THE MIDLAND COMPANY
537 E. PETE ROSE WAY
CINCINNATI, OHIO 45202
NOTICE OF ANNUAL MEETING
TO THE SHAREHOLDERS OF THE MIDLAND COMPANY:
Notice is hereby given that the Annual Meeting of the Shareholders of
The Midland Company will be held at the Company's offices, 537 E. Pete Rose Way,
Cincinnati, Ohio 45202, on Thursday, April 13, 1995, at 10 a.m., for the
following purposes:
1. To elect 6 members of the Board of Directors to hold office for terms
of three years.
2. To ratify and approve the appointment of Deloitte & Touche LLP as
independent auditors.
3. To consider and vote upon the proposed Employee Stock Purchase Plan.
4. To transact any other business that may lawfully come before the
meeting.
As of the date of this notice, the foregoing is the only business which
the Board of Directors intends to present or which the Board of Directors has
knowledge that others will present at the meeting.
You are urged to be present. If you do not expect to be present at the
meeting but wish your stock to be voted, please date, fill in and sign the
enclosed form of proxy and mail it in the enclosed return envelope which
requires no postage if mailed in the United States.
Shareholders of record at the close of business on March 10, 1995,
will be entitled to vote at the meeting or any adjournment thereof.
DATED AT CINCINNATI, OHIO THIS 17th day of March, 1995.
JOHN R. LABAR
Secretary
<PAGE>
THE MIDLAND COMPANY
537 E. Pete Rose Way
Cincinnati, Ohio 45202
The proxy and statement will first be sent to shareholders on or about
March 17, 1995.
PROXY STATEMENT
The enclosed proxy is solicited by the issuer. Each person giving a
proxy may revoke it at any time before it is voted by giving notice to the
Company in writing or in open meeting, or by a later dated proxy received by the
Company. Any written notice of revocation should be addressed to the Company as
indicated above to the attention of the Secretary. Each valid proxy received in
time will be voted at the meeting, and if a choice is specified on the ballot,
it will be voted in accordance with such specification. Holders of stock on the
books of the Company at the close of business on the 10th day of March, 1995,
are entitled to notice of and to vote at the meeting. The Company then had
outstanding voting securities consisting of 3,045,731 shares of common stock,
the holders of which are entitled to one (1) vote per share.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of March 10, 1995, the holdings of
persons (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) known by the Company to be the beneficial owner
of more than 5% of its outstanding common stock. Information has been furnished
by the persons listed. Beneficial ownership has been determined in accordance
with rules and regulations of the Securities and Exchange Commission.
Name and Address of Amount Beneficially
Beneficial Owner Owned Percent of Class
J. P. Hayden, Jr.
537 E. Pete Rose Way
Cincinnati, Ohio 45202 566,205 (1) 18.3%
Robert W. Hayden
537 E. Pete Rose Way
Cincinnati, Ohio 45202 475,894 (2) 15.6%
Burgess L. Doan
1 Riverfront Place
Newport, KY 41071 366,964 (3) 12.0%
John R. LaBar
537 E. Pete Rose Way
Cincinnati, Ohio 45202 259,314 (4) 8.5%
Gabelli Fund, Inc.
One Corporate Center
Rye, NY 10580 194,700 6.4%
William McD. Kite
525 Vine Street
Cincinnati, Ohio 45202 191,501 (5) 6.3%
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(1) Includes 432,040 shares over which J. P. Hayden, Jr. has sole voting
and investment power, 77,465 over which he has sole voting power only, 10,800
over which he shares voting and investment power, and 45,900 shares that may be
acquired through exercise of options within 60 days of March 10, 1995.
(2) Includes 459,894 shares over which Robert W. Hayden has sole voting
and investment power, 3,600 shares over which he has sole voting power, and
12,400 shares that may be acquired through exercise of options within 60 days of
March 10, 1995.
(3) Includes 195,830 shares over which Burgess L. Doan has sole voting
and investment power, including 47,798 shares held in trust for the benefit of
the family of J. P. Hayden, III, 40,398 shares held in trust for the benefit of
the family of John W. Hayden and 50,458 shares held in trust for the benefit
of the family of William T. Hayden. These shares held in trust are not shown
as owned beneficially by J. P. Hayden, III, John W. Hayden or William T. Hayden.
In addition, Mr. Doan shares voting and investment power over 138,000 shares as
co-trustee with William McD. Kite, under agreement with J. Page Hayden,
deceased. J. P. Hayden Jr. is among the beneficiaries of the trust entitled to
receive distribution of income. These trust shares are not shown as
beneficially owned by J. P. Hayden, Jr. Furthermore, Mr. Doan shares voting and
investment power over 33,134 shares held in trust as a co-trustee for the
benefit of the children of Robert W. Hayden.
(4) Includes 242,614 shares over which John R. LaBar has sole voting and
investment power, 3,600 shares over which he has sole voting power, 100 shares
over which he shares voting and investment power, and 13,000 shares that may
be acquired through exercise of options within 60 days of March 10, 1995.
