Company's financial performance,
the employment agreements provide for the payment of a bonus each year in an
amount equal, in the case of Mr. Bull, to 5% of the amount by which the
Company's consolidated net income after taxes exceeds $6.0 million and, in the
case of Mr. Wall, to 1.67% of the amount by which the Company's consolidated
net income after taxes exceeds $8.25 million in calendar 1997 and $12.16
million in each of calendar years 1998 and 1999. (The fiscal year end of the
Company has been changed from March 31st to December 31st, effective for the
nine month period ending December 31, 1997. See "Proposal 2 -- Ratification of
Appointment of Independent Auditors.")
To further establish a direct link between employee performance and
shareholder value, the Committee established the Incentive Plan. The Incentive
Plan is designed to provide incentive for
11
<PAGE> 16
extraordinary performance through the award of stock options, restricted stock
and other forms of equity-based compensation to employees of the Company
selected by the Committee. Through grants of stock options and other forms of
equity-based compensation, opportunities for significant compensation by the
Company's executive officers and other key employees are tied directly to
increases in the price of the Company's Common Stock, thereby directly linking a
significant component of their compensation package to increases in shareholder
value. On May 28, 1997, options were granted under the Incentive Plan to
Messrs. Bull and Wall having an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant and, to encourage a long-term
perspective by the employee, having an exercise period of ten years. The number
of options granted to the respective executive officers was based on the
Committee's subjective determination of each officer's potential ability to
positively impact the Company's performance and the price of its Common Stock.
For information regarding the stock options granted to Messrs. Bull and Wall,
see "-- Stock Ownership."
The base salaries, targeted bonus amounts and number of stock options
established for or granted to the Company's executive officers were based, in
part, on the trustees' or the Committee's understanding of compensation amounts
and forms paid to persons in comparable roles performing at comparable levels
at other companies in the insurance or related industries. Such amounts,
however, principally reflect the subjective discretion of the trustees or
Committee members based on their evaluation of the Company's current and
anticipated future financial performance, the contribution of the individual
executive officers to such financial performance, the contribution of the
individual executive officers to the Company in areas not necessarily reflected
by the Company's financial performance and the most appropriate incentive to
link the performance and compensation of the executive officers to the
shareholders' return on the Company's Common Stock.
It is also the responsibility of the Committee to address the issues
raised by Section 162(m) of the Internal Revenue Code which made certain
non-performance-based compensation in excess of $1,000,000 to executives of
public companies non-deductible to these companies beginning in 1994. The
Committee has reviewed the issues applicable to the Company and has determined
that it is not necessary for the Company to take any action at this time with
regard to this limit.
COMPENSATION COMMITTEE
Greg C. Branch
C.C. Dockery
Thomas S. Petcoff
CERTAIN TRANSACTIONS
Aeromech, Inc. ("Aeromech"), an entity in which Mr. Bull currently owns
approximately 10% of the outstanding shares, has provided services to SCI in the
form of airplane maintenance, hangar leasing and office space for the crew since
October 1994. During the fiscal years ended March 31, 1995, 1996 and 1997, SCI
paid Aeromech approximately $62,000, $420,000 and $17,000, respectively, for
such services.
SCI had an arrangement with BJ Limo Services, Inc. ("BJ"), a Company in
which Mr. Bull owns 50% of the outstanding stock, pursuant to which BJ provided
the employees of the Company limousine services and, on occasion, the use of a
private airplane and charter boat. During the fiscal years ended
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<PAGE> 17
March 31, 1995, 1996 and 1997, the Company paid approximately $17,000, $9,000
and $700, respectively, for such services.
Mr. Bull is on the Board of Directors of the Florida Retail Federation (the
"Association"), which is the sponsoring trade association for FRF, one of the
Funds administered by SCI. Pursuant to a written arrangement between SCI and
the Association, the Association, as the Fund sponsor, is entitled to a fee
equal to 1% of such Fund's premiums earned in each year, and SCI is obligated to
pay such fee out of the administrative fee it receives from FRF. During the
fiscal years ended March 31, 1995, 1996 and 1997, the Company paid approximately
$1.0 million, $0.9 million and $0.08 million to the Association for such fees.
