Notice
BALDWIN & LYONS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 1, 2007
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 1, 2007 at 10:00 a.m.,
Indianapolis Time, at 1099 North Meridian Street, Indianapolis, Indiana 46204
for the following purposes:
1. To elect thirteen (13) 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, 2007, 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: March 30, 2007.
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
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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 1, 2007, in accordance with the
foregoing notice. The Proxy Statement and accompanying proxy card were mailed to
shareholders on or about March 30, 2007.
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 thirteen directors named as nominees in this Proxy Statement and
FOR the ratification of 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, 2007, 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, 2007, the
Corporation had 2,650,059 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.
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.
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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, 2007, more than 5%
of the outstanding voting securities of the Corporation:
NUMBER OF CLASS A SHARES
NAME AND ADDRESS OF AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS A SHARES
---------------------------------- ------------------------ -------------------------
SHAPIRO FAMILY INTERESTS
(in the aggregate) 1,248,749 47.12%
799 Central Avenue
Highland Park, Illinois 60035
Nathan Shapiro 1,130,399 42.68%
Robert Shapiro 861,375 32.50%
Norton Shapiro 758,625 28.63%
Steven A. Shapiro 751,125 28.34%
JOHN D. WEIL
509 Olive Street
St. Louis, Missouri 334,000 12.60%
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.
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 brothers and Steven Shapiro is the son of
Nathan Shapiro and nephew of Robert and Norton Shapiro. The Class A shares
reported in the above table for the Shapiro family interests include
353,250 shares (13.25%) held of record by the Shapiro Family Limited
Partnership - Gift Shares for which Nathan, Robert and Norton are each
limited partners and beneficiaries as well as 178,500 shares (6.69%) held
of record by Gelbart Fur Dressers, 41,250 shares (l.55%) held of record by
Jay Ell Company and 178,125 shares (6.68%) held of record by Diversified
Enterprises, all three of which are 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, totaling 751,125 Class A
shares (28.17%), are also included in the listing for individual
beneficial ownership of each of the three brothers.
Information with respect to the interests of John D. Weil was obtained
from Amendment No. 5 to Schedule 13D, dated February 21, 2006, as well as
Forms 4 and 5 filed with the Securities and Exchange Commission and
delivered to the Corporation. 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 185,000 Class A shares and shared voting and investment
powers as to 149,000 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.
DIRECTORS AND NOMINEES
Thirteen (13) directors are to be elected to hold office until the 2008 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
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named as proxies in the accompanying Proxy may vote for another nominee, or
nominees according to their best judgment. All of the nominees are currently
directors of the Corporation with the exception of Steven A. Shapiro. None of
the nominees are family-related, except Nathan, Robert and Norton Shapiro, who
are brothers and Steven Shapiro, who is the son of Nathan Shapiro and nephew of
Robert and Norton Shapiro. A majority of the nominees are Independent Directors
within the meaning of applicable NASDAQ listing standards, as noted in the table
on Page 5. Steven A. Shapiro was recommended to the nominating committee by
non-management directors. Set forth in the following summaries is the age of
each director and nominee, all offices held with the Corporation, the nominee's
principal occupation, a brief account of business experience during the past
five years and other directorships.
STUART D. BILTON Age 60 Director Since 1987
Mr. Bilton is currently the Chairman and C.E.O. of Aston Asset Management, LLC.,
a diversified institutional based investment management firm. Mr. Bilton was
Vice Chairman of ABN AMRO Asset Management (US), Inc. and Chairman of ABN AMRO
Funds, Inc. from 2003 until 2006 and President and Chief Executive Officer of
ABN AMRO Asset Management, Inc. from 2001 to 2003.
JOSEPH J. DEVITO Age 55 Director Since 1997
Mr. DeVito was named President and Chief Operating Officer of the Corporation in
February, 2007 and is President and a director of Sagamore Insurance Company
("Sagamore"), a wholly-owned subsidiary of the Corporation's wholly-owned
subsidiary, Protective Insurance Company ("Protective") and a director of
Protective. Mr. DeVito has been employed by the Corporation since 1981.
OTTO N. FRENZEL III Age 76 Director Since 1979
Mr. Frenzel is retired and was formerly the Chairman of the Board of National
City Bank of Indiana, a national bank and a subsidiary of National City
Corporation.
GARY W. MILLER Age 66 Director Since 1977
Mr. Miller has been Chairman and Chief Executive Officer of the Corporation
since 1997 and was President of the Corporation from 1983 until February, 2007.
He is also Chairman and Chief Executive Officer of the Corporation's
wholly-owned subsidiaries Protective, Sagamore and B & L Insurance, Ltd. Mr.
Miller has been employed by the Corporation since 1965.
JON MILLS Age 68 Director Since 2004
Mr. Mills is the Co-Chairman of Medline Industries, Inc., a privately held
manufacturer and distributor of health care supplies.
