<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MEADOWBROOK INSURANCE INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MEADOWBROOK INSURANCE INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
MEADOWBROOK INSURANCE GROUP, INC.
26600 TELEGRAPH ROAD
SOUTHFIELD, MICHIGAN 48034
(248) 358-1100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1999
To the Stockholders of:
MEADOWBROOK INSURANCE GROUP, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Meadowbrook Insurance Group, Inc. ("the Company") will be held at
Temple Beth El, 7400 Telegraph Road, Bloomfield Hills, Michigan 48301 (located
on the northwest corner of 14 Mile Road and Telegraph Road), on Monday, May 17,
1999 at 2:00 p.m., E.S.T., to consider and act upon the following proposals:
1) The election of three (3) members of the Board of Directors;
2) Ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent accountants;
3) Transaction of such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof;
all as more fully described in the accompanying Proxy Statement.
Only holders of record of the Company's Common Stock at the close of
business on March 19, 1999, the record date for the Annual Meeting, are entitled
to notice of and to vote at the Annual Meeting.
The Company's 1998 Annual Report to Stockholders is included with this
Notice and Proxy Statement.
By Order of the Board of Directors,
cubbin
Robert S. Cubbin
Secretary
Southfield, Michigan
Dated: March 20, 1999
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING
ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE.
<PAGE> 3
MEADOWBROOK INSURANCE GROUP, INC.
26600 TELEGRAPH ROAD
SOUTHFIELD, MICHIGAN 48034
(248) 358-1100
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1999
GENERAL
This Proxy Statement is being furnished to holders of record of Common
Stock, $.01 par value per share ("Common Stock") of Meadowbrook Insurance Group,
Inc., a Michigan Corporation ("the Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders ("Annual Meeting") to be held at the Temple Beth
El, 7400 Telegraph Road, Bloomfield Hills, Michigan, 48301, on Monday, May 17,
1999 at 2:00 p.m., E.S.T., and at any and all adjournments or postponements
thereof. The cost of this solicitation will be borne by the Company. This Proxy
Statement and enclosed proxy card are being mailed to the Company's stockholders
on or about March 20, 1999.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the Meeting, the stockholders will be asked to consider and vote upon
the following proposals:
1) The election of three (3) members of the Board of Directors;
2) Ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent accountants;
3) Transaction of such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof;
all as more fully described in this Proxy Statement.
VOTING AT THE ANNUAL MEETING
Only holders of record of Common Stock at the close of business on March
19, 1999 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting, each such holder of record being entitled to one vote per share on each
matter to be considered at the Annual Meeting. On the Record Date, there were
8,663,434 shares of Common Stock issued and outstanding.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting (4,331,718 shares of the 8,663,434 shares outstanding) is
necessary to constitute a quorum at the Annual Meeting. A plurality vote of the
shares of Common Stock present in person or represented by proxy at the Annual
Meeting is required to elect the three (3) members of the Board of Directors,
and the affirmative vote by the holders of a majority of such shares is required
to ratify the reappointment of PricewaterhouseCoopers LLP as the independent
accountants of the Company for the year ending December 31, 1999.
If the enclosed proxy card is properly executed and returned to the Company
prior to voting at the Annual Meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. Shares represented by
proxies which are marked "WITHHELD" to vote for: (i) all three (3) nominees, or
(ii) for any individual nominee(s) for election as Director(s) and are not
otherwise marked "FOR" the other nominees, will not be counted in determining
whether a plurality vote has been received for the election of Directors.
Similarly, shares represented by proxies which are marked "ABSTAIN" on any other
proposal will not be counted in determining whether the requisite vote has been
received for such
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proposal. IN THE ABSENCE OF CONTRARY INSTRUCTIONS, THE SHARES WILL BE VOTED FOR
ALL THE PROPOSALS SET FORTH IN THE NOTICE OF THE ANNUAL MEETING.