(5) Includes 185,501 shares over which William McD. Kite shares voting
and investment power, including 138,000 shares over which Mr. Kite is a
co-trustee with Burgess L. Doan under agreement with J. Page Hayden, deceased.
J. P. Hayden, Jr. is among the beneficiaries of the trust entitled to receive
distribution of income. These trust shares are not shown as beneficially
owned by J. P. Hayden, Jr. In addition, it includes 33,134 shares over which
Mr. Kite is a co-trustee for the benefit of children of Robert W. Hayden.
Finally it includes 6,000 shares that may be acquired through exercise of
options within 60 days of March 10, 1995. Mr. Kite, a director, is a partner
of the law firm of Cohen, Todd, Kite & Stanford, general counsel for the
Company. The Company paid the firm fees of $491,419 in 1994.
As of March 10, 1995, all Directors and Officers of the Company, as a
group, beneficially owned 1,759,294 shares of the common stock of the Company.
This amount includes 178,400 shares which may be acquired through exercise of
options within 60 days of March 10, 1995. The amount so beneficially owned
represents 54.6% of the aggregate of the shares outstanding on that date plus
the shares which may be so acquired through exercise of options.
ELECTION OF DIRECTORS
It is intended that proxies given to the persons named in the enclosed
form of proxy will be voted for the election of nominees listed below. In case
any nominee is unable or declines to serve, it is intended that proxies will be
voted for the balance of those named and for such person as shall be designated
by the Board of Directors to replace any such nominee. The issuer has no
knowledge or reason to believe that any nominee will be unable or unwilling to
serve. Shareholders have cumulative voting rights in the election of Directors.
If notice in writing is given by any shareholder to the President, a Vice
President, or the Secretary of the Company, not less than forty-eight (48) hours
before the time fixed for holding the meeting, that he desires that the voting
for the election of Directors be cumulative, and if an announcement of the
giving of such notice is made upon convening of the meeting, each shareholder
shall have the right to cumulate his shares in voting for the Directors. By
this procedure a shareholder, instead of registering one vote per share for each
candidate of his choice, may cast the entire total of his votes (as many votes
as the number of Directors to be elected multiplied by the number of his shares
equals) for one candidate or distribute them among the candidates otherwise as
he desires. This proxy does not solicit discretionary authority to accumulate
votes.
2
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The Board of Directors will consist of sixteen members divided into
three classes. Six directors are to be elected at the annual meeting to serve
until the annual meeting in 1998 and until their successors have been elected
and qualified. It is intended that the accompanying proxy will be voted for the
election of the following six nominees:
Shares of Common
Principal Occupation Stock of Company Percent
and Other Director Beneficially Owned of
Directors Business Affiliations Since on March 10, 1995 Class
- --------------------------------------------------------------------------------
J. P. Hayden, Jr.(1) Chairman of the Board of 1961 566,205(2) 18.3%
(Age 65) the Company; Director,
Star Banc Corporation
William T. Hayden (1) Attorney, Partner of firm 1994 97,187(14) 3.2%
(Age 41) of Cohen, Todd, Kite &
Stanford
William McD. Kite Attorney, Partner of firm 1966 191,501(2) 6.3%
(Age 71) of Cohen, Todd, Kite &
Stanford
John M. O'Mara Financial Consultant; 1983 8,500(10) 0.3%
(Age 67) Director, Baldwin &
Lyons, Inc., Plantronic,
Inc.; Formerly Chairman
of the Executive Committee,
Quality Care Systems;
Formerly President, Chemvest
International, Inc.
Glenn E. Schembechler Formerly President, 1981 11,400(11) 0.4%
(Age 65) Detroit Tigers Baseball
Club; Formerly, Athletic
Director and Head Football
Coach, University of
Michigan; Director, Riddell
Sports, Inc.
John I. Von Lehman Vice President, Treasurer 1991 14,600(12) 0.5%
(Age 42) and Chief Financial Officer
of the Company
3
<PAGE>
The following directors have been elected to serve until the annual
meeting in 1996 and until their successors have been elected and qualified:
Shares of Common
Principal Occupation Stock of Company Percent
and Other Director Beneficially Owned of
Directors Business Affiliations Since on March 10, 1995 Class
- --------------------------------------------------------------------------------
James H. Carey CEO, National Capital 1971 3,440(3) 0.1%
(Age 62) Benefits Corp. since
March, 1994; Managing
Director, Briarcliff
Financial Associates, Since
June, 1991; Director,
Airborne Freight Corporation;
Cowan Group of Funds;
Formerly President and Chief
Executive Officer of The
Berkshire Bank, NY, NY
John W. Hayden (1) Vice President of the 1991 65,343(6) 2.1%
(Age 37) Company; President of
American Modern Insurance
Group, Inc.; President of CS
Crable Sportswear, Inc. (wholly
owned Subsidiaries of The
Midland Company)
Robert W. Hayden (1) Vice President of the 1968 475,894(2) 15.6%
(Age 56) Company
John R. Orther Certified Public 1961 4,200(4) 0.1%
(Age 76) Accountant
William F. Plettner Retired Vice Chairman 1961 58,788(5) 1.9%
(Age 72) and President of the Company
<PAGE>
4
The following directors have been elected to serve until the annual
meeting in 1997 and until their successors have been elected and qualified:
Shares of Common
Principal Occupation Stock of Company Percent
and Other Director Beneficially Owned of
Directors Business Affiliations Since on March 10, 1995 Class
- --------------------------------------------------------------------------------
George R. Baker Corporate Director/ 1971 6,640(7) 0.2%
(Age 65) Advisor,since July 1,
1985; Director, Reliance
Group Holdings, Inc.,
Reliance Insurance Co.,
W. W. Grainger, Inc.,
WMS Industries, Inc.