JOHN M. O'MARA Age 79 Director Since 1981
Mr. O'Mara is a business consultant and private investor. He is also a director
of The Midland Company .
THOMAS H. PATRICK Age 63 Director Since 1983
Mr. Patrick is currently a principal and co-owner of New Vernon Capital LLC an
investment management company. From 2002 until his retirement in 2003, he was
the Executive Vice Chairman, Finance & Administration of Merrill Lynch & Co.,
Inc., and prior thereto he held a number of executive positions with Merrill
Lynch & Co., Inc. Mr. Patrick also serves as a director of Deere & Company and
Computer Sciences Corporation.
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JOHN A. PIGOTT Age 75 Director Since 1997
Mr. Pigott is retired. Prior to his retirement in 1996, he served in various
capacities at Anixter, Inc., including Director, Vice Chairman, President and
Chief Executive Officer.
NATHAN SHAPIRO Age 70 Director Since 1979
Mr. Shapiro is the president of SF Investments, Inc., a broker/dealer in
securities. Since December, 1977, he has also served as President of New
Horizons, Inc., management consultants.
NORTON SHAPIRO Age 74 Director Since 1983
Mr. Shapiro is 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.
ROBERT SHAPIRO Age 68 Director Since 1997
Mr. Shapiro is the President and Chief Executive Officer of Emlin Cosmetics,
Inc.
STEVEN A. SHAPIRO Age 42 Nominee
Mr. Shapiro is a professional money manager with SF Investments, a broker/dealer
in securities. Mr. Shapiro is also a member of Millennium Asset Advisers LLC,
the General Partner in a series of investment limited partnerships, including
the New Vernon Insurance Fund. Since 2004, Mr. Shapiro has served on the Board
of Directors of First Mercury Financial Corporation.
JOHN D. WEIL Age 66 Director Since 1997
Mr. Weil is President of Clayton Management Co. and also serves as a director of
Allied Healthcare Products, Inc. and PICO Holdings, Inc.
In December 2002 an action initiated by the Securities and Exchange Commission
("Commission") against Mr. Weil was settled simultaneously with its filing
pursuant to a consent agreement entered into by Mr. Weil. The Commission alleged
violations of the anti-fraud provisions of the federal securities laws arising
in connection with transactions in the securities of Kaye Group, Inc. ("Kaye
Group") involving material non-public information. Mr. Weil was not an officer
or director of Kaye Group. The transaction cited by the Commission in its
complaint involved less than one percent of the securities of Kaye Group
beneficially owned by Mr. Weil and less than one-tenth of one percent of the
Kaye Group's outstanding shares. Mr. Weil consented to the entry of a final
judgment of permanent injunction and other relief, including disgorgement of
alleged profits in the amount of $47,000 and civil penalties of a like amount,
but did not admit to nor deny any of the allegations in the Commission's
complaint.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
The duties of the Audit Committee are described in the Audit Committee Report
found on pages 13 and 14 of this Proxy Statement.
COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE
The executive compensation program is administered by the Compensation and
Employee Benefit Committee of the Board of Directors (the "Committee"). The
Committee oversees the administration of the Corporation's employee benefits
plans 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, including the Named
Executive Officers of the
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Corporation. In addition, the 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. 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 Corporation's Executive Compensation
Discussion and Analysis is presented beginning on page 8 of this Proxy
Statement.
INVESTMENT COMMITTEE
The Investment Committee controls and makes decisions concerning investments
made by the Corporation and each of its wholly owned subsidiaries.
NOMINATING COMMITTEE
The Nominating Committee is responsible for selecting the nominees for election
as directors and reviewing with the Board of Directors, on an annual basis, the
requisite skills and characteristics of members of the Board of Directors. An
additional discussion of the responsibilities of the Nominating Committee is
contained on page 15 of this Proxy Statement.
BOARD AND COMMITTEE MEMBERSHIP AND MEETINGS
In 2006, each director attended at least 75 percent of the total number of
meetings of the board and the committees on which he or she serves. In addition,
all board members are expected to attend the annual meeting of shareholders, and
all attended in 2006. Current committee membership and the number of meetings of
the full board and each committee in 2006 are shown in the table below.
AUDIT COMPENSATION INVESTMENT NOMINATING
NAME BOARD COMMITTEE COMMITTEE COMMITTEE COMMITTEE
------------------------ -------------- -------------- ---------------- -------------- --------------
Stuart D. Bilton Member Member Chairman
------------------------ -------------- -------------- ---------------- -------------- --------------
Joseph J. DeVito Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Otto N. Frenzel III Member Chairman Member
------------------------ -------------- -------------- ---------------- -------------- --------------
James W. Good Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Gary W. Miller Chairman Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Jon Mills Member
------------------------ -------------- -------------- ---------------- -------------- --------------
John M. O'Mara Member Member Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Thomas H. Patrick Member Member Member
------------------------ -------------- -------------- ---------------- -------------- --------------
John A. Pigott Member Member Member Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Nathan Shapiro Member Chairman
------------------------ -------------- -------------- ---------------- -------------- --------------
Norton Shapiro Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Robert Shapiro Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Steven A. Shapiro Nominee
------------------------ -------------- -------------- ---------------- -------------- --------------
John D. Weil Member Chairman Member
------------------------ -------------- -------------- ---------------- -------------- --------------
Number of 2006 meetings 4 5 2 4 1
------------------------ -------------- -------------- ---------------- -------------- --------------
An Independent Director within the meaning of applicable NASDAQ listing
standards.