During the years ended March 31, 1995, 1996 and 1997, FRF paid SCI fees for
administrative services of approximately $30.5 million, $27.7 million and $24.5
million, respectively.
Mr. Bull is also the sole shareholder of Louisiana Employers Safety
Association, Inc., the sponsoring association for LESA, one of the Funds managed
by SCI, and Mr. Bull has been nominated to be on the Board of Directors of LESA
if it completes a currently proposed conversion to a nonassessable mutual
insurance company.
The 1994 and 1995 financial statements of SHC were restated in 1997 to
reflect an estimated return premium of approximately $3.7 million. This
restatement could have given rise to potential claims by the former shareholders
of SHC against ESIF for payment of additional purchase price in connection with
the acquisition by ESIF of SHC and its affiliates on January 16, 1996 (the
"Acquisition"), and to claims by ESIF against such former shareholders for taxes
associated with such return premium. ESIF and the former shareholders of SHC
have agreed to the waiver and release of such potential claims. When such
return premium is paid, the Company will receive approximately $2.5 million net
of taxes. Mr. Bull and Mr. Wall were each former shareholders of SHC.
In connection with the Acquisition on January 16, 1996, the Department of
Insurance of the State of Florida (the "Florida DOI") issued a consent order
requiring that Mr. Bull, who at that time was a principal shareholder as well as
President and Chief Executive Officer of SHC, personally indemnify ESIF up to a
maximum of $5.0 million for certain loss, injury or damage to ESIF that may
result from the Acquisition. Pursuant to an order issued by the Florida DOI in
connection with the Conversion, Mr. Bull was relieved of such personal
indemnification obligations when the Conversion became effective.
Any future transactions between the Company and any director, officer or
principal shareholder of the Company, or any affiliate of such a person, will
be on terms no less favorable to the Company than can be obtained from
unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's directors and executive officers and any persons who beneficially own
more than 10% of the Company's Common Stock, as well as certain affiliates of
such persons, to file initial reports of their ownership of the Company's Common
Stock and subsequent reports of changes in such ownership with the Securities
and Exchange Commission and the National Association of Securities Dealers, Inc.
Directors, executive officers and persons beneficially owning more than 10% of
the Company's Common Stock are required by applicable regulations to furnish the
Company with copies of all Section 16(a) reports they file. Based solely on its
review of the copies of such reports received by it and written representations
that no other reports were required of those persons, the Company believes that
during the fiscal year ended March 31, 1997, all of its directors, executive
officers
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<PAGE> 18
and beneficial owners of more than 10% of its Common Stock complied with
applicable Section 16(a) filing requirements.
PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has changed the fiscal year end of
the Company from March 31st to December 31st, effective for the nine month
period ending December 31, 1997, and has appointed the firm of Ernst & Young
LLP to serve as independent auditors of the Company for such fiscal year ending
December 31, 1997. The Board has directed that such appointment be submitted
to the shareholders of the Company for ratification at the Annual Meeting.
Ernst & Young LLP has served as independent auditors of certain predecessors of
the Company since 1992 and is considered by management of the Company to be
well qualified. If the shareholders do not ratify the appointment of Ernst &
Young LLP, the Board of Directors will reconsider the appointment.
Representatives of Ernst & Young LLP will be present at the Annual Meeting.
They will have an opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
SHAREHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Director nominations and other proposals of shareholders intended to be
presented at the 1998 Annual Meeting of Shareholders must be submitted to the
Company in accordance with the procedures set forth in Section 2.11 of the
Bylaws of the Company and in accordance with applicable rules of the Securities
and Exchange Commission. The effect of these provisions is that shareholders
must submit such nominations and proposals, together with certain related
information specified in the above-referenced section of the Bylaws, in writing
to the Company on or before December 31, 1997 in order for such matters to be
included in the Company's proxy materials for, and voted upon at, the 1998
Annual Meeting. All such proposals, nominations and related information should
be submitted on or before such date by certified mail, return receipt
requested, to the Secretary of the Company, 2310 A-Z Park Road, Lakeland,
Florida 33801. A copy of the above-referenced section of the Bylaws will be
provided upon request in writing to the Secretary of the Company at such
address.
