SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant: Yes.
Filed by a Party other than the Registrant: No.
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 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
[ ] 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: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(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): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] 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. N/A
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[MORGAN LOGO]
2746 Old U.S. 20 West
Elkhart, Indiana 46514-1168
(219) 295-2200
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
To Be Held On June 17, 1999
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 Thursday, June 17, 1999 at 3:00 P.M., Mishawaka
Time.
The Annual Meeting will be held for the following purposes:
1. Election of Directors. To elect one director of the Company by holders
of shares of Class A Common Stock, voting separately as a class, and
to elect all remaining directors by holders of Class A Common Stock
and Class B Common Stock, voting together as a single class.
2. Amendment to Certificate of Incorporation. To consider and act upon a
proposal to amend the Company's Certificate of Incorporation to allow
the transfer of shares of Class B Common Stock in certain limited
situations without such shares converting to shares of Class A Common
Stock.
3. 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 April 20, 1999, 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, 1998, 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
May 12, 1999
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>
[MORGAN LOGO]
2746 Old U.S. 20 West
Elkhart, Indiana 46514-1168
(219) 295-2200
---------------
PROXY STATEMENT
---------------
FOR
ANNUAL MEETING OF STOCKHOLDERS
June 17, 1999
This Proxy Statement is being furnished to the holders of Class A Common
Stock, $0.015 par value per share (the "Class A Common Stock"), and Class B
Common Stock, $0.015 par value per share (the "Class B Common Stock" and
together with the Class A Common Stock, the "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 3:00 P.M., Mishawaka Time, on
June 17, 1999 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 May 12, 1999.
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: Dennis R. Duerksen, 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 April 20, 1999
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 1,249,207 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.
<PAGE>
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>
<PAGE>
(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) Lynch Corporation ("Lynch") announced that it would transfer its equity
interest in the Company, along with Lynch's multimedia and service
businesses, to Brighton Communications Corporation, a wholly-owned
subsidiary of Lynch Interactive Corporation, and distribute the shares of
Lynch Interactive Corporation to the shareholders of Lynch. 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 proposed amendment to the Company's Certificate
of Incorporation would allow the transfer of Class B common Stock in
limited situations without the Class B common Stock automatically
converting to Class A Common Stock. 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>
PROPOSAL I -- ELECTION OF DIRECTORS
The Board of Directors has five 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, Frank E. Grzelecki and
Robert S. Prather, Jr. be nominated for election to the Board of Directors and
that Mr. Prather 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
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 each nominee
for election as a director 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> <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%
- --------------
</TABLE>
footnotes on following page
<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.
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.
<PAGE>
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.
THE DIRECTORS, EXCEPT FOR MR. PRATHER, SHALL BE ELECTED UPON RECEIPT OF A
PLURALITY OF ALL VOTES CAST BY HOLDERS OF CLASS A COMMON STOCK AND CLASS B
COMMON STOCK AT THE ANNUAL MEETING OF STOCKHOLDERS. MR. PRATHER SHALL BE ELECTED
UPON RECEIPT OF A PLURALITY OF VOTES CAST BY HOLDERS OF CLASS A COMMON STOCK AT
THE ANNUAL MEETING OF STOCKHOLDERS.
<PAGE>
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 1998, the Board of Directors of
the Company met five times in addition to taking a number of actions by
unanimous written consent. During fiscal 1998, 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, which is responsible for recommending
nominees for election to the Company's Board of Directors, is made up of
directors Grzelecki and Baum. The committee met one time during the year ended
December 31, 1998.
The Company's Audit Committee is responsible for recommending the
appointment of the Company's independent accountants and 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 three meetings
during the year ended December 31, 1998.
The Compensation Committee of the Board of Directors is comprised of Mr.
Black, as Chairman, Mr. Bell and Mr. Prather. 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 two times during the year ended December 31, 1998.
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.
<PAGE>
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.
<PAGE>
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
Robert S. Prather, Jr.
<PAGE>
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 $200 matching
contributions under the Company's 401(k) Plan. Amounts shown for Mr.
Charleston, Mr. Duerksen, Mr. Borghesani and Mr. Russell include an
automobile allowance. Remaining amounts shown for all executive officers
are for annual premiums paid by the Company for health, life and disability
insurance.
(2) Mr. Duerksen joined the Company in December of 1997.
<PAGE>
Incentive Stock Plan
The purpose of the Stock Plan is to provide to certain directors, officers
(including officers who are members of the Board of Directors) and other key
employees of the Company who are materially responsible for the management or
operations of the Company and have provided valuable services to the Company a
favorable opportunity to acquire Class A Common Stock of the Company, thereby
providing them with an increased incentive to work for the success of the
Company and better enabling the Company to attract and retain capable directors
and executive personnel. Options to purchase 15,000 shares were granted to Mr.
