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:
[ ] 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 ss. 240.14a-11(c) or ss. 240.14a-12
The Morgan Group, Inc.
(Name of Registrant as Specified In Its Charter)
The Morgan Group, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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pursuant to Exchange Act Rule 0-11(Set forth the amount on which
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1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
[THE MORGAN GROUP, INC. LOGO]
2746 Old U.S. 20 West
Elkhart, Indiana 46514-1168
(219) 295-2200
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
To Be Held On May 12, 1997
Notice is hereby given that the Annual Meeting of Stockholders of The
Morgan Group, Inc. (the "Company") will be held at the Varsity Club, 3800 Main
Street, Mishawaka, Indiana on Monday, May 12, 1997 at 2:00 P.M., Mishawaka Time.
The Annual Meeting will be held for the following purposes:
1. Election of Directors. Election of one director of the Company by
holders of shares of Class A Common Stock, voting separately as a
class, and election of all remaining directors by holders of Class A
and Class B Common Stock, voting together as a single class.
2. Other Business. Such other matters as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 27, 1997, are
entitled to vote at the meeting or any adjournment thereof.
We urge you to read the enclosed Proxy Statement carefully so that you may
be informed about the business to come before the meeting, or any adjournment
thereof. At your earliest convenience, please sign and return the accompanying
proxy in the postage-paid envelope furnished for that purpose.
A copy of our Annual Report for the fiscal year ended December 31, 1996, is
enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this letter.
By Order of the Board of Directors
/s/ Charles C. Baum
Charles C. Baum, Chairman of the Board
and Chief Executive Officer
Elkhart, Indiana
April 12, 1997
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE
AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
[THE MORGAN GROUP, INC. LOGO]
2746 Old U.S. 20 West
Elkhart, Indiana 46514-1168
(219) 295-2200
---------------
PROXY STATEMENT
---------------
FOR
ANNUAL MEETING OF STOCKHOLDERS
May 12, 1997
This Proxy Statement is being furnished to the holders of Class A and Class
B Common Stock, $0.015 par value per share (the "Class A Common Stock"), of The
Morgan Group, Inc. (the "Company"), a Delaware corporation, in connection with
the solicitation of proxies by the Board of Directors of the Company to be voted
at the Annual Meeting of Stockholders to be held at 2:00 P.M., Mishawaka Time,
on May 12, 1997 at the Varsity Club, 3800 Main Street, Mishawaka, Indiana, and
at any adjournment of such meeting. This Proxy Statement is expected to be
mailed to stockholders on or about April 12, 1997.
The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for each of the matters described below and, upon
the transaction of such other business as may properly come before the meeting,
in accordance with the best judgment of the persons appointed as proxies.
Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Company written notice thereof
(Attention: Richard B. DeBoer, 2746 Old U.S. 20 West, P.O. Box 1168, Elkhart,
Indiana 46514-1168), (ii) submitting a duly executed proxy bearing a later date,
or (iii) by appearing at the Annual Meeting and giving the Secretary notice of
his or her intention to vote in person. Proxies solicited hereby may be
exercised only at the Annual Meeting and any adjournment thereof and will not be
used for any other meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on March 27, 1997
("Voting Record Date"), will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 1,482,020 shares of the Class A Common Stock
issued and outstanding and 1,200,000 shares of the Class B Common Stock issued
and outstanding. Each share of Class A Common Stock is entitled to one vote, and
each share of Class B Common Stock is entitled to two votes on all matters
properly presented at the Annual Meeting; provided, that holders of Class A
Common Stock may vote together as a single class upon the election of one (1)
director.
The following table sets forth certain information regarding the beneficial
ownership of the Class A Common Stock and Class B Common Stock as of March 27,
1997, by each person who is known by the Company to own beneficially 5% or more
of the Class A Common Stock or the Class B Common Stock. Unless otherwise
indicated, the named beneficial owner has sole voting and dispositive power with
respect to the shares reported.
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Name and Address of of Class A Common Stock Percent of of Class B Common Stock Percent of
Beneficial Owner Beneficially Owned(1) Class (1) Beneficially Owned Class
- ------------------------ ----------------------- ----------- ------------------------ ----------
<S> <C> <C> <C> <C>
Charles C. Baum (2) 180,499 (3) 12.2% -- --
2545 Wilkens Avenue
Baltimore, Maryland 21223
Lynch Corporation 150,000 (4) 10.1% (4) 1,200,000(4) 100%(4)
8 Sound Shore Drive
Suite 290
Greenwich, Connecticut 08630
United Holdings Co., Inc. (2) 118,518 8.0% -- --
2545 Wilkens Avenue
Baltimore, Maryland 21223
John L. Keeley 174,300 11.8% -- --
401 South LaSalle Street
Suite 1201
Chicago, Illinois 60605
Terrence L. Russell 78,750 5.3% --- ---
2746 Old U.S. 20 West
Elkhart, Indiana 46514
- -----------------
</TABLE>
(1) Based upon 1,482,020 shares of Class A Common Stock outstanding, which does
not include stock options held by management and non-employee directors for
183,000 shares of Class A Common Stock, of which options for 96,375 shares
have become exercisable.
