<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MIDLAND FINANCIAL GROUP, INC
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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
MIDLAND FINANCIAL GROUP, INC.
825 CROSSOVER LANE, SUITE 112
MEMPHIS, TENNESSEE 38117
(901) 680-9100
-------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
OCTOBER 25, 1996
-------------------------
TO THE STOCKHOLDERS OF
MIDLAND FINANCIAL GROUP, INC.
Notice is hereby given that the Annual Meeting of Stockholders of
Midland Financial Group, Inc. will be held at The Racquet Club of Memphis, 5111
Sanderlin Avenue, Memphis, Tennessee, 38117, on October 25, 1996 at 9:00 A.M.
local time, for the following purposes:
1. To elect seven members of the Board of Directors, each to serve until
the next Annual Meeting or until their successors are duly elected and
qualified;
2. To ratify the appointment of independent public accountants for the
fiscal year ending December 31, 1996; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The accompanying Proxy Statement contains further information with
respect to these matters.
Stockholders of record at the close of business on August 28, 1996 are
entitled to notice of and to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors:
Elena Barham,
Secretary
September 25, 1996
<PAGE> 3
MIDLAND FINANCIAL GROUP, INC.
825 CROSSOVER LANE, SUITE 112
MEMPHIS, TENNESSEE 38117
(901) 680-9100
------------------------------------------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS, OCTOBER 25, 1996
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Midland Financial Group, Inc. (the
"Company") for use at its Annual Meeting of Stockholders ("the Annual Meeting")
to be held on October 25, 1996 at the Racquet Club of Memphis, 5111 Sanderlin
Avenue, Memphis, Tennessee and any adjournments thereof. Common shares
represented at the meeting by the enclosed Proxy will be voted in accordance
with any directions noted thereon. If no directions are given, proxies will be
voted for the election of the nominees named herein as directors, and for the
ratification of the appointment of independent public accountants. A
stockholder giving a Proxy may revoke it before it is voted by giving written
notice of such revocation to the Secretary of the Company. Attendance at the
meeting by a stockholder who has given a Proxy will not have the effect of
revoking a Proxy previously given unless the stockholder gives such written
notice of revocation to the Secretary before the Proxy is voted.
This Proxy Statement and the accompanying form of proxy were mailed on
or about September 25, 1996 to all stockholders of record as of the close of
business on August 28, 1996.
As of August 28, 1996, the Company had outstanding and entitled to
vote at the Annual Meeting 5,546,522 common shares, no par value ("Common
Shares"). Each Common Share is entitled to one vote and only holders of record
of Common Shares as of the close of business on August 28, 1996 will be
entitled to vote at the meeting. The presence in person or by proxy of the
holders of a majority of the issued and outstanding Common Shares entitled to
vote at the Annual Meeting is necessary to constitute a quorum.
Each nominee for director must receive the vote of a majority of the
Common Shares voted with respect to his election in order to be elected. The
appointment of independent public accountants and any other matters which may
properly come before the meeting must be approved by a majority of the Common
Shares voted on such matter.
1
<PAGE> 4
OWNERSHIP OF COMMON SHARES BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
To the best knowledge of the Company, based on information filed with
the Securities and Exchange Commission and the Company's stock records, the
following table sets forth, as of August 28, 1996 the number of Common Shares
beneficially owned by (i) each person who beneficially owns more than 5% of the
Common Shares, (ii) directors and persons nominated to become directors of the
Company and executive officers, and (iii) directors and executive officers as a
group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficially Owned (1) of Class
------------------- ------------------------- --------
<S> <C> <C>
(i) MARCo Holdings, L.P. (2)
C/O Michael A. Robinson
One Commerce Square, Suite 1700
Memphis, Tennessee 512,448 9.1
Fenimore Asset Management, Inc.
118 N. Grand Street, Box 310
Cobleskill, New York, 10243 451,150 8.4
John J. Shea, Jr., M.D. (3) 330,777 5.9
Philip R. Zanone (4)(5) 443,353 7.9
(ii) John J. Shea, Jr., M.D. (3) 330,777 5.9
Philip R. Zanone (4)(5) 443,353 7.9
Joseph W. McLeary (5)(6) 180,265 3.2
J. Shea Leatherman (7) 164,038 3.0
Elena Barham (5) 71,977 1.3
James E. Farmer (5) 68,330 1.2
Sidney A. Stewart (5) 21,650 *
F. Ross Johnson (8) 38,200 *
Carlos H. Cantu (5) 15,000
Theodore J. Bender, III (10) 14,000 *
(iii) All Directors and Executive
Officers as a Group
(10 persons) 1,347,590 23.3
</TABLE>
______________________
* Less than one percent
(1) The numbers shown include the shares that are not currently outstanding
but which certain stockholders are entitled to acquire or will be
entitled to acquire within sixty (60) days. Such shares are deemed to be
outstanding for the purpose of computing the percentage of outstanding
Common Shares owned by the particular stockholder and by the group, but
are not deemed to be outstanding for the purpose of computing the
percentage of ownership of any other person.