In addition to formal meetings, these committees also carry on
their business through telephone conversations and informal contacts among
their members.
Mr. Good has determined to retire as an officer and director of the
Corporation and will not stand for re-election.
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DIRECTORS' FEES
Compensation paid to directors who are not employees during 2006 was as follows:
PENSION AND
FEES EARNED NON-EQUITY NONQUALIFIED
OR PAID IN STOCK OPTION INCENTIVE DEFERRED ALL OTHER
CASH AWARDS AWARDS COMPENSATION COMPENSATION COMPENSATION TOTAL
NAME ($) ($) ($) ($) ($) ($) ($)
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Stuart D. Bilton 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Otto N. Frenzel III 31,000 0 0 0 0 0 31,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Jon Mills 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
John M. O'Mara 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Thomas H. Patrick 25,500 0 0 0 0 0 25,500
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
John A. Pigott 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Nathan Shapiro 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Norton Shapiro 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Robert Shapiro 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
John D. Weil 27,000 0 0 0 0 0 27,000
---------------------- ------------- ------------- ------------ ---------------- ---------------- ---------------- ---------------
Cash compensation consists of:
o Retainer of $5,500 per quarter (effective July 1, 2006; $5,000 per quarter
prior thereto).
o Board meeting attendance fee of $1,500 (does not apply to attendance by
teleconference).
o No additional fees for committee meetings
o The Chairman of the Audit Committee receives $1,000 per quarter as
compensation for the chairman's preparation time.
o Reimbursement for customary and usual travel expenses.
Directors who are employed by the Corporation do not receive directors' fees.
Prior to May, 2005, certain of the directors 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
deferred receipt of portions of their director fees through receipt of
discounted stock options. Options received under the Deferred Fee Plan become
exercisable one year from the date of the grant and were exercisable within ten
years of the date of the grant. Exercise prices were set at $1.00 per share on
the date of grant. As a result of revisions to tax law relating to deferred
compensation, it was determined that none of the Directors would participate in
the Deferred Fee Plan after May, 2005 and, accordingly, no discounted stock
options were granted during 2006. From the beginning of the plan to the present,
a total of 133,255 options have been granted in lieu of cash compensation under
the Deferred Fee Plan. All granted options have been exercised since the
beginning of the Deferred Fee Plan, including 20,134 during 2006.
During 2004 and 2005, directors received annual grant of an option to purchase
1,500 Class B Common Shares at the market price at the close of business on the
date of the annual meeting. No such options were granted to directors during
2006 and all previously granted options were terminated without compensation to
directors during 2006. None of the options granted were exercised.
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COMMON STOCK BENEFICIALLY OWNED BY DIRECTORS AND MANAGEMENT
The following table contains information concerning shares of Class A and Class
B Common Stock of the Corporation beneficially owned on March 13, 2007 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:
CLASS A SHARES CLASS B SHARES
NAME OF BENEFICIAL OWNER OR ------------------------------ ----------------------------------
IDENTITY OF GROUP NUMBER PERCENT NUMBER PERCENT
-------------------------------- -------------- -------------- ------------------ --------------
Stuart D. Bilton 0 .00% 33,182 .27%
-------------------------------- -------------- -------------- ------------------ --------------
G. Patrick Corydon 10,125 .38% 83,750 .67%
-------------------------------- -------------- -------------- ------------------ --------------
Joseph J. DeVito 1,087 .04% 172,630 1.38%
-------------------------------- -------------- -------------- ------------------ --------------
Otto N. Frenzel, III 4,687 .18% 38,714 .31%
-------------------------------- -------------- -------------- ------------------ --------------
James W. Good 17,250 .65% 24,570 .20%
-------------------------------- -------------- -------------- ------------------ --------------
James E. Kirschner 15,468 .58% 49,774 .40%
-------------------------------- -------------- -------------- ------------------ --------------
Gary W. Miller 46,286 1.75% 243,895 1.94%
-------------------------------- -------------- -------------- ------------------ --------------
Jon Mills 0 .00% 1,053 .01%
-------------------------------- -------------- -------------- ------------------ --------------
John M. O'Mara 85,312 3.22% 75,057 .60%
-------------------------------- -------------- -------------- ------------------ --------------
Thomas H. Patrick 88,875 3.35% 247,071 1.98%
-------------------------------- -------------- -------------- ------------------ --------------
John A. Pigott 5,063 .19% 36,665 .29%
-------------------------------- -------------- -------------- ------------------ --------------
Nathan Shapiro 1,130,999 42.68% 2,584,797 20.70%
-------------------------------- -------------- -------------- ------------------ --------------
Norton Shapiro 758,625 28.63% 1,827,245 14.63%
-------------------------------- -------------- -------------- ------------------ --------------
Robert Shapiro 861,375 32.50% 1,860,662 14.90%
-------------------------------- -------------- -------------- ------------------ --------------
Steven A. Shapiro 751,125 28.34% 1,820,140 14.57%
-------------------------------- -------------- -------------- ------------------ --------------
John D. Weil 334,000 12.60% 1,508,378 12.08%
-------------------------------- -------------- -------------- ------------------ --------------
All directors and officers 1,856,902 70.07% 5,157,985 40.90%
-------------------------------- -------------- -------------- ------------------ --------------
Unless otherwise indicated, shares disclosed are those as to which the
beneficial owner has sole voting and investment powers with respect to
Class A shares 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.