(2) Mr. Baum is a director, executive officer and minority shareholder of
United Holdings Co., Inc. ("United Holdings").
(3) Includes 8,000 shares held of record by Mr. Baum's children, 1,602 shares
held in the Company's 401(k) Plan, and unexercised options to acquire
18,750 shares. An additional 118,518 shares of Class A Common Stock (not
included in Mr. Baum's holdings) are held by United Holdings Co., Inc. of
which Mr. Baum is a director, executive officer and minority shareholder.
(4) Lynch Corporation ("Lynch") owns 1,200,000 shares of Class B Common Stock,
$0.015 par value per share, of the Company ("Class B Common Stock"). Class
B Common Stock is automatically converted into Class A Common Stock upon
transfer on a share-for-share basis. In addition, the Class B Common Stock
is convertible at all times, at the option of the stockholder and without
cost to the stockholder, into Class A Common Stock on a share-for-share
basis. Upon conversion, such shares would represent 50.3% of the then
outstanding shares of Class A Common Stock. The outstanding Class A and
Class B Common Stock held by Lynch represents 65.7% of the aggregate voting
power of both classes of Common Stock of the Company. Lynch has pledged all
1,200,000 shares of Class B Common Stock to a bank ("Bank") as security for
borrowings. In the unlikely event of a default by Lynch, the Bank could
acquire ownership of the shares of Class B Common Stock, which would
automatically convert to 1,200,000 shares of Class A Common Stock. In that
event, Lynch may no longer hold voting control of the Company. Mr. Mario J.
Gabelli is the Chairman of the Board and Chief Executive Officer of Lynch.
Mr. Gabelli may be deemed to be a beneficial owner of 150,000 shares of
Class A and all of the Class B Common Stock owned by Lynch (shown in the
above table) by virtue of his and certain affiliated parties' beneficial
ownership of 23.1% of the shares of Common Stock of Lynch Corporation. Mr.
Gabelli, however, specifically disclaims beneficial ownership of all shares
of the Class A and Class B Common Stock of the Company held by Lynch.
PROPOSAL I -- ELECTION OF DIRECTORS
The Board of Directors has five members and effective as of the Annual
Meeting the Board of Directors will have four members. The Company's By-Laws, as
amended, provide that a plurality of the votes cast at the Annual Meeting of
stockholders shall elect a Board of Directors. Directors are elected for
one-year terms and serve until the next annual meeting of stockholders and until
their successors are elected or until their death, resignation or removal. The
Board of Directors' Nominating Committee has recommended to the Board of
Directors that Charles C. Baum, Bradley J. Bell, Richard B. Black and Frank E.
Grzelecki be nominated for election to the Board of Directors and that Mr. Bell
be nominated for election by the holders of Class A Common Stock voting
separately as a class.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees listed below. If any
person named as a nominee should be unable or unwilling to stand for election at
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<PAGE>
the time of the Annual Meeting, the proxy holders will nominate and vote for a
replacement nominee recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why the nominees listed below may not be
able to serve as directors if elected.
The following table sets forth certain information regarding the nominees
for election as a director including the number and percent of shares of Class A
Common Stock beneficially owned by such persons as of the Voting Record Date. No
nominee for director is related to any other nominee for director or executive
officer of the Company by blood, marriage, or adoption, and there are no
arrangements or understandings between any nominee and any other person pursuant
to which such nominee was selected. The table also sets forth the number of
shares of Company Class A Common Stock beneficially owned as of March 27, 1997
by each director nominee and each executive officer of the Corporation and by
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Class A
Common
Director of Stock(1) Percentage
Company Beneficially of
Name and Title Since Owned Class
- ------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
Director Nominees:
For Election By Holders
of Class A and Class B
Common Stock:
Charles C. Baum 1992 180,499 (2) 12.0%
Chairman and
Chief Executive Officer
Richard B. Black 1993 8,000 (3) *
Director
Frank E. Grzelecki 1997 8,000 (3) *
Director
For Election By Holders
of Class A Common Stock:
Bradley J. Bell 1993 10,000 (3) *
Director
Other Directors:
Todd L. Parchman (8) 1993 10,500 (4) *
Director
Other Executive Officers:
Terence L. Russell 78,750 (5) 5.3%
President and Chief Executive
Officer of Morgan Drive Away, Inc.
Richard B. DeBoer 8,430 (6)(7) *
Chief Financial Officer
and Treasurer
Paul D. Borghesani 8,394 (6)(7) *
Vice President
of Morgan Drive Away, Inc.
All directors and executive officers
as a group (8 persons) 312,573 20.2%
- --------------
</TABLE>
* Indicates less than 1% of Common Stock beneficially owned.
Footnotes on following page.
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<PAGE>
(1) Based upon information furnished by the respective directors, director
nominees and executive officers. Under applicable regulations, shares are
deemed to be beneficially owned by a person if he directly or indirectly
has or shares the power to vote or dispose of the shares and if he has
the right to acquire such power with respect to shares within 60 days.
Accordingly, shares subject to options are only included if exercisable
within 60 days. Includes shares beneficially owned by members of the
immediate families of the director nominees or executive officers
residing in their homes.
