Filed with the SEC on April 17, 1997 Registration No. 333-24739
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NUMBER ONE TO
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
STONEVILLE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MISSISSIPPI 6331 72-1341156
(State or other juris- (Primary Standard (IRS Employer
diction of incorporation Industrial Classifica- Identifica-
or organization) tion Code Number) tion Number)
HARRY E. VICKERY HARRY E. VICKERY
STONEVILLE INSURANCE COMPANY DELTA AGRICULTURAL AND
633 NORTH STATE STREET, SUITE 200 INDUSTRIAL TRUST
JACKSON, MISSISSIPPI 39202-7817 833 WASHINGTON AVENUE
(601) 352-7817 GREENVILLE, MISSISSIPPI
(Address, including zip code, 38704-5037
and telephone number, including (601) 378-8005
area code of registrant's (Name, address, including
principal executive offices) zip code, and telephone
number, including area code,
of agent for service)
Copies to:
David L. Martin, Esq.
Stephen M. Roberts, Esq.
Watkins Ludlam & Stennis, P.A.
633 North State Street
P. O. Box 427
Jackson, Mississippi 39205-0427
Telephone Number: (601)949-4900
Approximate date of commencement of proposed sale of securities
to the public: As soon as practicable after the effective date of
this Registration Statement and the liquidation of Delta
Agricultural and Industrial Trust and capitalization of
Stoneville Insurance Company have been consummated pursuant to
the Plan and Agreement of Reorganization and Conversion described
in this Prospectus.
If the securities being registered on this form are being offered
in conjunction with the formation of a holding company and there
is compliance with General Instruction G, check the following
box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
<PAGE>
<TABLE>
<CAPTION>
STONEVILLE INSURANCE COMPANY
CROSS REFERENCE SHEET
Caption or Location
Items in Form S-4 in Prospectus
<S> <S>
A. Information About the Transaction
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus....................... Cover Page of
Registration
Statement; Cross
Reference Sheet;
Cover Page of the
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus........ Available
Information;
Incorporation of
Certain Documents by
Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information...................... Summary; Risk
Factors; Selected
Financial Data of the
Trust; Pro Forma
Condensed Balance
Sheet-Statutory Basis
(Unaudited) of the
Company
4. Terms of the Transaction......... Summary; The
Conversion; The Plan;
Description of
Company Stock;
Comparison of Rights
of Former Members of
the Trust and
Shareholders of the
Company; Plan of
Distribution of
Excess Stock
5. Pro Forma Financial Information. Pro Forma Condensed
Balance Sheet-
Statutory Basis
(Unaudited) of the
Company
6. Material Contacts with the
Company Being Acquired........... Not Applicable
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Under-
writers.......................... Not Applicable
8. Interest of Named Experts and
Counsel.......................... Legal Opinion;
Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities... Comparison of
Rights of Former
Members of the
Trust and
Shareholders of the
Company
B. Information About the Registrant
10. Information with Respect to
S-3 Registrants.................. Not Applicable
11 Incorporation of Certain Infor-
mation by Reference.............. Not Applicable
12. Information with Respect to S-2
or S-3 Registrants............... Not Applicable
13. Incorporation of Certain Infor-
mation by Reference.............. Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants.................. Summary; The
Conversion;
Business of the
Company; Financial
Statements; Pro
Forma Condensed
Balance Sheet-Statutory Basis
(Unaudited) of the
Company
C. Information About the Company Being Acquired
15. Information with Respect to S-3
Companies........................ Not Applicable
16. Information with Respect to S-2
or S-3 Companies................. Not Applicable
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies.................... Summary; The
Conversion;
Business of the
Trust; Financial
Statements;
Selected Financial
Data of the Trust;
Trust Management's
Discussion and
Analysis of
Financial
Conditions and
Results of
Operations
D. Voting and Management Information
18. Information if Proxies, Consents
or Authorizations Are to be
Solicited........................ Not Applicable
19. Information if Proxies, Consents
or Authorizations Are Not to be
Solicited or in an Exchange
Offer............................ Cover Page of
Prospectus;
Summary; The
Special Meeting;
The Plan; Business
of the Company;
Certain
Transactions of
Relationships
</TABLE>
<PAGE>
, 1997
To Our Former Members:
As you are aware, since the Delta Agricultural and Industrial
Trust (the "Trust") was started by the Delta Council in 1991, the
purpose of the Trust has been to provide reasonably priced
insurance for its insureds. Due to fundamental changes in the
workers' compensation market, a key part of the Trust's strategy has
been to move gradually toward the formation of a stock insurance
company while providing continuity of coverage to its insureds. In
December, 1996, Stoneville Insurance Company (the "Company") was
formed to become the successor of the Trust. The Board of Trustees
believes that the creation of the Company will allow the
continuation of the Trust's original mission as well as allow the
flexibility to provide services the Trust could not offer, such as
property and casualty insurance.
The Board of Trustees of the Trust recently took the next step
to make the Company an operating entity by voting to approve and
adopt a plan and Agreement of Reorganization and Conversion of the
Trust (the "Plan").
Pursuant to the Plan, the Trust will transfer substantially
all of its assets to the Company in exchange for common stock
("Stock") of the Company, the Trust will be dissolved, and Former
Members (as defined in the Plan) of the Trust will receive Stock of
the Company on the terms and subject to the conditions set forth in
the Plan, all as more fully described in the attached Prospectus
(the "Conversion"). Upon completion of the actions set forth in the
Plan, the Company will have succeeded to substantially all of the
assets and liabilities of the Trust (other than insurance
liabilities) and the Company will apply for, and anticipates being
licensed as, a Mississippi stock insurance company eligible to
write workers' compensation insurance. Simultaneously with
implementation of the Plan, Continental Casualty Company (a member
of the CNA Insurance Group) will assume direct responsibility for
the insurance liabilities of the Trust, which will relieve the
Former Members of the Trust from their joint and several liability
with respect to the insurance liabilities of the Trust. The terms
of the Conversion are described in detail in the enclosed
Prospectus.
The Board of Trustees of the Trust has unanimously approved
the Plan and believes the Conversion is in the best interests of
the Trust and its Former Members. No approval by Former Members is
necessary for the consummation of the Conversion; however, all
Former Members should carefully read the enclosed Prospectus to
understand the Conversion and their rights under the Plan.
The Board of Trustees believes that the creation of the
Company will best continue the Trust's original mission while
providing Former Members the opportunity to participate in the
Company's growth.
By Order of the Board of Trustees
William L. Kennedy
Chairman of the Board of Trustees
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration
Statement") with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended
(the "Securities Act") of which this Prospectus is a part with
respect to the shares of Stock to be issued in connection with the
Conversion. This Prospectus does not contain all the information
set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the Rules and Regulations of the
Commission. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements
contained in this Prospectus or in any document incorporated by
reference referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the
Registration Statement or attached as an annex hereto or such other
document, each such statement being qualified in all respects by
such reference.
Prior to the issuance of the shares of Stock of the Company
and registration thereof pursuant to the Registration Statement,
neither the Company nor the Trust have been subject to any
informational requirements of the Securities Exchange Act of 1934.
Subsequent to the registration of the Company's Stock, the Company
will be subject to certain informational requirements of the
Securities Exchange Act of 1934.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE HEREIN, ARE AVAILABLE
WITHOUT CHARGE, UPON THE WRITTEN OR ORAL REQUEST OF ANY FORMER
MEMBER OF THE TRUST TO WHOM THIS PROSPECTUS IS DELIVERED. IN ORDER
TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE
MADE BY , 1997 [DATE AT LEAST 10 DAYS AFTER MAILING
DATE], AND SUCH REQUESTS SHOULD BE DIRECTED TO THE COMPANY'S
OFFICES AT 633 NORTH STATE STREET, SUITE 200, JACKSON, MISSISSIPPI
39202; TELEPHONE (601) 352-7817, ATTENTION: HARRY E. VICKERY,
PRESIDENT.
<PAGE>
PROSPECTUS
[INSERT LOGO HERE]
DELTA AGRICULTURAL AND STONEVILLE INSURANCE COMPANY
INDUSTRIAL TRUST Maximum of 650,000 Shares of Common Stock,
$1.00 par value
This Prospectus is being furnished to former members of Delta
Agricultural and Industrial Trust, a Mississippi workers'
compensation self insurance trust (the "Trust") in connection with
the Plan and Agreement of Reorganization and Conversion of the
Trust (the "Plan") and the transactions contemplated thereby, which
was adopted and approved by the Trust's Board of Trustees on March
20, 1997. A conformed copy of the Plan is attached as Exhibit A.
Pursuant to the Plan: (i) the Trust will transfer substantially all
its assets to Stoneville Insurance Company (the "Company"); (ii) in
exchange for the contribution of such assets by the Trust to the
Company, the Company will issue shares of its common stock, $1.00
par value (the "Stock") to the Trust; and (iii) the Trust will
dissolve and distribute its assets (Stock of the Company) in a
liquidating distribution to former members of the Trust ("Former
Members") in accordance with the formula set forth in the Plan and
described in this Prospectus (the foregoing transaction is referred
to as the "Conversion").
No vote of Former Members is required for the approval or
consummation of the Conversion. However, all Former Members should
carefully read this Prospectus to understand the Conversion and
their rights under the Plan. Consummation of the Conversion is
subject to various conditions as set forth in the Plan and
described in the Prospectus.
THIS PROSPECTUS, WHICH IS BEING FURNISHED TO FORMER MEMBERS OF
THE TRUST TO ADVISE THEM OF THE TERMS OF THE CONVERSION, ALSO
CONSTITUTES THE PROSPECTUS OF THE COMPANY WITH RESPECT TO A MAXIMUM
OF 650,000 SHARES OF COMPANY STOCK TO BE ISSUED IN CONNECTION WITH
THE CONVERSION.
IN THE EVENT THAT THE MAXIMUM NUMBER OF SHARES OF STOCK
REGISTERED HEREUNDER ARE NOT DISTRIBUTED PURSUANT TO THE PLAN, THE
COMPANY MAY SELL THE BALANCE OF SUCH STOCK TO PERSONS OTHER THAN
FORMER MEMBERS. SUCH SALES SHALL BE MADE ONLY THROUGH OFFICERS AND
DIRECTORS OF THE COMPANY AND NO COMMISSIONS WILL BE CHARGED.
No person is authorized to give any information or to make any
representation concerning the Conversion not contained in this
Prospectus and, if given or made, such information or
representation should not be relied upon as having been authorized
by the Company or the Trust. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Prospectus in any jurisdiction, to or
from any person to whom it is unlawful to make such offer or
solicitation of an offer in such jurisdiction. Neither the delivery
of this Prospectus nor any distribution of the securities made
under this Prospectus shall, under any circumstances, create any
implication that there has been no change in the information set
forth herein since the date of this Prospectus.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED CAREFULLY BY FORMER MEMBERS OF THE TRUST IN
CONSIDERING THEIR RIGHTS REGARDING THE CONVERSION. THIS STOCK IS
PURELY SPECULATIVE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, THE
MISSISSIPPI DEPARTMENT OF INSURANCE OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is being first mailed to Former Members of the
Trust on or about , 1997.
