BALDWIN & LYONS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 2, 2000
TO THE SHAREHOLDERS OF
BALDWIN & LYONS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Baldwin &
Lyons, Inc. (the "Corporation") will be held Tuesday, May 2, 2000 at 10:00 a.m.,
Indianapolis Time, at 1099 North Meridian Street, Indianapolis, Indiana 46204
for the following purposes:
1. To elect twelve (12) directors,
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for the Corporation, and
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 13, 2000,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are urged to
mark, date and sign the enclosed proxy and return it promptly so your vote can
be recorded. If you are present at the meeting and desire to do so, you may
revoke your proxy and vote in person.
Shares of the Class B Common Stock are not entitled to vote and proxies are
not being solicited in regard to the Class B shares.
Date: April 1, 2000.
By Order of the Board of
Directors
James E. Kirschner
Secretary
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON
<PAGE> 1
BALDWIN & LYONS, INC.
PROXY STATEMENT
GENERAL INFORMATION
USE OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by
Baldwin & Lyons, Inc. (the "Corporation") of proxies to be voted at the Annual
Meeting of Shareholders to be held on Tuesday, May 2, 2000, in accordance with
the foregoing notice. The Proxy Statement and accompanying proxy card were
mailed to shareholders on or about April 1, 2000.
The mailing address of the Corporation's principal office is 1099 North
Meridian Street, Indianapolis, Indiana 46204.
Any proxy may be revoked by the person giving it at any time before it is
voted by delivering to the Secretary of the Corporation a written notice of
revocation or a duly executed proxy bearing a later date. Shares represented by
a proxy, properly executed and returned to the Corporation, and not revoked,
will be voted at the Annual Meeting.
Shares will be voted according to the directions of the shareholder as
specified on the proxy. If no directions are given, the proxy will be voted FOR
the election of the twelve directors named as nominees in this Proxy Statement
and FOR the appointment of Ernst & Young LLP as independent auditors for the
Corporation. Any other matters that may properly come before the meeting will be
acted upon by the persons named in the accompanying proxy in accordance with
their discretion.
RECORD DATE AND VOTING SECURITIES
The close of business on March 13, 2000, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. As of March 13, 2000, the
Corporation had 2,321,154 shares of Class A Common Stock outstanding and
entitled to vote. Each share of Class A Common Stock is entitled to one vote.
The vote can be exercised in person or by proxy. There are no other outstanding
securities of the Corporation entitled to vote. There will be no cumulative
voting for the election of directors. Shares of Class B Common Stock are not
entitled to vote and proxies are not being solicited in regard to the Class B
shares.
The By-Laws of the Corporation provide that the Board of Directors is to
consist of thirteen (13) members. Dr. L. Leslie Waters, a member of the Board of
Directors since 1980, recently informed the Corporation that in light of his age
and other factors, he would not be able to dedicate sufficient time to the
Corporation's business to serve as a director and would therefore not stand for
re-election to the Board of Directors. No decision has been made as to when, or
if, the vacancy will be filled. It is also possible that the Board of Directors
will be reduced to twelve members.
PROXIES MAY NOT BE VOTED FOR GREATER THAN TWELVE (12) NOMINEES.
EXPENSES OF SOLICITATION
All expenses of the solicitation of proxies will be paid by the
Corporation. Officers, directors and other employees of the Corporation may
solicit proxies by telephone or telegram or by special calls. The Corporation
will also reimburse brokers and other persons holding stock in their names or in
the names of their nominees for their expenses in forwarding proxies and proxy
material to the beneficial owners of the Corporation's stock.
</PAGE> 1
<PAGE> 2
BENEFICIAL OWNERS OF MORE THAN 5% OF THE CLASS A COMMON STOCK
The following table contains information concerning persons who, to the
knowledge of the Corporation, beneficially owned on March 13, 2000, more than 5%
of the outstanding voting securities of the Corporation:
<TABLE>
<CAPTION>
Number of Class A Shares
Name and Address of And Nature of
Beneficial Owner (1) Beneficial Ownership Percent of Class A Shares
- ------------------------- ------------------------ -------------------------
<S> <C> <C>
SHAPIRO FAMILY INTERESTS 999,600 43.06%
(in the aggregate) (2)
311 S. Wacker Drive
Chicago, Illinois
Nathan Shapiro 622,200 26.81%
Lester Shapiro 283,200 12.20%
Robert Shapiro 406,500 17.51%
Norton Shapiro 324,300 13.97%
CIBC TRUST COMPANY
(Bahamas) Limited 524,718 22.61%
Nassau, Bahamas (3)
JOHN D. WEIL
509 Olive Street 307,650 13.25%
St. Louis, Missouri (4)
</TABLE>
[FN]
(1) Shares as to which the beneficial owner has, or may be deemed to have, sole
voting and investment powers as to Class A shares, except as otherwise noted.