(2) Includes 8,000 shares held of record by Mr. Baum's children, 1,602 shares
held in the Company's 401(k) Plan; and options to acquire 18,750 shares.
An additional 118,518 shares of Class A Common Stock are held by United
Holdings Co., Inc. of which Mr. Baum is a director, executive officer and
minority shareholder. See "Voting Securities and Principal Holders
Thereof" above.
(3) Includes options to acquire 8,000 shares. See "Management Remuneration --
Compensation of Directors."
(4) Includes 2,500 shares held in Mr. Parchman's IRA and options to acquire
8,000 shares. See "Management Remuneration -- Compensation of Directors."
(5) Includes options to acquire 2,750 shares. See "Management Remuneration --
Stock Options."
(6) Includes options to acquire 7,500 shares. See "Management Remuneration --
Stock Options."
(7) Includes holdings under the Company's 401(k) Plan of 394 shares for Mr.
Borghesani and 430 shares for Mr. DeBoer.
(8) Effective as of the Annual Meeting, Mr. Parchman will no longer serve as
a director of the Company.
The business experience of each director and director nominee, along with
that of certain other officers, is set forth below.
Mr. Baum (age 55) was appointed Chairman and Chief Executive Officer of
the Company in August 1992. Mr. Baum has also been Chief Financial Officer,
Treasurer and Secretary of United Holdings Co., Inc. and its predecessors and
affiliates since 1973. United Holdings Co., Inc. was involved in the metal
business until 1990 when it shifted its focus to become a firm which invests in
real estate and securities. Mr. Baum is also a director of United Holdings Co.,
Gabelli Funds, Inc. (a registered investment adviser under the Investment
Advisers Act of 1940, as amended), Shapiro Robinson & Associates (a firm which
represents professional athletes), and Municipal Mortgage and Equity LLC (a
company engaged in the business of mortgage financing).
Mr. Bell (age 44) became a director of the Company in 1993. Mr. Bell also
has been the Treasurer of Whirlpool Corporation, a manufacturer and marketer of
major appliances, since September 1987 and was elected Vice President of
Whirlpool in April 1990.
Mr. Black (age 63) joined the Company's Board of Directors in 1993. He is
Chairman of ECRM, Incorporated, a producer of electronic publishing equipment
since 1983. Mr. Black has been General Partner in KBA Partners, a venture
capital firm, since 1987. He is a director of Oak Technology, Inc., General
Scanners, Inc. and Gabelli Funds, Inc. From 1967 to 1979, Mr. Black was
Chairman, President and Chief Executive Officer of Maremont Corporation, an auto
parts manufacturer.
Mr. Grzelecki (age 59) was appointed to the Board of Directors of the
Company in January, 1997, to fill the vacancy created by the resignation of
Mario J. Gabelli, as a director of the Company. Mr. Grzelecki is being nominated
to be elected as a director at the Annual Meeting. He has served as President
and Chief Operating Officer of Handy & Harman, a precious metal and wire/tubing
fabricator, since 1992. He held the position of Vice Chairman at Handy & Harman
for 1989 to 1992. Mr. Grzelecki was a Corporate Executive Vice President and a
member of the Board of Directors of Beatrice Companies from 1984 to 1986.
Between 1981 and 1984, he was President and Chief Operating Officer and a member
of the board of Lenox, Inc. Prior to Lenox, Mr. Grzelecki spent 13 years at
Textron, Inc. and six years with the Colgate Palmolive Co. Mr. Grzelecki is a
director of Handy & Harman, Chartwell Re Corp, Spinnaker Industries and Barnes
Group Inc.
Mr. Parchman (age 42) has been a director of the Company since 1993. He
has been a member of Parchman Vaughan & Co., LLC since 1996. He has also served
as a Senior Vice President of Ferris, Baker Watts, Incorporated from 1990 until
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<PAGE>
the first quarter of 1996 and has served on its Board of Directors since 1994.
From 1985 to 1989, he served as Senior Managing Director of Signet Investment
Banking Company. Mr. Parchman is a director of Champion Industries, Inc. and a
member of the Baltimore City Board of Finance. Ferris, Baker Watts, Incorporated
was one of the managing underwriters of the Company's initial public offering
and has provided advisory services to the Company from time to time. Effective
as of the Annual Meeting, Mr. Parchman will no longer serve as a director of the
Company.
Mr. Russell (age 53) became President and Chief Executive Officer of
Morgan Drive Away, Inc. in 1996. He served as President and Chief Executive
Officer of the Ryder Automotive Carrier Division, a division of Ryder Systems,
beginning in 1988 until 1992. In 1993, Mr. Russell became Chairman of Ryder
Automotive Carrier Division, and President of Ryder International, both a
division of Ryder Systems. Previously, Mr. Russell served as Senior Vice
President-Development from 1983 to 1984 for Ryder Systems and then as President
of Ryder's Insurance Management Services Division from 1984 to 1988.
Mr. DeBoer (age 38) has been Vice President and Chief Financial Officer
of the Company since August 1988. He was elected Treasurer in May 1992. He also
serves as a Director of the American Trucking Association Finance Council. Mr.