The date of this Prospectus is , 1997.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . .1
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Definition of Former Members of the Trust. . . . . . . . . . . .1
Description of Plan. . . . . . . . . . . . . . . . . . . . . . .2
Adoption of Plan . . . . . . . . . . . . . . . . . . . . . . . .2
Reasons for Conversion . . . . . . . . . . . . . . . . . . . . .2
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . .2
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . .2
Conditions and Termination . . . . . . . . . . . . . . . . . . .3
Assumption Reinsurance Agreement . . . . . . . . . . . . . . . .3
Termination of Self Insurer Status . . . . . . . . . . . . . . .3
Management of the Company. . . . . . . . . . . . . . . . . . . .4
Regulation of the Company. . . . . . . . . . . . . . . . . . . .4
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . .4
Certain Federal Income Tax Consequences. . . . . . . . . . . . .4
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . .4
Required Regulatory Approvals. . . . . . . . . . . . . . . . . .4
Comparison of Rights of Former Members of the Trust and
Shareholders of the Company. . . . . . . . . . . . . . . . . . .5
Sale of Excess Stock . . . . . . . . . . . . . . . . . . . . . .5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . .5
History of Operations. . . . . . . . . . . . . . . . . . . . . .5
Limited Operations . . . . . . . . . . . . . . . . . . . . . . .5
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . .5
Reliance on Certain Persons. . . . . . . . . . . . . . . . . . .6
Variability of Operating Results . . . . . . . . . . . . . . . .6
Adequacy of Loss Reserves. . . . . . . . . . . . . . . . . . . .6
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . .7
Reinsurance Considerations . . . . . . . . . . . . . . . . . . .7
Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Licensure. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
THE CONVERSION . . . . . . . . . . . . . . . . . . . . . . . . .8
Background . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Reasons for Conversion . . . . . . . . . . . . . . . . . . . . .8
Recommendation of the Trust's Board of Trustees. . . . . . . . 10
Assumption Reinsurance Agreement . . . . . . . . . . . . . . . 10
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 11
Resales of Company Stock . . . . . . . . . . . . . . . . . . . 11
Certain Federal Income Tax Consequences. . . . . . . . . . . . 11
Consequences to Former Members . . . . . . . . . . . . . . . . 11
Consequences to the Trust and the Company. . . . . . . . . . . 12
Anticipated Accounting Treatment . . . . . . . . . . . . . . . 12
THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 13
Terms of the Plan . . . . . . . . . . . . . . . . . . . . . . 13
Dissemination of Liquidating Distribution. . . . . . . . . . . 14
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 14
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED) OF THE COMPANY . 14
THE WORKERS' COMPENSATION INSURANCE SYSTEM . . . . . . . . . . 18
BUSINESS OF THE TRUST. . . . . . . . . . . . . . . . . . . . . 19
History of the Trust . . . . . . . . . . . . . . . . . . . . . 19
Operations of the Trust. . . . . . . . . . . . . . . . . . . . 19
The Commercial Program . . . . . . . . . . . . . . . . . . . . 19
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 20
SELECTED FINANCIAL DATA OF THE TRUST . . . . . . . . . . . . . 21
TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATION. . . . . . . . . . . . . . 23
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Results of Operations. . . . . . . . . . . . . . . . . . . . . 23
Earned Premium . . . . . . . . . . . . . . . . . . . . . . . . 23
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 24
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 24
Investment Income. . . . . . . . . . . . . . . . . . . . . . . 25
Liquidity and Capital Resources. . . . . . . . . . . . . . . . 25
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Liquidity Requirements . . . . . . . . . . . . . . . . . . . . 26
Admitted Assets. . . . . . . . . . . . . . . . . . . . . . . . 27
Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . 27
BUSINESS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . 27
Organization and Purpose . . . . . . . . . . . . . . . . . . . 27
Company Management's Plan of Operation . . . . . . . . . . . . 27
Continuation of Commercial Program . . . . . . . . . . . . . . 27
Recapture of Reserves. . . . . . . . . . . . . . . . . . . . . 28
Provision of Reinsurance . . . . . . . . . . . . . . . . . . . 28
Provision of Other Property and Casualty Insurance . . . . . . 28
General Operations . . . . . . . . . . . . . . . . . . . . . . 28
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Government Regulation. . . . . . . . . . . . . . . . . . . . . 33
Assumption of Trust Contracts. . . . . . . . . . . . . . . . . 34
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Management of the Company. . . . . . . . . . . . . . . . . . . 34
Executive Compensation . . . . . . . . . . . . . . . . . . . . 35
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 36
DESCRIPTION OF COMPANY STOCK . . . . . . . . . . . . . . . . . 36
COMPARISON OF RIGHTS OF FORMER MEMBERS OF THE TRUST
AND SHAREHOLDERS OF THE COMPANY . . . . . . . . . . . . . . .. 36
Governance . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Indemnification of Officers and Directors of the Company . . . 37
Indemnification of Trustees of the Trust . . . . . . . . . . . 38
Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . 39
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
PLAN OF DISTRIBUTION OF EXCESS STOCK . . . . . . . . . . . . . 36
CERTAIN TRANSACTIONS AND RELATIONSHIPS . . . . . . . . . . . . 40
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 40
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
INDEX TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . .F-1
EXHIBIT A -- PLAN AND AGREEMENT OF REORGANIZATION AND
CONVERSION . . . . . . . . . . . . . . . . . .A-1
</TABLE>
<PAGE>
SUMMARY
The following is a brief summary of certain information
contained elsewhere in this Prospectus and the documents
incorporated herein by reference. This summary does not contain a
complete statement of all material information relating to the
Conversion and is subject to and qualified in its entirety by
reference to the more detailed information and financial statements
contained elsewhere in this Prospectus, including any Exhibits and
the documents incorporated in this Prospectus by reference.
Certain capitalized terms used in this summary are defined
elsewhere in this Prospectus.
THE COMPANY
The Company is a Mississippi corporation, with its principal
office located 633 North State Street, Suite 200, Jackson,
Mississippi 39202, telephone number (601) 352-7817. The Company
was incorporated on December 13, 1996. Subsequent to the
Conversion, the Company will apply for, and anticipates completing
licensure as a Mississippi stock insurance company eligible to
provide workers' compensation insurance within the State of
Mississippi. See "Business of the Company -- Organization and
Purpose."
THE TRUST
The Trust is a Mississippi workers' compensation self insurance
trust with its principal office located 833 Washington Avenue, P.
O. Box 5037, Greenville, Mississippi, 38704-5037, telephone number
(601) 378-5005. The Trust was formed under a Trust Agreement dated
August 1, 1991 (the "Trust Agreement"), to provide workers'
compensation insurance to its participants. See "Business of the
Trust -- History of the Trust; Operations of the Trust."
DEFINITION OF FORMER MEMBERS OF THE TRUST
Since July 1, 1996, the date of the inception of the Trust's
program of workers' compensation insurance coverage provided through
TIG Insurance Company (the "Commercial Program"), no employer has
paid a premium to the Trust for workers' compensation insurance nor
has the Trust issued such insurance. Because the Trust Agreement
governing operations of the Trust defines members as those who
purchase insurance through the Trust, as a result of the creation
of the Commercial Program the Trust ceased having members as
contemplated by the provisions of the Trust Agreement. To clarify
the rights of Former Members regarding the terms of the Conversion,
the Board of Trustees of the Trust adopted a resolution to clarify
and define those who are Former Members of the Trust. Pursuant to
the resolution, Former Members of the Trust are those employers who
at any time had workers' compensation insurance coverage provided
by the Trust for one or more full Fund Years, which Fund Years
resulted in positive net income for the Trust.
DESCRIPTION OF PLAN
The Company has been formed to become the successor of the
Trust. Pursuant to the Plan: (i) the Trust will transfer
substantially all its assets to the Company; (ii) in exchange for
the contribution of the such assets by the Trust to the Company,
the Company will issue Stock to the Trust; and (iii) the Trust will
be liquidated and will distribute to Former Members of the Trust
one (1) share of Company Stock for each $4.00 of value of Trust
equity (a "Trust Unit") allocable to such Former Member, except for
those Trust Units with respect to which rights of dissent have been
exercised (collectively, the "Liquidating Distribution"). The total
number of Trust Units shall be computed based upon the value of the
equity of the Trust as of December 31, 1996, reduced by all
expenses incurred between such date and the effective date of the
Plan, including amounts reserved to pay estimated expenses of the
Trust, but excluding amounts reserved to pay dissenters. The
assets of the Trust to be transferred to the Company will be
substantially all the assets of the Trust less an amount sufficient
to pay the Trust's remaining costs and expenses and amounts due to
dissenters. See "The Plan -- General; Terms of the Plan;
Dissemination of Liquidating Distribution" and "Description of
Company of Stock."
ADOPTION OF PLAN
The Trust's Board of Trustees approved and adopted the Plan on
March 20, 1997. No vote of Former Members is required to approve
or adopt the Plan or consummate the Conversion.
REASONS FOR CONVERSION
Formation of the Company is intended to provide a locally
controlled, long term source of dependable and reasonably priced
insurance without the joint and several liability associated with
workers' compensation self-insured pools such as the Trust. As a
Mississippi stock insurance company, the Company is permitted by
law to expand into a broader range of insurance activities and to
have more flexibility in financing activities and other matters
than is currently permitted to the Trust as a Mississippi workers'
compensation self-insured pool. Formation of the Company also is
intended to facilitate the development of an active market in the
Company's Stock. See "The Conversion -- Reasons for Conversion;
Resales of Company Stock" and "Business of the Company -- Company
Management's Plan of Operation."
DISSENTERS' RIGHTS
Former Members of the Trust have the right to dissent from the
Plan and receive $4.00 in cash for each of their Trust Units. See
"The Plan -- General; Terms of the Plan."
EFFECTIVE DATE
The effective date of the Plan at which time the Company will
be capitalized and the Trust liquidated and dissolved (the
"Effective Date") is expected to be the close of business on the
last day of the month after which all of the conditions to the Plan
have been satisfied or waived. See "The Plan -- Effective Date;
Conditions; Termination."
CONDITIONS AND TERMINATION
The Plan may be terminated and abandoned at any time prior to
the Effective Date by vote of the Trust's Board of Trustees. In
addition, the Plan is subject to certain conditions, which, if not
met, also constitute grounds for termination. Such conditions
include: (i) receipt of an opinion from Watkins Ludlam & Stennis,
P.A., to the effect that the Conversion will be treated, for
federal income tax purposes, as a tax-free transaction as to the
Trust, the Company, and to those Former Members who receive Stock
of the Company; (ii) effectiveness of the Assumption Reinsurance
Agreement described elsewhere herein; and (iii) dissenters' rights
shall not be perfected by holders of more than twenty percent (20%)
of the Trust Units. See "The Plan -- Conditions; Termination."
ASSUMPTION REINSURANCE AGREEMENT
The Trust and the Company have entered into an Assumption
Reinsurance Agreement (the "Assumption Reinsurance Agreement") with
Continental Casualty Company ("Continental"), a member of the CNA
Insurance Group.
The Assumption Reinsurance Agreement provides that Continental
will assume the Trust's insurance liabilities and the joint and
several liability of any employers to whom the Trust provided
insurance and that such employers will be able to look directly to
Continental for coverage and claims payments without the necessity
of making a claim against the Trust.
Under the terms of the Assumption Reinsurance Agreement, the
Company has the option to reinsure part or all of the Trust's former
insurance which Continental directly assumed as well as recapture
certain reserves transferred to Continental. The Assumption
Reinsurance Agreement is expected to provide significant net income
to the Company. See "The Conversion -- Assumption Reinsurance
Agreement" and "Business of the Company -- Company Management's Plan
of Operation."
TERMINATION OF SELF INSURER STATUS
Upon consummation of the Assumption Reinsurance Agreement, the
Trust will surrender its Certificate of Authority to the
Mississippi Workers' Compensation Commission (the "Workers'
Compensation Commission"). See "The Conversion -- Regulatory
Approvals."
MANAGEMENT OF THE COMPANY
The officers and directors of the Company are William L.
Kennedy (Director and Chairman of the Board), Harry E. Vickery
(Director and President) and David R. White (Director, Secretary,
Treasurer and Vice President). See "Business of the Company --
Management of the Company; Executive Compensation."
REGULATION OF THE COMPANY
The Company will be subject to the regulation of the
Mississippi Department of Insurance (the "Department of Insurance").
See "The Conversion -- Regulatory Approvals"; "The Workers'
Compensation Insurance System"; and "Business of the Company --
Government Regulation."
DIVIDEND POLICY
The payment of dividends by the Company is subject to
regulatory restrictions. See "Comparison to the Rights of Members
of the Trust and Shareholders of the Company -- Dividends."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Where a Former Member exercises the right to dissent and
receives cash in exchange for Trust Units, such cash will be
treated as having been received by the Former Member as a
distribution in redemption of the Trust Units subject to the
provisions and limitations of Section 302 of the Internal Revenue
Code of 1986, as amended (the "Code"). Where a Former Member
receives shares of Company Stock in exchange for Trust Units, no
gain or loss will be recognized by the Former Member on the Company
Stock received. No gain or loss will be recognized by the Trust or
the Company with respect to the Conversion. See "The Conversion --
Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The Conversion is intended to qualify as a pooling of
interests for accounting and financial reporting purposes. The
qualification of the Conversion as a pooling of interests is not a
condition to the Conversion. See "The Conversion -- Anticipated
Accounting Treatment."