A total of 12,488,955 Class B shares were issued and outstanding or
subject to currently exercisable options as of March 13, 2007.
Includes 13,875 Class A shares owned by Mr. O'Mara's wife and 57,375
Class A shares held in trust for his children, with Mr. O'Mara serving
as trustee. Mr. O'Mara disclaims any beneficial interest in these
shares.
Includes 36,375 Class A shares owned by Mr. Patrick's wife and 236,862
Class B shares owned by a private family foundation in which Mr.
Patrick is an officer and director. Mr. Patrick disclaims any
beneficial interest in any of these shares.
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,
Robert and Steven Shapiro include 751,125 Class A and 1,820,140 Class
B shares owned by the Shapiro Family Limited Partnership, a family
charitable foundation and three partnerships: Gelbart Fur Dressers;
Jay Ell Company and Diversified Enterprises. Nathan, Robert, Norton
and Steven Shapiro are beneficial owners and/or share investment power
with respect to these shares.
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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. DeVito 40,000 and Mr. Miller 55,000; and all officers and
directors as a group 95,000.
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.
Total ownership by officers, directors and nominees equals 45.94% of
the aggregate of all Class A and Class B shares outstanding on the
record date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers, directors and ten percent (10.0%) beneficial owners to file initial
reports of ownership and reports of changes in ownership of our securities with
the Securities and Exchange Commission. Copies of those reports must be
furnished to the Corporation. Based solely on a review of the Section 16(a)
reports furnished to the Corporation with respect to 2006 and written
representations from the executive officers and directors, we believe that all
Section 16(a) filing requirements applicable to our executive officers and
directors during 2006 were satisfied except that Gary W. Miller filed one late
Form 4 in 2006 reporting the sale of 300 shares of Class B common stock.
..
EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION POLICY
The Compensation Committee ("the Committee" or "we") bases its executive
compensation policy on the same principles that guide the Corporation in
establishing all its compensation programs. The Corporation designs programs to
attract, retain, and motivate highly talented individuals at all levels of the
organization. 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 both
individual and corporate performance, as discussed in the following paragraph.
The Corporation also utilizes long-term incentive compensation tied to the
Corporation's increase in book value to ensure that executives, and management
in general, have a continuing stake in the long-term success of the Corporation.
The Committee sets the CEO's, as well as the other executive officers',
compensation in light of the standards mentioned above as well as the
performance of the Corporation in relation to expectations of the Board. 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. In general,
profitability and growth in the Corporation's book value are the most important
factors considered by the Committee in its deliberations.
9
COMPONENTS OF EXECUTIVE COMPENSATION FOR 2006
ANNUAL COMPENSATION
-------------------
Annual cash compensation for 2006 consisted of base salary and a cash
bonus. We determined base salaries based on Corporation and individual
performance for the previous year, internal relativity, and market
conditions, including reference to pay at selected other companies. We use
the comparison data to test for reasonableness and competitiveness of base
salaries, but we also exercised significant subjective judgment in view of
our compensation objectives. For 2006, we redesigned the bonus program
whereby base salaries now comprise a larger portion of total annual
compensation than in prior years. We believe that this change was important
to reduce the volatility of annual compensation given the cyclical nature
of the Corporations' business and 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 and unique
knowledge base of the executive management team which has essentially been
in place since 1980.
Cash bonuses for all management employees for 2006 were determined using a
preset formula-based bonus program which provides targets for
profitability. Under the plan, bonus target amounts, expressed as a dollar
amount relative to each individual's base salary, are established for
participants at the beginning of each year. Bonus payouts for the year are
then determined by the Corporation's financial results relative to
predetermined performance measures. Bonus targets were established based on
job responsibilities and internal relativity.
STOCK OPTIONS
-------------
Portions of annual compensation to management personnel have, in the past,
been paid in the form of stock options. However, the Committee has
determined that, given the thinly-traded nature of the Corporation's common
stock, this form of compensation is not an effective means to compensate
all management personnel and, accordingly, has not widely granted stock
options since 1997. While stock options may be used in the future, it is
likely that they will only be used on a limited basis for executive
management.