DeBoer has also been Senior Vice President, Chief Financial Officer, and
Treasurer of Morgan Drive Away, Inc. since 1988. He joined Morgan Drive Away,
Inc. in 1984.
Mr. Borghesani (age 58) has been a Vice President of the Company since
1988 and President, Chief Operating Officer of Morgan Drive Away, Inc. from 1983
through 1992. He also serves as a Director of the Manufactured Housing
Institute, Supplier Group. From 1980 to 1983, Mr. Borghesani was in private
practice as an attorney specializing in transportation law and related matters.
From 1968 to 1980, Mr. Borghesani served in various management capacities for
Morgan Drive Away, Inc.
THE DIRECTORS, EXCEPT FOR MR. BELL, SHALL BE ELECTED UPON RECEIPT OF A
PLURALITY OF ALL VOTES CAST BY HOLDERS OF CLASS A AND CLASS B COMMON STOCK AT
THE ANNUAL STOCKHOLDERS MEETING. MR. BELL SHALL BE ELECTED UPON RECEIPT OF A
PLURALITY OF VOTES CAST BY HOLDERS OF CLASS A COMMON STOCK AT THE ANNUAL
STOCKHOLDERS MEETING.
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 1996, the Board of Directors of
the Company met 5 times in addition to taking a number of actions by unanimous
written consent. During fiscal 1996, no incumbent director of the Company
attended fewer than 75% of the aggregate of the total number of Board meetings
and the total number of meetings held by the committees of the Board of
Directors on which he served.
The Company's Nominating Committee is responsible for recommending nominees
for election to the Company's Board of Directors. The current members of this
committee are directors Grzelecki and Baum. The committee met 1 time during the
year ended December 31, 1996.
The Company's Audit Committee is responsible for recommending the
appointment of the Company's independent accountants, meeting with the
independent accountants to outline the scope and review the results of the
annual audit. The current members of this committee are directors Black and
Bell, with Mr. Bell serving as chairman. The Committee held 2 meetings during
the year ended December 31, 1996.
The Compensation Committee of the Board of Directors is comprised of Mr.
Black, as Chairman, Mr. Bell and Mr. Parchman. The Committee recommends employee
compensation, benefits and personnel policies to the Board of Directors and
establishes for Board approval salary and cash bonuses for senior officers. The
committee met 2 times during the year ended December 31, 1996.
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<PAGE>
Management Remuneration
Report of the Compensation Committee
The objectives of the Compensation Committee with respect to executive
compensation are the following:
(1) provide compensation opportunities generally competitive with those
offered by other similarly situated companies to ensure the Company's
ability to attract and retain talented executives who are essential to
the Company's long-term success;
(2) reward executive officers based upon their ability to achieve
short-term and long-term strategic goals and objectives and to enhance
stockholder value; and
(3) align the interests of the executive officers with the long-term
interests of stockholders by granting stock options which will become
more valuable to the executives as the value of the Company's shares
increases.
At present, the Company's executive compensation program is comprised
principally of base salary, annual incentive bonuses and long-term incentive
opportunities provided in the form of stock options or similar stock purchase
arrangements. The Company has an employment contract with Mr. Russell which
helps the Company retain Mr. Russell as an executive officer and currently
provides for his base salary. Annual incentive bonuses are expected to be tied
to the Company's financial performance during the fiscal year and the
executive's individual performance, and stock options have a direct relation to
long-term enhancement of stockholder value. In years in which the Company's
performance goals are met or exceeded, executive compensation should tend to be
higher than in years in which performance is below expectations.
Mr. Baum. Mr. Baum does not have an employment agreement with the Company.
His annual salary from January 1 to August 31, 1994 was $100,000. This amount
was adjusted to $113,500 on September 1, 1994 and was determined by the
Compensation Committee after negotiation with Mr. Baum in consideration of Mr.
Baum's knowledge and experience and the level of time (though less than full
time) Mr. Baum expends giving attention to the Company's affairs.
Mr. Russell. Mr. Russell was not employed by Morgan Drive-Away, Inc.
("Morgan Drive Away"), the Company's principal subisidiary, until 1996.
Consequently, no data is set forth below respecting his compensation in prior
years. The basic terms of Mr. Russell's compensation are provided for in an
employment agreement with Morgan Drive-Away. The agreement has an initial term
ending in February, 1998 and continues thereafter until terminated by the
Company or Mr. Russell upon 60 days prior notice. The contract entitles Mr.
Russell to receive a base salary of $240,000 for the first two years (subject to
review in the second year by the compensation committee) and to participate in
other benefits made available to management. The Company may at its option
terminate Mr. Russell's employment for "just cause" (as defined in the
agreement), upon 30 days written notice, or without cause upon 60 days notice.
If Morgan Drive-Away terminates Mr. Russell's employment other than for "just
cause" before the end of the initial two-year term, he will be entitled to a
six-month severance payment of $20,000 per month.