REQUIRED REGULATORY APPROVALS
The Assumption Reinsurance Agreement and the Plan have been
approved by the Workers' Compensation Commission. No other
regulatory approvals are required. See "The Conversion --
Regulatory Approvals."
COMPARISON OF RIGHTS OF FORMER MEMBERS OF THE TRUST AND
SHAREHOLDERS OF THE COMPANY
See "Comparison of Rights of Former Members of the Trust and
Rights of Shareholders of the Company" for a summary of the
material differences between rights of Former Members of the Trust
and rights of shareholders of the Company.
SALE OF EXCESS STOCK
In the event that the maximum number of shares of Stock
registered hereunder are not distributed pursuant to the Plan, the
Company may sell the balance of such stock to persons other than
Former Members. The sale price of such Stock shall be $4.00 per
share. Such sales shall be made only through officers and
directors of the Company and no commissions will be charged. See
"Plan of Distribution of Excess Stock."
RISK FACTORS
The following risk factors should be considered carefully by
Former Members in evaluating whether to become holders of Company
Stock. These factors should be considered in conjunction with
other information included and incorporated by reference in this
Prospectus.
HISTORY OF OPERATIONS
The Company is a newly formed Mississippi corporation and has
no history of operations. Although the Company will be the
successor in interest to the Trust and plans to capitalize on
relationships between the Trust and its present and former
insureds, there can be no assurance that the Company will succeed
or meet its objectives. See "Business of the Company --
Organization and Purpose; Company Management's Plan of Operation."
LIMITED OPERATIONS
The Company's operations will initially be limited. The
Company anticipates that its sole sources of revenue will initially
consist of investment income and premiums generated from the
provision of reinsurance and recapture of reserves under the
Assumption Reinsurance Agreement. See "The Conversion --
Assumption Reinsurance Agreement" and "Business of the Company --
Company Management's Plan of Operations."
CAPITALIZATION
Although the Company anticipates it will exceed the statutory
minimum capital and surplus requirements of the Department of
Insurance for property and casualty insurance companies (the
classification which includes workers' compensation insurance), it
will be thinly capitalized. In the early years, the Company may
incur losses. Losses in excess of those anticipated by management
during the initial years of the Company's operations or otherwise
could result in the Company failing to meet the statutory minimum
capital and surplus requirements. In that event, the Company could
be placed under certain operating and other restrictions by the
Department of Insurance or supervision by the Department of
Insurance or the Department of Insurance could seek to appoint a
receiver or liquidator for the Company. See "Business of the
Company -- Company Management's Plan of Operations; Government
Regulation."
RELIANCE ON CERTAIN PERSONS
The success of the Company will be substantially dependent on
the services of Harry E. Vickery (Director, President of the
Company) and David R. White (Director, Secretary, Treasurer, and
Vice President). The loss of the services of one or both persons
could have an adverse impact on the Company's ability to reach its
objectives. See "Business of the Company -- Management of the
Company" and "Certain Transactions and Relationships."
VARIABILITY OF OPERATING RESULTS
Historically, the workers' compensation industry has been
cyclical, generally characterized by periods of overcapacity which
result in lower premium rates followed by periods of scarcity
resulting in higher rates. Premium rates, and thus profitability,
can be affected significantly by many factors including
competition, the severity and frequency of claims, interest rates,
regulations, court decisions, the judicial climate, and general
economic conditions and trends, all of which are outside of the
Company's control. These factors could contribute to significant
variation of results of operations from year to year. Changes in
economic conditions can lead to reduced premium levels due to lower
payrolls as well as increased claims due to the tendency of workers
who are laid off to submit worker's compensation claims.
Legislative and regulatory changes can also contribute to variable
operating results for worker's compensation insurance businesses.
See "The Conversion -- Reasons for Conversion" and "The Workers'
Compensation Insurance System."
ADEQUACY OF LOSS RESERVES
The Company will be required to maintain reserves to cover its
estimated ultimate liability for losses with respect to reported
and unreported claims incurred as of the end of each accounting
period. These reserves do not represent an exact calculation of
liabilities but rather are estimates involving actuarial
projections at a given time of what the Company expects the
ultimate settlement and administration of claims will cost based on
facts and circumstances then known, predictions of future events,
estimates of future trends in claims frequency and severity. See
"Business of the Company -- Government Regulation."
In light of present facts and current legal interpretations,
management of the Company believes that adequate provisions will
have been made for loss reserves upon the Conversion. In making
this determination, management has considered the claims experience
with the Trust, loss development history for prior accident years
for the Trust, estimates of future trends of claims frequency and
severity and the proposed underwriting activities of the Company.
However, establishment of appropriate reserves is an inherently
uncertain process, and there can be no certainty that currently
established reserves will prove adequate in light of subsequent
actual experience. Subsequent actual experience could result in
loss reserves being too high or too low. Future loss development
could require reserves for prior periods to be increased, which
would adversely impact earnings in future periods.
REGULATION
The Company's worker's compensation insurance operations will
initially be conducted only in Mississippi and will be subject to
supervision and regulation by the Department of Insurance. Such
supervision and regulation relate to numerous aspects of an
insurance company's business and financial condition. The primary
purpose of such supervision and regulation is the protection of
policyholders rather than investors or stockholders of an issuer.
See "Business of the Company -- Government Regulation."
COMPETITION
The insurance industry is characterized by competition
primarily on the basis of price. However, availability and quality
of products, quality and speed of service (including claims
service), financial strength, distribution systems and technical
expertise are also important elements of competition. Many of the
Company's competitors are larger and have greater resources than
the Company. See "Business of the Company -- Company Management's
Plan of Operations."
REINSURANCE CONSIDERATIONS
In the event the Company begins to write insurance on a direct
basis (i.e., assuming insurance risk), it anticipates that it will
limit the amount of risk retained under policies written by
entering into reinsurance agreements. The availability and cost of
reinsurance are subject to prevailing market conditions, both in
terms of price and available capacity, which would affect the
Company's business volume and profitability. The Company also is
subject to credit risk with respect to its ability to recover
amounts due from reinsurers, since unlike the absolute assumption
by Continental of the obligations of the Trust via notification and
consent of the insureds, the ceding of risk to reinsurers does not
relieve the Company of liability to its insureds. In the event the
Company begins to write insurance on a direct basis, there can be
no assurance that the Company's reinsurance programs will
effectively limit its overall exposure for policy claims. See
"Business of the Company -- Company Management's Plan of
Operations."
RATINGS
In the event the Company elects to write insurance on a direct
basis, the absence of ratings will make the Company's products less
attractive to insureds. Rating organizations review the financial
performance and condition of insurers. The Company will initially
not be rated as a result of having less than five consecutive years
of operating experience.
LICENSURE
Upon completion of the Conversion, the Company expects to be
licensed by the Department of Insurance as a provider of workers'
compensation insurance. Although the Company believes it will meet
all requirements for licensure and has undertaken discussions with
the Department of Insurance to that effect, the Department of
Insurance is not required to grant such licensure. In the event
that the Company desires to engage in the business of insurance in
other states, the Company must be licensed in each such state by
that state's insurance regulatory authority. Although the Company
believes it will be eligible for such licensure, there is no
guarantee that such licenses will be issued.
THE CONVERSION
BACKGROUND
During late 1995, management of the Trust began discussing the
best method of continuing to fulfill the Trust's mission of ensuring
long term availability of reasonably priced workers' compensation
insurance to its core agricultural and industrial clients. Due to
fundamental changes in the workers' compensation insurance market,
management of the Trust determined that the conversion of the Trust
into a commercial stock company would best suit the needs of the
Trust's insureds. See "The Workers' Compensation Insurance System."
On March 20, 1997, the Trustees of the Trust voted to approve
and adopt the Plan. The Company approved and adopted the Plan and
the sale of its stock to the Trust and related transactions on the
same date.
REASONS FOR CONVERSION
THE CHANGING WORKERS COMPENSATION MARKET
At the time the Trust was organized, workers' compensation
insurance written by commercial insurers in Mississippi was
becoming difficult and expensive to obtain as a result of losses
experienced by commercial insurers. Mississippi's experience
paralleled a national trend of limited availability of workers'
compensation insurance which prompted the formation of self insured
pools across the United States. See "The Workers' Compensation
Insurance System."
However, as a result of structural changes in the workers'
compensation market, such as tort reform and better loss analysis,
premiums charged by commercial workers' compensation carriers have
lessened while availability of insurance has increased. As a
result, self insured pools such as the Trust have found it
difficult to compete with commercial insurance companies on a cost
of premium basis because commercial insurers, due to different
regulatory requirements, can change their pricing strategy much
more rapidly than can the self insured pools. See "Business of the
Trust -- Regulation" and "Trust Management's Discussion and Analysis
of Financial Conditions and Operation." Although availability of
workers' compensation insurance has increased, the industry remains
highly cyclical, which could result in periods of scarcity and high
premiums in the future.
As a result of the changing nature of the workers' compensation
market, effective July 1, 1996 the Trust ceased writing workers'
compensation insurance and created the Commercial Program with TIG
Insurance Company ("TIG") and TIG Reinsurance Company. Under the
Commercial Program, TIG (an "A" (excellent) rated commercial
insurance company according to A. M. Best Company), provides
workers' compensation to Former Members and other persons through
the Trust's network of agents.
The Trust created the Commercial Program in order to maintain
coverage of its insureds at reasonable rates as the Trust planned
for the Conversion. The Trust continues to operate, primarily to
service and "run off" its existing claims.
NO JOINT AND SEVERAL LIABILITY
In a self insurance pool such as the Trust, all insureds are
jointly and severally liable for the loss obligations of one
another. Upon the effectiveness of the Assumption Reinsurance
Agreement which is a condition precedent of the Plan, Continental
will assume the joint and several liability obligations of all the
insureds of the Trust. The shareholders of the Company will not be
jointly and severally liable for any obligations arising out of
policies written by the Company. See "Comparison of the Rights of
Former Members of the Trust and Shareholders of the Company --
Liability; Assessment."
ABILITY TO WRITE OTHER LINES OF BUSINESS
Mississippi law prohibits self insured workers' compensation
trusts from writing any type of insurance other than workers'
compensation insurance. As a commercial insurer, assuming
appropriate licensure and financial strength, the Company could
write other lines of business in addition to workers' compensation.
ABILITY TO WRITE INSURANCE IN OTHER STATES
Self insurers such as the Trust cannot write workers'
compensation insurance outside of Mississippi. As a commercial
insurer, assuming appropriate licensure and financial strength, the
Company could write insurance in other states, including adjacent
areas of Louisiana and Arkansas.
ABILITY TO RAISE ADDITIONAL CAPITAL
If self insured workers' compensation trusts require additional
capital, their principal options would be to either increase
premiums or assess their members jointly and severally. As a
commercial insuror, the Company's shareholders are not liable to
assessment and capital needs may be met through the sale of stock.
See "Comparison of the Rights of Members of the Trust and
Shareholders of the Company -- Liability; Assessment" and "Business
of the Company -- Government Regulation."
RECOMMENDATION OF THE TRUST'S BOARD OF TRUSTEES.
THE BOARD OF TRUSTEES OF THE TRUST HAS UNANIMOUSLY VOTED FOR
APPROVAL AND ADOPTION OF THE PLAN AND BELIEVES THAT THE
CONVERSION IS IN THE BEST INTERESTS OF THE TRUST AND THE
FORMER MEMBERS.
ASSUMPTION REINSURANCE AGREEMENT
The Trust and the Company have entered into the Assumption
Reinsurance Agreement to be effective as of January 1, 1997, with
Continental, a member of the CNA Insurance Group. The CNA
Insurance Group has a rating by the A. M. Best Company of "A"
(Excellent). This rating applies to the group's nine-member
intercompany pool which includes Continental.