LONG-TERM INCENTIVES
--------------------
We have utilized what we refer to as "equity appreciation rights" as our
sole form of long-term incentives for all management personnel for several
years. Equity appreciation rights provide deferred compensation to
employees, including Executive Officers, based on the increase in the
Corporation's book value, with certain adjustments for dividends paid to
shareholders, over a five year period. This program results in compensation
which is directly linked to the Corporation's performance and increases in
shareholder value. Rights can not be exercised until near their expiration
date, which provides employee retention benefits to the Corporation. Equity
appreciation rights are widely distributed to all salaried employees in
amounts proportional to their job responsibilities and annual salary bases.
In its deliberations regarding calendar year 2006, 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. Base salaries of all management personnel, including the executive
officers, was increased and bonus amounts were decreased for the reasons
mentioned above. No equity appreciation rights or stock options were granted
during 2006. The Committee believes that the salaries and bonuses approved are
consistent with a long-term view of both the performance of the Corporation and
of its executive officers.
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OTHER COMPENSATION MATTERS
The Corporation has not entered into employment, severance or change-in-control
agreements with any employees, including the Named Executive Officers. Further,
the Corporation has no post-retirement benefit programs or pension or retirement
plans, other than its 401(k) Profit Sharing Plan which is generally available to
all employees. The Corporation has not, since 1997, offered deferred
compensation arrangements other than the equity appreciation rights described
above.
Under Section 162(m) of the Internal Revenue Code, the Corporation cannot take a
tax deduction for certain compensation paid in excess of $1 million to the five
executive officers listed in the summary compensation table below. However,
performance-based compensation, as defined in the tax law, is fully deductible
if the programs are approved by shareholders and meet other requirements. The
Committee has considered the impact of Section 162(m), and the regulations
thereunder, on the deductibility of the executive compensation by the
Corporation. At the present time, the Committee believes that the impact of
Section 162(m) 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 COMMITTEE REPORT
The Committee and the Board believe that the caliber and motivation of all our
employees, and especially our executive leadership, are essential to the
Corporation's performance. We believe our management compensation programs
contribute to our ability to perform well in a marketplace dominated by much
larger companies. We will continue to design executive compensation programs in
a manner that we believe will be in shareholders' interests and worthy of
shareholder support.
The Compensation Committee has reviewed and discussed the above Executive
Compensation Discussion and Analysis with management and, based on this review
and discussion, has recommended to the Board of Directors that the Executive
Compensation Discussion and Analysis be included in the Corporation's annual
report on form 10-K and this proxy statement.
COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE
John D. Weil, Chairman
Thomas H. Patrick
John A. Pigott
11
SUMMARY COMPENSATION TABLE
NON-QUALIFIED
NON-EQUITY DEFERRED
NAME AND PRINCIPAL STOCK OPTION INCENTIVE COMPENSATION ALL OTHER
POSITION YEAR SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
--------------------- ------ ---------- ----------- -------- --------- -------------- -------------- ----------------- -------------
Gary W. Miller
CEO 2006 $868,978 $283,421 $0 $0 $60,500 $0 $53,694 $1,266,593
--------------------- ------ ---------- ----------- -------- --------- -------------- -------------- ----------------- -------------
James W. Good
Executive Vice
President 2006 702,529 248,256 0 0 53,000 0 118,313 1,122,098
--------------------- ------ ---------- ----------- -------- --------- -------------- -------------- ----------------- -------------
Joseph J. DeVito
President and
C.O.O. 2006 673,889 248,256 0 0 53,000 0 35,393 1,010,538
--------------------- ------ ---------- ----------- -------- --------- -------------- -------------- ----------------- -------------
James E. Kirschner
Senior Vice
President
and Secretary 2006 420,361 158,313 0 0 33,000 0 19,482 631,156
--------------------- ------ ---------- ----------- -------- --------- -------------- -------------- ----------------- -------------
G. Patrick Corydon
Senior Vice President
and C. F. O. 2006 450,017 140,816 0 0 33,000 0 29,262 653,095
--------------------- ------ ---------- ----------- -------- --------- -------------- -------------- ----------------- -------------
See the table following these footnotes for information on other
compensation. The perquisites shown consist principally of the total cost
of company automobiles provided to the named executives, without reduction
for business use but less any gain realized on the sale of the automobiles.
Tax reimbursements shown relate to the exercise of stock options in the
prior calendar year.
Mr. DeVito was elected President and Chief Operating Officer on February 6,
2007. Previously, he held the office of Executive Vice President.
Mr. Good has announced his retirement as Executive Vice President effective
in May, 2007.