Also, in connection with Mr. Russell's initial engagement, Morgan-Drive
Away adopted a Special Employee Stock Purchase Plan under which Mr. Russell
purchased 70,000 shares of Class A Common Stock at an aggregate price of
$560,000. Mr. Russell paid $56,000 and delivered a promissory note in the amount
of $504,000 bearing an interest rate of five (5%) percent per annum due in 2003.
Mr. Russell has the right to repay the note using shares at $8.00 per share.
Morgan Drive-Away has the right to repurchase a portion of his shares (56,000
for one year and 28,000 for two years) at $8.00 per share.
Mr. Borghesani. The basic terms of Mr. Borghesani's compensation for 1995
and prior years were provided for in an employment agreement with Morgan Drive
Away, entered into in 1988 when it was initially acquired by Lynch. The initial
term of the contract expired July 26, 1993, but the contract continued in effect
until January 1996 as described below. The contract guaranteed Mr. Borghesani a
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<PAGE>
base salary of at least $125,000 per year (subject to increase with Board
approval) and participation in other benefits made available to management. Mr.
Borghesani's salary was $149,000 in 1995. Mr. Borghesani and Morgan Drive Away
entered into a consulting agreement effective April 1, 1996 which substantially
replaced Mr. Borghesani's former employment agreement. Mr. Borghesani will
remain available to the Company on a substantially continuous basis (though less
than full time) for basic compensation of $100,000 per year. If his employment
is terminated other than for just cause (as defined) he is entitled to a 3 month
severance benefit of $8,333 per month. Mr. Borghesani remains eligible to
participate in benefit plans and programs available to Morgan Drive Away's
executive officers.
In 1996 and prior years, the base salary of Mr. Baum was approved by the
Compensation Committee. The base salaries of the other executive officers are
based on the recommendations of Mr. Baum, taking into account personal
performance and experience.
Annual Incentive Bonuses. Under the Company's Bonus Plan, a bonus pool is
made available to approximately 65 management and administrative employees. The
bonus pool is generally equal to 4% of operating income with additional
incentives of 9% of incremental operating income over business plan levels. The
aggregate 1995 bonus paid in 1996 was $105,750 with $5,500 allocated to Mr.
Borghesani. There were no bonuses paid to employees in 1997 for 1996, other than
a bonus of $25,200 for Mr. Russell which represents the first years' interest on
the promissory note for the Special Employee Stock Purchase Plan.
Under the Company's Executive Bonus Plan and a similar arrangement
established under Mr. Russell's employment agreement, Mr. Baum and Mr. Russell
can obtain up to 50% of their base salary in bonus based upon exceeding the
prior year's results and/or the current year's business plan. The applicable
formulas include such planned items as (i) Operating Income, (ii) Earnings
Before Interest, Taxes, Depreciation and Amortization, (iii) Cash Flow, (iv)
Earnings Per Share, and (v) Return on Managed Assets. The 1995 Executive Bonus
paid in 1996 was $17,231 with $10,207 allocated to Mr. Borghesani and $7,025
allocated to Mr. Baum. There were no bonuses paid to Mr. Russell or Mr. Baum
under this agreement in 1997 for 1996 performance.
Allocations of bonuses under the Bonus Plan and Executive Bonus Plan are
made from the bonus pools by the Compensation Committee in its discretion,
generally based on its assessment of the executive's performance and level of
responsibility for achieving business plan and other operating objectives.
Stock Options. The Morgan Group, Inc. Incentive Stock Plan ("Stock Plan")
is the Company's principal long-term incentive plan for directors, executive
officers and other key employees. The objectives of the Stock Plan are to align
executive and stockholder long-term interests by creating a strong and direct
link between executive compensation and stockholder return, and to enable
executive officers and other key employees to develop and maintain a significant
long-term ownership position in the Company's Class A Common Stock. The Stock
Plan authorizes the Compensation Committee to award executive officers and other
key employees stock options, shares of restricted stock or certain cash awards.
See "-- Incentive Stock Plan" below.
The Stock Plan was approved by the stockholders of the Company in June
1993. A total of 200,000 shares have been reserved for issuance under the Plan,
of which options for 152,000, 163,500, 139,000 and 175,500 shares were granted
and outstanding at December 31, 1993, 1994, 1995 and 1996, respectively. Options
for 46,000 shares of Class A Common Stock have been granted to the named
executive officers as follows: 25,000 to Mr. Baum, 11,000 to Mr. Russell and
10,000 to Mr. Borghesani. Mr. Baum already had a significant equity interest in
the Company in addition to these option grants. Such grants were deemed
appropriate to reward Mr. Baum for past performance, especially for successful
completion of the initial public offering, and to enhance his equity incentive.
Mr. Baum's options are nonqualified stock options with an exercise price of
$8.75 per share and become exercisable one-fourth each year in 1994, 1995, 1996,
and 1997. Mr. Borghesani had not been granted any options prior to this grant
and his grant was deemed appropriate both to reward him for past performance and
to provide him with a significant equity incentive. Stock options are generally
granted with exercise prices at the prevailing market price and will only have a
value to the executives if the stock price increases. Additional options for
10,000 shares have been granted to other executive officers.