In the instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned proxies (so called "broker
non-votes"), those shares will not be included in the totals and, therefore,
will have no effect on the vote. At any time prior to its exercise, a proxy may
be revoked by the holder of Common Stock by delivering written notice of
revocation or a duly executed proxy bearing a later date to the Secretary of the
Company, at the address set forth on the first page of this Proxy Statement, or
by attending the Annual Meeting and voting in person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following Table sets forth as of the Record Date the beneficial
ownership of the Company's Common Stock by: (i) each person known by the Company
to beneficially own five percent or more of such shares, (ii) each Director,
three (3) of whom are nominees for election as a Director, (iii) each person
named in the Summary Compensation Table under "Executive Compensation" on page 9
of this Proxy Statement, and (iv) all Directors and Executive Officers as a
group, together with their respective percentage ownership of the outstanding
shares:
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
---------------- ----------------------- --------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Merton J. Segal.......................................... 3,107,175(2/3) 35.7%
Warren D. Gardner........................................ 11,699(4) *
Robert S. Cubbin......................................... 129,482(5) 1.5
Joseph C. Henry.......................................... 103,393(6) 1.2
James R. Parry, Sr....................................... 98,632(7) 1.1
Joseph S. Dresner........................................ 108,188 1.2
Hugh W. Greenberg........................................ 137,563(8) 1.6
Irvin F. Swider.......................................... 294,397(9) 3.4
Bruce E. Thal............................................ 14,784(10) *
Herbert Tyner............................................ 146,377(11) 1.7
David J. Campbell........................................ 1,000 *
Florine Mark............................................. -- *
All Directors and Executive Officers as a group (12
persons)............................................... 4,152,690 46.3%
5% BENEFICIAL OWNERS
(EXCLUDING DIRECTORS AND EXECUTIVE OFFICERS)
- ---------------------------------------------------------
Dimensional Fund Advisors Inc............................ 639,400(12) 7.1
Philo Smith, et al....................................... 684,000(13) 7.8
All Directors and Officers and 5% Beneficial Owners.... 5,471,927 59.2%
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes shares subject to options exercisable within 60 days of the Record
Date.
(2) Address is 26600 Telegraph Road, Southfield, Michigan 48034.
(3) Includes 28,128 shares, subject to currently exercisable options.
(4) Includes 6,832 shares, subject to currently exercisable options.
(5) Includes 64,764 shares, subject to currently exercisable options.
(6) Includes 5,199 shares held by a Revocable Trust established by Mr. Henry.
Mr. Henry may be deemed to share beneficial ownership of these shares.
Also, includes 98,194 shares subject to currently exercisable options.
(7) Includes 98,132 shares, subject to currently exercisable options.
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(8) Includes 95,076 shares held by a Family Trust established by Mr. Greenberg.
Also, includes 42,487 shares held by Detroit Gauge & Tool Company ("DGT")
of which Mr. Greenberg is President and a greater than 10% stockholder. Mr.
Greenberg may be deemed to share beneficial ownership of the shares held by
the Trust and by DGT.
(9) Includes 252,320 shares held by a Revocable Trust established by Mr.
Swider. Also, includes 41,077 shares held by Future Products Tool Corp.
("FPTC") of which Mr. Swider is President and sole stockholder. Mr. Swider
may be deemed to share beneficial ownership of the FPTC shares.
(10) Includes 4,000 shares held in trust by Mr. Thal's spouse and 9,000 shares
held in trust by Mr. Thal. Also includes 1,784 shares held in trust by Mr.
Thal's nephews. Mr. Thal may be deemed to share beneficial ownership in
these shares held by his nephews, because he has voting power over these
shares.
(11) Includes 146,377 shares held by Hartman & Tyner, Inc. Mr. Tyner is
President and greater than 10% stockholder of Hartman and Tyner, Inc. Mr.
Tyner may be deemed to share beneficial ownership of these shares.
(12) Address is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. Based on
a Schedule 13G filed with the SEC dated February 11, 1999, Dimensional Fund
Advisors Inc., held sole voting power of 639,400 shares and sole
dispositive power of 639,400 shares.
(13) Address is 695 East Main Street, Stamford, Connecticut 06901. Based on a
Schedule 13D filed with the SEC dated March 3, 1999, PSCO Partners owns
125,000 shares of the Company's Common Stock, or approximately 1.43% of the
outstanding shares of the class. PSCO Partners Two owns 120,000 shares of
the Company's Common Stock, or approximately 1.38% of the outstanding
shares of that class. PSCO Fund Limited owns 420,000 shares of the
Company's Common Stock, or approximately 4.8% of the outstanding shares of
that class. PSCO Financial Services Fund, plc., owns 19,000 shares of the
Company's Common Stock, or approximately .22% of the outstanding shares of
that class.
Philo Smith and Philo Smith & Co., Inc. share voting and investment power
with respect to shares held by PSCO Partners. Capital has sole voting and
investment power with respect to shares held by PSCO Partners Two. Philo
Smith and Capital share voting and investment power with respect to shares
held by PSCO Fund Limited and PSCO Financial Services Fund, plc.