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<PAGE> 19
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Annual Meeting of Shareholders which
may properly come before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the Annual Meeting
or any adjournments thereof, it is the intention of the persons named as
proxies on the enclosed form of proxy card to vote the shares represented by
all valid proxy cards in accordance with their judgment of what is in the best
interest of the Company.
By Order of the Board of Directors.
Russell L. Wall
Secretary
Lakeland, Florida
September 12, 1997
The Company's Annual Report for the fiscal year ended March 31, 1997,
which includes audited financial statements, has been mailed to shareholders of
the Company with these proxy materials. The Annual Report does not form any
part of the material for the solicitation of proxies.
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<PAGE> 20
APPENDIX
REVOCABLE PROXY
COMMON STOCK
SUMMIT HOLDING SOUTHEAST, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING
OF SHAREHOLDERS.
The undersigned hereby appoints Greg C. Branch and Russell L. Wall, and
each of them, proxies, with full power of substitution, to act for and in the
name of the undersigned to vote all shares of Common Stock of Summit Holding
Southeast, Inc. (the "Company") which the undersigned is entitled to vote at the
1997 Annual Meeting of Shareholders of the Company, to be held at the Tampa
Airport Marriott, Tampa, Florida, on Wednesday, October 15, 1997 at 9:30 a.m.,
local time, and at any and all adjournments thereof, as indicated below.
THIS PROXY CARD WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY CARD WILL BE VOTED IN THE DISCRETION OF THE PROXIES "FOR"
THE ELECTION OF THE THREE NOMINEES NAMED IN PROPOSAL 1 AND "FOR" PROPOSAL 2. If
any other business is presented to a vote of the shareholders at the Annual
Meeting, this proxy card will be voted by the proxies in their best judgment. At
the present time, the Board of Directors knows of no other business to be
presented to a vote of the shareholders at the Annual Meeting.
If the undersigned elects to withdraw this proxy card on or before the time
of the Annual Meeting or any adjournments thereof and notifies the Secretary of
the Company at or prior to the Annual Meeting of the decision of the undersigned
to withdraw this proxy card, then the power of said proxies shall be deemed
terminated and of no further force and effect. If the undersigned withdraws
this proxy card in the manner described above and prior to the Annual Meeting
does not submit a duly executed and subsequently dated proxy card to the
Company, the undersigned may vote in person at the Annual Meeting all shares of
Common Stock of the Company owned by the undersigned as of the record date,
August 29, 1997.
(Continued, and to be signed and dated, on the reverse side)
<PAGE> 21
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
1. The election of William B. Bull, John A. Gray and Thomas S. Petcoff as
directors to serve until the 2000 Annual Meeting of Shareholders and until
their successors are elected and qualified.
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY TO
BELOW (EXCEPT AS MARKED VOTE FOR ALL NOMINEES LISTED
TO THE CONTRARY BELOW). BELOW.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
WILLIAM B. BULL, JOHN A. GRAY AND THOMAS S. PETCOFF
2. The ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the Annual Meeting and any adjournments
thereof.
Do you plan to attend the Annual Meeting? YES [ ] NO [ ]
Please mark, date and sign exactly as your name
appears on this proxy card. When shares are
held jointly, both holders should sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give your full
title. If the holder is a corporation or a
partnership, the full corporate or partnership
name should be signed by a duly authorized
officer.
Date: , 1997
----------------------------------
---------------------------------------
Signature
---------------------------------------
Signature, if shares held jointly
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE
ENCLOSED PREPAID ENVELOPE.