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<PAGE>
The Compensation Committee believes that the combination of the performance
bonus plan and option plan helps to link executive compensation to corporate
performance. This should result in better alignment of compensation with
corporate goals and the interests of the Company's stockholders. As performance
goals are met or exceeded, most probably resulting in increased value to
stockholders, executives are appropriately rewarded. The Committee believes that
compensation levels during fiscal 1996 for executive officers adequately reflect
the Company's compensation goals and policies.
Compensation
Committee Members
Richard B. Black, Chairman
Bradley J. Bell
Todd L. Parchman
Remuneration of Named Executive Officers. The following table sets forth
for each of the Company's last two fiscal years information with respect to the
Chairman and each of the executive officers of the Company whose aggregate
salary and bonus for fiscal 1996 exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Name and Principal Position Year Salary Bonus (1) (options/warrants) All Other Compensation (2)
- ---------------------------------- ----- --------- --------- ------------------ --------------------------
<S> <C> <C> <C> <C> <C>
Charles C. Baum 1996 113,500 --- --- 2,189
Chairman and 1995 113,500 7,025 --- 1,666
Chief Executive Officer 1994 104,500 8,750 --- 2,377
Terence L. Russell 1996 230,769 25,200 11,000 1,152
President and Chief Executive 1995 --- --- --- ---
Officer of Morgan Drive 1994 --- --- --- ---
Away, Inc.
Paul D. Borghesani 1996 100,000 --- --- 9,927
Vice President 1995 149,000 15,707 --- 6,374
1994 140,500 10,000 --- 5,593
</TABLE>
- ---------------
(1) Amounts paid to the executives in 1995 for 1994 performance and in 1996 for
1995 performance from a bonus pool established for distribution to
approximately 65 management and administrative employees. See "-- Annual
Incentive Bonuses" above.
(2) Amount shown for Mr. Borghesani for 1994, 1995 and 1996, respectively
include $200 matching contributions under the Company's 401(k) Plan. Amount
shown for Mr. Baum for 1994, 1995 and 1996 includes a $200 matching
contribution under the Company's 401(k) Plan. Remaining amounts shown for
Mr. Baum, Mr. Russell and Mr. Borghesani are annual premiums paid by the
Company for health, life and disability insurance.
Incentive Stock Plan
Executive officers as a group have received non-qualified options to
purchase 56,000 shares of Class A Common Stock under the Stock Plan. The purpose
of the Stock Plan is to provide to certain directors, officers (including
officers who are members of the Board of Directors) and other key employees of
the Company who are materially responsible for the management or operations of
the Company and have provided valuable services to the Company a favorable
opportunity to acquire Class A Common Stock of the Company, thereby providing
them with an increased incentive to work for the success of the Company and
better enabling the Company to attract and retain capable directors and
executive personnel.
-8-
<PAGE>
The following table includes the number of shares covered by both
exercisable and unexercisable stock options or warrants held by the named
executive officers as of March 27, 1997. Also reported are the values for
"in-the-money" options (options whose exercise price is lower than the market
value of the shares at fiscal year end) which represent the spread between the
exercise price of any such existing stock options and the fiscal year-end market
price of such stock.
Outstanding Stock Option Grants and Value Realized as of December 31, 1996
<TABLE>
<CAPTION>
Value of
Number of Unexercised Options In-the-Money Options
at Fiscal Year End at Fiscal Year End(3)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles C. Baum (1) 18,750 6,250 -- n/a (4)
Terence L. Russell (2) 2,750 8,250 -- n/a (4)
Paul D. Borghesani (1) 7,500 2,500 -- n/a (4)
</TABLE>
(1) The options granted to Mr. Baum and Mr. Borghesani under the Incentive
Stock Plan become exercisable over a four year period with 25% becoming
exercisable on each of August 17, 1994, August 17, 1995, August 17, 1996
and August 17, 1997.
(2) The options granted to Mr. Russell under the Incentive Stock Plan become
exercicable over a four year period with 25% becoming excerisable on each
of March 19, 1997, March 19, 1998, March 19, 1999 and March 19, 2000.
(3) Based on market value of the Class A Common Stock of $7.500 per share at
December 31, 1996.
(4) Since the fair market value of the shares subject to the options was below
the exercise price of the options at fiscal year end, such options were not
"in-the-money."
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential
Realizable Value
at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
-------------------------------------------------------------- -----------------------
Number of % of
Securities Total
Underlying Options SARs
Operations Granted to Exercise or
SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ---------------- ----------- -------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Terence Russell 11,000 22.7% $8.75 3/19/06 $59,457 $151,682
</TABLE>
Defined Benefit Plans
401(k) Plan. The Company adopted The Morgan Group, Inc. Deferred
Compensation 401(k) Plan (the "401(k) Plan") effective June 1, 1993. All
employees of the Company and its subsidiaries are eligible to participate in the
401(k) Plan after having satisfied eligibility requirements including age,
employment term and hours of service, as specified in the plan. Employees began
participating in the 401(k) Plan in January, 1994.