With respect to shares held by PSCO Partners, PSCO Partners Two, and PSCO
Fund Limited, and PSCO Financial Services Fund, plc., no person other than
the holder has the right or power to receive dividends from, or proceeds
from the sale of, shares of the Company.
By virtue of the investment and voting arrangement described above, Philo
Smith and Philo Smith & Co., Inc., beneficially own 125,000 shares of the
common stock of the Company, or approximately 1.43% of the outstanding,
held by PSCO Partners, Capital beneficially owns 120,000 shares of the
common stock of the Company, or approximately 1.38% of the outstanding,
held by PSCO Partners Two, and Philo Smith and Capital beneficially own
439,000 shares of the Common Stock of the Company, or approximately 5.0% of
the outstanding, held by PSCO Fund Limited and PSCO Financial Services
Fund, plc.
Each filing party disclaims membership with any other filing party in a
"group", as that term is used in Section 13(d)(3) of the Securities
Exchange Commission Act of 1934 and the rules promulgated thereunder. PSCO
Partners owns its shares of the Company separately from PSCO Partners Two,
PSCO Fund Limited, and PSCO Financial Services Fund, plc.; and PSCO
Partners Two, PSCO Fund Limited, and PSCO Financial Services Fund, plc.,
own their respective shares of the Company separately from each other.
Although they have a common investment advisor, from whom each takes its
name, and common investment goals, PSCO Partners, PSCO Partners Two and
PSCO Fund Limited, and PSCO Financial Services Fund, plc., have no
agreement or understanding for concerted action in acquiring, holding or
disposing of shares of Common Stock.
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<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
Each Director and Executive Officer's name, age, office with the Company,
the year first elected as a Director, and certain biographical information are
set forth below:
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS
NAME AGE DIRECTOR POSITION
---- --- ---------- --------
<S> <C> <C> <C>
Merton J. Segal................................. 70 1985 Chairman, Chief Executive Officer and
Director
Warren D. Gardner............................... 64 1995 Vice Chairman and Director
Robert S. Cubbin................................ 41 1995 Secretary, Office of the President
and Director
Joseph C. Henry................................. 46 1995 Treasurer, Office of the President
and Director
James R. Parry, Sr. ............................ 55 1995 Office of the President and Director
Joseph S. Dresner............................... 73 1985 Director
David J. Campbell............................... 52 1996 Director
Hugh W. Greenberg............................... 68 1985 Director
Florine Mark.................................... 1996 Director
Irvin F. Swider................................. 71 1990 Director
Bruce E. Thal................................... 67 1995 Director
Herbert Tyner................................... 68 1985 Director
</TABLE>
The following is a biographical synopsis of each of the Officers and
Directors of the Company:
Merton J. Segal is Founder, Chairman, Chief Executive Officer and Director
of the Company, Star Insurance Company ("Star", a property and casualty
insurance company and subsidiary of the Company), Savers Property and Casualty
Insurance Company ("Savers", a surplus lines insurance company and a subsidiary
of Star) and Meadowbrook, Inc. ("Meadowbrook", an insurance agency and
subsidiary of the Company). Mr. Segal is a member of the Investment and the
Mergers and Acquisition Committee to the Board of Directors of the Company. Mr.
Segal's term as Director of the Company will expire in 2001.
Warren D. Gardner has been Vice Chairman of the Company since June, 1996
and a Director since November, 1995. Until November, 1996, he was President of
the Company, President and Chief Executive Officer of Star and Chairman and
Chief Executive Officer of Savers. He joined the Company in 1990, when it
acquired Savers, where he had served as Chairman of the Board since 1985. He was
elected President of Star in 1991 and President of the Company in 1994. He is an
employee of Meadowbrook. Mr. Gardner has recently retired as an officer of the
Company, Star and Savers, but will maintain his directorship with the Company,
Star, Savers and Meadowbrook. Mr. Gardner's term as Director will expire in
2001.
Robert S. Cubbin was appointed to the Office of the President of the
Company in 1996. He has also been Secretary and Director of the Company since
1995. Mr. Cubbin was appointed Executive Vice President and Director of Star and
Savers in 1996. Mr. Cubbin is Director of Meadowbrook and was appointed
Executive Vice President in 1996. Effective April, 1997, Mr. Cubbin was
appointed President of Meadowbrook. He joined the Company in 1987, as Vice
President and General Counsel. From 1983, until he joined the Company, Mr.