(2) Information with respect to the Shapiro family interests was obtained from
Amendment No. 13 to Schedule 13D dated December 23, 1986 and Forms 4 and 5 as
filed by such persons with the Securities and Exchange Commission and delivered
to the Corporation, and additional information was provided by Nathan Shapiro.
The amounts shown for the individuals are included in the amount shown for the
Shapiro family interests in the aggregate. Nathan, Robert and Norton Shapiro are
sons of Lester Shapiro. The shares reported in the above table for the Shapiro
family interests include 142,800 Class A (6.10%) shares held by Gelbart Fur
Dressers, 33,000 Class A (l.41%) shares held of record by Jay Ell Company and
142,500 Class A shares (6.08%) held of record by Diversified Enterprises,
Illinois partnerships of which Nathan, Robert and Norton Shapiro are the general
partners and as to which they share voting and investment powers. These shares
are also included in the listing for individual beneficial ownership of each of
the three.
(3) Information regarding current ownership was obtained from the Form 5 filed
with the Securities and Exchange Commission and delivered to the Corporation for
the year ended December 31, 1993. According to Amendment No. 9 to Schedule 13D,
dated October l, 1986, as filed with the Securities and Exchange Commission and
delivered to the Corporation, by CIBC Trust Company (Bahamas) Limited, such
shares are held in trust for the benefit of members of the Pritzker family of
Chicago, Illinois, including lineal descendants of Nicholas J. Pritzker and
certain of their current and former spouses.
(4) Information with respect to the interests of John D. Weil was obtained from
Amendment No. 2 to Schedule 13D, dated September 15, 1987 and Forms 4 and 5
filed with the Securities and Exchange Commission and delivered to the
Corporation, and additional information provided by Mr. Weil. The shares
reported include all shares held in the name of family members, family
custodianships or family trusts of Mr. Weil. Mr. Weil has reported that he has
sole voting and investment powers as to 156,450 Class A shares and shared voting
and investment powers as to 151,200 Class A shares, subject to the limitation
that Mr. Weil has declared that the Schedule 13D shall not be construed as an
admission that he is, for purposes of Sections 13(d) or 13(g) of the Securities
Exchange Act, the beneficial owner of the securities covered by the Schedule
13D.
</FN>
</PAGE> 2
<PAGE> 3
DIRECTORS AND NOMINEES
Twelve (12) directors are to be elected to hold office until the 2001
Annual Meeting and until their respective successors are elected and qualified.
The Corporation contemplates that all of the nominees will be able to serve.
However, if any of the nominees are unable to serve, the persons named as
proxies in the accompanying Proxy may vote for another nominee, or nominees
according to their best judgment.
Dr. L. Leslie Waters, a long time director has indicated that he does not
wish to stand for re-election to the Board. The Board would like to thank Dr.
Waters for his long and valuable service as a director.
In light of Dr. Waters' decision, there will be one vacancy on the Board.
It has not yet been decided when, or if, a replacement for Dr. Waters will be
appointed. However, the current plan is that one seat on the Board will remain
vacant at this time.
All of the nominees are now directors of the Corporation. None of the
directors are family-related, except Nathan, Robert and Norton Shapiro, who are
brothers. Set forth in the following summaries is the age of each director and
nominee, all offices held with the Corporation, his principal occupation, a
brief account of his business experience during the past five years and his
other directorships.
STUART D. BILTON (3) Age 53 Director Since 1987
Mr. Bilton is currently the President of Alleghany Asset Management. Inc. as
well as the President and Chief Executive Officer of Chicago Trust Company. Mr.
Bilton is also the Chairman and Chief Executive Officer of The Alleghany Funds.
JOSEPH J. DEVITO Age 48 Director Since 1997
Mr. DeVito is a Vice President of the Corporation and Executive Vice President
and a director of Sagamore Insurance Company ("Sagamore"), a wholly-owned
subsidiary of the Corporation's wholly-owned subsidiary, Protective Insurance
Company ("Protective"). Mr. DeVito has been employed by the Corporation since
1981.
OTTO N. FRENZEL III (2) Age 69 Director Since 1979
Mr. Frenzel is the Chairman of the Executive Committee of National City Bank of
Indiana and, prior thereto, was the Chairman of the Board of National City Bank
of Indiana, a national bank and a subsidiary of National City Corporation. Mr.
Frenzel serves on the Board of Directors of the following companies: American
United Life Insurance Company; IPALCO Enterprises, Inc.; and Indianapolis Power
& Light Company.
JAMES W. GOOD Age 56 Director Since 1997
Mr. Good is a Vice President of the Corporation and Executive Vice President and
a director of Protective. Mr. Good has been employed by the Corporation since
1964.