The 401(k) Plan permits employees to make contributions by deferring a
portion of their compensation. Participating employees also share in
contributions made by their respective employers. The annual employer
contribution to each participant's account is equal to 25% of the first $800 of
the participant's contribution, provided the employer has net income or retained
earnings. The Company has discretion to, and may consider, increasing the annual
matching contribution in the future. A participant's interest in both employee
and employer matching contributions and earnings thereon are fully vested at all
times. The Company also has discretion to make profit-sharing contributions to
the 401(k) Plan which would vest over six years.
Employee and employer contributions may be invested in the Company's Class
A Common Stock or in one or more guaranteed income or equity funds or insurance
contracts offered under the Plan from time to time. Except in certain cases of
financial hardship, a participant (or his or her beneficiary) receives
distributions from the 401(k) Plan only at retirement, termination of
-9-
<PAGE>
employment, total permanent disability, death, or termination of the Plan. At
that time, the value of the participant's interest in the 401(k) Plan is
distributed to the participant (or his or her beneficiary). The Company offers
no other post-termination benefit plans.
Other Benefits
The Company pays annual premiums for health, life and disability insurance
for executive officers.
Compensation of Directors
Directors of the Company who are salaried employees of the Company do not
receive any additional compensation for serving as director. Non-employee
directors of the Company receive $1,000 per year for serving on the Board of
Directors and $1,000 for each Board of Directors meeting attended. In addition
the Chairmen of the Compensation, Audit and Nomination Committees each receive
$5,000 annually.
The Stock Plan contains a formula providing for the grant of non-qualified
options to each non-employee director. Under this formula, non-employee
directors serving prior to consummation of the initial public offering,
including Mr. Bell and Mr. Black, were granted options to purchase (i) 4,000
shares of Class A Common Stock upon consummation of the initial public offering,
at an exercise price equal to the initial public offering price, and (ii) an
additional 4,000 shares of Class A Common Stock upon their re-election to the
Board of Directors at the 1994 annual meeting of the stockholders at an exercise
price equal to 80% of the fair market value of the Class A Common Stock on such
date. Non-employee directors first appointed to the Board of Directors after
completion of the initial public offering but prior to the 1994 annual meeting
of stockholders, including Mr. Parchman, who was entitled options to purchase
8,000 shares of Class A Common Stock upon his election to the Board of Directors
at an exercise price equal to the greater of (i) the initial public offering
price, or (ii) 80% of the fair market value of the Class A Common Stock on the
date of grant. Non-employee directors first elected to the Board of Directors at
or after the 1994 annual meeting of the stockholders will be granted options to
purchase 8,000 shares of Class A Common Stock upon initial election to the Board
of Directors at an exercise price equal to 80% of the fair market value of the
Class A Common Stock on the date of grant. All such options have terms of 10
years and one day and are exercisable 6 months after grant. To date, options for
32,000 shares have been granted to outside directors as a group under these
provisions. Mr. Bell and Mr. Black were each granted options for 4,000 shares
effective July 29, 1993 at an exercise price equal to the initial public
offering price of $9.00 per share and they were also each granted options for
4,000 shares, effective May 4, 1994, at an exercisable price equal to $6.80 per
share upon their re-election to the Board of Directors at the 1994 annual
meeting of stockholders. Mr. Parchman was granted an option for 8,000 shares at
an exercise price of $9.00 per share upon his initial election to the Board of
Directors in August, 1993. Mr. Grzelecki was granted an option for 8,000 shares
at an exercise price of $6.20 per share upon his election to the Board of
Directors in January 1997.
-10-
<PAGE>
Performance Graph
The graph shows the performance of the Company's Class A Common Stock since
July 22, 1993, in comparison to the NASDAQ Market Value Index, the American
Stock Exchange Market Value Index and a Company-constructed peer group described
below. The Class A Common Stock was listed on The American Stock Exchange
effective February 9, 1995.