(2) Includes 102,630 shares directly owned by MARCo Holdings, L.P. and 84,000
shares that Michael A. Robinson may acquire by exercise of warrants.
Also includes 130,000 shares owned by Charles P. and Anne W. Brown;
45,818 shares owned by C.P. Brown Family Trust; 108,000 owned by Thomas
W. Barbara D. Staed; and 14,000 shares owned by each of Blaine Brantly
Staed Irrevocable Trust; Leslie Shelton Staed Irrevocable Trust and
Whitney Egan Staed Irrevocable Trust.
2
<PAGE> 5
(3) Dr. Shea's address is Shea Clinic, 6133 Poplar Pike, P.O. Box 17987,
Memphis, Tennessee 38187-0987.
(4) Includes 55,734 shares owned by his wife, Irwin L. Zanone, as to which
Mr. Zanone disclaims beneficial ownership; includes 45,700 shares
issuable upon the exercise of options granted under Midland's stock
option plans; excludes options to purchase 17,500 shares which are not
exercisable within the next 60 days.
(5) The address of each of the Company's officers and of Messrs. Cantu and
Stewart is Midland Financial Group, Inc., 825 Crossover Lane, Suite 112,
Memphis, Tennessee 38117.
(6) Includes 1,000 shares owned by his wife, Joyce C. McLeary; 44,904 shares
owned by McLeary Financial Group, L.P., of which Mr. McLeary is a limited
partner; 45,700 shares issuable upon the exercise of stock options
granted under Midland stock option plans; excludes options to purchase
17,500 shares that are not exercisable within the next 60 days.
(7) Mr. Leatherman's address is Route 1, Box 193, Robinsonville, Mississippi
38664.
(8) Mr. Johnson's address is 2660 Peachtree Street, N.W., Atlanta, Georgia
30305. Mr. Johnson's ownership includes 2,000 shares owned by his wife,
Laurie Johnson, for which he disclaims beneficial ownership.
(9) Mr. Bender's address is 3541 Ridgewood Road, Atlanta, Georgia 30327.
-----------------------------------------------
PROPOSAL NO. 1. ELECTION OF DIRECTORS
PROXIES IN THE ACCOMPANYING FORM WILL BE VOTED AT THE MEETING IN FAVOR OF
THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED BELOW, UNLESS AUTHORITY TO DO
SO IS SPECIFICALLY WITHHELD.
Pursuant to the Company's Bylaws, each member of the Board of Directors
is elected to a term of one year or until his successor is elected. At each
annual meeting of stockholders, successors to directors whose terms expire at
the meeting shall be elected for one-year terms. Seven (7) directors are to be
elected at this Annual Meeting to hold office for a term of one year expiring
at the 1997 Annual Meeting of Stockholders, or until successors shall have been
elected. The Board of Directors has no reason to believe that any of the
following nominees named will be unavailable, or if elected, will decline to
serve. If some unexpected occurrence should, in the judgment of the Board of
Directors, make necessary a substitution of some other person for any nominee,
the shares represented by proxies will be voted for such other person as the
Board of Directors may select. Certain information is given below for each
nominee for director. All of the nominees are presently directors and were
previously elected by stockholders.
3
<PAGE> 6
NOMINEES FOR DIRECTOR
NAME OF NOMINEE OFFICES HELD WITH COMPANY
(YEAR FIRST ELECTED PRINCIPAL OCCUPATION
A DIRECTOR) FOR PAST FIVE YEARS
----------- -------------------
Theodore J. Bender, III (1993) Mr. Bender, 48, is a partner
with Croft & Bender, LLC, a
securities and investment
banking firm formed in 1996.
He served in various
investment banking capacities
from 1976 until 1996 with The
Robinson-Humphrey Company,
Inc.
