UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1998
THE MORGAN GROUP, INC.
2746 Old U.S. 20 West
Elkhart, Indiana 46514
(219) 295-2200
Commission File Number 1-13586
Delaware 22-2902315
(State of Incorporation) (I.R.S. Employer Identification Number)
Securities Registered Pursuant to Section 12(b) of the Act:
American Stock Exchange
Class A common stock, without par value
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the issuer's voting stock held by non-affiliates,
as of March 26, 1999 was $7,392,000. The number of shares of the Registrant's
Class A common stock $.015 par value and Class B common stock $.015 par value,
outstanding as of March 26, 1999, was 1,249,207 shares, and 1,200,000 shares,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The business experience of each director and director nominee, along with
that of certain other officers, is set forth below.
Mr. Baum (age 57) was appointed Chairman and Chief Executive Officer of the
Company in 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., Inc., Gabelli
Asset Management, 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 Co. (a
company engaged in the business of mortgage financing).
Mr. Bell (age 46) became a director of the Company in 1993. He has served
as the Vice President, Chief Financial Officer and Treasurer of Rohm and Haas
Company, a chemical company, since 1997. Mr. Bell served as the Vice President
and Treasurer of Whirlpool Corporation, a manufacturer and marketer of major
appliances, from 1987 to 1997.
Mr. Black (age 65) joined the Company's Board of Directors in 1993. Mr.
Black is Vice Chairman and has been a director of Oak Technology, Inc., a
worldwide semiconductor supplier for the personal computer and consumer
electronics industries, since 1988. He was President of Oak Technology, Inc.
from January 1988 to March 1999. Mr. Black has been Chairman and a director of
ECRM, Incorporated, a producer of electronic publishing equipment, since 1983.
He is also a director of GSI Lumonics, Inc., a manufacturer of laser-based
position systems, testing equipment, and medical imaging systems, Oak
Technology, Inc. and Gabelli Asset Management, Inc.
Mr. Grzelecki (age 61) was appointed to the Board of Directors of the
Company in 1997. Mr. Grzelecki retired as Vice Chairman of Handy & Harman, a
diversified industrial manufacturing company in 1998, a position he held since
1997. He served as President and Chief Operating Officer of Handy & Harman from
1992 until 1997. Mr. Grzelecki is a director of Chartwell Re Corp., Spinnaker
Industries Inc. and Barnes Group Inc.
Mr. Prather (age 54 ) has been a director of the Company since 1997. He has
served as the President and Chief Executive Officer of Bull Run Corporation, an
investment holding company, since 1992 and as Executive Vice President of Gray
Communications Systems, Inc., a media and communications company, since 1996.
Mr. Prather is also a director of Bull Run Corporation and Gray Communications
Systems, Inc.
Mr. Charleston (age 52) became President and Chief Executive Officer of the
Company's primary operating subsidiary, Morgan Drive Away, Inc. ("Morgan Drive
Away") in July, 1998. He has been with Morgan Drive Away for the past five years
serving as President of the Manufactured Housing Group of Morgan Drive Away and
Senior Vice President prior to that.
Mr. Borghesani (age 60) has been Vice President and Special Counsel of
Morgan Drive Away since 1996. He served as Vice President of the Company and its
predecessors from 1988 to 1996. Mr. Borghesani has also been Counsel to Baker &
Daniels, a private law firm, since 1996. 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.
Mr. Duerksen (age 58) was named Treasurer, Vice President and Chief
Financial Officer of the Company and Treasurer, Senior Vice President and Chief
Financial Officer of Morgan Drive Away in December, 1997. Prior to joining the
Company, Mr. Duerksen was Manager - Financial Systems and Reporting of CTS
Corporation, a manufacturer of electronic components, from February 1996 to
October 1997. He served as Financial Controller of CTS Corporation's subsidiary,
CTS Singapore PTE, Ltd., from August, 1994 to February, 1996, and was a
self-employed financial consultant from February 1994 to August 1994. Mr.
Duerksen was Manager - Corporate Accounting and Accounting Services for J & L
Specialty Steel from January, 1993 to February, 1994.
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, 1998, all filing requirements applicable to its
officers, directors and greater than 10% stockholders with respect to Section
16(a) of the 1934 Act were complied with, except that (a) Mr. Charleston filed a
Form 3 late, (b) Mr. Charleston filed a Form 5 late reporting his acquisition of
15,000 options and (c) Mr. Prather filed a Form 5 late reporting his acquisition
of 8,000 options.
