THE MIDLAND COMPANY
7000 MIDLAND BOULEVARD
AMELIA, OHIO 45102
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, 7000 Midland
Boulevard, Amelia, Ohio 45102, on Thursday, April 10, 1997, at 10 a.m., for the
following purposes:
1. To elect 5 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 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 7, 1997, will
be entitled to vote at the meeting or any adjournment thereof.
DATED AT AMELIA, OHIO THIS 14th day of March, 1997.
JOHN R. LABAR
Secretary
<PAGE>
THE MIDLAND COMPANY
7000 Midland Boulevard
Amelia, Ohio 45102
The proxy and statement will first be sent to shareholders on or about
March 14, 1997.
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 7th day of
March, 1997, are entitled to notice of and to vote at the meeting. The Company
then had outstanding voting securities consisting of 3,109,918 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 7, 1997, 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.
7000 Midland Boulevard
Amelia, Ohio 45102 565,630(1) 18.0%
Robert W. Hayden
7000 Midland Boulevard
Amelia, Ohio 45102 455,194(2) 14.6%
Burgess L. Doan
5710 Wooster Road
Cincinnati, Ohio 45227 375,174(3) 12.1%
John R. LaBar
7000 Midland Boulevard
Amelia, Ohio 45102 340,987(4) 10.9%
Gabelli Fund, Inc.
One Corporate Center
Rye, NY 10580 293,800 9.4%
William McD. Kite
525 Vine Street
Cincinnati, Ohio 45202 192,501(5) 6.2%
<PAGE>
(1) Includes 421,220 shares over which J. P. Hayden, Jr. has sole voting
and investment power, 105,268 over which he has sole voting power
only, 10,842 over which he shares voting and investment power, and
28,300 shares that may be acquired through exercise of options within
60 days of March 7, 1997.
(2) Includes 441,094 shares over which Robert W. Hayden has sole voting and
investment power, 6,100 shares over which he has sole voting power, and
8,000 shares that may be acquired through exercise of options within 60
days of March 7, 1997.
(3) Includes 198,805 shares over which Burgess L. Doan has sole voting and
investment power, including 47,648 shares held in trust for the benefit
of the family of J. P. Hayden, III, 40,873 shares held in trust for the
benefit of the family of John W. Hayden and 51,108 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. 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. Furthermore, Mr. Doan
shares voting and investment power over 5,235 shares held in trust as
co-trustee with William T. Hayden (3,498 shares) and J. P. Hayden, III
(1,737 shares).
(4) Includes 315,087 shares over which John R. LaBar has sole voting and
investment power, 6,100 shares over which he has sole voting power,
11,600 shares over which he shares voting and investment power, and
8,200 shares that may be acquired through exercise of options within 60
days of March 7, 1997.
(5) Includes 187,501 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, and 33,134 shares over which Mr. Kite is a co-trustee for the
benefit of children of Robert W. Hayden. J. P. Hayden, Jr. is among
the beneficiaries of the J. Page Hayden Trust entitled to receive
distribution of income. These trust shares are not shown as
beneficially owned by J. P. Hayden, Jr. Finally it includes 5,000
shares that may be acquired through exercise of options within 60 days
of March 7, 1997. Mr. Kite, a director, is a member of the law firm of
Cohen, Todd, Kite & Stanford, LLC, general counsel for the Company.
The Company paid the firm fees of $437,531 in 1996.
As of March 7, 1997, all Directors and Officers of the Company, as a
group, beneficially owned 1,814,872 shares of the common stock of the Company.