F. Ross Johnson (1995) Mr. Johnson, 64, has been
the Chairman and Chief
Executive Officer of RJM
Group, an international
management and advisory firm
since 1989. Prior to that
Mr. Johnson served as
Chairman and Chief Executive
Officer of RJR Nabisco. He
serves on the boards of three
public companies, American
Express Company, Archer
Daniels Midland Company and
National Service Industries,
as well as Canadian-based
firms, Noma Industries, Power
Corporation, Black & McDonald
and Bionaire.
Shea Leatherman (1987) Mr. Leatherman, 44, has
been President of Grant &
Leatherman, Inc., a farm
management company, and the
General Manager of Riverfield
Farms, a substantial farming
interest located in
Mississippi, for more than
five years.
Joseph W. McLeary (1987) Mr. McLeary, 56, is the
Chairman of the Board and
Chief Executive Officer and
has served in these
capacities since 1987.
John J. Shea., M.D. (1987) Dr. Shea, 71, has been the
President and a physician at
Shea Clinic Corporation for
more than five years.
Sidney A. Stewart, Jr. (1992) Mr. Stewart, 69, retired
from Sedgwick James, Inc., an
international insurance
agency/brokerage firm, in
1990 after serving as Vice
Chairman since 1986. Mr.
Stewart was Chairman and
Chief Executive Officer of
the Crump Companies, Inc.
from 1981 to 1986. Mr.
Stewart serves as a director
of National Commerce
Bancshares Corporation, a
public company.
Philip R. Zanone (1987) Mr. Zanone, 54, is the
Vice-Chairman and Chief
Investment Officer of the
Company. He served as
President of the Company from
1987 until 1993. Mr. Zanone
is a director of Cooper
Communities, Inc.
Mr. Zanone and Mr. Leatherman are brothers-in-law. Dr Shea is the
uncle of Mr. Leatherman and of Mr. Leatherman's sister, who is the wife of Mr.
Zanone. Mr. Johnson's son is the husband of Mr. Zanone's daughter.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION,
AS DIRECTORS, OF EACH OF THE SEVEN INDIVIDUALS LISTED.
4
<PAGE> 7
BOARD OF DIRECTORS AND COMMITTEES
BOARD MEETINGS AND ATTENDANCE OF DIRECTORS
The Board of Directors held eight meetings in 1995. All directors
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors held while they were members, and (ii) the total number
of meetings held by all Committees of the Board on which they served as
members.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has six (6) committees: Executive Committee,
Investment Committee, Audit Committee, Nominating Committee, Compensation
Committee and Stock Option Committee.
Executive Committee. The members of the Executive Committee are
Messrs. McLeary, Zanone, Bender and Johnson. This Committee, which held seven
(7) meetings in 1995, is responsible for exercising the powers of the Board of
Directors in the management of the business and affairs of the Company.
Investment Committee. The members of the Investment Committee are
Messrs. McLeary and Zanone. This Committee, which held six (6) meetings in
1995, reviews and recommends to the Board policies and actions relating to the
Company's investment portfolio.
Audit Committee. The members of the Audit Committee are Messrs.
Leatherman, Cantu, and Bender. This Committee recommends to the Board the
engagement of independent public accountants; reviews the professional services
to be rendered by the independent accountants, the scope of their audit, their
fees and the results of their engagement; and oversees compliance with the
Company's standards of conduct and policies. This Committee held two (2)
meetings in 1995.
Nominating Committee. The members of the Nominating Committee are
Messrs. McLeary and Bender and Dr. Shea. This committee, which held one (1)
meeting in 1995, recommends candidates for officer and director positions of
the Company to the Board and stockholders.
Compensation Committee. The members of the Compensation Committee are
Messrs. Stewart, Leatherman and Johnson. This Committee, which held four (4)
meetings in 1995, is responsible for approving, administering, or recommending
to the Board, compensation, stock and benefit programs and plans for employees
of the Company, except for administration of the Company's 1989 Incentive Stock
Option Plan and 1992 Long-Term Incentive Plan.
Stock Option Committee. The members of the Stock Option Committee are
Messrs. Leatherman and Stewart. This Committee, which held two (2) meetings in
1995, is responsible for administering the Company's stock-based plans.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of independent outside directors. Decisions on
compensation of the Company's executives generally are made by the Committee
and are reviewed by the full Board (except for decisions about awards under the
Company's stock-based compensation plans, which are made solely by an
independent committee in order to satisfy Rule 16b-3 under the Securities
Exchange Act of 1934). Set forth below is a report submitted by the Committee
addressing the Company's compensation policies for 1995 as they affected Joseph
W. McLeary, the Company's Chairman of the Board and Chief Executive Officer,
Philip R. Zanone, the Company's Vice-Chairman and Chief Investment Officer,
Charles H. Gray, III, the Company's President and Chief Operating Officer
(since deceased), Elena Barham, the Company's Senior Vice President, Chief
Financial Officer and Secretary, and James E. Farmer, the Company's Vice
President of Underwriting and Assistant Secretary (collectively, the "Named
Officers").