Michael J. Conaton President of the 1969 58,200(8) 1.9%
(Age 61) Company; Director, Society
National Bank
J. P. Hayden, III (1) Vice President of The 1989 43,423(9) 1.4%
(Age 42) Company; President of M/G
Transport Services, Inc.
(wholly owned Subsidiary of
The Midland Company)
William J. Keating Formerly Chairman and 1991 4,000(13) .01%
(Age 67) Publisher and Chief
Executive Officer of
The Cincinnati Enquirer;
Formerly Chairman of the
Board of Associated Press;
Director, Fifth Third
Bancorp and Fifth Third Bank
John R. LaBar Vice President and 1963 259,314(2) 8.5%
(Age 63) Secretary of the Company
Information has been furnished by the persons listed. Beneficial
ownership has been determined in accordance with rules and regulations of the
Securities and Exchange Commission. Periods of service as directors include
service as directors of the Company's predecessor, Midland-Guardian Co.
<PAGE>
5
(1) J. P. Hayden, Jr. and Robert W. Hayden, both of whom are executive officers
of the Company and various subsidiaries, are brothers. J. P. Hayden, III, John
W. Hayden and William T. Hayden are sons of J. P. Hayden, Jr.
(2) With reference to the holdings of J. P. Hayden, Jr., Robert W. Hayden, John
R. LaBar, and William McD. Kite, see footnotes (1) through (5) under Principal
Holders of Voting Securities.
(3) Includes 440 shares over which James H. Carey has sole voting and
investment power, and 3,000 shares that may be acquired through exercise of
options within 60 days of March 10, 1995.
(4) Includes 700 shares over which John R. Orther has sole voting and
investment power, and 3,500 shares that may be acquired through exercise of
options within 60 days of March 10, 1995.
(5) Includes 55,568 shares over which William F. Plettner has sole voting and
investment power, 220 shares over which he shares voting and investment power,
and 3,000 shares that may be acquired through exercise of options within 60 days
of March 10, 1995.
(6) Includes 1,062 shares over which John W. Hayden has sole voting and
investment power, 3,600 over which he has sole voting power, 4,091 shares over
which he shares voting and investment power, 46,090 shares over which he shares
investment power only, and 10,500 shares that may be acquired through exercise
of options within 60 days of March 10, 1995.
(7) Includes 2,640 shares over which George R. Baker has sole voting and
investment power and 4,000 shares that may be acquired through exercise of
options within 60 days of March 10, 1995.
(8) Includes 7,500 shares over which Michael J. Conaton has sole voting power,
29,700 shares over which he shares voting and investment powers, and 21,000
shares that may be acquired through exercise of options within 60 days of March
10, 1995.
(9) Includes 462 shares over which J. P. Hayden, III has sole voting and
investment power, 3,600 shares over which he has sole voting power, 10,561
shares over which he shares voting and investment power, 17,700 shares over
which he shares investment power only, and 11,100 shares that may be acquired
through exercise of options within 60 days of March 10, 1995.
(10) Includes 2,500 shares over which John M. O'Mara has sole voting and
investment power, and 6,000 shares that may be acquired through exercise of
options within 60 days of March 10, 1995.
(11) Includes 5,400 shares over which Glenn E. Schembechler has sole voting and
investment power and 6,000 shares that may be acquired through exercise of
options within 60 days of March 10, 1995.
(12) Includes 600 shares over which John I. Von Lehman has sole voting and
investment power, 3,600 shares over which he has sole voting power, and 10,400
shares that may be acquired through exercise of options within 60 days of
March 10, 1995.
(13) Includes 2,000 shares over which William J. Keating shares voting and
investment powers and 2,000 shares that may be acquired through exercise of
options within 60 days of March 10, 1995.
(14) Includes 462 shares over which William T. Hayden has sole voting and
investment power, 51,460 shares over which he shares voting and investment
power, 42,265 shares over which he shares investment power only, and 3,000
shares that may be acquired through exercise of options within 60 days of March
10, 1995. Mr. Hayden is a partner of the law firm of Cohen, Todd, Kite &
Stanford, general counsel for the Company. The Company paid the firm fees of
$491,419 in 1994.