The Assumption Reinsurance Agreement provides that Continental
will assume the Trust's insurance liabilities and the joint and
several liability of any employers to whom the Trust provided
insurance from the inception of the Trust and that such employers
will be able to look directly to Continental for coverage and
claims payments without the necessity of making a claim against the
Trust. Each Former Member of the Trust which accepts a Liquidating
Distribution will be deemed to have agreed to look solely to
Continental for coverage, to release the Trust from further
insurance obligations, and to release the Former Members of the
Trust from joint and several liability. In addition, all Former
Members will be required to sign and return an Assumption
Certificate evidencing their agreement to the assumption by
Continental as a condition to receiving the Liquidating
Distribution applicable to such Former Member.
The Assumption Reinsurance Agreement provides that the Trust
will pay to Continental a total premium not to exceed $2,400,000
composed of $2,200,000 in reserves to be transferred to Continental
for use in paying claims made against the Trust (which amount may
be adjusted downward depending on claims settled), and $200,000 as
a fee to Continental for the provision of coverage. The Company
will be required to provide additional security in the amount of
$1,500,000 through placement of cash and/or marketable securities
in a trust account such that if the reserves are exhausted,
Continental may draw upon the additional security. See "Risk
Factors -- Capitalization;" "Business of the Company -- Government
Regulation;" and "Trust Management's Discussion and Analysis of
Financial Conditions and Results of Operation."
Under the terms of the Assumption Reinsurance Agreement, the
Company has the option to reinsure part or all of the Trust's former
insurance which Continental directly assumed ("Stoneville
Reinsurance"). As Stoneville Reinsurance is provided, reserves
allocable to such risk reinsured by the Company will be transferred
to the Company, thus allowing the Company to invest those funds and
generate income. In addition, the Assumption Reinsurance Agreement
will allow the Company to recapture portions of the reserves and
funds held in trust by Continental as described above which may not
be actuarially required due to settlement of claims ("Stoneville
Recapture"). As Stoneville Recapture proceeds and such amounts are
transferred from Continental to the Company, the Company will have
the opportunity to invest those funds and generate income. See
"Business of the Company -- Company Management's Plan of
Operations."
REGULATORY APPROVALS
The Assumption Reinsurance Agreement and the Plan have been
approved by the Workers' Compensation Commission. No regulatory
approvals are required in order for the Trust to consummate the
Conversion. However, the Company must be licensed as an insurance
company by the Department of Insurance prior to commencing
operations as a workers' compensation insurer. The Company believes
such licensure will be granted upon the consummation of the
Conversion. See "Business of the Company -- Government
Regulations."
Immediately prior to the consummation of the Conversion, the
Trust will surrender its Certificate of Authority to the Workers'
Compensation Commission.
RESALES OF COMPANY STOCK
All shares of Company Stock received by Former Members of the
Trust in the Conversion will be freely transferable, except that
shares of Company Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of
the Trust before the Conversion may be resold by them only in
transactions permitted by the resale provisions of Rule 145
promulgated under the Securities Act (or Rule 144 in the case of
such persons who become affiliates of the Company), or as otherwise
permitted under the Securities Act. Persons who may be deemed to
be affiliates of the Trust or the Company generally include
individuals or entities that control, are controlled by, or are
under common control with, such party and may include certain
officers and directors of such party as well as principal
shareholders of such party in the case of the Company, or certain
Trustees or Former Members in the case of the Trust. See
"Comparison of the Rights of Former Members of the Trust and
Shareholders of the Company -- Resale."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of certain federal income tax
consequences of the Conversion is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the
regulations thereunder, judicial authority, and administrative
rulings and practice as of the date hereof.
CONSEQUENCES TO FORMER MEMBERS
Former Members receiving cash as a result of the Conversion
will be treated as having received cash as a distribution in
redemption of the Trust Units. Such distribution will be taxable,
subject to the provisions and limitations of Code Section 302. No
gain or loss will be recognized by the Former Members upon their
receipt of Company Stock solely in exchange for their Trust Units
by virtue of Code Section 354(a)(1). The basis of the Company
Stock to be received by the Former Members will be the same as the
Former Members' basis in the Trust Units allocable to such Former
Members, under Code Section 358(a)(1).
The holding period of the Company Stock received by the Former
Members will include, in each instance, the period during which the
Former Members had an interest in the equity of the Trust as
determined under the Plan, provided that such Trust equity
constituted a capital asset on the date of the exchange, pursuant
to Code Section 1223(1).
CONSEQUENCES TO THE TRUST AND THE COMPANY
No gain or loss will be recognized by the Trust or the Company
as a result of the Conversion under Code Sections 361(a) and
1032(a). The basis of the assets of the Trust in the hands of the
Company will be the same as the basis of those assets in the hands
of the Trust immediately prior to the transfer under Code Section
362(b). The holding period of the assets of the Trust in the hands
of the Company will include the period during which such assets
were held by the Trust under Code Section 1223(2).
EACH FORMER MEMBER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH FORMER
MEMBER OF THE CONVERSION, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, FOREIGN AND OTHER TAX LAWS. THE FOREGOING CONSTITUTES ONLY
A GENERAL DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE CONVERSION WITHOUT REGARD TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OF EACH FORMER MEMBER OF THE TRUST.
ANTICIPATED ACCOUNTING TREATMENT
The Conversion is intended to qualify as a pooling of
interests for accounting and financial reporting purposes. Under
this method of accounting, the recorded assets of the Trust will be
carried forward to the Company at their recorded amounts, income of
the Company will include income of the Trust for the entire fiscal
year in which the Conversion occurs and the reported income of the
Trust for prior periods will be combined with and included as
income of the Company.
THE PLAN
GENERAL
The terms of the Conversion are contained in the Plan, a copy
of which is attached to the Prospectus as Exhibit A. The
statements in this Prospectus are qualified entirely by reference
to the Plan.
Upon the satisfaction or waiver of the conditions to the
effectiveness of the Plan: (i) the Trust will transfer
substantially all its assets to the Company; (ii) in exchange for
the contribution of such assets by the Trust to the Company, the
Company will issue shares of its Stock to the Trust; and (iii) the
Trust will dissolve and distribute its assets (stock of the
Company) to Former Members of the Trust, with the exception of
Former Members who elect to dissent from the transaction, who will
receive $4.00 for each share of Stock to which they would have been
entitled to under the Plan.
EFFECTIVE DATE
The Plan is dated as of March 20, 1997, but will become
effective as of the Effective Date, which is the close of business
on the last day of the month during which all conditions to the
Plan have been satisfied or waived. The capitalization of the
Company and the liquidation and dissolution of the Trust shall be
deemed to have occurred simultaneously and completely as of the
Effective Date.
TERMS OF THE PLAN
As of the Effective Date, the Trust will transfer to the
Company substantially all of the assets of the Trust (i.e. all
assets of the Trust other than amounts required to consummate the
Assumption Reinsurance Agreement and an amount reserved for
expenses of the liquidation and payment of dissenters) in return
for the number of shares of Stock of the Company equal to the Trust
equity transferred by the Trust to the Company measured by $4.00 of
Trust equity (one Trust Unit) per share of Company Stock. At that
point, the Trust will own all the issued and outstanding shares of
Stock of the Company. Immediately thereafter, the Trust will be
liquidated.
Upon liquidation of the Trust, each Former Member shall
receive its Liquidating Distribution of one share of Company Stock
for each Trust Unit allocable to such Former member, except
dissenters, who shall receive $4.00 in cash for each Trust Unit
allocable to such dissenter. The total number of Trust Units
shall be computed based upon the value of the equity of the Trust
as of December 31, 1996 reduced by all expenses incurred between
such date and the Effective Date of the Plan including amounts
reserved to pay estimated expenses of the Trust, but excluding
amounts reserved to pay dissenters. For purposes of computing the
number of shares of Stock (or in the case of dissenters, cash)
distributable to each Former Member, each Former Member of the
Trust will have allocated to it a number of Trust Units determined
by multiplying the total number of Trust Units by the Proportionate
Earned Premium of each Former Member.
The Proportionate Earned Premium is the percentage computed by
dividing (i) the net earned premium derived by the Trust from each
Former Member for all Fund Years during which the Trust has
positive net income since inception of the Trust through December
31, 1996 by (ii) the total net earned premium of the Trust derived
from Former Members for all Fund Years during which the Trust had
positive net income from the inception of the Trust through
December 31, 1996.
Former Members may dissent from the Plan and receive $4.00 in
cash for each Trust Unit allocable to such persons upon perfection
of dissenters' rights. Payments to dissenters shall be paid by the
Trust up to an aggregate amount not to exceed $200,000. In the
event that Former Members as a group perfect dissenters' rights
resulting in an obligation to pay dissenters an amount in excess of
$200,000, the excess over that amount due to dissenters shall be
paid by the Company out of operating funds and not out of assets
transferred to the Company from the Trust pursuant to the Plan.
In order to perfect dissenters' rights, a Former Member wishing
to dissent must deliver to the Trust's office at 833 Washington
Avenue, Greenville, Mississippi 38704-5037, before
, 1997, written notice of such Former Member's
intent to demand payment.
As of the Effective Date, following the Liquidating
Distribution, the Trust shall be dissolved. Subsequent to the
dissolution of the Trust, any amounts remaining not needed to pay
expenses or dissenters, if any, shall be transferred to the
Company.
DISSEMINATION OF LIQUIDATING DISTRIBUTION
Promptly after the Effective Date, each Former Member will
receive an Assumption Certificate which will evidence Continental's
assumption of the insurance liabilities of the Trust, including the
joint and several liability obligations of each of the Trust's
insureds to the other. Each Former Member must sign and return the
Assumption Certificate to the Trust at which time the Trust will
tender to the Former Member such Former Member's Stock in the
Company or such amount as may be due if such Former Member has
complied with the dissenters' procedures as set forth in the Plan.
CONDITIONS
The obligation of the Trust to consummate the Plan is subject
to the following conditions: (i) the Assumption Reinsurance
Agreement being in effect; (ii) receipt of an opinion from Watkins
Ludlam & Stennis, P.A. to the effect that the Conversion will be
treated as a tax-free transaction as to the Trust, the Company, and
to those Former Members who receive Stock of the Company; and (iv)
dissenter's rights shall not be perfected by holders of more than
twenty percent (20%) of the Trust Units.
TERMINATION
The Plan may be terminated at any time by vote of the Trustees
of the Trust or if all conditions to the Plan have not been
satisfied or waived by December 31, 1997.
PRO FORMA CONDENSED BALANCE SHEET-STATUTORY BASIS (UNAUDITED) OF
THE COMPANY
The following unaudited pro forma condensed balance sheet-statutory
basis as of January 1, 1997, give effect to the Conversion as if the
Conversion had been in place effective January 1, 1997. The pro forma
information is based on historical financial statements of the Trust giving
effect to the transactions under the pooling of interests method of
accounting and the assumptions and adjustments described in the accompanying
notes to the unaudited pro forma financial statements.
The unaudited pro forma condensed balance sheet-statutory
basis has been prepared by the management of the Company based upon
financial statements of the Trust and the Company which are
included elsewhere herein. This pro forma balance sheet-statutory
basis may not be indicative of the financial condition that would
have existed if the Conversion had become effective on January 1,
1997. The pro forma condensed balance sheet-statutory basis should
be read in conjunction with the financial statements and related
notes of the Company and the Trust contained elsewhere herein.
<PAGE>
<TABLE>
<CAPTION>
STONEVILLE INSURANCE COMPANY
PRO FORMA BALANCE SHEET
STATUTORY BASIS
JANUARY 1, 1997
<S> <C>
ADMITTED ASSETS
Cash and Cash Equivalents $401,346
Invested assets 1,184,388
Accrued interest receivable 52,410
----------
Total Admitted Assets $1,918,144
==========
LIABILITIES, CAPITAL AND SURPLUS
LIABILITIES $280,000
Notes Payable ----------
Total Liabilities $280,000
Capital and Surplus
Common Stock 400,000 shares
issued and outstanding;
$1 par value 400,000
Surplus 1,238,144
----------
Total and Capital and Surplus 1,638,144
----------
Total Liabilities, Capital and
Surplus $1,918,144
==========
</TABLE>
<PAGE>
STONEVILLE INSURANCE COMPANY
PRO FORMA BALANCE SHEET
STATUTORY BASIS
SUMMARY OF SIGNIFICANT ASSUMPTIONS
JANUARY 1, 1997
GENERAL ASSUMPTIONS
The accompanying pro forma statutory balance sheet of Stoneville
Insurance Company is presented as though the Plan became effective
as of January 1, 1997.