This amount includes 126,500 shares which may be acquired through exercise of
options within 60 days of March 7, 1997. The amount so beneficially owned
represents 56.1% 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. Five directors are to be elected at the annual meeting to serve
until the annual meeting in 2000 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 five nominees:
Shares of Common
Principal Occupation Stock of Company Percent
and Other Director Beneficially Owned of
Directors Business Affiliations Since on March 7, 1997 Class
- --------------------------------------------------------------------------------
George R. Baker Corporate Director/ 1971 7,440 (7) 0.2%
(Age 67) 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 Company; 1969 58,965 (8) 1.9%
(Age 63) Director, KeyBank National
Association
J.P.Hayden, III(1) Senior Executive Vice 1989 50,892 (9) 1.6%
(Age 44) President of the Company;
President of M/G Transport
Services, Inc. (wholly
owned Subsidiary of The
Midland Company)
William J. Keating Formerly Chairman and 1991 5,000 (13) 0.2%
(Age 69) Publisher and Chief
Executive Officer of
The Cincinnati Enquirer;
Director, Fifth Third
Bancorp and Fifth Third Bank
John R. LaBar Vice President and 1963 340,987 (2) 10.9%
(Age 65) Secretary of the Company
3
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The following directors have been elected to serve until the annual
meeting in 1998 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 7, 1997 Class
- --------------------------------------------------------------------------------
J.P.Hayden, Jr.(1) Chairman of the Board of 1961 565,630 (2) 18.0%
(Age 67) the Company; Director,
Star Banc Corporation
William T. Hayden(1) Attorney; Formerly 1994 110,306 (14) 3.5%
(Age 43) Partner of Firm of Cohen,
Todd, Kite & Stanford
William McD. Kite Attorney, Member of Firm 1966 192,501 (2) 6.2%
(Age 73) of Cohen, Todd, Kite &
Stanford, LLC
John M. O'Mara Financial Consultant; 1983 8,000 (10) 0.3%
(Age 69) Director, Baldwin &
Lyons, Inc., Plantronic,
Inc.; Formerly Chairman
of the Executive Committee,
Quality Care Systems
Glenn E. Schembechler Professor Emeritus, 1981 10,481 (11) 0.3%
(Age 67) University of Michigan;
Formerly President, Detroit
Tigers Baseball Club;
Formerly, Athletic Director
and Head Football Coach,
University of Michigan;
Director, Riddell Sports, Inc.
John I. Von Lehman Executive Vice President, 1991 14,564 (12) 0.5%
(Age 44) Treasurer and Chief
Financial Officer of the
Company
4
<PAGE>
The following directors have been elected to serve until the annual
meeting in 1999 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 7, 1997 Class
- --------------------------------------------------------------------------------
James H. Carey Corporate Advisor and 1971 4,440 (3) 0.1%
(Age 64) Director since September,
1995; Managing Director,
Briarcliff Financial
Associates since June, 1991;
formerly CEO, National
Capital Benefits Corp.;
Director, Airborne
Freight Corporation; Cowan
Group of Funds
John W. Hayden(1) Senior Executive Vice 1991 76,655 (6) 2.5%
(Age 39) President of the Company;
Vice Chairman of American
Modern Insurance Group, Inc.
and Chairman of CS Crable
Sportswear, Inc. (wholly
owned Subsidiaries of The
Midland Company)
Robert W. Hayden(1) Vice President of the 1968 455,194 (2) 14.6%
(Age 58) Company
John R. Orther Certified Public 1961 5,000 (4) 0.2%
(Age 78) Accountant
William F. Plettner Retired Vice Chairman and 1961 59,188 (5) 1.9%
(Age 74) President 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.
5
<PAGE>
(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 4,000 shares that may be acquired through exercise
of options within 60 days of March 7, 1997. Mr. Carey was indebted to the
Company in the amount of $97,000 in 1996 on a loan for personal purposes.
The current amount due on the loan is $97,000. The rate of interest is 8%.
(4) Includes 500 shares over which John R. Orther has sole voting and
investment power, and 4,500 shares that may be acquired through exercise of
options within 60 days of March 7, 1997.
(5) Includes 46,968 shares over which William F. Plettner has sole voting and
investment power, 8,220 shares over which he shares voting and investment
power, and 4,000 shares that may be acquired through exercise of options
within 60 days of March 7, 1997.
(6) Includes 1,611 shares over which John W. Hayden has sole voting and
investment power, 8,600 over which he has sole voting power, 4,131 shares
over which he shares voting and investment power, 55,413 shares over which
he shares investment power only, and 6,900 shares that may be acquired
through exercise of options within 60 days of March 7, 1997.
(7) Includes 2,440 shares over which George R. Baker has sole voting and
investment power and 5,000 shares that may be acquired through exercise of
options within 60 days of March 7, 1997.
(8) Includes 13,500 shares over which Michael J. Conaton has sole voting power,
32,465 shares over which he has sole voting and investment powers, and
13,000 shares that may be acquired through exercise of options within 60
days of March 7, 1997.
(9) Includes 1,060 shares over which J. P. Hayden, III has sole voting and
investment power, 8,600 shares over which he has sole voting power, 12,829
shares over which he shares voting and investment power, 21,103 shares over
which he shares investment power only, and 7,300 shares that may be
acquired through exercise of options within 60 days of March 7, 1997.
(10) Includes 3,000 shares over which John M. O'Mara has sole voting and
investment power, and 5,000 shares that may be acquired through exercise of
options within 60 days of March 7, 1997.
(11) Includes 5,481 shares over which Glenn E. Schembechler has sole voting and
investment power and 5,000 shares that may be acquired through exercise of
options within 60 days of March 7, 1997.