</PAGE> 3
<PAGE> 4
GARY W. MILLER (3) Age 59 Director Since 1977
Mr. Miller was elected Chairman and Chief Executive Officer of the Corporation
in 1997 and has been President of the Corporation since 1983. He is also
Chairman, President and Chief Executive Officer of the Corporation's
wholly-owned subsidiaries, Protective and B & L Insurance, Ltd., and
Protective's wholly-owned subsidiary, Sagamore. Mr. Miller has been employed by
the Corporation since 1966.
JOHN M. O'MARA (2)(3) Age 72 Director Since 1981
Mr. O'Mara is a business consultant and private investor. From 1993 though 1996
he was a financial consultant with Citicorp Venture Capital Ltd. He is also a
director of: Glenoit, Inc.; The Midland Company; and Plantronics, Inc.
THOMAS H. PATRICK (1)(3) Age 55 Director Since 1983
Mr. Patrick has been Executive Vice President, Special Advisory Services, Office
of the Chairman of Merrill Lynch & Co., Inc. since 1993. Mr. Patrick also serves
as a director of Comdisco, Inc.
JOHN A. PIGOTT (1)(2)(4) Age 68 Director Since 1997
Mr. Pigott is currently retired. Prior to his retirement in 1996, he served in
various capacities, including Director, Vice Chairman, President and Chief
Executive Officer of Anixter Corp.
NATHAN SHAPIRO (1)(2)(3) Age 63 Director Since 1979
Mr. Shapiro is the president of SF Investments, Inc., a broker/dealer in
securities located in Chicago, Illinois. Since December, 1977, he has also
served as President of SLD Corp., management consultants. Mr. Shapiro also
serves as a director of D.V.I., Inc.
NORTON SHAPIRO (4) Age 67 Director Since 1983
Mr. Shapiro is currently retired. Prior to his retirement he was Executive Vice
President of National Superior Fur Dressing & Dyeing Co., Inc., a corporation
engaged in the processing, cleaning and dressing of furs. He had been an officer
of that company since 1957.
ROBERT SHAPIRO (1) Age 61 Director Since 1997
Mr. Shapiro is the President and Chief Executive Officer of Emlin Cosmetics,
Inc.
JOHN D. WEIL (1)(3)(4) Age 59 Director Since 1997
Mr. Weil is President of Clayton Management Co. Mr. Weil also serves as a
director of: Allied Healthcare Products, Inc.; PICO Holdings, Inc.; Oglebay
Norton Co.; Todd Shipyards Corp.; and Southern Investors Service Co., Inc.
[FN]
(1) Member of the Compensation and Employee Benefits Committee which makes
recommendations to the Board of Directors concerning the compensation
arrangements for the executive officers of the Corporation; establishes policies
relating to salaries and job descriptions; evaluates performance of executive
employees; and reviews and administers remuneration and incentive plans and
employee benefit programs of the Corporation, other than those administered by
the Option Committee. This Committee held two formal meetings during 1999, and
also carried on its business through telephone conversations and informal
contacts among its members.
</PAGE> 4
<PAGE> 5
(2) Member of the Audit Committee which reviews with the independent auditors
the scope of the audit work performed, any questions arising in the course of
such work, and inquiries as to other matters such as internal accounting
controls, financial reporting and security and personnel staffing. The Audit
Committee held two formal meetings during 1999, and also carried on its business
through telephone conversations.
(3) Member of the Investment Committee which considers and makes decisions
concerning investments made by the Corporation and each of its wholly owned
subsidiaries. The Investment Committee held two formal meetings during 1999 and
also carried on its business through frequent telephone conversations and
informal contacts among its members.
(4) Member of the Option Committee which reviews, manages, and administers the
Employee Discounted Stock Option and Deferred Director Fee Option Plan and, in
the case of the Employee Plan, designates officers and key employees to receive
options and the number and terms of the options. The Committee also interprets
the terms of all three plans. The Option Committee held two formal meetings
during 1999, and also carried on its business through telephone conversations
and informal contacts among its members.
</FN>
During 1999, the Board of Directors held four regular meetings, and each
director attended more than 75% of the meetings of the Board of Directors and
the committees on which he served with the exceptions of Mr. Patrick, who
attended two of the four Board of Directors meetings; Mr.O'Mara, who attended
one of the two Audit Committee meetings; and Mr. Pigott, who attended one of the
two Option Committee meetings. The Board of Directors has no standing nominating
committee or committee performing a similar function.