[Graph omitted]
<TABLE>
<CAPTION>
BASE 7/30/93 8/31/93 9/30/93 10/29/93 11/30/93 12/31/93 1/31/94 2/28/94 3/31/94
---- ------- ------- ------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Morgan Group, Inc. 100 94.59 91.89 86.49 89.19 86.49 84.01 94.85 97.56 86.91
Peer Group Index 100 100.27 110.02 115.03 116.63 114.69 115.66 128.07 114.81 107.45
AMEX market Value Index 100 100.00 105.73 106.28 110.79 106.58 113.57 115.21 109.89 103.60
</TABLE>
<TABLE>
<CAPTION>
4/29/94 5/31/94 6/30/94 7/29/94 8/31/94 9/30/94 10/31/94 11/30/94 12/30/94 1/31/95
------- ------- ------- ------- ------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Morgan Group, Inc. 92.34 82.84 89.86 83.06 87.14 81.91 87.37 77.82 78.04 86.25
Peer Group Index 115.04 117.32 113.86 122.90 134.15 119.59 118.02 109.41 115.53 119.56
AMEX market Value Index 102.53 101.70 96.77 101.60 105.56 106.82 106.50 100.80 100.45 101.26
</TABLE>
<TABLE>
<CAPTION>
2/28/95 3/31/95 4/28/95 5/31/95 6/30/95 7/31/95 8/31/95 9/29/95 10/31/95 11/30/95
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Morgan Group, Inc. 94.47 94.69 97.44 91.95 88.05 85.30 96.30 102.71 100.64 90.99
Peer Group Index 140.25 143.34 142.46 142.01 143.09 161.61 165.90 169.45 157.92 170.66
AMEX market Value Index 103.23 107.30 111.05 114.35 115.97 121.52 123.76 125.07 119.39 123.41
</TABLE>
<TABLE>
<CAPTION>
12/29/95 1/31/96 2/28/96 3/31/96 4/28/96 5/31/96 6/30/96 7/31/96 8/31/96 9/29/96
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Morgan Group, Inc. 92.60 87.07 102.27 92.60 96.98 96.98 103.22 84.70 83.31 80.76
Peer Group Index 167.38 175.71 188.84 198.12 199.41 201.53 199.64 202.68 203.72 222.84
AMEX market Value Index 125.35 128.19 130.47 132.56 136.94 141.52 133.85 125.06 129.57 132.20
</TABLE>
10/31/96 11/30/96 12/29/96
-------- -------- --------
The Morgan Group, Inc. 83.54 84.93 83.54
Peer Group Index 225.98 227.74 212.30
AMEX market Value Index 131.42 136.12 134.18
Peer group comparisons. The Company arranges for delivery services for the
manufactured housing and motor home industries as well as provides financial and
insurance services. Accordingly, the Company's peer group includes those
manufacturers and other companies who arrange for delivery services and provide
for financial and insurance services.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company consists of Mr. Black (who is
Chairman), Mr. Bell and Mr. Parchman.
Certain Transactions with Related Persons
The Company was formed by Lynch in 1988 to acquire the shares of Morgan
Drive Away, Inc. Lynch is a diversified company listed on the American Stock
Exchange with subsidiaries in multimedia, services and manufacturing. Lynch
currently owns all 1.2 million shares of the Company's outstanding Class B
Common Stock and 150,000 shares of Class A Common Stock, which together
represent approximately 66% of the combined voting power of all outstanding
-11-
<PAGE>
Common Stock. By virtue of its relationship with Lynch, the Company receives
certain benefits and services from Lynch such as directors and officers errors
and omissions insurance placement, strategic consultation from time to time and
similar items. The Board of Directors has approved a services agreement
providing for the payment of reasonable compensation to Lynch for these benefits
and services. Such payments in 1996 were $100,000.
INDEPENDENT AUDITORS
Representatives of Ernst & Young, the Corporation's auditors for 1996, are
expected to be available at the Annual Meeting with the opportunity to make a
statement if they desire to do so and to answer appropriate questions. The
Corporation has not yet selected a principal auditor for 1997.
Effective March 19, 1996, the Company replaced Arthur Anderson LLP ("Arthur
Anderson") and retained Ernst & Young LLP ("Ernst & Young") as its public
accountants. Ernst & Young had expressed reliance on Arthur Anderson's audit for
1994 and 1995. Arthur Anderson's report on the Company's financial statements
during the 1994 and 1995 fiscal years prior to its replacement contained no
adverse opinion or disclaimer of opinions, and was not qualified or modified as
to uncertainty, audit scope or accounting principles. The decision to change
auditors was approved by the Company's Board of Directors.
During the 1994 and 1995 fiscal years and until its replacement there were
no disagreements between the Company and Arthur Anderson on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Arthur Anderson, would have caused it to make a reference to the subject matter
of the disagreement in connection with its reports.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder wishes to have presented at the next Annual
Meeting of the Company to be held in May 1998 must be received at the main
office of the Company for inclusion in the proxy statement no later than 120
days in advance of April 12, 1998. Any such proposal should be sent to the
attention of the Secretary of the Company at 28651 U.S. 20 West, Elkhart,
Indiana 46514-1168.
FILINGS UNDER SECTION 16(a) OF THE 1934 ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's officers and directors and persons who own more than 10% of
the Company's Class A Common Stock file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that during the fiscal
year ended December 31, 1996, all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners with respect to
Section 16(a) of the 1934 Act were complied with.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described in the Proxy Statement. However, if any other
matters should properly come before the Annual Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
-12-
<PAGE>
The solicitation of proxies is made on behalf of the Board of Directors of
the Company, and the cost thereof will be borne by the Company. The Company has
employed Corporate Investor Communications, Inc., 111 Commerce Road, Carlsadt,
New Jersey, 07072 to assist in this solicitation at a cost of $3,725 plus out of
pocket expenses. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy material to the beneficial owners of the Class A Common Stock. In
addition to solicitation by mail, directors, officers, and employees of the
Company may solicit proxies personally or by telephone without additional
compensation.
Each stockholder is urged to complete, date and sign the proxy and return
it promptly in the enclosed return envelope.
Insofar as any of the information in this Proxy Statement may rest
peculiarly within the knowledge of persons other than the Company, the Company
relies upon information furnished by others for the accuracy and completeness
thereof.
By Order of the Board of Directors
/s/ Charles C. Baum
Charles C. Baum, Chairman of the Board
and Chief Executive Officer
April 12, 1997
-13-