Cubbin was an attorney with Plunkett & Cooney, a Michigan law firm specializing
in insurance law. Mr. Cubbin's term as Director will expire in 2000.
Joseph C. Henry was appointed to the Office of the President of the Company
in 1996. He has also been Treasurer and Director of the Company since 1995. Mr.
Henry was appointed Executive Vice President and Director of Star and Savers in
June, 1996. Mr. Henry was appointed as President of Star in November, 1996. Mr.
Henry is Director of Meadowbrook and was appointed Executive Vice President of
Meadowbrook in 1996. He joined the Company in 1993, as Senior Vice President and
Chief Financial Officer. Mr. Henry served as Vice President and Chief Financial
Officer of the Hanover Insurance Companies from 1987 until
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<PAGE> 7
1993. Prior to 1987, Mr. Henry was a partner with KPMG Peat Marwick, L.L.P. Mr.
Henry is a member of the Investment Committee. Mr. Henry's term as Director will
expire in 2000.
James R. Parry, Sr., was appointed to the Office of the President of the
Company in 1996. He has also been Executive Vice President and Director of the
Company since 1995. Mr. Parry was appointed Executive Vice President and
Director of Star and Savers in 1996. Also, in 1996, Mr. Parry was elected
Director of Meadowbrook. He joined the Company in 1995, as Executive Vice
President and Chief Marketing Officer. Mr. Parry was formerly Chairman of the
Board of Sedgwick James of New York, Inc., a subsidiary of an insurance
brokerage firm, from 1988 to 1995. Mr. Parry is a nominee for reelection at the
Annual Meeting.
David J. Campbell, Director, was formerly President and Chief Executive of
the Detroit Medical Center and now serves as a Senior Health Care Consultant. He
has served as a Director of the Company since 1996. Mr. Campbell's term as
Director will expire in 1999. Mr. Campbell is a member of the Compensation
Committee of the Board of Directors of the Company. Mr. Campbell is a nominee
for reelection at the Annual Meeting.
Joseph S. Dresner, Director, is Chairman of the Highland Companies, a
Detroit-area-based developer and manager of commercial, industrial and
residential properties. He has served as a Director of the Company since 1985.
Mr. Dresner is a member of the Investment, Mergers and Acquisition and Audit
Committees of the Board of Directors of the Company. Mr. Dresner's term as
Director will expire in 2001.
Hugh W. Greenberg, Director, is President of Detroit Gauge & Tool Company,
a designer and manufacturer of precision tools and special machinery. Mr.
Greenberg has served as a Director of the Company since 1985. Mr. Greenberg is a
member of the Audit and Compensation Committees of the Board of Directors of the
Company. Mr. Greenberg's term as Director will expire in 2000.
Florine Mark, Director, is President and Chief Executive Officer of The WW
Group, Inc., the largest franchise of Weight Watchers International. She has
served as a Director of the Company since 1996. Ms. Mark's term as Director will
expire in 2000.
Irvin F. Swider, Director, is owner, President and Chief Executive Officer
of Future Products Tool Corporation, and Metal Punch, Inc., which are both
manufacturers of precision tooling. Mr. Swider has owned these companies since
1963. He has served as a Director of the Company since 1990. Mr. Swider's term
as Director will expire in 2000.
Bruce E. Thal, Director, is a retired partner of Deloitte & Touche L.L.P.,
a public accounting firm. He has served as a Director of the Company since 1995.
Mr. Thal's term as Director will expire in 1999. Mr. Thal is a member of the
Investment and the Mergers and Acquisition Committees of the Board of Directors
of the Company. Mr. Thal is a nominee for reelection at the Annual Meeting.
Herbert Tyner, Director, is Chief Executive Officer of Hartman and Tyner,
Inc., a Detroit-based real estate developer with land, apartment developments
and other real estate holdings in Michigan and Florida. He has served as a
Director of the Company since 1985. Mr. Tyner is a member of the Compensation
Committee of the Board of Directors of the Company. Mr. Tyner's term as Director
will expire in 2001.
William J. Lohmeyer, III, effective January 25, 1999, has been appointed as
Senior Vice President and Chief Financial Officer of the Company.
Edgar J. Leverett, Jr., effective December 31, 1998, has resigned from his
position as director of the Company.
MEETINGS AND COMMITTEES
The Board of Directors has established an Audit Committee, Investment
Committee, Compensation Committee and Mergers and Acquisition Committee.