5
<PAGE> 8
The Compensation Committee and the management of the Company are
committed to the principle that pay should be commensurate with performance and
attainment of predetermined financial and strategic objectives. The base
salaries of the Company's executives are contained in long-term employment
agreements, but are reviewed each year by the Committee. Through 1994, the
Company relied to a large degree on annual incentive programs to motivate the
Named Officers to perform to the full extent of their abilities for the benefit
of the Company's shareholders and compensated the Named Officers through fixed
base salaries somewhat below competitive amounts paid to senior managers in
comparable positions along with incentive compensation.
During 1995, the Committee reconsidered this philosophy, with these
conclusions:
(1) Measuring and rewarding the Named Officers based on the short-term
annual performance of the Company is inconsistent with the major
objective, namely; building long-term shareholder value.
(2) Annual compensation should represent the appropriate level for Named
Officers that competitively compensates then for their performance.
(3) Long-term compensation in the form of stock options should make up a
major share of executive compensation and as a result integrate the
rewards to the executive at the same time as the shareholder receives
appreciation. Importantly, the appreciation is identical between the
Named Officers and the shareholders of the Company. There is no
incentive payment until the shareholders get stock appreciation.
The Committee recommended that future stock options have five-year
terms, rather than the current 10 years to tighten the focus and to produce
improved shareholder value. The compensation program recommended for the Named
Officers was intended to accomplish the following:
(1) Ensure that the Named Officers are properly and competitively
compensated for their performance.
(2) Ensure that their incentives are simple and straightforward and
identical to that of the shareholders they serve.
(3) Ensure that their focus is on the long-term growth in "shareholder
value" and that they are not forced to be distracted by short-term
situations that an annual incentive system generates.
The Committee negotiated new contracts for the Named Officers including
five-year terms for each of Messrs. Gray and Farmer and Ms. Barham and
four-year terms for Messrs. McLeary and Zanone. In addition, the Named
Officers were awarded five-year stock options during 1995 by the Stock Option
Committee.
July 5, 1995 COMPENSATION COMMITTEE
J. Shea Leatherman, Chairman
Sidney A. Stewart, Jr.
F. Ross Johnson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Leatherman, Stewart and Johnson, all of whom are non-employee
directors, served as members of the Compensation Committee during 1995. There
were no compensation committee interlocks in 1995, and no insider participated
in decisions related to his compensation.
6
<PAGE> 9
STOCK PRICE PERFORMANCE
MIDLAND FINANCIAL GROUP, INC.
TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
Nasdaq Nasdaq Midland
Stock Insurance Financial
Market Stocks Group, Inc.
-----------------------------------
<S> <C> <C> <C>
12/10/92 10,000 10,000 10,000
12/31/92 10,268 10,365 14,464
12/31/93 11,787 11,086 14,464
12/30/94 11,522 10,433 10,558
12/29/95 16,281 14,823 8,797
</TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation
for services in all capacities to the Company for 1995, 1994 and 1993 of those
persons who were at December 31, 1995, (i) the Chief Executive Officer and (ii)
the other four most highly compensated executive officers of the Company (the
"Named Officers").
<TABLE>
<CAPTION> Long Term
Annual Compensation (1) Compensation
------------------------------ ------------
Options All Other
Name and Salary Bonus Awards Compensation
Principal Position Year $ $ # $ (2)
- - ------------------ ---- ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Joseph W. McLeary, 1995 250,000 40,000 15,000 5,500
Chairman of the Board and 1994 150,000 -0- 5,000 15,312
Chief Executive Officer 1993 100,000 62,500 25,000 3,672
Philip R. Zanone, 1995 250,000 40,000 15,000 5,500
Vice Chairman and 1994 150,000 -0- 5,000 17,432
Chief Investment Officer 1993 100,000 62,500 25,000 2,500
Charles H. Gray, III,(3) 1995 450,000 80,000 30,000 5,500
President 1994 200,000 -0- 10,000 23,578
and Chief Operating Officer 1993 170,000 190,000 50,000 4,250
Elena Barham, 1995 200,000 40,000 12,500 5,500
Senior Vice President, 1994 125,000 -0- 5,000 15,310
Chief Financial Officer 1993 76,000 55,000 20,000 3,650
and Secretary
James E. Farmer, 1995 200,000 40,000 12,500 5,500
Vice President-Underwriting 1994 105,000 -0- 5,000 10,431
and Asst. Secretary 1993 75,000 55,000 20,000 2,875
</TABLE>
(1) Compensation deferred at election of executive includable in category
and year earned.