OTHER COMPENSATION FOR 2006:
CONTRIBUTION
TO 401(K) TAX
TOTAL PLAN PERQUISITES REIMBURSEMENTS
------------ ---------------- --------------- ----------------
Gary W. Miller $ 53,694 $ 17,600 $ 4,529 $ 31,565
James W. Good 118,313 17,600 11,896 88,817
Joseph J. DeVito 35,393 17,600 17,793 0
James E. Kirschner 19,482 17,600 1,882 0
G. Patrick Corydon 29,262 17,600 11,662 0
GRANTS OF PLAN-BASED AWARDS TABLE
No stock or non-stock grants of incentive plan awards and no stock options were
made during 2006.
12
OPTION EXERCISES AND STOCK VESTING TABLE
The following table contains information about stock options exercised during
2006 by the Named Executive Officers. No stock awards have ever been granted.
OPTION AWARDS STOCK AWARDS
--------------------------------- ---------------------------------
NUMBER OF VALUE NUMBER OF VALUE
SHARES REALIZED SHARES REALIZED
ACQUIRED ON UPON ACQUIRED ON UPON
NAME EXERCISE (#) EXERCISE ($) VESTING (#) VESTING ($)
-------------------------- ---------------- ---------------- ----------------- ---------------
Gary W. Miller 55,000 220,000 0 0
-------------------------- ---------------- ---------------- ----------------- ---------------
James W. Good 53,750 278,363 0 0
-------------------------- ---------------- ---------------- ----------------- ---------------
Joseph J. DeVito 53,750 319,400 0 0
-------------------------- ---------------- ---------------- ----------------- ---------------
James E. Kirschner 62,500 340,625 0 0
-------------------------- ---------------- ---------------- ----------------- ---------------
G. Patrick Corydon 30,000 119,400 0 0
-------------------------- ---------------- ---------------- ----------------- ---------------
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table contains information about option awards outstanding as of
December 31, 2006 for the Named Executive Officers. No stock awards have ever
been granted and, accordingly, no columns are presented regarding stock awards.
EQUITY
INCENTIVE
NUMBER OF PLAN AWARDS:
NUMBER OF SECURITIES NUMBER OF
SECURITIES UNDERLYING SECURITIES
UNDERLYING UNEXERCISED UNDERLYING
UNEXERCISED OPTIONS (#) UNEXERCISED OPTION OPTION
OPTIONS (#) NOT UNEARNED EXERCISE EXPIRATION
NAME EXERCISABLE EXERCISABLE OPTIONS (#) PRICE ($) DATE
-------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Gary W. Miller 55,000 0 0 $20.60 12/18/2007
-------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Joseph J. DeVito 40,000 0 0 $20.60 12/18/2007
-------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
2002 STOCK PURCHASE PLAN
At the 2002 Annual Meeting of Shareholders, the Board of Directors proposed,
and the shareholders of the Corporation adopted, the Baldwin & Lyons, Inc.
2002 Stock Purchase Plan (the "Stock Purchase Plan"). The Stock Purchase Plan
was intended to encourage officers and certain management personnel of the
Corporation to purchase additional Class B Common Shares in the open market.
The Stock
13
Purchase Plan authorized the Corporation to loan the funds necessary to enable
participating management personnel to make those purchases. Each loan is
evidenced by a ten year full recourse promissory note, interest only payable
annually in arrears and is secured by a pledge of all of the shares purchased.
The loans were offered to officers and certain other management personnel and
forty-nine employees originally participated in the program. As of December 31,
2006, twelve employees have outstanding loans with all others having been fully
repaid to the Corporation. For detailed information concerning the loans to the
Named Executive Officers as well as overall information concerning the loans to
all employees see "Transactions with Management and Others" on page 16 of this
Proxy Statement. As a result of legislation enacted during 2002, no further
loans will be made under the 2002 Stock Purchase Plan.
AUDIT COMMITTEE MATTERS
AUDIT COMMITTEE MEMBERSHIP
All members of the audit committee are independent as defined in both the NASDAQ
listing standards and the Securities and Exchange Commission standards
applicable to audit committee members. The board of directors has determined
that Otto N. Frenzel III is an audit committee financial expert, as defined in
the rules of the Securities and Exchange Commission.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors, a copy
of which is attached to this Proxy Statement as Appendix A, the Audit Committee
of the Board (the "Audit Committee") assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Corporation. During the
calendar year 2006, the Audit committee met five times. The full Committee
discussed and reviewed the interim financial information contained in the
Corporation's quarterly Forms 10-Q with the CEO, the CFO and the independent
auditors prior to filing with the Securities and Exchange Commission.
In discharging its oversight responsibility as to the audit process, the Audit
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Corporation that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1 "Independence Discussions with Audit Committees," and discussed
with the auditors any relations that may impact their objectivity and
independence and satisfied itself as to the auditors' independence. The Audit
Committee also discussed with management, the internal audit manager and the
independent auditors the quality and adequacy of the Corporation's internal
controls and the internal audit function's organization, responsibilities,
budget and staffing. The Audit Committee also reviewed both with the independent
auditors and the internal audit manager their audit plans, audit scope and
identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement of Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee reviewed the audited financial statement of the Corporation
as of and for the year ended December 31, 2006, with management and the
independent auditors. Management has the responsibility for the preparation of
the Corporation's financial statements and the independent auditors have the
responsibility for the examination of those statements.