6
<PAGE>
The Board of Directors of the Company has an audit committee and a
compensation committee, but has no nominating committee. The audit committee is
composed of James H. Carey, John R. Orther, John M. O'Mara and Glenn E.
Schembechler. The function of the audit committee is to nominate auditors for
the annual audit of the Company and discuss the audit work with the auditors
appointed to perform the audit. The compensation committee is composed of
George R. Baker, James H. Carey and William J. Keating. The function of the
compensation committee is to review and make recommendations as to compensation
of the senior executive officers of the Company. The Board of Directors of the
Company had four meetings, the audit committee had four meetings and the
compensation committee had three meetings in 1994.
The Company pays outside Directors an annual fee of $12,000 plus an
attendance fee of $750 for each regularly held meeting. In addition, the
Company pays outside Directors who serve on the audit committee or the
compensation committee an annual fee of $2,000 for services on such committee.
The net value realized from exercise of options in 1994 by non-employee
directors was $35,532.
EXECUTIVE COMPENSATION
The following Summary Compensation Table provides an overview of
compensation paid, earned or awarded to the CEO and the four other most highly
paid executive officers of the Company as to whom total annual salary and bonus
exceeded $100,000 for 1994.
SUMMARY COMPENSATION TABLE
Long Term Compensation All Other
Annual Compensation Awards Compensations
Restricted
Name and Stock Options/ (2) (3)
Principle Position Year Salary Bonus Awards(1) SAR'S 401(k) Insurance
- -------------------------------------------------------------------------------
J.P. Hayden, Jr. 1994 $525,000 $106,984 $ 0 $ 0 $ 4,620 $ 4,440
Chairman of the 1993 475,000 162,396 229,375 0 4,497 2,208
Board and Chief 1992 440,000 145,922 0 0 4,364 2,208
Executive Officer
Michael J. Conaton 1994 285,000 53,496 0 0 4,620 2,208
President and 1993 260,000 81,198 114,687 0 4,497 2,208
Chief Operating 1992 214,000 55,451 0 0 4,364 1,200
Officer
John R. LaBar 1994 165,000 42,794 0 0 4,620 2,208
Vice President and 1993 155,000 65,559 68,812 0 4,497 2,208
Secretary 1992 141,000 57,769 0 0 4,230 2,208
Robert W. Hayden 1994 160,000 42,794 0 0 4,620 2,208
Vice President 1993 150,000 65,559 68,812 0 4,497 1,200
1992 134,000 57,769 0 0 4,020 552
John I. Von Lehman 1994 180,000 39,228 0 0 4,620 0
Vice President, 1993 170,000 48,919 68,812 0 4,497 0
Treasurer and Chief 1992 150,000 43,576 0 0 4,364 0
Financial Officer
(1) Dividends will be paid on stock reported in this column. The aggregate
number of restricted stock holdings and valuations at 12/31/94 are as follows:
J. P. Hayden, Jr., 5,000 shares valued at $216,250; Michael J. Conaton, 2,500
shares valued at $108,125; John R. LaBar, Robert W. Hayden, and John I.
Von Lehman, each 1,500 shares valued at $64,875.
(2) Total 401(k) Company matching contributions earned during year.
(3) Total group term life insurance premium paid by the Company during the year.
7
<PAGE>
A 401(k) Savings Plan has been adopted by the Board of Directors and
approved by the Internal Revenue Service. The plan provides an additional
retirement benefit for salaried employees. An employee may make basic pre-tax
contributions to his plan account up to 6% of his base salary. The Company will
contribute $.50 for each dollar of the employee's basic contribution. An
employee may also make supplemental contributions up to an additional 10% of his
base salary. However, an employee's total contributions under the Plan may not
exceed $9,240 in 1995. The Company will not match supplemental contributions.
Cash compensation paid pursuant to this plan is included in the Summary
Compensation Table as All Other Compensation.
A Pension Plan has been adopted by the Board of Directors and approved
by the Internal Revenue Service. The plan provides for payment of annual
benefits to salaried employees of the Company upon retirement. The monthly
benefits equal the years of service (up to a maximum of 35 years) multiplied by
the sum of 1% of that portion of average monthly salary constituting Social
Security covered compensation, plus 1.75% of that portion of average monthly
salary not constituting Social Security covered compensation. Average monthly
salary is based on the highest average salary for 5 consecutive years.
Proposed compensation in the form of payments from this non-contributory
defined benefit pension plan are not included in the Summary Compensation Table.