(2) includes the matching contributions to the Company's deferred
compensation plan as follows for 1995: Mr. McLeary, $12,812, Mr.
Zanone, $12,812; Mr. Gray, $18,958; Ms. Barham, $10,810; and Mr. Farmer
$9,250; and of contributions to defined contribution plans.
(3) Mr. Gray died in July 1996.
7
<PAGE> 10
OPTION GRANTS, EXERCISES AND FISCAL YEAR END VALUES
No options were granted under the Company's 1989 Incentive Stock
Option Plan in 1995; option grants shown below for 1995 were under the
Company's 1992 Long-Term Incentive Plan. Shown below is information with
respect to the exercised and unexercised options to purchase Common Shares
granted in fiscal 1995 and prior years under the 1989 Incentive Stock Option
Plan and the 1992 Long-Term Incentive Plan to the Named Officers and held by
them at December 31, 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
STOCK PRICE
OPTIONS/ OPTIONS/SARS EXERCISE APPRECIATION FOR
SARS GRANTED TO OR BASE OPTION TERM
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- -------- ------------ ------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Joseph W. McLeary 15,000(1) 13.0 18.75 8/01/00 $ 77,700 $171,750
Philip R. Zanone 15,000(1) 13.0 18.75 8/01/00 $ 77,700 $171,750
Charles H. Gray, III 30,000(1) 26.0 18.75 8/01/00 $155,400 $343,500
Elena Barham 12,500(1) 10.9 18.75 8/01/00 $ 64,750 $148,125
James E. Farmer 12,500(1) 10.9 18.75 8/01/00 $ 64,750 $148,125
</TABLE>
(1) Options vest ratably over five years from date of grant.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES ACQUIRED VALUE AT FY-END (#) AT FY END ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ---- --------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Joseph W. McLeary 16,800 240,005 45,700/17,500 35,326/-0-
Philip R. Zanone 16,800 237,905 45,700/17,500 35,326/-0-
Charles H. Gray, III -0- -0- 104,800/27,200 -0-/-0-
Elena Barham 2,800 39,718 32,300/15,000 24,668/-0-
James E. Farmer 2,800 24,668 29,500/15,000 -0-/-0-
</TABLE>
Each of Messrs. McLeary, Zanone and Farmer and Ms. Barham is a party to
an employment agreement with the Company which was renegotiated effective
January 1, 1995, and is for a term expiring in December 1998 for Messrs.
McLeary and Zanone and 1999 for Ms. Barham and Mr. Farmer, unless terminated
sooner in accordance with the provisions of such agreements. In addition, the
employment agreements, as amended, provide for minimum annual base salaries as
follows: Mr. McLeary-$250,000; Mr. Zanone-$250,000; Ms. Barham-$200,000; and
Mr. Farmer-$200,000. If an employment agreement were terminated other than for
cause, the Company is required to pay such individual an amount equal to one
year's base salary as a severance payment and continue benefits for two years
after termination. The foregoing employment agreements contain certain
noncompetition covenants pursuant to which, for a period of one year after
termination of employment, Ms. Barham and Mr. Farmer agree not to solicit
customers or employees or to disclose confidential information of the Company
and each of Messrs. McLeary and Zanone agree, in addition to the foregoing
covenants, not to compete in any manner with the Company.
Until his death, Mr. Gray was a party to a similar employment
agreement. His agreement provided a base salary of $450,000 and his severance
compensation was equal to 2 times his base salary in the event of termination
other than for cause.
8
<PAGE> 11
DIRECTORS' COMPENSATION
Independent directors of the Company receive an annual fee of $30,000,
plus travel expenses incurred to attend meetings. Directors who are also
officers of the Company do not receive any annual fee for their services as a
director. Directors may defer the receipt of all or a portion of their fees
under the Company's unfunded deferred compensation program.