DIRECTORS' FEES
Members of the Board of Directors who are not employed by the Corporation
receive directors' fees in the amount of $4,500 for each quarterly meeting
attended in person. Directors attending by teleconference or unable to attend a
meeting receive a fee of $3,000. Some of the directors have elected to
participate in the Baldwin & Lyons, Inc. Deferred Director Fee Option Plan
("Deferred Fee Plan"), which was approved by shareholders at the 1989 annual
meeting. Those directors have deferred receipt of portions of their director
fees. Options received under the Deferred Fee Plan become exercisable one year
from the date of the grant and are exercisable within ten years of the date of
the grant. Exercise prices are either $1.00 or $0.33 per share. The difference
in exercise price reflects the effect of the three for one share split which
became effective on November 17, 1993. A total of 6,571 discounted stock options
were granted in lieu of cash compensation during 1999. From the beginning of the
plan to the present, a total of 69,832 options have been granted in lieu of cash
compensation under the Deferred Fee Plan. A total of 17,059 options have been
exercised since the beginning of the Deferred Fee Plan, including 8,547 options
exercised during 1999. Directors who are employed by the Corporation do not
receive directors' fees. Members of committees of the Board of Directors receive
no additional compensation for their service on committees. Travel and
out-of-pocket expenses of members of the Board of Directors incurred in
attending Board of Directors meetings and committee meetings are paid by the
Corporation.
</PAGE> 5
<PAGE> 6
COMMON STOCK BENEFICIALLY OWNED BY DIRECTORS AND MANAGEMENT
The following table contains information concerning shares of Class A and B
Common Stock of the Corporation beneficially owned on March 13, 2000 by all
directors and nominees, the five most highly compensated executive officers (the
"Named Executive Officers") and by all directors and officers as a group:
<TABLE>
<CAPTION>
Name of Beneficial Owner
or Identity of Group (1) Class A Shares Class B Shares
- ------------------------- ----------------------- ----------------------
Number Percent Number Percent
(8) (2) (7) (8)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Stuart D. Bilton -0- -0- 22,283 .21%
G. Patrick Corydon 8,100 .35% 60,233 .56%
Joseph J. DeVito 3,750 .16% 77,750 .72%
Otto N. Frenzel, III 3,750 .16% 26,138 .24%
James W. Good 13,800 .59% 65,200 .60%
James E. Kirschner 12,375 .53% 76,833 .71%
Gary W. Miller 37,029 1.60% 182,783 1.69%
John M. O'Mara(3) 68,250 2.94% 283,923 2.64%
Thomas H. Patrick(4) 71,100 3.06% 194,716 1.81%
John A. Pigott 2,100 .09% 18,222 .17%
Nathan Shapiro(5) 622,200 26.81% 1,804,603 16.79%
Norton Shapiro(5) 324,300 13.97% 1,165,500 10.85%
Robert Shapiro(5) 406,500 17.51% 1,178,829 10.96%
L. Leslie Waters(6) 7,800 .34% 24,900 .23%
John D. Weil 307,650 13.23% 1,488,429 13.86%
Directors and officers as a 1,252,104 53.94% 4,368,742 39.48%
group (15 persons including
the above named)
</TABLE>
[FN]
(1) Unless otherwise indicated, shares disclosed are those as to which the
beneficial owner has sole voting and investment powers or sole investment power
with respect to Class B shares; and includes the beneficial interest of spouses
and minor children who share the same residence as the named individual.
(2) A total of 10,737,387 Class B shares were issued and outstanding as of
March 13, 2000.
(3) Includes 11,100 Class A shares and 44,400 Class B shares owned by Mr.
O'Mara's wife; and 45,900 Class A shares and 183,600 Class B shares held in
trust for his children, with Mr. O'Mara serving as trustee. Mr. O'Mara disclaims
any beneficial interest in the foregoing shares.
(4) Includes 29,100 Class A shares and 15,400 Class B shares owned by Mr.
Patrick's wife. Mr. Patrick disclaims any beneficial interest in her shares.
(5) See "Beneficial Owners of More than 5% of the Common Stock" for Class A
shares. The shares reported in the above table for Nathan, Norton and Robert
Shapiro include 1,150,800 Class B shares owned by three partnerships: Gelbart
Fur Dressers; Jay Ell Company and Diversified Enterprises. Nathan, Robert and
Norton Shapiro are general partners of those partnerships and they share
investment power.
</PAGE> 6
<PAGE> 7
(6) Includes 150 Class A shares and 600 Class B shares owned by Dr. Waters'
wife. Dr. Waters has determined not to stand for re-election to the Board of
Directors.
(7) Includes the number of Class B shares which each of the following persons
have a right to acquire within 60 days by exercise of stock options: Mr. Miller
78,667; Mr. Nathan Shapiro 10,139; Mr. Patrick 8,649; Messrs. Frenzel and Bilton
8,768 each; Mr. O'Mara 8,553; Mr. DeVito 59,250; Mr. Kirschner 39,333; Mr. Good
57,700; Mr. Corydon 41,858; Messrs. Weil and Robert Shapiro 2,229 each; Mr.
Piggott 1,722; and all officers and directors as a group 327,865.
(8) For purposes of determining the percentage of the class owned by each named
individual, shares subject to options in favor of that individual are deemed
outstanding but are not deemed outstanding for computing the percentage of the
class held by any other person. All shares subject to options in favor of
officers and directors as a group are deemed outstanding for purposes of
computing the percentage of the class owned by the officers and directors as a
group.