The Audit Committee members are Joseph S. Dresner and Hugh W. Greenberg.
The Audit Committee reviews the services provided by the Company's independent
accountants, consults with the accountants and
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<PAGE> 8
reviews the need and adequacy of internal auditing procedures and the adequacy
of internal controls. The Audit Committee met twice during 1998.
The Investment Committee members are Joseph S. Dresner, Joseph C. Henry,
Merton J. Segal and Bruce E. Thal. The Investment Committee reviews and approves
investment transactions, reviews investment performance and establishes
investment guidelines. The Investment Committee met four times during 1998.
The Compensation Committee members are David J. Campbell, Hugh W. Greenberg
and Herbert Tyner. The Compensation Committee determines executive compensation
and long-term incentive compensation awards. Please refer to the Compensation
Committee Report for particulars of the Committee's proceedings during 1998.
The Mergers and Acquisition Committee members are Joseph S. Dresner, Bruce
E. Thal and Merton J. Segal. The Acquisition Committee was formed, in November
1997, to review and plan acquisitions of companies that may fit the strategic
needs of the Company. The Mergers and Acquisition Committee met twice during
1998.
The Company does not have a Nominating Committee.
The Board of Directors met seven times during 1998. During 1998, each
Director attended at least 75% of the aggregate of the total number of meetings
of the Board of Directors and the total number of meetings held by all
Committees of the Board on which he/she served.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a Director's fee of
$5,000 per year and $400 for each Board or Committee meeting attended.
CERTAIN RELATED TRANSACTIONS
At December 31, 1998, the Company held a $661,000 Demand Note receivable
from Robert S. Cubbin and Kathleen D. Cubbin. This Demand Note arose from a
transaction in late 1998 whereby the Company loaned Robert S. Cubbin and
Kathleen D. Cubbin funds to exercise 64,718 common stock options to cover the
exercise price and associated tax withholdings. The Demand Note provided for
interest at the Company's borrowing rate which was 7.75% at December 31, 1998.
The Demand Note was due on demand on or after January 1, 2002. The loan is
collateralized by 64,718 shares of the Company's common stock, pursuant to a
Stock Pledge Agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5, any amendments thereto
furnished to the Company pursuant to the rules of the Securities and Exchange
Commission, or written representations from certain reporting persons presented
to the Company, all such reports required to be filed by reporting persons have
been filed in a timely fashion during the fiscal year ended December 31, 1998.
ELECTION OF DIRECTORS
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES FOR
THE BOARD OF DIRECTORS.
At the Annual Meeting, three (3) members of the Board of Directors are to
be elected to hold office until 2002 and until their successors are duly elected
and qualified. Bruce E. Thal, David J. Campbell and James R. Parry, Sr. , all of
whom are currently Directors of the Company, are the nominees for the Board of
Directors. There is additional information concerning Messrs. Thal, Campbell and
Parry under the "Directors and Executive Officers" Section on pages 4 and 5 of
this Proxy Statement. Unless otherwise specifically directed by stockholders
executing proxies, it is intended that all proxies in the accompanying form
received in time for the Annual Meeting will be voted at the Annual Meeting FOR
the election of the three (3) nominees. In the
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<PAGE> 9
event any nominee should become unavailable for election for any unforeseen
reason, it is intended that the proxies will be voted for such substitute
nominee as may be designated by the present Board of Directors.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT ACCOUNTANTS.
Subject to ratification by the stockholders, the Board of Directors has
reappointed PricewaterhouseCoopers LLP as independent accountants of the Company
for the current year. The affirmative vote of a majority of shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
required to ratify the appointment of PricewaterhouseCoopers LLP. Unless marked
to the contrary, proxies received will be voted FOR ratification of the
reappointment of PricewaterhouseCoopers LLP.
A representative from PricewaterhouseCoopers LLP will be available at the
Annual Meeting to respond to any appropriate questions from stockholders.
OTHER BUSINESS
Management is not aware of any matter that may be brought before the Annual
Meeting other than as described above. In the event any other matter properly
comes before the Annual Meeting, the persons named in the accompanying form of
proxy have discretionary authority to vote on such matters.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
In February, 1998, the Compensation Committee, consisting of, David J.
Campbell, Hugh W. Greenberg and Herbert Tyner (in consultation with Merton J.