The 1994 estimated annual benefits (after deduction for social security
benefits) payable upon retirement is a straight line annuity paid from the plan
and may be individually estimated by reference to the following table:
YEARS OF SERVICE
Average
Annual
Salaries 15 20 25 30 35
---------- -------- -------- -------- -------- --------
$150,000 $ 36,459 $ 48,612 $ 60,765 $ 72,918 $ 85,071
175,000 43,022 57,362 71,703 86,043 100,384
200,000 49,584 66,112 82,640 99,168 115,696
250,000 62,709 83,612 104,515 125,418 * 146,321 *
300,000 75,834 101,112 126,390 * 151,668 * 176,946 *
350,000 88,959 118,612 148,265 * 177,918 * 207,571 *
400,000 102,084 136,112 * 170,140 * 204,168 * 238,196 *
450,000 115,209 153,612 * 192,015 * 230,418 * 268,821 *
500,000 128,334 * 171,112 * 213,890 * 256,668 * 299,446 *
550,000 141,459 * 188,612 * 235,765 * 282,918 * 330,071 *
* Under the Internal Revenue Code, the maximum allowable annual benefit payable
by the qualified pension plan in 1995 is $120,000. In addition, the maximum pay
that can be used to determine the benefit is $150,000. However, the Board of
Directors has approved the payment to participants directly by the Company of
any reduction in benefits occasioned by limitations on benefits contained in the
Internal Revenue Code.
The compensation currently covered by the plan includes only basic
salary. However, the Board of Director's recently amended the Pension Plan,
effective April 1, 1995, to include overtime and bonus as covered plan
compensation. The credited years of service through 1994 covered by the plan
(not to exceed 35 years) for each of the five most highly compensated executive
officers of the Company is: J. P. Hayden, Jr. (35), Michael J. Conaton (33.8),
John R. LaBar (35), Robert W. Hayden (34.8) and John I. Von Lehman (14.5).
8
<PAGE>
The following table sets forth the aggregated option exercises during
1994 and the option value as of December 31, 1994 for the CEO and the four other
most highly paid executive officers of the Company under the 1992 Employee
Incentive Stock Option Plan adopted by the Board of Directors and approved by
the shareholders.
Aggregate Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY End 1994 at Year End
Shares
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
J.P. Hayden, Jr. -- -- 45,900 $920,835
0 0
Michael J. Conaton -- -- 21,000 420,750
0 0
John R. LaBar -- -- 13,000 259,000
0 0
Robert W. Hayden -- -- 12,400 245,325
0 0
John I. Von Lehman -- -- 10,400 203,012
0 0
Report of the Compensation Committee
The Compensation Committee's compensation policies are to attract and
retain qualified executive officers, to reward them for profitable corporate
performance and to provide incentives for them to create long-term corporate
stability and growth. Therefore, the Company's compensation package for its
executive officers consists of base salary, annual performance based bonus and
incentive awards. The level of these amounts is determined by this Committee.
The Committee sets base salaries at levels believed by the Committee to
be sufficient to attract and retain qualified executives, including the Chief
Executive Officer, considering other compensation components offered by the
Company and salaries offered by other companies. The Chief Executive Officer's
1994 salary of $525,000 was an 10.5% increase over 1993. Salaries of executive
officers are listed in the Summary Compensation Table.
The Committee believes that a significant portion of total compensation
should be subject to specific annual performance criteria. Consequently, the
annual bonus potential is set at a significant percentage of salary. The target
bonus is based on the annual profit performance of the Company and the
individual officer's percentage of participation in the Profit Sharing Plan.
The Board of Directors of the Company has continued its policy of adopting a
Profit Sharing Plan first initiated in 1968 under which the Board is authorized
to pay to certain of the executive officers of the Company as additional
compensation during each year an aggregate sum not to exceed 3% of the
consolidated earnings (before taxes) of the Company during such year. The
Compensation Committee determines each respective executive officer's, including
the Chief Executive Officer's, percentage of participation in the Plan based on
specific job responsibilities. Total executive bonuses are generally less than
50 percent of the executive's base salary. The Chief Executive Officer's annual
bonus for 1994 was $106,984 which represents 30% of the bonus pool created under
the Profit Sharing Plan. This amount is less than prior years and reflects the
Company's profit performance for 1994. Cash compensation paid pursuant to the
Plan is included in the Summary Compensation Table.
9
<PAGE>
Long-term incentive awards are made under the Company's 1992 Employee
Incentive Stock Plan which authorizes restricted stock awards, stock option
grants and stock appreciation rights. The Plan was adopted to provide
incentives to encourage employee contribution to the Company's stability and
growth. The Plan is administered by the members of the Compensation Committee.
Restricted stock was awarded to the Chief Executive Officer and other executive
officers in 1993 as set forth in the Summary Compensation Table, but no stock
was awarded in 1994.
The Compensation Committee is composed of three independent nonemployee
directors, whose names are:
George R. Baker
James H. Carey
William J. Keating
FIVE YEAR TOTAL RETURN
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MIDLAND CO., AMERICAN STOCK EXCHANGE COMPOSITE AND THE S&P PROPERTY AND
CASUALTY GROUP
1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------
MIDLAND 100 109.4 132.8 163.4 163.1 160.9
S&P PROPERTY & CASUALTY 100 97.7 122.3 143.3 140.7 147.6
AMEX COMPOSITE 100 84.0 115.9 121.0 142.4 131.9
ASSUMES $100 INVESTED ON DECEMBER 31, 1989 IN MIDLAND COMMON STOCK, AMEX
COMPOSITE AND THE S&P PROPERTY AND CASUALTY GROUP.