(12) Includes 1,464 shares over which John I. Von Lehman has sole voting and
investment power, 6,100 shares over which he has sole voting power, and
7,000 shares that may be acquired through exercise of options within 60
days of March 7, 1997.
(13) Includes 2,000 shares over which William J. Keating shares voting and
investment powers and 3,000 shares that may be acquired through exercise of
options within 60 days of March 7, 1997.
(14) Includes 55,165 shares over which William T. Hayden shares voting and
investment power, 51,141 shares over which he shares investment power only,
and 4,000 shares that may be acquired through exercise of options within 60
days of March 7, 1997. The Company paid Mr. Hayden fees of $197,500 in 1996
for professional services provided to the Company.
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 1996.
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, the
compensation committee or the advisory committee an annual fee of $2,000 for
services on such committee. The net value realized from exercise of options in
1996 by non-employee directors was $118,625.
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 1996.
SUMMARY COMPENSATION TABLE
--------------------------
Long Term Compensation All Other
Annual Compensation Awards Compensations
------------------- ---------------------- -----------------
Restricted (2)
Name and Stock Options/ Savings (3)
Principle Position Year Salary Bonus Awards(1) SAR'S Plans Insurance
- --------------------------------------------------------------------------------
J.P. Hayden, Jr. 1996 $600,000 $ 0 $ 0 $ 0 $27,622 $50,147
Chairman of the 1995 550,000 112,641 540,625 0 4,620 14,031
Board and Chief 1994 525,000 106,984 0 0 4,620 4,440
Executive Officer
Michael J. Conaton 1996 315,000 0 0 0 14,468 3,566
President and 1995 298,000 56,321 216,250 0 4,620 0
Chief Operating 1994 285,000 53,496 0 0 4,620 2,208
Officer
Thomas J. Rohs 1996 266,250 0 0 0 13,283 1,275
Vice President 1995 240,000 78,731 90,825 0 4,620 1,094
1994 205,000 34,164 0 0 4,620 552
J. P. Hayden, III 1996 245,000 52,868 0 0 11,266 381
Senior Executive 1995 225,000 33,643 90,825 0 4,620 357
Vice President 1994 195,000 28,740 0 0 4,620 0
John W. Hayden 1996 230,000 5,000 0 0 11,733 228
Senior Executive 1995 210,000 81,984 90,825 0 4,620 211
Vice President 1994 180,000 40,143 0 0 4,620 0
(1) Dividends will be paid on stock reported in this column. The aggregate
number of restricted stock holdings and valuations at 12/31/96 are as follows:
J. P. Hayden, Jr., 17,500 shares valued at $673,750; Michael J. Conaton, 7,500
shares valued at $288,750; Thomas J. Rohs, J. P. Hayden, III and John W. Hayden,
each 3,600 shares valued at $138,600.
(2) Total Company matching contributions earned during year from savings plans.
(3) The Company has instituted a split-dollar life insurance program for Mr. J.
P. Hayden, Jr., a director and an executive officer of the Company. Under this
program, the Company has purchased life insurance policies on the lives of J. P.
Hayden, Jr. and his wife. J. P. Hayden, Jr. is responsible for a portion of the
premiums and
7
<PAGE>
the Company pays the remainder of the premiums on the life insurance policies.
The amount of premium advanced by the Company in 1996 was $590,975. No interest
is charged on the amount advanced but repayment of such amount is secured by
collateral assignment of the policies. Upon the death of J. P. Hayden, Jr. and
his wife, the Company will be entitled to receive that portion of the benefits
paid under the life insurance policy as is equal to the premiums paid by the
Company on that policy. In the event of surrender of a policy prior to death of
an insured, the Company would recover the premiums it has paid from the cash
surrender value of the policy or from the insureds. The life insurance trust
established by the decedent will receive the remainder of the death benefits.
The economic value of the benefit for the period the funds were advanced during
1996, using the Demand Loan Approach and the Company's commercial paper rate of
5.29%, is $39,174 for J. P. Hayden, Jr. Such amount is reflected in the Summary
Compensation Table. The remaining amounts represent total group term life
insurance premium paid by the Company during the year. Similar programs have
been instituted for Robert W. Hayden and John R. LaBar, both directors and
executive officers of the Company. The amount of premium advanced by the
Company in 1995 was $235,971 for Robert W. Hayden and $259,519 for John R.
LaBar. No interest is charged on the amounts advanced. The economic value of
the benefits for the period the funds were advanced during 1996, using the
Demand Loan Approach and the Company's commercial paper rate of 5.29%, are
$15,613 for Robert W. Hayden, Jr. and $18,839 for John R. LaBar.