Segal, the Company's Chief Executive Officer and Chairman of the Board),
reviewed the procedures for reviewing and approving executive compensation for
the officers of the Company and its subsidiaries, as presented for the
Committee's consideration by PricewaterhouseCoopers LLP.
The Committee adopted a compensation and incentive/performance bonus plan,
based on Company results, for the Chairman of the Board and Chief Executive
Officer and the three members of the Office of the President. The bonus is based
upon performance criteria established for each executive office by the Committee
on an annual basis. The compensation level and performance criteria were based
on an analysis prepared by PricewaterhouseCoopers LLP.
Compensation consists of three (3) elements for the Chief Executive
Officer: Base Salary, Annual Incentive Bonus and Stock Options.
Base Salary is based upon sustained corporate performance, personal
contribution to the Company's success, experience, expertise and his position as
Founder of the Company, along with market data for similarly sized companies.
Annual Incentive Bonus is based upon market analysis, actual achievement of
predetermined objectives, including: projected growth of premiums, revenues and
net income and the achievement of corporate strategic objectives.
Long term incentives, in the form of Stock Options were awarded at one (1)
times or less of the base salary. This recommendation was determined based upon
survey data, prevalence within the industry, and PricewaterhouseCoopers LLP's
experience with executive compensation. Actual grants of options, at market
price, will be based upon achievement of predetermined objectives.
Individual executive bonuses have been established for senior managers and
are administered by the three members of the Office of the President. These
bonuses are based upon market analysis and attainment of the
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<PAGE> 10
other executives' and senior managers' predetermined goals. Additional factors
include growth of revenues and net income and achievement of corporate
objectives.
The Company's 1995 Stock Option Plan (the "Plan") is also administered by
the Compensation Committee. All stock options under the Plan are issued at an
exercise price equal to the fair market value on the date of grant. The total
aggregate number of shares of Common Stock which may be available for grant
under the Plan is not to exceed 2,000,000 shares, subject to adjustment pursuant
to the terms of the Plan. The maximum number of shares eligible for a single
individual is 800,000 shares. Options shall not exceed 10 years in duration and
expire pursuant to their terms and/or upon the termination, death or disability
of the employee.
In the event of a hostile change of control (defined as a change in control
that is not approved by two-thirds of the members of the Board of Directors,
immediately prior to change in control), all stock options become immediately
exercisable. "Change in control" is defined as the acquisition, directly or
indirectly, of 50% of the voting power of all classes of Company stock or 50% of
the outstanding shares of stock or if the stockholders approve any merger or
consolidation of the Company with any other person in which the Company is not
the continuing or surviving corporation.
The Compensation Committee members met on February 6, 1998.
THE COMPENSATION COMMITTEE
David J. Campbell
Hugh W. Greenberg
Herbert Tyner
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<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal years ended
December 31, 1998, 1997 and 1996 concerning the compensation of the Company's
Chief Executive Officer and Company's four most highly compensated Executive
Officers, other than the Chief Executive Officer, whose total annual salary and
bonus exceeded $100,000 and includes all compensation paid to such officers:
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND --------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATION($)(1)
------------------ ---- --------- -------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Merton J. Segal................ 1998 475,533 -- -- 22,960 --
Chairman, Chief Executive 1997 453,200 56,650 -- 19,956 7,259
Officer and Director 1996 440,000 -- -- -- 10,986
Warren D. Gardner.............. 1998 225,000 -- -- -- --
Vice Chairman and Director 1997 225,000 36,125 -- 7,171
1996 289,000 131,250 -- 8,540 10,986
James R. Parry, Sr. ........... 1998 279,375 -- -- 11,330 --
Chief Marketing Officer, Office 1997 266,250 33,281 -- 9,379 3,994
of the President and Director 1996 262,865 52,083 -- 5,750 1,598
Joseph C. Henry................ 1998 279,375 -- -- 11,330 --
Treasurer, Office of the 1997 266,250 33,281 -- 9,379 7,180
President and Director 1996 251,664 58,750 -- 5,400 10,986
Robert S. Cubbin............... 1998 279,375 -- -- 11,330 --
Secretary, Office of the 1997 266,250 33,281 -- 9,379 7,228
President and Director 1996 237,083 53,958 -- 5,360 10,986
</TABLE>
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(1) Amount contributed to the Officer's account under the Company's 401(k) and
Profit-Sharing Plans.
The following table sets forth information concerning 1998 grants of stock
options made by the Company, under the 1995 Stock Option Plan, during the fiscal
year ended December 31, 1998 to the following Executive Officers.