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
10
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche LLP as
auditors to make an examination of the accounts of the Company for the year
1995. This firm of independent certified public accountants has made the annual
audits of the accounts of the Company and its predecessor, Midland-Guardian Co.,
since 1952. Such selection of auditors is submitted to the shareholders for
ratification and approval or rejection. If rejected, the audit committee of the
Board of Directors will select other auditors. Representatives of such auditors
are expected to be present at the meeting and will have an opportunity to make a
statement and be available to respond to appropriate questions.
EMPLOYEE STOCK PURCHASE PLAN
On March 2, 1995, the Company's Board of Directors adopted, subject to
shareholder approval, the Employee Stock Purchase Plan (the "Plan"). The
purpose of the Plan is to allow employees to easily purchase Company stock
without incurring brokerage charges. All full time regular employees of the
Company and its subsidiaries (approximately 750) who meet the waiting period
(not to exceed one year) established by a committee may participate. Employees
may authorize payroll deductions from $3.00 per payroll to 10% of gross pay per
payroll and those payroll deductions will be used to purchase shares of the
Company. All payroll deductions will be pooled during the pricing period.
Stock will be purchased on the first business day after the end of the pricing
period based on the applicable purchase price. A committee of three outside
directors is authorized to determine the pricing period, the price, and to
allow a discount to employees. The pricing period shall not be longer than
three months. The price may be either the closing price on the last day of the
pricing period, the lower of the closing price on the first and last day of the
pricing period or the average closing price on each day of the pricing period.
The discount, if any may not exceed 10% of the price. The excess of the value
of the stock on the date of purchase over the applicable purchase price will be
reported to employees as ordinary income in the year the stock is purchased.
All dividends on shares held in the Plan will be reinvested in shares of the
Company. An employee may terminate his payroll deduction, withdraw shares held
in the Plan or have shares held in the Plan sold at any time. The Board has
authorized 75,000 shares for the Plan. It is anticipated that the shares will
be purchased from treasury shares held by the Company. Society Bank will
administer the Plan and send quarterly statements to employees. The Board has
reserved the right to terminate the Plan at any time. The amounts or benefits
that will be received, or would have been received if the Plan had been in
effect last year, by participants cannot be determined because participation is
voluntary, the amount of payroll deduction varies, the discount, if any, has not
been set and the purchase price varies with the market price.
The proposal to approve and adopt the Plan is contained in the
resolution attached to this Proxy Statement as Annex 1. The favorable vote of
the holders of at least a majority of the outstanding shares is required for
approval of the Plan. Proxies will be voted in favor of the resolution unless
otherwise instructed. The Board of Directors recommends a vote for adoption.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1996 annual
meeting must be received at the Company's executive offices on or before
November 15, 1995, in order to be included in the proxy statement and form of
proxy relating to that meeting.
COST OF SOLICITATION
The cost of preparing and mailing this statement and the accompanying
notice of meeting and proxy, and any additional material relating to the
meeting, and the cost of soliciting proxies, will be borne by the Company.
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OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the meeting. However, if any other matters not now known
properly come before the meeting, the persons named in the enclosed proxy or
their substitute, will vote said proxy in accordance with their judgment of such
matters.
The above notice and proxy statement are sent by order of the Board of
Directors.
JOHN R. LABAR
Secretary
Dated: March 17, 1995
Shareholders may obtain without charge a copy of the Company's 1994 report to
the Securities and Exchange Commission on Form 10-K by sending a request to:
Office of the Secretary - 10K Report, The Midland Company, 537 E. Pete Rose Way,
Cincinnati, Ohio 45202.
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ANNEX 1.
Proposed The Midland Company Employee Stock Purchase Plan
Resolved, that The Midland Company Employee Stock Purchase Plan in the
following form is hereby approved and adopted:
THE MIDLAND COMPANY
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of this Plan is to give Eligible Employees of
the Company an opportunity to acquire shares of its Common Stock and to continue
to promote its best interests and enhance its long term performance.
2. Definitions. Whenever used herein, the following words and phrases
shall have the meaning stated below unless a different meaning is plainly
required by the context.
(a) "Board" means the Board of Directors of the Company.
(b) "Closing Price" shall mean the closing price of the Common Stock
as reported in the Wall Street Journal or on the composite tape
or other comparable reporting system for a day on which shares
are traded.
(c) "Code" means the Internal Revenue Code of 1986 as amended.
(d) "Committee" means a committee appointed by the Board and composed
of not less than three (3) members to which the Board may
delegate its powers with respect to administration of the Plan
pursuant to Section 3 hereof.
(e) "Common Stock" means shares of the common stock of the Company.
(f) "Company" means The Midland Company, an Ohio corporation.
(g) "Effective Date of the Plan" means July 1, 1995, or such later
date as the Committee may determine, but not later than July 1,
1996.
(h) "Eligible Employee" means each person who is employed by the
Company or an affiliate on a regular full-time basis and who
meets any applicable waiting period (not to exceed one year)
established from time to time by the Committee. A person shall
be considered employed on a regular full-time basis if he or she
is customarily employed at least 40 hours per week.