CERTAIN TRANSACTIONS
Messrs. McLeary and Zanone each own 7.8% of the outstanding common
stock of NewSouth Capital Management, Inc. ("NewSouth"), the investment
advisor for the Company's investment portfolio. At December 31, 1995, the
Company's portfolio represented 10% of the assets under management by NewSouth,
and in 1995 fees paid by the Company to NewSouth totaled $351,000 and
represented 4.6% of all fees received by NewSouth during such period. The
Company believes that the amount charged by NewSouth to the Company for
investment management services is competitive with fees that are charged by
NewSouth and other managers for portfolios of similar size and with similar
objectives. The Company may elect to diversify its portfolio management in the
future.
In the opinion of management, the foregoing transactions with
affiliates were made under terms that were no less favorable to the Company
than those that could have been obtained from unaffiliated third parties. In
the future, the Company will not enter into any transactions with officers,
directors, 5% stockholders or affiliates unless the terms are no less favorable
to the Company than those that could be obtained from unaffiliated third
parties and the transactions are approved by a majority of the Company's
directors, including a majority of the disinterested directors.
PROPOSAL NO. 2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders at the Annual Meeting, the
Board of Directors has appointed KPMG Peat Marwick LLP to serve as the
independent public accountants for the Company for its fiscal year ending
December 31, 1996. KPMG Peat Marwick LLP has served the Company as its
independent public accounting firm since 1991. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting, will have the
opportunity to make a statement, if they desire to do so, and will be available
to respond to appropriate questions.
The affirmative vote of the majority of the votes cast by the holders
of the Company's Common Shares on this proposal shall constitute ratification
of the appointment of KPMG Peat Marwick LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on review of the copies of reporting forms furnished to the
Company, or written representations that no forms are required, the Company
believes that during 1995 its officers and directors and 10% stockholders
complied with all filing requirements for reporting to the Securities and
Exchange Commission their ownership and changes in ownership of Common Shares.
9
<PAGE> 12
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the proxy will act in respect thereof in accordance with their best
judgment.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1997 Annual Meeting
of Stockholders must be received by the Company no later than December 1, 1996
and the proposal must meet certain eligibility requirements of the Securities
and Exchange Commission. Proposals may be mailed to the Company, to the
attention of the Secretary, 825 Crossover Lane, Suite 112, Memphis, Tennessee
38117.
SOLICITATION OF PROXIES AND COST THEREOF
The cost of solicitation, which will be undertaken by mail, telephone,
telegraph, and personal contact, will be borne by the Company. Expenses of
solicitation will include reimbursement to brokerage firms and other
custodians, nominees, and fiduciaries for their reasonable expenses in
forwarding solicitation material regarding the annual meeting to beneficial
owners. The Company's regularly retained investor relations consultant,
Corporate Communications, Inc., will assist in the solicitation of proxies from
stockholders, and further solicitation may be undertaken by directors, officers
and employees of the Company, none of whom will be additionally compensated
therefore, but who will be reimbursed for out-of-pocket expenses
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
Stockholders may obtain a copy of the Company's Form 10-K as filed with
the Securities and Exchange Commission without charge (except for exhibits), by
writing to: Secretary, Midland Financial Group, Inc., 825 Crossover Lane,
Suite 112, Memphis, Tennessee, 38117.
By Order of the Board of Directors:
Elena Barham,
Secretary
September 25, 1996
10
<PAGE> 13
APPENDIX A
PROXY
MIDLAND FINANCIAL GROUP, INC.
This proxy is solicited on behalf of the Board of Directors. The undersigned
hereby appoints Joseph W. McLeary as Proxy, with the power to appoint his
substitute, and hereby authorizes him to represent and vote as designated below,
all the shares of Common Stock of Midland Financial Group, Inc. held of record
by the undersigned on August 28, 1996 at the annual meeting of the shareholders
to be held on October 25, 1996 or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS / /FOR all nominees listed below / /WITHHOLD ALL AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
below
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME ON THE LIST BELOW)
<TABLE>
<S> <C> <C>
Theodore J. Bender, III John J. Shea, Jr., M.D. F. Ross Johnson
Joseph W. McLeary J. Shea Leatherman Sidney A. Stewart, Jr.
Philip R. Zanone
</TABLE>
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK as the independent
public accountants of the corporation.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the Proxy is authorized to vote upon such other
business as may properly come before the meeting.
(Continued on other side)
(Continued from other side)
This proxy, when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO ELECTIONS ARE MADE, THE PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as name
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: 19
---------------- ----
--------------------------------
Signature
--------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