OPTIONS GRANTS FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
TOTAL OPTIONS OF STOCK PRICE
NUMBER OF GRANTED TO APPRECIATION FOR
SECURITIES EMPLOYEES IN OPTION TERM
UNDERLYING OPTIONS YEAR ENDED EXERCISE EXPIRATION --------------------------
NAME GRANTED (#) 12/31/98 PRICE ($/SH) DATE 5% ($)(C) 10% ($)(C)
- ---- ------------------ ------------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Merton J. Segal......... 22,960(A) 22.6% 24.69 01/01/03 156,645 346,524
James R. Parry, Sr. .... 11,330(B) 11.1% 24.69 01/01/08 175,984 446,317
Joseph C. Henry......... 11,330(B) 11.1% 24.69 01/01/08 175,984 446,317
Robert S. Cubbin........ 11,330(B) 11.1% 24.69 01/01/08 175,984 446,317
</TABLE>
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(A) Options are exercisable in 20% increments, each year, beginning January 1,
1998.
(B) Options are exercisable in 10% increments, each year, beginning January 1,
1998.
(C) In calculating the potential realizable values, the Company used the average
stock price for the ten day period prior to the date of grant for the fair
market value of the Company Common Stock per share. The dollar amounts under
these columns assume a compounded annual market price increase of the
underlying shares of the Common Stock from the date of grant to the end of
the option term of 5% and 10%. This format is prescribed by the Securities
and Exchange Commission and is not intended to forecast future appreciation
of shares of the Common Stock. The actual value, if any, an executive may
9
<PAGE> 12
realize will depend on the excess of the price for shares of the Common Stock on
the date the option is exercised over the exercise price. Accordingly, there is
no assurance that the value realized by an executive will be at or near the
value estimated above.
OPTIONS VALUE TABLE
The following table sets forth information concerning exercises of Company
stock options during the fiscal year ended December 31, 1998 by the following
executive officers.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES FOR YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE 1998 DECEMBER 31, 1998
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE($)*
- ---- ----------- ----------- ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Merton J. Segal............. -- -- 18,950/ 38,416 --/ --
Warren D. Gardner........... 8,629 187,034 6,832/ 10,337 --/ 79,710
James R. Parry, Sr.......... -- -- 72,798/121,035 444,163/782,454
Joseph C. Henry............. -- -- 76,692/132,432 467,135/598,921
Robert S. Cubbin............ 64,718 727,676 62,157/ 50,305 110,459/165,707
</TABLE>
- -------------------------
* Fair market value based on the closing price of the Company's Common Stock on
December 31, 1998 of $16.44.
MEADOWBROOK INSURANCE GROUP, INC. 1995 STOCK OPTION PLAN
The Meadowbrook Insurance Group, Inc. 1995 Stock Option Plan (the "Plan")
is intended to further the interests of the Company and its stockholders by
attracting, retaining and motivating associates. The Plan provides for the grant
of stock options (which may be nonqualified options or incentive stock options
for tax purposes).
The aggregate number of shares of Common Stock which may be issued under
the Plan is 2,000,000. Options issued under the Plan which expire unexercised
will again become available for grant under the Plan. Cash exercises of stock
appreciation rights and cash supplemental payments will not count against this
limit. Lapsed, forfeited or canceled awards will also not count against this
limit. The maximum number of shares of Common Stock which may be issued under
the Plan to any single individual is 800,000.
STOCK OPTIONS
The Compensation Committee is authorized to determine the terms and
conditions of all option grants, subject to the limitations that the option
price per share may not be less than the fair market value of a share of Common
Stock on the date of grant and the term of an option may not be longer than ten
years. Payment of the option price may be made in any manner specified by the
Compensation Committee (which may include payment in cash or Common Stock or by
"cashless exercise").
EMPLOYMENT AGREEMENTS
On March 27, 1995, Meadowbrook entered into an Employment Agreement
("Agreement") with James R. Parry, Sr. He is the Chief Marketing Officer and a
member of the Office of the President of the Company. Pursuant to the terms of
this Agreement, Meadowbrook agreed to initially pay Mr. Parry a base
compensation of $20,833 per month. Effective, March 1, 1998, Mr. Parry's base
compensation has been increased to $23,500 per month. The term of Mr. Parry's
Agreement extends until March 27, 2000, subject to earlier termination upon
death, retirement, discharge due to permanent disability or discharge "for
cause," which is defined as (i) failure to substantially perform his principal
duties, (ii) misconduct that is materially injurious to the Company or (iii)
engagement in dishonest activities injurious to the Company.