Item 11. EXECUTIVE COMPENSATION
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 and long-term incentive opportunities provided in the
form of stock options. 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 beginning in 1998 was $123,500. Mr. Baum's salary 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. Charleston. Mr. Charleston does not have an employment agreement with
the Company. His annual base salary beginning in 1998 is $155,000. He was
granted options to purchase 15,000 shares in September, 1998, in recognition of
his appointment as President and Chief Executive Officer of Morgan Drive Away.
Mr. Duerksen does not have an employment agreement with the Company. His
annual base salary beginning in 1998 is $115,000.
Mr. Borghesani. Mr. Borghesani and Morgan Drive Away entered into a
consulting agreement effective April 1, 1996, which replaced Mr. Borghesani's
former employment agreement. Under such agreement, Mr. Borghesani will remain
available to the Company on a substantially continuous basis (though less than
full time) for basic compensation of $98,000 per year. If his employment is
terminated other than for just cause (as defined in the employment agreement) he
is entitled to a three-month severance benefit of $8,333 per month. During such
period, Mr. Borghesani remains eligible to participate in benefit plans and
programs available to Morgan Drive Away's executive officers.
Mr. Russell. Mr. Russell resigned from Morgan Drive Away in July, 1998.
During his employment, the basic terms of Mr. Russell's compensation were
provided for in an employment agreement with Morgan Drive Away. Under the terms
of the agreement, Mr. Russell received a base salary of $240,000 subject to
review by the Compensation Committee. Prior to his termination Mr. Russell
participated in other benefits made available to management. 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
for the shares and delivered a promissory note in the amount of $504,000. Upon
Mr. Russell's termination, the Company purchased his 70,000 shares of Class A
Common Stock at the then market price of $637,000. As part of the settlement,
Mr. Russell paid off the promissory note.
Mr. Russell received continuance of his salary and other benefits through
August 14, 1998, and received $6,875 for consulting services rendered from
August 15, 1998 through February 15, 1999. Mr. Russell paid the Company $12,600
interest on his promissory note for 1998.
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.
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 170,375 shares were outstanding at December 31, 1998.
Options for 62,500 shares of Class A Common Stock have been granted to the named
executive officers as follows: 25,000 to Mr. Baum, 22,500 to Mr. Charleston,
10,000 to Mr. Borghesani and 5,000 to Mr. Duerksen. 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 are fully exercisable. 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 54,500 shares have been granted to other executive
officers.
The Compensation Committee believes that the 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 Compensation Committee believes that compensation levels during
fiscal 1998 for executive officers adequately reflect the Company's compensation
goals and policies.
Compensation
Committee Members
-----------------
Richard B. Black, Chairman
Bradley J. Bell
Remuneration of Named Executive Officers. The following table sets forth,
for each of the Company's last three fiscal years, information with respect to
the Chief Executive Officer and each of the executive officers of the Company
whose aggregate salary and bonus paid for fiscal 1998 exceeded $100,000 and
includes information with respect to Terence L. Russell, former President and
Chief Executive Officer of Morgan Drive Away, who resigned in July, 1998.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
Name and Principal Position Year Salary Bonus (options/warrants) All Other Compensation (1)
- ------------------------------------------------------------------- ---------------- --------------------------
<S> <C> <C> <C> <C> <C>
Charles C. Baum 1998 118,308 --- --- 1,417
Chairman and 1997 113,500 --- --- 2,413
Chief Executive Officer 1996 113,500 --- --- 2,189
Edward Charleston 1998 146,058 --- --- 6,748
President and Chief Executive 1997 144,896 --- --- 4,738
Officer of Morgan Drive Away 1996 121,996 12,000 --- 4,738
Dennis Duerksen 1998 109,038 --- --- 4,101
Treasurer, Vice President 1997 18,981 (2) --- 5,000 1,375
and Chief Financial Officer 1996 --- --- --- ---
Paul D. Borghesani 1998 98,000 --- --- 6,799
Vice President of 1997 99,731 --- --- 6,410
Morgan Drive Away 1996 100,000 --- --- 9,927
Terence L. Russell 1998 156,993 --- --- 2,815
Former President and Chief 1997 240,000 --- --- 28,886
Executive Officer of 1996 230,769 25,200 11,000 1,152
Morgan Drive Away
- ---------------
</TABLE>
(1) Amounts shown for Mr. Baum and Mr. Borghesani include $200 matching
contributions under the Company's 401(k) Plan. Amounts shown for Mr.
Charleston, Mr. Duerksen, Mr. Borghesani and Mr. Russell include an
automobile allowance. Remaining amounts shown for all executive officers
are for annual premiums paid by the Company for health, life and disability
insurance.