</FN>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
JOINT REPORT OF THE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE AND THE OPTION
COMMITTEE
The executive compensation program is administered by the Compensation and
Employee Benefit Committee of the Board of Directors (the "Committee") in
conjunction with the Option Committee (the "Option Committee"). At the present
time, three members of the Option Committee are also members of the Committee.
The Committee oversees the administration of the Corporation's employee benefits
plans, other than those administered by the Option Committee, and establishes
policies relating to compensation of employees. The Committee reviews all
aspects of executive compensation and evaluates performance of the Corporation's
executive officers. The Option Committee reviews, manages, and administers all
of the stock option plans of the Corporation and, in the case of the Employee
Plan, designates officers and key employees to receive options, and the number
and terms of the options. The Committee and the Option Committee functions are
coordinated to determine and review the total compensation package for each of
the named executive officers of the Corporation. All decisions by the Committee
relating to the compensation of the Corporation's executive officers are
reviewed by the full Board before they are implemented.
The goal of the Corporation's executive compensation policy is to ensure
that an appropriate relationship exists between executive pay and the creation
of shareholder value, while, at the same time, motivating and retaining key
employees. To achieve this goal, the Corporation's executive compensation
policies integrate annual base compensation with bonuses based upon corporate
performance. The Corporation also utilizes equity-based incentive and deferred
compensation to ensure that executives, and management in general, have a
continuing stake, as shareholders, in the long-term success of the Corporation.
The Committee first seeks to set the CEO's compensation in light of the
standards mentioned above and the performance of the Corporation in relation to
expectations of the Board. The compensation of other executives is set in
reference to the compensation of the CEO. Because of the unique nature of the
markets which the Corporation serves, the Committee does not believe that there
are individual companies or industry measures to which it can reliably compare
the performance of the Corporation over a limited period of time. Thus, while
the Committee considers the Corporation's financial results in light of industry
standards, prevailing market conditions for the Corporation's products and
expectations regarding future performance, corporate performance is evaluated
primarily against flexible, internally created goals and expectations which must
be adjusted frequently in order to react to the numerous external factors which
affect the Corporation. The Committee does not set specific numerical targets or
goals, but rather evaluates the performance of the management team annually in
relation to opportunities presented to them and challenges addressed by them.
This process is largely subjective and is not intended to, and cannot be
expected to, result in changes in executive compensation which are in direct
proportion
</PAGE> 7
<PAGE> 8
to increases or decreases in the Corporation's net income, return on equity or
any other single quantitative measure or a predetermined combination of
quantitative measures during the year.
In reviewing the compensation to be paid to the Corporation's executive
officers during any given year, the Committee views the results of operations
over a several year period. This approach recognizes the cyclical nature of the
Corporation's business, the fact that, as a specialty insurance underwriter
operating within very narrow markets, the Corporation must, from time-to-time,
sacrifice short-term profits for long-term financial growth. In addition, this
approach recognizes the stability of the executive management team which has
essentially been in place since 1980. Portions of executive officers annual
compensation have, in the past, been paid in the form of stock options and
equity appreciation rights. The use of stock options and equity appreciation
rights results in total compensation which is highly leveraged against, and
directly linked to, the Corporation's performance and increases in shareholder
value. The linkage results from the relationship of the stock options to the
market price of the Corporation's Class B common shares and the relationship of
the equity appreciation rights to the book value of the Corporation's shares.
In its deliberations regarding calendar year 1999, the Committee considered
its long-term approach regarding the goals and performance of the Corporation
and the performance and present compensation of each executive officer of the
Corporation. The Committee determined to increase salaries of executive officers
by an average of 8.8% and annual bonuses by an average of 4.2% when compared to
the prior year amounts. In addition, equity appreciation rights were granted to
the executive officers and other management personnel during 1999. No stock
options were granted to any of the executive officers during 1999. The Committee
and the Option Committee believe that the increases approved are consistent with
a long-term view of both the performance of the Corporation and of its executive
officers.
The Committee has considered the possible impact of Section 162(m) of the
Internal Revenue Code, and the regulations thereunder, on the deductibility of
the executive compensation by the Corporation. At the present time, the
Committee believes that the likelihood that Section 162(m) will have a
significant impact on the Corporation is negligible. Nonetheless, the Committee
plans to continue to monitor the regulations and any possible impact they may
have on the Corporation, and to take appropriate steps when, and if, any
measures are necessary.
COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE
Thomas Patrick, John Pigott, Nathan Shapiro, Robert Shapiro, L. Leslie
Waters and John Weil.
OPTION COMMITTEE
John Pigott, Norton Shapiro, L. Leslie Waters and John Weil.