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total stockholder return to
the Company's stockholders from November 21, 1995 through December 31, 1998, as
well as an overall stock market index (S&P 500 Index) and the Company's selected
peer group index (S&P Property and Casualty Insurance Index, and SNL $250 --
$500M Insurance Asset-Size Index).
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG MEADOWBROOK INSURANCE GROUP, INC., THE S&P 500 INDEX
AND THE SNL $250-$500M INSURANCE ASSET-SIZE INDEX
PERFORMANCE GRAPH
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
MEADOWBROOK S&P 500
INSURANCE GROUP, ------- SNL $250-$500M INSURANCE
INC. ASSET-SIZE INDEX
---------------- ------------------------
<S> <C> <C> <C>
'11/21/95' 100.00 100.00 100.00
'12/31/95' 136.04 102.86 107.97
'6/30/96' 125.03 113.24 107.99
'12/31/96' 85.52 126.38 113.58
'6/30/97' 101.72 152.42 124.63
'12/31/97' 106.48 168.55 140.66
'6/30/98' 111.24 198.41 153.52
'12/31/98' 67.34 153.52 143.18
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
MEADOWBROOK
MEASUREMENT PERIOD INSURANCE SNL $250-$500M INSURANCE
(FISCAL YEAR COVERED) GROUP, INC. S&P 500 ASSET-SIZE INDEX
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11/21/95 100.00 100.00 100.00
- -------------------------------------------------------------------------------------------------
12/31/95 136.04 102.86 107.97
- -------------------------------------------------------------------------------------------------
6/30/96 125.03 113.24 107.99
- -------------------------------------------------------------------------------------------------
12/31/96 85.52 126.38 113.58
- -------------------------------------------------------------------------------------------------
6/30/97 101.72 152.42 124.63
- -------------------------------------------------------------------------------------------------
12/31/97 106.48 168.55 140.66
- -------------------------------------------------------------------------------------------------
6/30/98 111.24 198.41 153.52
- -------------------------------------------------------------------------------------------------
12/31/98 67.34 153.52 143.18
- -------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
* $100 invested on 11/21/95 (the Company's IPO date) in stock or on 10/31/95 in
index. Including reinvestment of dividends, fiscal year ending December 31.
11
<PAGE> 14
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in the Company's
proxy soliciting material for the next Annual Meeting of Stockholders must
comply with Rule 14a-8 under the Securities Exchange Act of 1934 and be received
by the Company at its principal office by November 25, 1999.
Dated: March 20, 1999
12
<PAGE> 15
MEADOWBROOK INSURANCE GROUP, INC.
P
PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
R TO BE HELD MAY 17, 1999
O THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
MEADOWBROOK INSURANCE GROUP, INC.
X
Y The undersigned stockholder of MEADOWBROOK INSURANCE GROUP, INC. (the
"Company") hereby appoints MERTON J. SEGAL, ROBERT S. CUBBIN OR JOSEPH C.
HENRY, jointly and severally, the attorney and proxies of the undersigned
stockholder, with the full power of substitution, to vote all of the shares
of common stock of the Company standing in the name of the undersigned
stockholder at the close of business on March 19, 1999, at the 1999 Annual
Meeting (the "Annual Meeting") of the stockholders of the Company to be
held on Monday, May 17, 1999, an at any adjournments thereof, with all the
powers the undersigned stockholder would possess if then, and there
present.
The undersigned stockholder acknowledges receipt of the Notice of the 1999
Annual Meeting and Proxy Statement, both dated March 20, 1999.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 16
<TABLE>
<S><C>
[X] PLEASE MARK YOUR
VOTE AS IN THIS 6674
EXAMPLE.
If no choice is specified, this Proxy will be voted FOR the election of the
nominees listed and FOR the ratification of the appointment of
PricewaterhouseCoopers LLP, as the Company's independent accountants for the
year ending 1999.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of Election of Directors, Nominees: 2. Ratification of Appointment
Directors [ ] [ ] Bruce E. Thal of Independent Accountants [ ] [ ] [ ]
David J. Campbell (Please mark one)
For, except vote withheld from the James R. Parry, Sr.
following nominee(s):
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE PROMPTLY.
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
________________________________________________
________________________________________________
SIGNATURES(S) DATE
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
</TABLE>