(2) Mr. Duerksen joined the Company in December of 1997.
Incentive Stock Plan
The purpose of the Stock Plan is to provide to certain directors, officers
(including officers who are members of the Board of Directors) and other key
employees of the Company who are materially responsible for the management or
operations of the Company and have provided valuable services to the Company a
favorable opportunity to acquire Class A Common Stock of the Company, thereby
providing them with an increased incentive to work for the success of the
Company and better enabling the Company to attract and retain capable directors
and executive personnel. Options to purchase 15,000 shares were granted to Mr.
Charleston in September 1998, in recognition of his promotion to President and
Chief Executive Officer of Morgan Drive Away. No other options were granted to
named executive officers in 1998.
<TABLE>
<CAPTION>
Outstanding Stock Option Grants and Value Realized as of December 31, 1998
Individual Grants
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Securities Granted to of Stock Price
Underlying Employees in Exercise or Appreciation
Options Year Base Price Expiration for Option Term
Name Granted (#) 1998 ($Sh) Date 5%($)(1) 10%($)(1)
---- ----------- ---- ----- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles C. Baum --- --- --- --- --- ---
Edward Charleston 15,000 100% $7.00 9-17-08 $66,034 $167,343
Dennis Duerksen --- --- --- --- --- ---
Paul D. Borghesani --- --- --- --- --- ---
Terence L. Russell --- --- --- --- --- ---
</TABLE>
(1) These gains are based upon assumed rates of annual compound stock
appreciation of 5% and 10% from the date the options were granted over
the full option term. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on option exercises are
dependent upon the future performance of the shares and overall stock
market conditions. There can be no assurance that the amounts reflected
on this table will be achieved.
The following table includes the number of shares covered by both
exercisable and unexercisable stock options or warrants held by the named
executive officers as of December 31, 1998. Also reported are the values for
"in-the-money" options (options whose exercise prices are lower than the market
value of the shares at fiscal year end) which represent the spread between the
exercise price of any such existing stock options and the fiscal year-end market
price of such stock.
<TABLE>
<CAPTION>
Number of Value of
Shares Unexercised Options In-the-Money Options
Acquired On Value at Fiscal Year End at Fiscal Year End(1)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles C. Baum --- --- 25,000 --- $ 0 (2) $ 0 (2)
Edward Charleston --- --- 7,500 15,000 $ 0 (2) $5,825
Paul D. Borghesani --- --- 10,000 --- $ 0 (2) $ 0 (2)
Dennis Duerksen --- --- 1,250 3,750 $ 0 (2) $ 0 (2)
</TABLE>
(1) Based on market value of the Class A Common Stock of $7.375 per share at
December 31, 1998.
(2) 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."
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 401(k) 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
employment, total permanent disability, death, or termination of the 401(k)
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 directors. 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 Nominating 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, 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 exercise price equal to $6.80 per share upon their re-election to the Board
of Directors at the 1994 annual meeting of stockholders. 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. Non-employee directors
first elected to the Board of Directors after the 1997 annual meeting of
stockholders may be granted options to purchase up to 8,000 shares of Class A
Common Stock at an exercise price of not less than 80% of the fair market value
of Class A Common Stock on the date of grant, if and to the extent determined by
the Board of Directors. All options presently granted have terms of 10 years and
one day and are exercisable 6 months after grant. To date, options for 49,000
shares have been granted to non-employee directors as a group under these
provisions.
Performance Graph
The graph shows the performance of the Company's Class A Common Stock since
December 31, 1993, in comparison to the American Stock Exchange Market Value
Index and a customer selected peer group.(1) The Class A Common Stock was listed
on The American Stock Exchange effective February 9, 1995.
[graph omitted]
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Morgan Group A 100.00 92.90 110.23 99.44 124.07 99.58
Customer Selected Stock List 100.00 83.27 113.83 104.58 144.27 143.58
AMEX Market Index 100.00 88.33 113.86 120.15 144.57 142.61
</TABLE>
(1) The peer group is composed of Clayton Homes, Inc., Fleetwood
Enterprises, Inc., JB Hunt Transport Services, Inc., Kevco, Inc.,
Landstar System, Inc., Patrick Industries, Inc. and Skyline
Corporation. The Company arranges for delivery for the manufactured
housing, commercial and recreational vehicle industries as well as
provides financial and insurance services. Accordingly, the peer group
includes manufactured housing and recreational vehicle manufacturers
and companies who arrange for delivery services and provide financial
and insurance services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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 26,
1999, 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.