The balance sheet is prepared on the statutory basis of accounting
which differs from generally accepted accounting principles in
several respects. However, for purposes of the proforma balance
sheet as of January 1, 1997, there is only one difference. Under
the statutory basis, only highly liquid assets qualify as admitted
assets. All other non-liquid assets are classified as non-admitted
assets and reduce stockholders' equity. Non-admitted assets for
purposes of this pro forma balance sheet total $125,750.
ASSUMPTION REINSURANCE AGREEMENT CONSUMMATED
The pro forma balance sheet assumes a payment has been made to
Continental in the amount of $2,373,234 as a premium for the
assumption of all the claims liabilities of the Trust as of
December 31, 1996. The payment of this premium eliminates the
outstanding claims liability of the Trust as of December 31, 1996
in the amount of $2,173,234.
PAYMENTS TO DISSENTERS
It is estimated that Former Members representing approximately
twenty percent (20%) of the equity of the Trust at December 31,
1996 ($480,000) will perfect dissenters rights under the Plan. It
is assumed that payments totaling $200,000 have been made by the
Trust with the balance of $280,000 having been paid by the Company
with funds borrowed for that purpose.
LIQUIDATION OF NON-ADMITTED INVESTMENTS
At December 31, 1996, the Trust's investment portfolio included an
investment in a mutual fund which did not qualify as an admitted
asset under Mississippi statute. It is assumed that the Trust
liquidated this investment as of the pro forma balance sheet date.
RECEIVABLES
It is assumed that accrued interest on investments in the amount of
$52,410 and an income tax refund receivable in the amount of
$152,862 as of December 31, 1996 were received as of the pro forma
balance sheet date.
PAYMENT OF LIABILITIES
It is assumed that the reserve for premium adjustments in the
amount of $384,863 and accounts payable in the amount of $60,328 as
of December 31, 1996 were paid by the pro forma balance sheet date.
STOCK ISSUANCE
It is assumed that 400,000 shares of common stock in the Company
with a par value of $1.00 per share were issued to Former Members
of the Trust as of the sheet date.
<PAGE>
THE WORKERS' COMPENSATION INSURANCE SYSTEM
Workers' compensation is a legal system designed to provide
financial protection to employees in the event they are injured
while working. Each state has its own workers' compensation law
which governs the benefit structure and the administration of the
system. The intent of workers' compensation is to provide financial
security for employees, normally for a limited time period but, in
certain cases, for the remainder of an employee's natural life. In
Mississippi, employers which employ five or more employees must
obtain workers' compensation insurance coverage.
Oversight with regard to commercial insurors is generally
under the purview of the Department of Insurance, although control
over the delivery of benefits is handled by the Workers'
Compensation Commission.
Throughout the years, the determination of base rates for
workers' compensation premiums for commercial insurors has been in
most cases handled by the National Council on Compensation
Insurance ("NCCI"), which recommends base premium rate changes to
the insurance departments for over thirty states. Based on the
NCCI recommendations, the insurance departments typically adopt the
base rates with any revisions they deem necessary.
In addition to commercial insurers, self insured workers'
compensation pools (such as the Trust) also exist. The pools,
usually formed as trusts, allow employers to pay premiums into the
pool and claims are deducted from the amount of funds available.
The participants in pools are typically jointly and severally
liable for any funding shortfall.
The workers' compensation market is cyclical. In the late
1980's and early 1990's, commercial workers' compensation carriers
were losing money across the United States due to an imbalance
between claims costs and premium revenues. The result was a
scarcity of competitively priced workers' compensation insurance
coverage in a number of states, including Mississippi. As a
response, self insured pools such as the Trust were formed in order
to ensure that employers could obtain workers' compensation
insurance.
Due to structural changes in the workers' compensation market
such as tort reform and better loss analysis, commercial workers'
compensation carriers have become active in Mississippi once again.
The result has been increased competition by carriers to write
workers' compensation insurance for employers with low loss
histories. Premium rates have also begun to decrease. With a view
to increasing competition, a recent trend has been for a number of
states to legislate open rating for commercial insurance companies,
which means premium rates are subject to the open market. The
Department of Insurance has moved to the open rating concept by
adopting the "loss costs" system which became effective as of March
1, 1996.
The "loss costs" methodology reflects a change in philosophy;
the Department of Insurance previously set a blanket premium rate
from which commercial insurers could deviate or otherwise lower
their rates. As a result, many insurers clustered around the set
rate. Under the "loss costs" system, insurers are free to set
their rates at any level, subject only to Department of Insurance
approval. This is in contrast with premium setting by pools, the
rates of which must be analyzed and approved by the Workers'
Compensation Commission. See "Reasons for Conversion -- The
Changing Workers' Compensation Market."
BUSINESS OF THE TRUST
HISTORY OF THE TRUST
The Trust was formed under a Trust Agreement dated August 1,
1991, by members of the Delta Council of Stoneville, Mississippi,
as a response to the unavailability of workers' compensation
insurance at reasonable prices. The Trust was originally organized
to provide workers' compensation insurance to cotton gin owners, but
has since expanded its workers' compensation insurance activities.
See " Summary -- The Trust."
OPERATIONS OF THE TRUST
From the beginning of the Trust through June 30, 1996, the
Trust sold its workers' compensation insurance through a
nonexclusive network of agents. With the inception of the
Commercial Program (described below), the Trust ceased providing
direct insurance coverage and arranged for the Trust's agent network
to place its insureds with a commercial insurer in accordance with
a program jointly designed by the Trust and the commercial insurer.
THE COMMERCIAL PROGRAM
Effective July 1, 1996, pursuant to that certain Insurance
Placement Agreement by and between the Trust, TIG and TIG
Reinsurance Company (the "Insurance Placement Agreement") the Trust
ceased writing workers' compensation insurance directly and moved
the persons who wished to maintain their affiliation with the Trust
to the Trust's Commercial Program. Under the Commercial Program,
TIG (an "A" (Excellent) rated commercial insurance company according
to the A.M. Best Company), provides workers' compensation insurance
primarily to Former Members of the Trust and other persons through
the Trust's network of agents.
The Trust created the Commercial Program in order to allow its
insureds to take advantage of the lower rates being offered by
commercial insurers while preparing the Trust for conversion to a
Mississippi domestic stock insurance company, which the Board of
Trustees believes will best assure long term availability of
reasonably priced workers' compensation insurance. The Insurance
Placement Agreement provides that the Trust (or the Company as the
Trust's successor) may provide reinsurance with respect to policies
issued by TIG under the Commercial Program.
As part of the creation of the Commercial Program, the Trust
also entered into a Representative Agreement (the "Representative
Agreement") with Mississippi Risk Management, Inc. ("MRM") by which
MRM acts as the Trust's representative for marketing the Commercial
Program and allocates to Delta Administration, Inc. certain amounts
for oversight and administration of the Commercial Program and the
Trust's operations. See "Business of the Trust -- Employees" and
"Certain Transactions and Relationships."
REGULATION
The operations of the Trust are regulated by the Workers'
Compensation Commission. Any changes in premium rates must be
approved by the Workers' Compensation Commission, and operations of
the Trust are subject to the oversight of the Workers' Compensation
Commission.
EMPLOYEES
The Trust has no employees. From its inception, the
activities of the Trust have been managed by third parties. The
Administrator of the Trust, Harry E. Vickery, has managed the
activities of the Trust since October 1, 1993, through Delta
Administration, a sole proprietorship, which was incorporated as
Delta Administration, Inc. in 1996 (collectively, "Delta
Administration"). Delta Administration has two employees. From the
inception of the Trust until October 1, 1993, Harry E. Vickery
served as Chairman of the Board of Trustees of the Trust. When Mr.
Vickery assumed his current duties as Administrator of the Trust
effective October 1, 1993, he resigned from the Board of Trustees
of the Trust.
Under the Commercial Program, pursuant to the Representative
Agreement, Delta Administration is paid 3.5% of the collected
premiums generated by the Commercial Program to manage the
activities of the Trust. From the percentage of collected premiums
paid to Delta Administration under the Representative Agreement,
Delta administration pays the office expenses of the Trust
including rent, salaries of its employees who administer the Trust,
and sponsor fees. See "Certain Transactions and Relationships."
LEGAL PROCEEDINGS
There are no material legal proceedings pending, nor are any
material legal proceedings known by the Trust to be contemplated by
governmental authorities or other parties to which the Trust is or
might become a party. The Trust continually engages in defending
workers' compensation insurance claims, which is an ordinary part
of its business. Management does not believe that any such claims
will materially impact the Trust's liquidity or results of
operations.
SELECTED FINANCIAL DATA OF THE TRUST
The following selected financial data reflect the operations
of the Trust since January, 1995. Such data has been derived from
financial statements examined by Richard L. Eaton, independent
certified public accountant whose report with respect thereto
appears elsewhere in this Prospectus. See "Trust Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA OF THE TRUST
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUE 1996 1995
------------------------------------
<S> <C> <C>
EARNED PREMIUM $2,077,351 $5,659,925
NET INVESTMENT INCOME 297,076 328,027
REALIZED INVESTMENT GAINS
(LOSSES) (37,286) (159,557)
OTHER (422,850) 0
---------- ----------
Total $1,914,291 $5,828,395
========== ==========
Excess Revenue over Expense
Before Income Tax Provision $129,010 $1,948,286
========== ==========
Excess Revenue over Expense $30,242 $1,304,626
========== ==========
Total Assets $5,072,319 $7,448,211
========== ==========
Total Liabilities $2,618,425 $5,082,483
========== ==========
</TABLE>
<PAGE>
TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATION
OVERVIEW
The Trust is a taxable trust and is subject to both Federal
and Mississippi income tax.
The Trust operates under a Certificate of Authority granted by
the Workers' Compensation Commission. The Workers' Compensation
Commission regulates the establishment of rates charged by
self-insured groups, the payment of claims, the payment of refunds
to members, investments and other areas that may fall within their
purview. See "Business of the Trust -- Regulation."
Effective March 1, 1996, the Department of Insurance moved to
an open rating concept by adopting the "loss costs" system. This
has resulted in a major change in the method of calculating premium
rates a commercial insurance carrier charges employers for worker's
compensation insurance. This change resulted in Mississippi
worker's compensation commercial insurance rates dropping
significantly in 1996. However, since the rates charged by
self-funded worker's compensation trusts in Mississippi are regulated by
the Workers' Compensation Commission, neither the Trust nor any of
the other self-funded groups in Mississippi were able to reduce
rates in a timely manner to the level of the commercial carriers.
As a result of this disparity in rates, management of the Trust
sought an alternative arrangement that would allow its members to
benefit from lower market rates and still remain its base of
insureds. See "The Workers' Compensation Insurance System."
In conjunction with TIG and TIG Reinsurance Company, the Trust
created the Commercial Program, under which effective as of July 1,
1996, the Trust ceased writing workers' compensation insurance
directly and moved the persons who wished to maintain their
affiliation with the Trust to the Trust's Commercial Program.
Consequently, the Trust had no underwriting income or expense from
July 1, 1996 through December 31, 1996. See "Business of the Trust
- -- The Commercial Program." The Trust continues to service the
claims.
RESULTS OF OPERATIONS
EARNED PREMIUM
Net earned premium for the year ended December 31, 1996 was
$2,077,351 compared to $5,659,925 for the year ended December 31,
1995, a decrease of $3,582,574. This decrease was due to the fact
that, pursuant to the Commercial Program, the insureds of the Trust
who wished to maintain their affiliation with the Trust were
transferred to TIG effective July 1, 1996 and the Trust
consequently had no earned premium during the last six months of
1996. Historically, the Trust has earned a larger portion of its
premium during the last six months of each calendar year.
LOSSES
Losses and loss adjustment expenses are generally a function
of the amount of payroll expended by Trust members. Consequently,
as a result of having only six months of payroll used in
calculating earned premium in 1996, loss and loss adjustment
expenses decreased to $916,592 in 1996 from $2,448,722 in 1995.