</PAGE> 8
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table discloses, for the years ended December 31, 1997, 1998
and 1999, the cash compensation paid by the Corporation, as well as certain
other compensation paid or accrued for those years, to each person who served as
the Chief Executive Officer of the Corporation during the year and to each of
the five most highly compensated executive officers of the Corporation ("Named
Executive Officers") in all capacities in which they served.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
----------------------------- ------------------------ -----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Year Salary Bonus ($) Annual Restricted Securities LTIP All Other
Principal Position ($) Comp/ Stock Underlying Payouts Compen-
Other Awards Options/ ($) sation ($)1
($) ($) SARs (#)
- ------------------- -------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary W. Miller 1999 369,236 375,000 0 0 100,000 0 12,800
President 1998 314,346 330,000 0 0 0 0 12,800
CEO 1997 224,553 300,000 0 0 100,000 0 12,750
James W. Good 1999 284,722 280,000 0 0 75,000 0 12,800
Vice President 1998 243,700 230,000 0 0 0 0 12,800
1997 192,358 200,000 0 0 75,000 0 12,750
Joseph J. DeVito 1999 272,917 280,000 0 0 75,000 0 12,800
Vice President 1998 241,835 230,000 0 0 0 0 12,800
1997 194,014 200,000 0 0 75,000 0 12,750
James E. Kirschner 1999 212,167 100,000 0 0 50,000 0 12,800
Vice President 1998 207,038 195,000 0 0 0 0 12,800
Secretary 1997 188,889 150,000 0 0 50,000 0 12,750
G. Patrick Corydon 1999 214,500 200,000 0 0 50,000 0 12,800
Vice President 1998 206,660 200,000 0 0 0 0 12,800
Treasurer 1997 180,735 165,000 0 0 50,000 0 12,750
</TABLE>
[FN]
1 Company contribution to Salary Saving and Profit Sharing Plan (401K) Plan
</FN>
</PAGE> 9
<PAGE> 10
CORPORATION PERFORMANCE
The following graph shows a five year comparison of cumulative total return
for the Corporation's Class B common shares, the NASDAQ Insurance Stock Index
and the Russell 2000 Index.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
BALDWIN & LYONS, INC. (CLASS B COMMON SHARES)
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Baldwin & Lyons Nasdaq Insurance
Class B Stocks Russell 2000
--------------- ---------------- ------------
<S> <C> <C> <C>
December 31, 1994 100.000 100.000 100.000
December 31, 1995 112.296 142.048 126.206
December 31, 1996 129.649 161.922 144.835
December 31, 1997 173.772 237.522 174.557
December 31, 1998 181.454 211.579 168.542
December 31, 1999 165.308 164.286 201.610
</TABLE>
</PAGE> 10
<PAGE> 11
STOCK OPTIONS
STOCK OPTION EXERCISES AND HOLDINGS
The following table contains information about the exercise of stock
options during 1999, by the Named Executive Officers. It also contains
information about their unexercised stock options held as of the end of 1999.
The Corporation has not granted any stock appreciation rights and none are
outstanding.
Options shown in the table below represent discounted stock options and
fair market value options granted under the Baldwin & Lyons Employee Discounted
Stock Option Plan. Each option represents the right for the employee to acquire
one Class B common share upon payment in cash of the option exercise price.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN THE LAST
YEAR AND YEAR END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Name Shares Value Number of Value of
Acquired on Realized Unexercised Unexercised
Exercise ($) Options/SARs In-the-Money
(#) At Year End Options/SARs
(#) At Year End
($)(V)
- ------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gary W. Miller 10,500 207,156 78,667 (E) 253,500
33,333 (N) 0
James W. Good 4,500 91,875 57,700 (E) 162,663
25,000 (N) 0
Joseph J. DeVito 4,500 94,406 59,250 (E) 195,406
25,000 (N) 0
James E. Kirschner 4,500 90,750 39,333 (E) 126,750
16,667 (N) 0
G. Patrick Corydon 4,500 91,875 41,858 (E) 180,091
16,667 (N) 0
</TABLE>
[FN]
(E) Exercisable at December 31, 1999.
(N) Not exercisable at December 31, 1999.
(V) Market value of underlying securities at year end, minus exercise price.
</FN>
</PAGE> 11
<PAGE> 12
EQUITY APPRECIATION RIGHTS
EQUITY APPRECIATION RIGHT EXERCISES AND HOLDINGS
The following table contains information about Equity Appreciation Rights
("Rights") exercised by the Named Executive Officers during 1999. It also
contains information about unexercised Rights held by the Named Executive
Officers as of the end of 1999.
Rights shown in the table below represent Rights issued by the Corporation
to each of the Named Executive Officers. Each Right entitles the employee to
payment for the appreciation in the book value of one share of the Corporation's
common stock from the end of the quarter immediately prior to the date of grant
through the end of the quarter immediately prior to the date of exercise. The
Rights vest and become exercisable at the rate of one-third per year at the end
of the one-year, two-year and three-year periods from the date of grant. Any
unexercised Rights terminate ten years from the date of grant.