<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) 187,861 (3) 14.7 % -- --
2545 Wilkens Avenue
Baltimore, Maryland 21223
Lynch Corporation (4) 155,900 (5) 12.5 %(5) 1,200,000(5) 100%(5)
401 Theodore Fremd Avenue
Rye, New York 10580-1430
United Holdings Co., Inc. (2) 118,518 9.5 % -- --
2545 Wilkens Avenue
Baltimore, Maryland 21223
John L. Keeley, Jr. 95,550 (6) 7.6 % -- --
401 South LaSalle Street
Suite 1201
Chicago, Illinois 60605
- -----------------
</TABLE>
(1) Based upon 1,249,207 shares of Class A Common Stock outstanding, which does
not include stock options held by management and non-employee directors for
170,375 shares of Class A Common Stock, of which options for 123,625 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, 2,714 shares
held in the Company's 401(k) Plan, and unexercised options to acquire
25,000 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) The Lynch Corporation ("Lynch") announced that it would transfer its equity
interest in the Company, along with Lynch's multimedia and service
businesses, to Lynch Interactive Corporation, and distribute the shares of
such entity to its shareholders. The proposed spin-off requires certain
regulatory and other approvals. Lynch expects to obtain those approvals and
effect the spin-off in mid-1999. No record or payment date has been set.
(5) Lynch owns 1,200,000 shares of Class B Common Stock. Class B Common Stock
is automatically converted into Class A Common Stock upon transfer on a
share-for-share basis. 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 49% of the then outstanding shares
of Class A Common Stock. The outstanding Class A Common Stock and Class B
Common Stock held by Lynch represents 70.0% 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 155,900 shares of
Class A Common Stock 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 23.0% of the shares of Common Stock of Lynch. Mr.
Gabelli, however, specifically disclaims beneficial ownership of all shares
of the Class A Common Stock and Class B Common Stock of the Company held by
Lynch.
(6) Includes (a) 49,600 shares held of record by Keeley Asset Management Corp.,
(b) 9,500 shares held by Kamco Performance Limited Partnership, (c) 11,000
shares held of record by Kamco Limited Partnership No. 1 and (d) 2,200
shares held by the John L. Keeley, Jr. Foundation.
<PAGE>
The following table sets forth certain information regarding each nominee
for election as a director at the next annual meeting including the number and
percent of shares of Class A Common Stock beneficially owned by such persons as
of March 26, 1999. 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 26, 1999 by each executive officer of the Company and by all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Director of Class A
Company Common Stock (1) Percentage
Name and Title Since Beneficially Owned of Class
- -------------- ----- ------------------ --------
<S> <C> <C> <C>
Director Nominees:
For Election By Holders of
Class A and Class B Common Stock:
Charles C. Baum 1992 187,861 (2) 14.7%
Chairman and
Chief Executive Officer
Bradley J. Bell 1993 10,000 (3) *
Director
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:
Robert S. Prather, Jr. 1997 8,000 (3) *
Director
Other Executive Officers:
Edward Charleston 7,900 (4) *
President and Chief Executive Officer
of Morgan Drive Away, Inc.
Dennis R. Duerksen 1,250 (5) *
Chief Financial Officer
and Treasurer
Paul D. Borghesani 11,088 (6) *
Vice President
of Morgan Drive Away, Inc.
Terence L. Russell 5,506 (7) *
Former Vice President of the Company
and Former President and Chief Executive
Officer of Morgan Drive Away, Inc.
All directors and executive officers
as a group (9 persons) 247,605 19.0%
- --------------
footnotes on following page
</TABLE>
<PAGE>
* Indicates less than 1% of Common Stock beneficially owned.
(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, 2,714 shares
held in the Company's 401(k) Plan; and currently exercisable options to
acquire 25,000 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 currently exercisable options to acquire 8,000 shares.
(4) Includes currently exercisable options to acquire 7,500 shares.
(5) Includes currently exercisable options to acquire 1,250 shares.
(6) Includes currently exercisable options to acquire 10,000 shares and 588
shares under the Company's 401(k) Plan.
(7) Includes 3,006 shares held of record by Mr. Russell's spouse.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was formed by Lynch in 1988 to acquire the shares of Morgan
Drive Away. 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 155,900 shares of Class A Common Stock, which together represent
approximately 70% of the combined voting power of all outstanding 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 1998 were $100,000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Amendment
No. 1 to be signed on behalf of the undersigned, thereto duly authorized.
THE MORGAN GROUP, INC.
Date: April 28, 1999 By: /s/ Dennis R. Duerksen
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Dennis R. Duerksen
Chief Financial Officer