14
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit committee recommended to the Board of Directors
that the Corporation's audited financial statements be included in the Annual
Report on Form 10K for the year ended December 31, 2006, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended the
reappointment, subject to the shareholder approval, of the independent auditors
and the Board of Directors concurred in the recommendation.
Also see comments regarding pre-approval of audit fees contained in Independent
Auditor Fees, below.
AUDIT COMMITTEE
Otto N. Frenzel, III, Chairman John M. O'Mara John Pigott
INDEPENDENT AUDITOR FEES
AUDIT FEES
Fees for audit services performed by Ernst & Young, LLP totaled $441,500 for the
year ended December 31, 2006 and $444,100 for the year ended December 31, 2005,
including fees associated with the annual audit, reviews of quarterly reports on
Forms 10-Q and 10-Q/A and statutory audits and loss reserve certifications
required by regulatory authorities as well as the review of the internal
controls of the Corporation by Ernst & Young, LLP as required by Section 404 of
the Sarbanes-Oxley Act.
AUDIT-RELATED FEES
Fees for audit-related services paid to Ernst & Young, LLP totaled $8,050 for
the year ended December 31, 2006 and $4,000 for the year ended December 31,
2005, consisting of certification of reports required by regulatory authorities
and assistance in responding to routine inquiries by regulatory authorities.
TAX FEES
Fees for tax services, including fees for review of the consolidated federal
income tax return and assistance with electronic filing, are expected to total
$9,000 for the year ended December 31, 2006 and totaled $9,467 for the year
ended December 31, 2005.
ALL OTHER FEES
No fees were billed by Ernst & Young LLP for professional services rendered
during the fiscal years ended December 31, 2006 and 2005 other than those
specified above.
The Audit Committee pre-approves audit engagement terms and fees prior to the
commencement of any audit work, other than that which may be necessary for the
independent auditor to prepare the proposed audit approach, scope and fee
estimates. The independent auditors submit a written proposal that details all
audit and audit-related services. Revisions to the written proposal, if
necessary, are also submitted in writing. Audit fees, including internal control
attestation required by Sarbanes-Oxley Act, are fixed and contained in the
proposal. The Corporation received a three year proposal for the audit
engagement for the years 2004, 2005 and 2006, as well as revisions thereto
resulting from implementation of the Sarbanes-Oxley Act, and has completed the
third year of that proposal. The Audit Committee reviewed the nature and dollar
value of services provided under the engagement. Any future revisions will also
be reviewed and pre-approved by the Audit Committee.
All services described above under the captions "Audit Fees", Audit-Related
Fees" and "Tax Fees" were pre-approved by the Audit Committee pursuant to SEC
Regulation S-X, Rule 2-01(c)(7)(i).
15
COMPOSITION AND FUNCTIONS OF THE NOMINATING COMMITTEE.
The Board of Directors has formed a separate nominating committee, consisting
solely of Independent Directors, for the purpose of consideration and nomination
of directors of the Corporation. The nominating committee has a charter, a copy
of which may be found in the corporate governance section of the Corporation's
website at www.baldwinandlyons.com. The current members of the Nominating
Committee are Stuart D. Bilton, Chairman, Otto N. Frenzel III and John A.
Pigott. The Nominating Committee is responsible for selecting the nominees for
election as directors and reviewing with the Board of Directors, on an annual
basis, the requisite skills and characteristics of members of the Board of
Directors. The skills and characteristics assessed include independence,
business, strategic and financial skills, as well as overall experience in the
context of the needs of the Board of Directors as a whole.
The members of the Nominating Committee consider candidates with the following
qualifications (though they are not necessarily limited to candidates with such
qualifications) and no one factor is considered more important than any other
factor:
o Chief executive officers or senior executives, particularly those
with experience in finance, insurance, investments, marketing and
operations.
o Individuals who meet the current criteria of the Securities and
Exchange Commission and NASDAQ to be considered as Independent
Directors.
Any shareholder nominee, together with any information about the candidate's
qualifications, will be evaluated by the members of the Nominating Committee
along with any other proposed candidates. A shareholder wishing to nominate a
candidate for the Board of Director should send a written nomination to the
Corporate Secretary at the principal offices of the Corporation. The nomination
should specify the nominee's name and other qualifications, including, but not
limited to, those specified above. To be considered, a nomination must be
received at least 120 days prior to next annual meeting of shareholders. In the
case of the 2008 annual meeting, the deadline is November 30, 2007. All
recommendations must be accompanied by a written consent of the nominee to be
nominated for election to the Corporation's Board of Directors.
The Nominating Committee selected each of the nominees included for election in
this Proxy Statement.