Loss and loss adjustment expenses are determined actuarially each
year and adjustments to previous years' estimates included in
current year loss expenses. After such adjustments in 1996 and
1995, loss and loss adjustment expense as a percentage of earned
premium were forty-three percent (43%) and forty-four percent (44%)
respectively.
Losses and loss adjustment expenses determined without regard
to adjustments for previous years' estimates were 47% and 51% for
the years ended December 31, 1996 and 1995 respectively.
OTHER EXPENSES
Other expenses that are directly related to members' payroll
expense levels and consequently premium income are service company
fees and excess insurance premiums. Service company fees, the fees
paid to an outside claims administrator, decreased from $626,332 in
1995 to $299,322 in 1996 as a result of a decrease premium income
together with a rate decrease negotiated with the servicing
company. Excess insurance premiums decreased from $335,973 in 1995
to $89,860 as a result of decreased premium income and a decrease
in the rate charged for such coverage.
Regulatory fees were virtually unchanged, decreasing from
$30,858 in 1995 to $28,548 in 1996. These fees are levied by the
Workers' Compensation Commission and are based on the medical and
indemnity payments paid to claimants during the previous calendar
year. Consequently, the level of premium income does not have a
direct effect on these expenses.
General expenses increased from $438,224 in 1995 to $450,959
in 1996. The increase was due primarily to the expense involved in
the structuring and implementation of the Commercial Program and in
the analysis and planning of the dissolution of the Trust in
conjunction with the formation of the Company.
INCOME TAXES
The current tax provision of the Trust decreased to $98,768 in
1996 from $643,660 in 1995 as a result of decreased taxable income.
In 1996, the tax provision represents a large percentage of the net
income before tax because for tax purposes, the Trust can only
deduct capital losses up to the amount of its gains. Since the
Trust could not deduct the net loss from the sale of its securities
in 1996, its taxable income was significantly higher than financial
statement net income, thus creating a large tax provision in
comparison to net income before tax.
For temporary differences between the tax basis of assets and
liabilities, a deferred tax liability or asset account is
established. At December 31, 1995 a deferred tax asset existed as
a result of the future tax benefit the Trust would receive from the
sale of securities in which the Trust had current unrealized
losses. During 1996, it became apparent that the Trust may not be
able to fully realize a significant tax benefit from the eventual
sale of such securities at a loss unless the Trust was likely to
have future capital gains to offset such losses. Since only minimal
capital gains were likely due to a change in the investment
portfolio of the Trust, the deferred tax asset was eliminated in
1996 to reflect the net expected tax benefit from the sale of
securities at a loss.
INVESTMENT INCOME
Investment income decreased from $328,027 in 1995 to $297,076
in 1996. This decrease was a result of having less cash available
for investment in 1996. Cash and investments at December 31, 1996
and 1995 were $4,721,297 and $5,957,135 respectively. This decrease
was a result of the discontinuance of premium income effective July
1, 1996 coupled with the Trust's continuing obligation to pay
existing claims. Numerous claims were settled below reserved
amounts during the last six months of 1996, further reducing cash
available for investment.
The Statements of Revenue and Expenses for the years ended
December 31, 1996 and 1995 reflect net realized losses from the
sale of securities available-for-sale $37,286 and 159,557
respectively. Additionally, a 1996 loss on the sale of "trading
securities" in the amount of $422,850 is presented as "Other"on the
statement in accordance with generally accepted accounting
principals. The losses in 1995 were primarily the result of a
decline in the value of certain foreign currency based securities.
With respect to the 1996 losses, the Trust is in the process of
initiating arbitration proceedings against the brokerage firm to
recover its losses. As of December 31, 1996, the Trust had
liquidated virtually all of its equity security holdings with this
firm.
The Trust has engaged the services of Investek Capital
Management, Inc. ("Investek") to assist in the management of the
Trust's investment portfolio. Investek has substantial experience
in the management of insurance company investment portfolios.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The liquidity and capital requirements for a workers'
compensation carrier is significantly different from other property
and casualty carriers. Workers' Compensation carriers generally
have use of premium dollars for investment purposes for longer
periods of time because claims may be paid over a fifteen year or
longer period. Because of this long payment period, investment
income becomes a major source of revenue for most carriers.
Consequently, discounting the liability for future claims payments
for the present value of investment income that will be earned on
the funds available for future expected payments becomes a
significant factor in estimating a carrier's claims liability.
LIQUIDITY REQUIREMENTS
The Trust and its successors have entered into the Assumption
Reinsurance Agreement whereby Continental will assume all of the
claims liabilities of the Trust as of January 1, 1997. The Trust
will pay Continental an amount not to exceed $2,400,000 consisting
of $2,200,000 in reserves required to pay claims liabilities (which
amount may be adjusted downward depending on claims settled) plus
a fee of $200,000 for handling claims. The Company, on behalf of
the Trust, will be required to provide additional security in the
amount of $1,500,000 through placement of cash and/or marketable
securities in a trust account such that if the reserves are
exhausted, Continental may draw upon the additional security.
Under the Assumption Reinsurance Agreement, the Company has
the right at certain intervals to provide reinsurance to
Continental pertaining to the claims liabilities assumed by
Continental pursuant to the Assumption Reinsurance Agreement. The
Company plans to reinsure all claims that are three years old or
greater at the first available opportunity. As such reinsurance is
put in place, the assets the Trust transferred to Continental will
be transferred back to the Company along with any associated
liability.
The Company also has the right under the Assumption
Reinsurance Agreement at certain intervals to have transferred to
reserves allocable to reported claims which have been settled for
less than the amount of reserves which was allocated to such
reported claim.
The Trust has allocated up to $200,000 to pay dissenters that
may perfect their rights under the Plan. In the event that Former
Members as a group perfect dissenters' rights resulting in an
obligation to pay an amount in excess of $200,000, the excess over
that amount due to dissenters shall be paid by the Company.
After payments have been made pursuant to the Assumption
Reinsurance Agreement and assuming a maximum of $200,000 paid to
dissenters and all existing liabilities of the Trust have been
paid, it is anticipated that the Trust will have approximately
$1,918,144 in cash, investments and accrued interest with which to
capitalize the Company. The $1,500,000 of additional security to be
held in trust for Continental pursuant to the Assumption
Reinsurance Agreement is a part of the $1,918,144 but will not be
considered a liability unless the reserve for claims liability
determined actuarially exceeds the amount established.
In order to be licensed by the Department of Insurance, the
Company must maintain $400,000 in capital and $600,000 in surplus
on a statutory basis. The Company will have in excess of the
minimum required capital and surplus.
ADMITTED ASSETS
The Company will be required to maintain its books on the
statutory basis of accounting. Currently the Trust maintains its
books on a GAAP (generally accepted accounting principals) basis.
As far as the Company is concerned, the major difference in the
statutory and GAAP basis of accounting lies in the classification
of assets as admitted or non-admitted. Under the statutory basis,
only admitted assets will be permitted to be included as assets on
the Company's balance sheet. At December 31, 1996 the Trust owned
certain investments that are not considered admitted assets for
statutory accounting purposes. In January, 1997, the Trust sold the
major portion of these non-admitted investment assets for cash in
order to qualify them as admitted assets upon transfer to the
Company. Other non-admitted assets totaling $125,750 are fixed
assets of $13,517, prepaid expenses of $21,798 and receivables and
other assets totaling $90,435.
COMMITMENTS
Both the Trust and the Company, as successor to the Trust,
have ongoing commitments for administrative services to Delta
Administration in the approximate amount of $3,800 per month as
well as other normal operating expenses. See "Certain Transactions
and Relationships."
BUSINESS OF THE COMPANY
ORGANIZATION AND PURPOSE
The Company was organized on December 13, 1996, as a
Mississippi business corporation with the purpose of succeeding to
the assets of the Trust pursuant to the Conversion and thereafter
functioning as a commercial stock insurance company licensed to
write workers' compensation insurance in the State of Mississippi.
Until the Effective Date of the Plan, the Company will have no
material assets or liabilities. Because the Company has no material
assets as of the date hereof, selected financial data of the
Company is not included in this Prospectus; for financial
statements of the Company, see "Index to Financial Statements."
Upon the completion of the Conversion, the Company expects to be
licensed as a workers' compensation insurer by the Department of
Insurance.
COMPANY MANAGEMENT'S PLAN OF OPERATION
CONTINUATION OF COMMERCIAL PROGRAM
The Company plans to continue with the Commercial Program
begun by the Trust. Based on the current highly competitive state
of price competition in the workers' compensation market, the
Company believes its target market is currently best served by
workers' compensation insurance provided through the Commercial
Program.
RECAPTURE OF RESERVES
The Company anticipates recapturing reserve amounts on an
annual basis to be determined based on amounts actually needed to
provide for claims assumed by Continental under the Assumption
Reinsurance Agreement.
PROVISION OF REINSURANCE
The Company anticipates providing reinsurance to Continental
in accordance with the Assumption Reinsurance Agreement as well as
providing reinsurance to TIG in accordance with the Insurance
Placement Agreement.
The Company believes that provision of reinsurance will be
more advantageous to the Company because statutory reserve
requirements will allow the writing of reinsurance without
requiring the same level of statutory surplus as compared to if the
Company were directly writing insurance. See "The Company --
Government Regulation."
PROVISION OF OTHER PROPERTY AND CASUALTY INSURANCE
Upon the Conversion and issuance of its insurance license by
the Department of Insurance, the Company will be eligible to
provide all forms of property and casualty insurance (the property
and casualty insurance category includes a number of different
insurance products in addition to workers' compensation insurance).
The Company has been approached by several large property and
casualty insurors wanting to create a property and casualty
insurance program which would be operated in a fashion similar to
that of the Commercial Program (the "Casualty Program"). The
Company believes that an attractive opportunity exists to package
the Casualty Program with the workers' compensation insurance
currently being provided to insureds through the Commercial
Program. It is anticipated that the Company would have the option
to provide reinsurance to the Casualty Program, thereby generating
income on a basis similar to that conducted under the Commercial
Program. See "Business of the Trust -- the Commercial Program."
GENERAL OPERATIONS
The Company plans to position itself to begin directly writing
insurance at the time management believes the Company has the
appropriate financial strength to do so. Management of the Company
believes that it will not engage in the direct writing of insurance
for the first several years after the Conversion. See "The Company
- -- Government Regulation."
Assuming operation as set forth above, management of the
Company believes that the Company's business activities should allow
the Company to satisfy its cash needs without seeking additional
financing for the next twelve months. However, in the event that
operations do not meet projected targets, the Company will be
required to obtain financing for shortfall amounts.
INVESTMENTS
Management of the Company's portfolio of investments will be
a significant part of the Company's business. The Company's
investments are limited by statutes and other regulations which
restrict a large portion of such investments to specific
categories. The Company is expected to invest in securities and
other investments authorized by applicable state laws and
regulations and receive income from such investments in the form of
interest, dividends and capital gains. The Company expects to
follow an investment policy designed to maximize yield to the
extent consistent with liquidity requirements and preservation of
assets. The Company has retained Investek Capital Management, Inc.
as its investment advisor. Investek currently manages over $1.1
billion and has substantial experience in investing funds of
insurance companies.
GOVERNMENT REGULATION
The Company will be subject to regulation by the Department of
Insurance although control over the delivery of benefits is
generally under the purview of the Workers' Compensation Commission.
The primary purpose of regulation by the Department of Insurance is
to provide safeguards for policyholders rather than to protect the
interests of shareholders. The Department of Insurance has broad
administrative powers relating to the licensing of insurers and
their agents, the regulation of trade practices, transactions with
affiliates, investments, deposits of securities, the form and
content of financial statements, accounting practices, reporting
requirements, sales literature, insurance policy forms and the
maintenance of specified reserves and capital and surplus.
In order to be issued a license the Company must at all times
meet and maintain a minimum capital and surplus level of $400,000
and $600,000, respectively. As of the Effective Date of the
Conversion, the Company anticipates that it will have a combined
capital and surplus in excess of statutory requirements.