(i) "Entry Dates" mean January 1 and July 1 or such other dates as
the Committee may determine from time to time.
(j) "Investment Date" means the first business day after the end of a
Pricing Period.
(k) "Pricing Period" shall mean the period of time established by the
Committee prior to the beginning of each calendar year for
determining the Purchase Price of shares. The Pricing Period
shall not be longer than three months.
3. Administration. The administration of the Plan will be the
responsibility of the Committee which may delegate any and all administrative
duties to an Administrator. The Administrator will purchase Common Stock of the
Company as agent for the participants. The Board has the authority to make
changes in the Committee at any time. The Committee has the authority to change
the Administrator at any time. Until changed by further notice, any notices or
communications to the Committee should be directed to James H. Carey, William J.
Keating and George R. Baker.
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If an Eligible Employee decides to participate in the Plan, the
Administrator will keep a continuous record of his participation and send him
periodic statements of his account under the Plan. The Administrator will also
hold and act as custodian of shares purchased under the Plan. The number of
shares credited to a participant's account under the Plan will be shown on his
statement of account. Certificates of any number of whole shares credited to a
participant's account under the Plan will be issued to the participant upon his
written request to the Committee delivered to the address noted above.
Certificates for fractional share interest will not be issued.
The Committee reserves the right to interpret and regulate the Plan.
The Committee may establish such procedures and make such other provisions for
the administration and operation of the Plan as it deems appropriate to give
effect to its purpose.
4. Eligibility. All regular full-time employees of the Company and of
any affiliate that is a member of a controlled group of corporations as defined
in Section 1563 of the Code as of the Effective Date of the Plan, are eligible
to participate in the Plan. The Committee may, from time to time, establish a
waiting period for eligibility of employees not to exceed one year. After the
Effective Date of the Plan, each employee of the Company or an affiliated
company will become eligible as of the last day of the pay period in which he is
first employed as a regular full-time employee and meets any applicable waiting
period. Upon termination of employment or if a participant no longer qualifies
as a regular full-time employee of the Company or an affiliate, the participant
shall no longer be eligible to participate in the Plan.
5. Election to Participate. An Eligible Employee may join the Plan by
completing the Authorization Card provided by the company and returning it to
the Administrator. Authorization Cards will be furnished to Eligible Employees
at any time upon request to the Company. An Eligible Employee may join the Plan
only on an Entry Date after the Effective Date of the Plan.
6. Payroll Deductions. The Authorization Card directs the Company to
pay to the Adminisrator the amount withheld from the participant's paycheck.
The Authorization Card also directs the Administrator to use these payments to
purchase shares of Common Stock.
After an Authorization Card has been received by the Administrator and
the authority for the payroll deductions has been noted on the Company's
records, the Company will withhold from a participant's paycheck the amount
authorized by the participant commencing on the next Entry Date. The amounts
withheld from all participants' paychecks will be pooled and forwarded to the
Administrator to buy shares of Common Stock for the accounts of all
participants under the Plan on the next "Investment Date".
The payroll deduction authorization shall be effective for an
indefinite period of time until the termination of the Plan unless earlier
revoked by the participant. The employee will specify on the Authorization
Card the exact amount to be withheld from his pay check. Deductions may be
authorized in any whole dollar amount with a minimum of Three Dollars ($3.00)
and maximum equal to ten percent (10%) of his gross pay check. No interest will
be paid on payroll deduction amounts.
The amount of a participant's payroll deduction can be changed by the
participant effective on the next Entry Date by written notice to the Company.
An Authorization Card must be used for these purposes. A participant may
terminate his payroll deduction and/or terminate his participation in the Plan
at any time by written notice to the Administrator effective as soon as
practicable after notice is received by the Administrator.
7. Purchase Price. The price of the shares to be purchased with the
participants' payroll deductions and any applicable discount to participants
will be established by the Committee prior to the beginning of each calendar
year. The price established by the Committee may be either:
1. the Closing Price on the last trading date of the Pricing
Period; or
2. the lower of the Closing Price on the first trading date of
the Pricing Period or the last trading date of the Pricing
Period; or
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3. the average Closing Price on each trading date of the
Pricing Period.
The discount, if any, shall not exceed 10% of the price. Any fraction of a cent
will be rounded up.
8. Number of Shares Purchased. On each Investment Date, accumulated
payroll deductions from all participants will be pooled and used to purchase
shares of Common Stock for the accounts of the participants at the Purchase
Price as determined above under the heading "Purchase Price". The maximum
number of shares including fractional shares will be purchased. Each
participant's account will be credited with his pro rata share(s) computed to
three decimal places of the shares purchased. The number of shares credited to
each participant's account will depend on the amount of the participant's
payroll deduction and the Purchase Price of the shares.
9. Fees and Expenses. Participants will incur no brokerage commissions
or service charges for purchases made under the Plan.