Rights may not be exercised to acquire shares of the Corporation. In
addition, the value of Rights does not necessarily coincide with the market
value of the Corporation's shares. The value of Rights is linked to the book
value of the Corporation's shares, which we believe more closely reflects the
internal performance of the Corporation. Rights are generally not subject to
certain market factors which may effect, either positively or negatively, the
market value for the Corporation's Class A or Class B shares.
<TABLE>
<CAPTION>
AGGREGATED EQUITY APPRECIATION RIGHT EXERCISES IN THE LAST
YEAR AND YEAR END EQUITY APPRECIATION RIGHT VALUES
(a) (b) (c) (d) (e)
Name Number of Value Number of Value of
Rights Realized Unexercised Unexercised
Exercised ($) Rights At Year In-the-Money
(#) End Rights At Year
(#) End
($)(V)
- ------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gary W. Miller 49,624 446,120 125,500 (E) 827,285
75,000 (N) 50,250
James W. Good 0 0 68,750 (E) 413,543
56,250 (N) 37,387
Joseph J. DeVito 0 0 68,750 (E) 413,543
56,250 (N) 37,387
James E. Kirschner 0 0 62,500 (E) 409,355
37,500 (N) 25,125
G. Patrick Corydon 0 0 62,500 (E) 409,355
37,500 (N) 25,125
</TABLE>
[FN]
(E) Exercisable at December 31, 1999.
(N) Not exercisable at December 31, 1999.
(V) Book value at year end, minus book value at date of grant.
</FN>
</PAGE> 12
<PAGE> 13
OPTION/STOCK/EQUITY APPRECIATION GRANTS
The following table contains information about Equity Appreciation Rights
("Rights") granted to the Named Executive Officers during 1999. The table also
contains information about the value of those Rights. No stock options were
granted in 1999.
<TABLE>
<CAPTION>
OPTION/STOCK APPRECIATIOIN RIGHTS GRANTS IN LAST YEAR
Potential Realizable Value 1
at Assumed Annual Rates of Stock
Individual Grants Price Appreciation For Option Term 2
---------------------------------------------------- ------------------------------------
(a) (b) (c) (d) (d1) (e) (f) (g) (h)
Name Options/ % of Total Exercise Mkt or Book Expiration 0% ($) 5%($) 10%($)
SARs/ Options/EARs Or Base Value on Date
EARs,3 Granted to Price Date of
Granted Employees in $/Share Grant
Fiscal Year $/Share
- -------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary W. Miller 100,000 21.0% 20.66 20.66 12/29/09 0 641,000 641,000
James W. Good 75,000 15.8% 20.66 20.66 12/29/09 0 480,750 480,750
Joseph J. DeVito 75,000 15.8% 20.66 20.66 12/29/09 0 480,750 480,750
James E. Kirschner 50,000 10.5% 20.66 20.66 12/29/09 0 320,500 320,500
G. Patrick Corydon 50,000 10.5% 20.66 20.66 12/29/09 0 320,500 320,500
</TABLE>
[FN]
1 Potential realizable value represents the difference between the potential
book value of the Rights and the exercise price of the Rights, assuming the
indicated compound rates of growth and considering maximum appreciation
limitations on the Rights.
2 The dollar amounts in the last two columns are the result of calculations at
5% and 10% compound annual rates and are not intended to forecast future
appreciation of the Corporation's common shares. The Corporation did not elect
to use an alternative option pricing method for valuation because it is not
aware of any formula which it believes will determine with reasonable accuracy a
present value based on unknown factors. The potential realizable values in the
table include amounts which are the result of the Compensation Committee
granting certain executive officers Rights as part of an overall compensation
package in 1999.
</FN>
</PAGE> 13
<PAGE> 14
TRANSACTION WITH MANAGEMENT AND OTHERS
The Corporation and its subsidiaries, Protective and Sagamore, maintain
depository relationships with National City Bank, Indiana ("National City").
Otto N. Frenzel III, is Chairman of the Executive Committee of that bank.
National City also provides various custodial and safekeeping services to the
Corporation, Protective and Sagamore and serves as transfer agent for the
Corporation's common shares. The Corporation and its subsidiaries also had
investments in various money-market accounts which were managed by unrelated
third parties but were purchased through an affiliate of National City. In
addition, during 1999, the Corporation, Protective and Sagamore effected
purchases, but no sales, of securities aggregating approximately $1,500,000
through the same affiliate of National City.
During 1999, the Corporation, Protective and Sagamore made purchases and
sales of securities aggregating, respectively, approximately $25,617,000 and
$44,896,000 with SF Investments, Inc., a broker-dealer firm. Nathan Shapiro, a
director of the Corporation, is President of that firm. The Corporation also
paid approximately $141,000 during 1999 to SF Investments, Inc. and its
affiliates for advice and counseling on the Corporation's investment portfolio.
Protective has entered into an agreement with an associate of SF
Investments, Inc. for management of a portion of Protective's equity securities
portfolio. During 1999, that associate earned no performance-based compensation
and was paid approximately $120,000 for management services.