Property and casualty insurance companies (which include
worker's compensation insurers such as the Company) must maintain
reasonable ratios between net written premiums and statutory
surplus in order to be consistent with sound underwriting practices
and requirements of insurance regulators and rating agencies.
Accordingly, a property and casualty insurance company's volume of
net written premiums is limited by the amount of its statutory
surplus. As the premium volume of the Company grows, its statutory
surplus must also increase so that the ratio of net written
premiums to statutory surplus does not become too high. The
Company's objective will be to maintain the ratio of net written
premiums to statutory surplus within the maximum guidelines of the
NAIC.
Insurance companies are required by law to maintain reserves
for claims. These reserves are intended to cover the probable
ultimate cost of settling all claims incurred and unpaid, including
those not yet reported. Reserves will be determined by the Company
in accordance with applicable law. Reserves will be monitored by
the Company using a variety of techniques for analyzing claim cost
and frequency data and other economic factors. Among other
techniques, the Company expects to periodically compare estimated
and actual expenses for settled claims and adjust its reserve
estimates, if necessary, on the basis of such comparisons. Claim
reserves are estimates only, and it is possible that ultimate
liability may exceed or be less than such estimates.
Under Mississippi law, workers' compensation insurers must
maintain a reserve for losses as well as a reserve for unearned
premiums. The assets constituting the unearned premium reserve
must be withdrawn from use by the Company for its general purposes
and are gradually released over the life of the policy.
Upon being licensed by the Department of Insurance, the
Company will automatically become a member of the Mississippi
Insurance Guaranty Association (the "Guaranty Association"). The
purpose of the Guaranty Association is to provide a mechanism for
the payment of claims made by insureds against an insolvent
insurer. The Association may assess insurers to pay the
obligations of the Association in accordance with a statutory
formula based on net direct premiums written.
Upon being authorized by the Department of Insurance to write
workers' compensation insurance in Mississippi, the Company will be
required to be a member of the Mississippi Workers' Compensation
Assigned Risk Pool ("the "Pool") and to participate in the
Mississippi Workers' Compensation Assigned Risk Plan (the "Plan").
The purpose of the Pool is to be a reinsurance mechanism for the
Plan. The Pool may assess insures to pay the obligation of the
Pool in proportion to the insurers' direct net workers' compensation
premium writings in Mississippi. So long as the Company does not
directly write workers' compensation insurance, it will not be
subject to assessment by the Pool.
In a stock insurance company structure such as the Company's,
there is no personal liability of the shareholders in the event the
insurer becomes insolvent and is not able to pay claims. The
claims are assumed by the Guaranty Association. This is in
contrast to the joint and several liability of members of group
self insurers such as the Trust.
ASSUMPTION OF TRUST CONTRACTS
The Company and the Trust have entered into an Assignment and
Assumption Agreement dated as of March 20, 1997, which provides
that upon the Conversion, the Trust will assign, and the Company
will assume, the Trust's rights under the Insurance Placement
Agreement, the Representative Agreement, agreements relating to
claims administration, and certain other agreements and rights of
the Trust.
EMPLOYEES
The Company will initially have no employees. The Company will
be administered by Delta Administration on the same financial and
operational basis as the Trust. See "The Trust -- Employees" and
"Certain Transactions and Relationships."
The Company anticipates that it will continue to utilize the
services of Mr. Vickery through Delta Administration to manage the
day to day operations of the Company.
MANAGEMENT OF THE COMPANY
The names of the executive officers and directors of the
Company and their respective ages and positions with the Company
are set forth as follows:
<TABLE>
Name Age Position
<S> <C> <S>
William L. Kennedy 46 Chairman of the Board
of Directors, Chief
Executive Officer
Harry E. Vickery 62 President, Director
David R. White 47 Secretary, Treasurer,
Vice President,
Director
</TABLE>
William L. Kennedy resides in Inverness, Mississippi. He
holds a BS degree in Entomology from Mississippi State University.
He has worked with Duncan Gin, Inc. since 1972 and currently serves
as President and Chief Operating Officer of Duncan Gin, Inc.
Duncan Gin, Inc. is a multiline agricultural marketing entity and
is the largest cotton ginning operation in Mississippi. He has
served from inception on the Board of Trustees of the Delta
Agricultural & Industrial Trust and is presently Chairman of the
Trust.
Harry Vickery resides in Jackson, Mississippi. From 1962-1993,
Mr. Vickery was involved in the automobile business in
Greenville, Mississippi. Mr. Vickery was one of the original
members of the Board of Trustees of the Trust from inception until
1993 when he became Administrator. Mr. Vickery was President and
a director of Vickery Chevrolet Oldsmobile Co., Inc. which filed a
Chapter 11 bankruptcy petition in 1993. All assets of Vickery
Chevrolet Oldsmobile Co., Inc. were sold and the bankruptcy case
was subsequently dismissed.
David R. White resides in Jackson, Mississippi. He holds a BS
degree from the University of Mississippi in Accounting and
Business Administration. He has been involved in the insurance
business since 1987 and has served as President and Chief Operating
Officer of Mississippi Risk Management, Inc. since that date. He
holds a number of awards in the insurance field and has served as
president of insurance associations both on the local and state
level.
All directors hold office until the next annual meeting of
shareholders of the Company or until their successors have been
elected and qualified. Unless changed by the action of the Board
of Directors, the number of directors shall be no fewer than three
(3) nor more than seven (7) Officers serve at the discretion of the
Board of Directors. There are no family relationships between the
directors and officers.
EXECUTIVE COMPENSATION
With the exception of amounts paid to Harry E. Vickery through
Delta Administration, no compensation will be paid to officers or
directors other than for (i) attendance at meetings; and (ii)
activities undertaken on behalf of the Company with approval by the
board of directors. See "The Trust -- Employees"; "The Company --
Employees"; and "Certain Transactions and Relationships."
LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceeding
nor are any material legal proceedings known by the Company to be
contemplated by governmental authorities other parties, to which
the Company is or might become a party.
DESCRIPTION OF COMPANY STOCK
The Company is authorized to issue 100,000,000 shares of
common stock, $1.00 par value, of which up to 650,000 will be
issued and outstanding upon the Effective Date of the Plan. When
issued, the Stock will be fully paid and nonassessable. The
Company's Stock does not have preemptive rights. Holders of shares
of the Company's Stock are entitled to one vote per share in all
matters to be voted on by shareholders, except that holders are
entitled to cumulate their votes in the election of directors. See
"Comparison of Rights of Former Members of the Trust and
Shareholders of the Company."
COMPARISON OF RIGHTS OF FORMER MEMBERS OF THE TRUST AND
SHAREHOLDERS OF THE COMPANY
There are important differences between the rights of
shareholders of the Company ("Shareholders") and Former Members of
the Trust.
GOVERNANCE
The Company will be subject to the Mississippi Business
Corporation Act ("MBCA") and not to general trust law.
Shareholders of the Company will elect a Board of Directors who
will oversee governance of the Company. Former Members of the
Trust have no voting or governance rights.
LIABILITY
Former Members of the Trust are jointly and severally liable
for the obligations of the Trust which were incurred during such
Former Member's period of membership. Shareholders of the Company
will not be liable for the obligations of the Company or their
fellow shareholders except to the extent of their investment in the
Stock.
ASSESSMENT
Former Members of the Trust are assessable in the event the
Trust is unable to adequately discharge its financial obligations
which were incurred during such Former Member's period of
membership. The Stock of the Company is nonassessable.
VOTING
Former Members of the Trust have no voting rights.
Shareholders of the Company will be entitled to one vote for each
share held on each matter submitted to a vote at a meeting of the
Shareholders, with the exception that Shareholders may cumulate
their votes for directors.
RESALE
Former Members of the Trust may not sell or transfer their
interest in the Trust. Shareholders in the Company may freely sell
or transfer their shares, subject to applicable securities laws.
See "The Conversion -- Resales of Company Stock."
INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY
Subject to the terms and conditions of the Bylaws of the
Company, the Company is required to indemnify any person who was or
is a party or is threatened to be made a party to a threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative because he is or was
serving as an officer or director of the Company, or while serving
as a director of the Company, is or was serving at the request of
the Company as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.
Indemnification is available for an obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan) or reasonable expenses
(including counsel fees) incurred with respect to such proceeding.
Indemnification permitted in connection with a proceeding by or in
the right of the Company shall be limited to reasonable expenses
incurred in connection with the proceeding.
Under the Bylaws, the Company may not indemnify a director
unless the person indemnified shall have conducted himself in good
faith and reasonably believed, in the case of conduct in his
official capacity with the Company, that his conduct was in its
best interests, and in all other cases, that his conduct was at
least not opposed to its best interests, and in the case of any
criminal proceeding, that he had no reasonable cause to believe his
conduct was unlawful. Such a determination shall be made by the
Board of Directors by majority vote of a quorum consisting of
disinterested directors, or if a quorum cannot be obtained, by
majority vote of a committee duly designated by the Board of
Directors, by special legal counsel, by the shareholders of the
Company, or by a court of competent jurisdiction. The termination
of a proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director did not meet the standard of
conduct. The Company may not indemnify a director in connection
with a proceeding by or in the right of the Company in which the
director was adjudged liable to the Company or in connection with
any other proceeding charging improper personal benefit to him,
whether or not involving action in his official capacity, in which
he was adjudged liable on the basis that personal benefit was
improperly received by him.
The Company must pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if the director furnishes the
Company a written affirmation of his good faith belief that he has
met the applicable standard of conduct if the director furnishes
the Company a written undertaking, executed personally or on his
behalf, to repay the advance if it shall be ultimately determined
that he did not meet the standard of conduct and a determination is
made that the facts then known to those making the determination
would not preclude indemnification. The undertaking to repay must
be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial ability
to make repayment.
The Bylaws authorize the Company to purchase and maintain
insurance on behalf of an individual who is or was a director,
officer, employee or agent of the Company or who, while a director,
officer, employee or agent of the Company, is or was serving at the
request of the Company as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, against liability asserted against or incurred by him
in that capacity or arising from his status as a director, officer,
employee or agent, whether or not the Company would have power to
indemnify him against such liability.
The Bylaws authorize the Board of Directors of the Company to
make any further indemnity, including advance of expenses, to and
to enter contracts of indemnity with any director, officer,
employee or agent, except an indemnity against his gross negligence
or willful misconduct.
The Company must pay or reimburse expenses incurred by a
director in connection with his appearance as a witness in a
proceeding at a time when he has not been made a named defendant or
respondent to the proceeding when his appearance as a witness is in
connection with his serving as a director of the Company.
The Company's Articles of Association include a provision
limiting the personal liability of a director to the Company or its
shareholders for monetary damages with the exception of liability
arising out of (i) the amount of a financial benefit received by a
director to which he is not entitled, (ii) an intentional
infliction of harm on the corporation or the shareholders, (iii)
violation of certain provisions of the MBCA, or (iv) an intentional
violation of criminal law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 or under the securities laws of various
states may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and
Exchange Commission and certain state securities commissioners such
indemnification is against public policy and is therefore
unenforceable.
INDEMNIFICATION OF TRUSTEES OF THE TRUST
The Trust Agreement of the Trust (the "Trust Agreement")
provides for mandatory indemnification of the Trustees against all
costs and expenses (including attorneys' fees) incurred in
connection with any claim in which a Trustee may be involved by
virtue of his position in the Trust. The indemnification is not
operative with respect to: (i) a person gaining any personal profit
or advantage; (ii) the dishonesty of a person; (iii) a person's
conflict of interest; (iv) willful violation of a statute or
ordinance committed by a person or with the person's knowledge or
consent; or (v) any matter as to which a person shall have been
finally adjudged in such action, suit or proceeding to be liable
for misconduct in the performance of his duties. The Trust
Agreement further provides that the rights of indemnification set
forth therein shall not be deemed exclusive of any rights to which
those indemnified may be entitled and the Board of Trustees, by
vote of disinterested Trustees, may provide any further
indemnification it feels justified.
PREEMPTIVE RIGHTS
Under the MBCA, a shareholder does not have preemptive rights
unless such rights are specifically granted. The Company's Articles
of Association do not provide for preemptive rights. Because the
Trust is an unincorporated entity and issues no shares, preemptive
rights are not applicable.