SHAREHOLDER COMMUNICATION
The Board of Directors has determined to provide a process by which shareholders
may communicate with the Board as a whole, a Board Committee or individual
directors. Shareholders wishing to communicate with either the Board as a whole,
a Board Committee or an individual member may do so by sending a written
communication addressed to the Board of Directors of Baldwin & Lyons, Inc. or to
the committee or to an individual director, c/o Corporate Secretary, Baldwin &
Lyons, Inc., 1099 N. Meridian Street, Indianapolis, Indiana, 46204 or by sending
an electronic mail message to boardofdirectors@baldwinandlyons.com.
All communications will be compiled by the Secretary of the Corporation and
submitted to the Board of Directors or the addressee not later than the next
regular Board meeting.
16
CODE OF CONDUCT
The Board of Directors has adopted a Code of Ethics which is applicable to all
directors, officers at the vice president level and above as well as certain
other employees with control over accounting data. The Code of Conduct is
available on the Corporation's website at www.baldwinandlyons.com.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Corporation, through it subsidiary Protective, has invested $9,000,000 in
two limited partnerships managed by Millennium Group, LLC ("Millennium").
Millennium is partially owned by NV Capital Holdings II, LLC ("NV"). Thomas H.
Patrick, together with Nathan Shapiro, Steven Shapiro and affiliates, own 34% of
NV in the aggregate. Messrs. Patrick and Nathan Shapiro are directors of the
Corporation and Steven Shapiro is a nominee for director. During 2006,
Protective has recorded $152,429 in management fees and $314,285 in performance
based fees to Millennium for management of these limited partnerships. The
Corporation has been informed that the fee rates applied to its investments in
partnerships managed by Millennium are the same as, or lower than, the fee rates
charged to unaffiliated customers for similar investments.
Protective also has invested $15,000,000 in the New Vernon India Fund, L.P.
("India Fund") which is managed by New Vernon Management, LLC ("NVM"), an
affiliate of NV. During 2006, Protective recorded $451,854 in management fees
and $1,272,796 in performance based fees to NVM and its affiliates for
management of this limited partnership. The Corporation has been informed that
the fee rates applied to its investment in the India Fund are the same as, or
lower than, the fee rates charged to unaffiliated customers for similar
investments.
Protective utilizes SF Investments, Inc. ("SF"), a broker-dealer firm, for
management of portions of its investment portfolio. Nathan Shapiro is the
President and Steven Shapiro is an affiliate of SF. SF manages a portion of
Protective's equity securities portfolio with a market value of approximately
$3,854,000 at year end 2006 and serves as agent for purchases and sales of
securities. The Corporation has been informed that commission rates charged by
SF to the Corporation and its subsidiaries are no higher, and often less than,
rates charged to non-affiliated customers for similar investments. Total
commissions earned by SF on these transactions were approximately $1,014 during
2006. SF also manages a portion of Protective's fixed income securities
portfolio with a market value of approximately $16,052,000 at year end 2006.
Fees paid for the management of this portfolio totaled approximately $23,100
during 2006. The Corporation also paid approximately $123,700 during 2006 to SF
and its affiliates for advice and counseling on the Corporation's investment
portfolios.
The 2002 Stock Purchase Plan authorized the Corporation to loan the funds
necessary to enable participating employees to purchase shares of Class B Common
stock of the Corporation. The loans were made to a total of forty-nine
employees, including the Named Executive Officers. The full-recourse notes
evidencing the loans bear interest at the prime rate effective on the date of
the loan and are secured by share certificates covering the full value of the
loans. As of December 31, 2006, a total of $2,251,384 in principal and $91,251
in interest was owed to the Corporation by loan plan participants. Included
within those amounts are sums due from Mr. DeVito of $1,615,415. During the year
ended December 31, 2006, all loan plan participants paid interest to the
Corporation in the sum of $96,356, including $60,632 paid by Mr. DeVito. There
were no defaults on any of the loans. As a result of legislation enacted during
2002, no further loans will be made under the 2002 Stock Purchase Plan.
17
INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board of Directors has
appointed Ernst & Young LLP as independent auditors to audit the financial
statements of the Corporation for 2007. 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 will be available 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.
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 1,305,230 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 2008 Annual Meeting of Shareholders
must be received by the Corporation at its principal office on or before
November 30, 2007 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, 2006 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 included in this proxy statement
are 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.
March 30, 2007
By Order of the Board of
Directors
James E. Kirschner
Secretary
APPENDIX A
PROXY
BALDWIN & LYONS, INC.
1099 North Meridian Street, Indianapolis, Indiana
Annual Meeting of Shareholders -- May 1, 2007
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 1, 2007, 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, Gary W. Miller,
Jon Mills, John M. O'Mara, Thomas H. Patrick, John A. Pigott, Nathan Shapiro
Norton Shapiro, Robert Shapiro, Steven A. Shapiro, John D. Weil.
(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.
Please sign exactly as your name appears hereon.
Dated: , 2007
--------------------
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.