10. Withdrawal. A participant may withdraw from the Plan at any time.
To withdraw from the Plan, a participant must notify the Administrator in
writing of his withdrawal. In the event a participant withdraws or in the event
of the termination of the Plan, certificates for whole shares and cash in lieu
of fractional shares in the account of the withdrawing participant, or
participants in the case of a termination of the Plan, will be delivered by the
Administrator. Fractional shares shall be valued at the Closing Price on the
date the Administrator receives notice of withdrawal. As an alternative to
receiving certificates for shares, a participant may request the Administrator
to sell all of the shares held in his account under the Plan. Shares requested
to be sold shall first be offered for sale by the Administrator to the Company.
If the Company declines, such shares will be sold on the American Stock
Exchange and the proceeds, net of any brokerage commissions, will be remitted to
the participant. Sale requests may be accumulated and sales transactions, if
necessary, will occur at least every ten (10) business days.
If a request to withdraw is received by the Committee at least five (5)
days prior to any Investment Date, the amount of the participant's payroll
deductions which would otherwise have been invested on such Investment Date will
be repaid to him as soon as practicable. If a request to withdraw is received
by the Administrator within five (5) business days prior to any Investment Date,
the amount of the payroll deduction scheduled to be invested on such Investment
Date will be so invested. No payroll deductions shall be made from the pay
check of the employee following a request to withdraw unless the employee
completes a new Authorization Card providing for such deductions.
11. Voting of Shares. Each participant shall have the authority to
direct the Administrator in the manner of voting the number of whole shares held
in his account.
12. Dividends. Dividends paid on shares credited to a participant's
account will be reinvested in shares as soon as practicable following the
dividend payment date. No dividends will be paid on payroll deductions which
have not yet been used to purchase shares. Dividend amounts payable to
participants will be rounded to the nearest whole cent in the case of fractional
share interests. Participation in the Plan will not relieve participants of
any income tax which may be payable on dividends received.
13. Stock Dividends, Stock Splits or Rights Offerings. Any shares
distributed by the Company as a stock dividend on shares credited to a
participant's account under the Plan or upon any split of such shares will be
credited to his account. In a rights offering, the Administrator will sell the
rights to which a participant is entitled by virtue of the shares of Common
Stock allocated to his account under the Plan and the proceeds will be credited
to his account and applied to purchase of shares on the next Investment Date.
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14. Authorized Shares. The Company has reserved seventy-five thousand
(75,000) shares of Common Stock for issuance under the Plan. Unless terminated
earlier by the Company, the Plan will terminate when all such shares have been
purchased by participants. Such shares may be treasury shares, newly issued
shares of the Company or shares purchased on the open market. If on any
Investment Date there are insufficient shares remaining to fill all purchases
then to be made, such shares as are available shall be allocated on a pro rata
basis among purchasing participants.
15. Amendment and Termination. The Committee may amend the Plan at any
time, provided that without shareholder approval no such amendment shall
(a) materially increase the number of shares of Common Stock subject to the
Plan, (b) change the eligibility for participation by officers or directors, or
(c) materially increase the benefits available to participants. Although the
Company intends to continue the Plan as long as Common Stock reserved for
issuance under it remains, the Company (by action of the Board of Directors)
reserves the right to suspend, or terminate the Plan at any time. Any such
suspensions, amendment or termination shall not affect a participant's right to
shares of Common Stock already purchased for him except that the Company may
take any necessary steps to comply with applicable laws. Upon the termination
of the Plan, the Company shall return to participants their accumulated payroll
deductions as soon as practicable.
16. Reports. Each participant will receive a quarterly statement of
his account not less frequent than quarterly. Participants will also receive
the annual report for the Plan and communications sent to other stockholders
including the annual report of the Company and its notice of annual meeting and
proxy statement. Participants will receive information necessary for reporting
income realized under the Plan to the IRS.
17. Withholding. All taxes subject to withholding payable with respect
to the amount of each participant's payroll deductions under the Plan will be
deducted from the participant's salary and will not reduce the amounts to be
paid to the Administrator.
18. Successors. This Plan is binding upon all persons entitled to
benefit under the Plan, their respective heirs and legal representatives upon
the employer, its successors and assigns and upon the Committee as such may be
constituted from time to time.
19. State Law. Ohio law will determine all questions arising with
respect to the provisions of this agreement except to the extent superseded by
federal law.
20. Employment Not Guaranteed. Nothing contained in this Plan or with
respect to the establishment of the Plan or any modification or amendment to the
Plan or in the creation of any account for a participant or the payment of any
benefit gives any employee any right to continued employment, any legal or
equitable right against the employer or against the Committee except as
expressly provided by the Plan.
21. Shareholder Approval. This Plan shall not become effective until
approved by a majority vote of the Company's shareholders.
IN WITNESS WHEREOF, the Company has executed this Plan in Cincinnati,
Ohio the 2nd day of March, 1995.
THE MIDLAND COMPANY
By: Michael J. Conaton
President and Chief Operating Officer
By: John I. Von Lehman
Vice President, Treasurer and
Chief Financial Officer
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