Charleston in September 1998, in recognition of his promotion to President and
Chief Executive Officer of Morgan Drive Away. No other options were granted to
named executive officers in 1998.
<TABLE>
<CAPTION>
Outstanding Stock Option Grants and Value Realized as of December 31, 1998
Individual Grants
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Securities Granted to of Stock Price
Underlying Employees in Exercise or Appreciation
Options Year Base Price Expiration for Option Term
Name Granted (#) 1998 ($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 $167,343
Dennis Duerksen --- --- --- --- --- ---
Paul D. Borghesani --- --- --- --- --- ---
Terence L. Russell --- --- --- --- --- ---
</TABLE>
(1) These gains are based upon assumed rates of annual compound stock
appreciation of 5% and 10% from the date the options were granted over
the full option term. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on option exercises are
dependent upon the future performance of the shares and overall stock
market conditions. There can be no assurance that the amounts reflected
on this table will be achieved.
<PAGE>
The following table includes the number of shares covered by both
exercisable and unexercisable stock options or warrants held by the named
executive officers as of December 31, 1998. Also reported are the values for
"in-the-money" options (options whose exercise prices are lower than the market
value of the shares at fiscal year end) which represent the spread between the
exercise price of any such existing stock options and the fiscal year-end market
price of such stock.
<TABLE>
<CAPTION>
Number of Value of
Shares Unexercised Options In-the-Money Options
Acquired On Value at Fiscal Year End at Fiscal Year End(1)
Name Exercise (#) Realized ($) 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.
<PAGE>
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.
Certain Transactions with Related Persons
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.
INDEPENDENT AUDITORS
Representatives of Ernst & Young, the Company's auditors for 1997 and 1998,
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
Board of Directors of the Company has not yet completed the process of selecting
a principal auditor for 1999.
<PAGE>
PROPOSAL II -- AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has approved a proposed amendment to the Company's
Certificate of Incorporation which would allow the transfer of shares of Class B
Common Stock in limited situations without such shares converting into shares of
Class A Common Stock.
The Company's Certificate of Incorporation presently provides that any
transfer of shares of Class B Common Stock, whether by sale, assignment,
bequest, appointment or otherwise, will cause such shares to be automatically
converted into Class A Common Stock. The Certificate of Incorporation further
provides that the shares of Class B Common Stock shall be registered in the name
of the beneficial owners and not in "street" name or "nominee" name. The
proposed amendment would provide that the shares of Class B Common Stock may be
transferred without being converted into shares of Class A Common Stock to the
parent corporation or other business entity of the registered holder of the
Class B Common Stock, to a direct or indirect wholly-owned subsidiary of such
holder, or to a wholly-owned subsidiary of a corporation or other business
entity of which the holder is a wholly-owned subsidiary, provided such transfer
is not made with a view toward disposing of such transferee subsidiary in order
to avoid the effect of the conversion provision. The proposed amendment would
also specifically allow the contemplated transfer by Lynch to Brighton
Communications Corporation in connection with the proposed spin-off by Lynch to
its stockholders of the capital stock of Lynch Interactive Corporation without
converting the Class B Common Stock to Class A Common Stock. For the purposes of
the proposed amendment the term "wholly-owned" means ownership of all common
equity interests of a business entity.
In addition to owning 155,900 shares of the Company's Class A Common Stock,
Lynch owns all 1,200,000 outstanding shares of the Company's Class B Common
Stock. Lynch has announced that it plans to transfer its equity interest in the
Company, along with its multimedia and service businesses, to Lynch Interactive
Corporation or its subsidiaries, and distribute the shares of Lynch Interactive
Corporation to Lynch's shareholders. It is expected that the equity interest in
the Company will be transferred to Brighton Communications Corporation, a
wholly-owned subsidiary of Lynch Interactive Corporation. Under the Company's
present Certificate of Incorporation, such a transfer would result in the
automatic conversion of the shares of Class B Common Stock into shares of Class
A Common Stock on a share-for-share basis. The proposed amendment would allow
Lynch to transfer all of the shares of Class B Common Stock to Lynch Interactive
Corporation or Brighton Communications Corporation without the shares converting
to shares of Class A Common Stock, so that Lynch Interactive Corporation would
have the same voting control of the Company (70%) which Lynch currently has.
Without the amendment to the Certificate of Incorporation, the shares of Class B
Common Stock would convert to shares of Class A Common Stock and Lynch
Interactive Corporation would have only 55.36% of the voting control of the
Company.
Because the proposed amendment would allow Lynch to transfer the Class B
Common Stock without such shares converting to Class A Common Stock, thereby
allowing the transfer of 70% voting control instead of 55.36% voting control,
the proposed amendment preserves the anti-takeover effect, if any, of having a
70% controlling shareholder as opposed to a shareholder with 55.36% voting
control.