The Board of Directors has approved two savings plans: a Qualified
401(K) Savings Plan that has been approved by the Internal Revenue Service and a
Non-Qualified Savings Plan. These plans provide additional retirement benefits
for salaried employees. An employee may make basic pre-tax contributions to his
plan account up to 6% of his compensation. An employee may also make
supplemental contributions up to an additional 10% of his compensation. Under
the Qualified 401(K) Savings Plan: 1) the Company contributes $.50 for each
dollar of the employee's basic contribution, 2) an employee's total contribution
may not exceed the lesser of $9,500 or 16% of an employee's compensation in 1996
and 3) all funds under this plan are not available to the Company's creditors in
the unlikely case of bankruptcy or change in ownership. Under the Non-Qualified
Plan: 1) the Company contributes $.75 for each dollar of the employee's basic
contribution, 2) an employee's total contribution may not exceed 16% of the
employee's compensation and 3) all amounts in this plan are subject to the
Company's creditors in the unlikely case of bankruptcy or change of control.
The Company does not match supplemental contributions under either plan. Cash
Compensation paid pursuant to these plans 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.
8
<PAGE>
Proposed compensation in the form of payments from this non-contributory
defined benefit pension plan are not included in the Summary Compensation Table.
The 1996 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:
Average Years of Service
Annual
Salaries 15 20 25 30 35
---------- --------- --------- --------- --------- ---------
200,000 49,203 65,604 82,006 98,407 114,808
250,000 62,328 83,104 103,881 124,657 145,433 *
300,000 75,453 100,604 125,756 * 150,907 * 176,058 *
350,000 88,578 118,104 147,631 * 177,157 * 206,683 *
400,000 101,703 135,604 * 169,506 * 203,407 * 237,308 *
450,000 114,828 153,104 * 191,381 * 229,657 * 267,933 *
500,000 127,953 * 170,604 * 213,256 * 255,907 * 298,558 *
550,000 141,078 * 188,104 * 235,131 * 282,157 * 329,183 *
600,000 154,203 * 205,604 * 257,006 * 308,407 * 359,808 *
650,000 167,328 * 223,104 * 278,881 * 334,657 * 390,433 *
* Under the Internal Revenue Code, the maximum allowable annual benefit payable
by the qualified pension plan in 1997 is $125,000. In addition, the maximum pay
that can be used to determine the benefit is $160,000. 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 covered by the plan includes basic salary, overtime and
bonus. The credited years of service through 1996 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 (35), Thomas J.
Rohs (29.4), J. P. Hayden, III (21.3) and John W. Hayden (15.6).
The following table sets forth the aggregated option exercises during
1996 and the option value as of December 31, 1996 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.
9
<PAGE>
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 1996 at Year End
Shares
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
- --------------------------------------------------------------------------------
J.P. Hayden, Jr. 17,600 $368,500 28,300 $332,100
0 0
Michael J. Conaton 8,000 167,500 13,000 152,500
0 0
Thomas J. Rohs 4,600 96,312 8,300 97,350
0 0
J. P. Hayden, III 3,800 79,562 7,300 85,600
0 0
John W. Hayden 3,600 75,375 6,900 80,800
0 0
Report of the Compensation Committee
The Compensation Committee's compensation policies are designed 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
1996 salary of $600,000 was a 9.1% increase over 1995. 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 1996 was $0. This amount is less than prior years and reflects
the Company's profit performance for 1996. Cash compensation paid pursuant to
the Plan is included in the Summary Compensation Table.
10
<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 1995 as set forth in the Summary Compensation Table, but no stock
was awarded in 1996 and 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., AMERICNA STOCK EXCHANGE COMPOSITE AND THE S&P PROPERTY AND
CASUALTY GROUP
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
MIDLAND 100 123.0 122.8 121.1 139.4 111.0
S&P PROPERTY & CASUALTY GROUP 100 117.1 115.0 120.7 163.4 198.5
AMEX COMPOSITE 100 105.0 123.5 115.3 148.6 151.7
ASSUMES $100 INVESTED ON DECEMBER 31, 1991 IN MIDLAND COMMON STOCK, AMEX
COMPOSITE AND THE S&P PROPERTY AND CASUALTY GROUP.
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
11
<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
1997. 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.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1998 annual
meeting must be received at the Company's executive offices on or before
November 14, 1997, 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.
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 14, 1997
Shareholders may obtain without charge a copy of the Company's 1996 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, 7000 Midland
Boulevard, Amelia, Ohio 45102.
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