During 1999, the Corporation, Protective and Sagamore made purchases and
sales of securities aggregating, respectively, approximately $4,404,000 and
$2,878,000 with Merrill Lynch Co., Inc. ("Merrill Lynch"). In addition, the
Corporation had an investment of approximately $84,000 in various money-market
accounts managed by Merrill Lynch at December 31, 1999. Thomas H. Patrick, a
director of the Corporation, is an Executive Vice President of Merrill Lynch.
The Corporation, Protective, and Sagamore have agreements with Chicago
Trust Company ("CTC") for the management of substantial portions of the
Companies' investment portfolios. CTC is paid a management fee based on the
average cost of investments managed. During 1999, a total of approximately
$352,000 was paid by the Corporation and its subsidiaries to CTC for its
management services. Stuart D. Bilton, a director of the Corporation, is
President and Chief Executive Officer of CTC.
INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors to audit the financial statements of the Corporation for 2000.
Representatives of Ernst & Young LLP are expected to attend the Annual Meeting.
They will be provided an opportunity to make a statement should they desire to
do so and to respond to appropriate inquiries from the shareholders. Ernst &
Young LLP has acted as the Corporation's independent auditors since 1970.
The Board of Directors recommends a vote "FOR" ratification of the
selection of Ernst & Young LLP as independent auditors.
</PAGE> 14
<PAGE> 15
VOTE REQUIRED FOR APPROVAL
Shareholders owning a majority of the Class A shares outstanding must be
present or represented by proxy in order to constitute a quorum for the
transaction of business. Thus, a total of 1,160,578 Class A shares will be
required at the meeting for there to be a quorum. In order to elect the
directors for the ensuing year and to confirm the appointment of Ernst & Young
LLP as the Corporation's independent auditors, a majority of the votes present
at the meeting, either in person or by proxy, a quorum being present, will be
required.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals to be presented at the 2001 Annual Meeting of
Shareholders must be received by the Corporation at its principal office on or
before November 30, 2000 to be considered for inclusion in the Corporation's
proxy materials for that meeting.
OTHER MATTERS
The Corporation knows of no other matters to be presented for action at the
meeting. If any other matters should properly come before the meeting, or any
adjournment of the meeting, those matters will be acted on by the persons named
as proxies in the accompanying Proxy. The proxies will use their best judgment
to vote the shares in the best interests of the Corporation.
The Annual Report to Shareholders contains financial statements for the
year ended December 31, 1999 and other information about the operations of the
Corporation. The Annual Report is enclosed with this proxy statement but is not
regarded as proxy soliciting material. In addition, the Report of the
Compensation and Employee Benefits Committee and the Comparative Cumulative
Total Return graph included in is proxy statement is not regarded as proxy
soliciting material.
Each shareholder is urged to mark, date, sign and return the enclosed proxy
card in the envelope provided for that purpose. Prompt response is helpful, and
your cooperation will be appreciated.
April 1, 2000
By Order of the Board of
Directors
James E. Kirschner
Secretary
</PAGE> 15
APPENDIX
PROXY
BALDWIN & LYONS, INC.
1099 North Meridian Street, Indianapolis, Indiana
Annual Meeting of Shareholders -- May 4, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary W. Miller, James Kirschner and G.
Patrick Corydon or any of them, with powers of substitution, as proxies to
represent and vote all shares of stock which the undersigned would be entitled
to vote at the Annual Meeting of Shareholders of Baldwin & Lyons, Inc. to be
held on May 2, 2000, and at any adjournment thereof, with all of the powers the
undersigned would possess if personally present, as follows:
1. ELECTION OF DIRECTORS WITHHOLD AUTHORITY
FOR all nominees listed below to vote for all nominees
(except as marked to the [ ] listed below [ ]
contrary below)
Stuart D. Bilton, Joseph J. DeVito, Otto N. Frenzel III, James W. Good,
Gary W. Miller, John M. O'Mara, Thomas H. Patrick, John A. Pigott,
Nathan Shapiro, Norton Shapiro, Robert Shapiro, John D. Weil
THE PROXY MAY NOT BE VOTED GREATER THAN TWELVE (12) DIRECTORS
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
(Continued, and to be signed and dated, on the other side.)
2. RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP as independent
auditors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, on such other matters as may properly come
before the meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES NAMED IN PROPOSAL 1 AND
FOR THE RATIFICATION OF APPOINTMENT OF THE INDEPENDENT AUDITORS NAMED IN
PROPOSAL 2.
Dated: , 2000 Please sign exactly as your
---------------------- name appears hereon.
Address correction requested.
--------------------------
(Signature of Shareholder)
--------------------------
(Signature of Shareholder)
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY. Joint owners should each sign
personally. Administrators, trustees, guardians, attorneys or others signing in
a representative capacity should indicate the capacity in which they sign.