The Board of Directors believes that the proposed amendment is in the best
interests of the Company and its shareholders, because it will facilitate the
transfer of Lynch's controlling interest in the Company to Lynch Interactive
Corporation, an entity which will focus solely on the multimedia and service
businesses, including the Company. The Board of Directors anticipates no adverse
effects on the Company or its stockholders as a result of the amendment. The
spin-off effects no substantial change in ultimate control of the Company. The
Board of Directors recommends that stockholders vote in favor of the proposed
amendment to the Certificate of Incorporation.
<PAGE>
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.
VOTE REQUIRED TO APPROVE MATTERS
A quorum for the meeting requires a presence in person or by proxy of
holders of a majority of the outstanding shares of the Common Stock of the
Company. Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspector(s) of election appointed for that meeting.
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. The
directors, except for Mr. Prather, shall be elected upon receipt of a plurality
of all votes cast by the holders of Class A Common Stock and Class B Common
Stock voting together as a single class. Mr. Prather shall be elected upon
receipt of a plurality of all votes cast by holders of Class A Common Stock.
<PAGE>
Other actions, including the approval of the amendment to the Certificate
of Incorporation, are authorized by the affirmative vote of a majority of the
holders of Class A Common Stock and Class B Common Stock voting together as a
single class.
Abstentions, broker non-votes (i.e., where brokers or nominees indicate
they have not received instructions from the beneficial owner or other person
entitled to vote shares with respect to a particular matter) and votes withheld
will be included in the calculation of the presence of a quorum. Abstentions and
broker non-votes are not counted for purposes of the election of directors.
Abstentions are counted as votes against, and broker non-votes are not counted,
for purposes of approving other actions.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder wishes to have presented at the next Annual
Meeting of the Stockholders to be held in May 1999 must be received at the main
office of the Company for inclusion in the proxy statement no later than 120
days in advance of May 12, 2000 and must otherwise comply with the requirements
of Rule 14a-8 under the Exchange Act. Any such proposal should be sent to the
attention of the Secretary of the Company at 2746 Old U.S. 20 West, Elkhart,
Indiana 46514-1168.
In addition, if a shareholder intends to present a proposal at the next
annual meeting of stockholders without including the proposal in the proxy
materials for that meeting, and if the proposal is not received by the Company
by March 29, 2000, then the proxies designated by the Board of Directors for
that meeting may vote in their discretion on any proposal any shares for which
they have been appointed proxies without mention of such matter in the Company's
proxy statement or on the proxy card for that meeting.
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.
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 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.
<PAGE>
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
May 12, 1999
<PAGE>
THE MORGAN GROUP, INC.
Proxy For Annual Meeting of Shareholders to be held June 17, 1999
The undersigned hereby appoints Charles C. Baum or Dennis R. Duerksen,
such as the proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of The Morgan Group, Inc. (the "Company"), which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held June 17, 1999, or at any adjournment thereof, as follows:
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
Please date, sign and mail your proxy
card back as soon as possible!
Annual Meeting of Stockholders
THE MORGAN GROUP, INC.
June 17, 1999
A |X| Please mark your
votes as in this example
FOR all nominees WITHHOLD
listed at right AUTHORITY
except as marked to to vote for all nominees
the contrary below listed at right
1. ELECTION [ ] [ ]
OF
DIRECTORS
(INSTRUCTIONS: To withhold authority to vote for an individual
nominee, write that nominee on the space provided below).
(a) ELECTION OF FOUR DIRECTORS
BY ALL STOCKHOLDERS
Nominees:
Richard Black
Charles Baum
Frank Grzelecki
Bradley Bell
(b) ELECTION OF DIRECTOR BY
HOLDERS OF CLASS A COMMON STOCK
Nominee:
Robert Prather, Jr.
2. AMENDMENT TO CERTIFICATE OF INCORPORATION
to allow transfer of shares of Class B Common Stock in certain limited
situations without such shares converting to shares of Class A Common Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. The proxies are authorized to vote in their discretion on any other matters
which may properly come before the Annual Meeting to the extent set forth in
the proxy statement.
<PAGE>
This proxy when properly executed will be voted in the manner directed herein by
the undersigned Stockholder(s). If no direction is made, this Proxy will be
voted FOR Proposals 1(a) and 2(b).
Your vote is important. If you do not expect to attend the Annual Meeting, or if
you do plan to attend but wish to vote be proxy, please date, sign and mail this
proxy. A return envelope is provided for this purpose.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(Signature) (Signature) Date , 1999
SIGNATURE (IF JOINTLY OWNED)
NOTE: Please date this proxy. Please sign exactly as your name appears on the
accompanying. If shares are held jointly, both joint owners should sign.
If signing as attorney, executor, administrator, guardian or in any other
representative capacity, please give your full title as such.