DIVIDENDS
Under Mississippi law, the Company may pay cash dividends only
from actual net surplus determined on a statutory basis. In
addition, "extraordinary dividends" or "extraordinary distributions"
may not be paid until thirty (30) days after the Commissioner of
Insurance has received notice of the declaration thereof and has
not within such period disapproved such payment, or the
Commissioner has approved such payment within such thirty (30) day
period. Extraordinary dividends or distributions are defined as any
dividend or distribution of cash or other property whose fair
market value together with that of other dividends or distributions
made within the preceding twelve months exceeds the lesser of (i)
ten percent (10%) of the Company's surplus as regards policyholders
as of the December 31 next preceding, or (ii) the net income of
such insurer, not including realized capital gains, for the twelve
month period ending the December 31 next preceding, but shall not
include pro-rata distributions of any class of the insurer's own
securities. In determining whether a dividend or distribution is
extraordinary, an insurer may carry forward net income from the
previous two (2) calendar years that has not already been paid out
as dividends.
Payment of dividends (also called refunds) by the Trust are
restricted to any monies for a Fund Year in excess of the amount
necessary to fund all obligations for that Fund Year which have
been declared to be refundable by the Board of Trustees with the
approval of the Workers' Compensation Commission and which shall be
payable not less than twelve (12) months after the end of the fund
year. The Workers' Compensation Commission will not consider
refunds for a particular Fund Year for approval until financial
statements are available reflecting fund equity for that Fund Year
at the period ending 24 months after the end of that Fund Year.
After approval of a refund for a particular Fund Year: (i) up
to 33% of the equity for that Fund Year could be approved for
distribution as a refund during the period beginning 24 months
after the closing of that Fund Year; (ii) up to 50% of the
remaining equity for that Fund Year could be approved for
distribution as a refund during the period beginning 36 months
after the closing of that Fund Year; (iii) up to 50% of the
remaining equity for that Fund Year could be approved for
distribution as a refund during the period beginning 48 months
after the closing of that Fund Year; and (iv) up to 100% of the
remaining equity for that Fund Year could be approved for
distribution as a refund during the period beginning 60 months
after the closing of that Fund Year. Each refund distribution
requires a separate application and approval after financial
results are available reflecting the Fund Year equity balance at
the relevant time (i.e., 24 months after the close of the Fund
Year; 36 months after the close of the Fund Year, etc.).
PLAN OF DISTRIBUTION OF EXCESS STOCK
In the event that the maximum number of shares of Stock
registered hereunder are not distributed pursuant to the Plan, the
Company may sell the balance of such stock to persons other than
Former Members. The sale price of such Stock shall be $4.00 per
share. Such sales shall be made only through officers and
directors of the Company and no commissions will be charged.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
David R. White is an officer and director of the Company and
controls MRM. Through the Representative Agreement and MRM's
General Agent Agreement with TIG, MRM receives a percentage of the
premiums written through the Commercial Program. It is anticipated
that the Company will become the assignee of the Trust's rights
under the Representative Agreement and that MRM will continue
providing such services to the Company. MRM brokers directors and
officers coverage and excess workers' compensation coverage for the
Trust.
Harry E. Vickery is an officer and director of the Company and
serves as Administrator of the Trust and owns all the issued and
outstanding stock of Delta Administration. Under the
Representative Agreement, Delta Administration is paid 3.5% of the
collected premiums generated by the Commercial Program which is
used by Delta Administration to pay the office expenses of the
Trust, including rent, the salaries of the employees of Delta
Administration (including Mr. Vickery) and sponsor fees. This
arrangement was created because it is unlawful to pay commissions
to a person or entity not licensed as an insurance agent or agency.
Mr. Vickery is licensed by the Department of Insurance as an
individual property and casualty agent and Delta Administration is
licensed by the Department of Insurance as a property and casualty
insurance agency. Mr. Vickery, through Delta Administration, also
acts as an agent for the Commercial Program through MRM. Mr.
Vickery will continue to sell coverage through the Commercial
Program in addition to his management role in the Company.
After payment by Delta Administration of office expenses of
the Trust, Mr. Vickery's gross compensation in 1995 was $87,092 and
$104,451 in 1996. Prior to the commencement of the Commercial
Program, Delta Administration was paid directly by the Trust for
its services. As a part of the Conversion, the Trust's obligations
regarding Delta Administration will be assumed by the Company.
LEGAL MATTERS
The validity of the shares of Stock to be issued in connection
with the Conversion will be passed upon for the Company and the
Trust by Watkins Ludlam & Stennis, P.A., Jackson, Mississippi.
Certain of the tax consequences of the Conversion will be passed
upon by Watkins Ludlam & Stennis, P.A.
EXPERTS
The audited financial statements and financial statement
schedules of the Trust included in this Prospectus and elsewhere in
the Registration Statement have been examined by Richard L. Eaton,
independent certified public accountant, Jackson, Mississippi, for
the periods and to the extent set forth in his reports and are
included herein in reliance upon the reports of such firm, given
upon his authority as an expert in accounting and auditing.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Delta Agricultural and Industrial Trust
Report of Independent Auditor F-2
Balance Sheets as of December 31, 1996 and 1995 F-3
Statements of Revenues and Expenses for Years Ended
December 31, 1996 and 1995 F-4
Statements of Changes in Trust Equity for Years Ended
December 31, 1996 and 1995 F-5
Statements of Cash Flows for Years Ended December 31,
1996 and 1995 F-6
Notes to Financial Statements F-8
Stoneville Insurance Company
Report of Independent Auditor F-18
Balance Sheet as of December 31, 1996 F-19
Statement of Income for Year Ending December 31, 1996 F-20
Statement of Changes in Stockholders' Equity for Year
Ended December 31, 1996 F-21
Statement of Cash Flows for Year Ended
December 31, 1996 F-22
Notes to Financial Statements F-23
</TABLE>
<PAGE>
RICHARD L. EATON
CERTIFIED PUBLIC ACCOUNTANT
(A PROFESSIONAL CORPORATION)
POST OFFICE BOX 16603
JACKSON, MISSISSIPPI 39236
MEMBER OF:
AMERICAN INSTITUTE OF
TELEPHONE: (601) 956-9751 CERTIFIED PUBLIC
FAX: (601) 956-7415 ACCOUNTANTS
MISSISSIPPI SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
Board of Trustees
Delta Agricultural and Industrial Trust
Jackson, Mississippi
I have audited the accompanying balance sheets of Delta
Agricultural and Industrial Trust as of December 31, 1996 and 1995
and the related statements of revenue and expenses, changes in
trust equity and cash flows for the years then ended. These
financial statements are the responsibility of management. My
responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements present fairly, in all
material respects, the financial position of Delta Agricultural and
Industrial Trust as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Richard L. Eaton
Jackson, Mississippi
January 29, 1997
<PAGE>
<TABLE>
<CAPTION>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
ASSETS ---------- -------
<S> <C> <C>
Investments:
Trading securities $1,696,944 $ 0
Securities available-for-sale 1,141,504 2,469,692
Securities held-to-maturity 522,884 2,247,145
---------- ----------
Total Investments 3,361,332 4,716,837
Cash and Cash Equivalents 1,359,965 1,240,298
Premiums receivable net of
uncollectible amount 0 1,337,030
Notes receivable 20,000 0
Accrued interest receivable 52,410 90,736
Excess insurance premium overpayment 89,860 0
Capital equipment leases at cost
less accumulated depreciation of
$9,775 and 5,759 13,517 16,782
Prepaid expenses 21,798 2,622
Income tax refund receivable 152,862 0
Deferred tax asset 0 43,331
Other assets 575 575
---------- ----------
TOTAL ASSETS $5,072,319 $7,448,211
========== ==========
LIABILITIES AND TRUST EQUITY
LIABILITIES
Reserve for losses and loss
adjustment expenses $2,173,234 $3,005,414
Unearned premiums 0 1,466,279
Reserve for premium adjustment 384,863 0
Accounts payable and accrued
liabilities 56,290 207,762
Income taxes payable 0 394,048
Capital lease obligations 4,038 8,980
---------- ----------
TOTAL LIABILITIES 2,618,425 5,082,483
========== ==========
TRUST EQUITY
Retained earnings 2,463,130 2,432,888
Unrealized decline in market value
of equity securities less
applicable future tax benefit (9,236) 67,160
---------- ----------
TOTAL TRUST EQUITY 2,453,894 2,365,728
---------- ----------
TOTAL LIABILITIES AND TRUST EQUITY $5,072,319 $7,448,211
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DELTA AGRICULTURAL & INDUSTRIAL TRUST
STATEMENTS OF REVENUE AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
REVENUE --------- ----------
<S> <C> <C>
Net earned premium $2,077,351 $5,659,925
Investment income 297,076 328,027
Net realized gains and losses on
securities available-for-sale (37,286) (159,557)
Other (422,850) 0
---------- ----------
TOTAL REVENUE 1,914,291 5,828,395
---------- ----------
EXPENSES
Loss and loss adjustment expenses 916,592 2,448,722
Service company fees 299,322 626,332
Excess insurance 89,860 335,973
Regulatory fees 28,548 30,858
General expenses 450,959 438,224
---------- ----------
TOTAL EXPENSES 1,785,281 3,880,109
---------- ----------
EXCESS REVENUE OVER EXPENSES
BEFORE INCOME TAX PROVISION 129,010 1,948,286
Provision for income tax 98,768 643,660
---------- ----------
EXCESS REVENUE OVER EXPENSES $30,242 $1,304,626
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
STATEMENTS OF CHANGES IN TRUST EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
--------- --------
<S> <C> <C>
TRUST EQUITY - BEGINNING OF YEAR $2,365,728 $1,023,330
Excess Revenue over Expenses 30,242 1,304,626
Change in Unrealized decline in
value of securities available-
for-sale less change
in applicable deferred tax benefit 57,924 37,772
-------- ---------
TRUST EQUITY - END OF YEAR $2,453,894 $2,365,728
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Premiums collected $2,688,450 $7,034,172
Losses and loss adjustment
expenses paid (1,748,772) (2,456,050)
Refunds and premium adjustments
paid (449,415) (297,576)
Administrative expenses paid (1,056,948) (1,463,647)
Income taxes paid (625,678) (1,012,930)
Investment income received 335,402 225,407
Interest paid (855) (43,037)
NET CASH PROVIDED BY OPERATING ---------- ----------
ACTIVITIES (857,816) 1,986,339
---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of investments 6,220,769 4,021,484
Purchase of investments (5,237,593) (6,974,793)
Capital expenditures (751) (2,991)
NET CASH PROVIDED BY INVESTING ---------- ----------
ACTIVITIES 982,425 (2,956,300)
---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Principal payments under capital
lease obligations (4,942) (6,235)
NET CASH USED IN FINANCING ---------- ----------
ACTIVITIES (4,942) (6,235)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 119,667 (976,196)
Cash and Cash Equivalents at
Beginning of Year 1,240,298 2,216,494
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $1,359,965 $1,240,298
========== ==========
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED
BY OPERATING ACTIVITIES
Net Income $30,242 $1,304,626
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 4,818 3,424
Gain or loss on sale of
investments 460,136 159,557
Decrease in premiums receivable 1,337,030 1,070,626
Decrease (increase) in prepaid
expenses (19,176) 158,981
Decrease (increase) in accrued
interest receivable 38,326 (90,736)
Increase in notes and other
receivables (109,860) 0
Amortization of bond premium
(discount) 12,646 (11,884)
Decrease in upaid losses and
loss adjustment expenses (832,180) (7,328)
Increase (decrease) in unearned
premiums (1,466,279) 134,256
Decrease in accounts payable
and accrued expenses (151,472) (365,914)
Increase in premium adjustment
reserve 384,863 0
Decrease in income tax liability (546,910) (369,269)
---------- ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES ($857,816) $1,986,339
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
Notes to Financial Statements
For the Years Ended December 31, 1996 and 1995
NOTE 1: DESCRIPTION AND OPERATION OF THE TRUST
The Delta Agricultural and Industrial Trust (the "Trust") was formed
under a Trust Agreement, dated August 1, 1991, between the Delta
Council, a Mississippi nonprofit corporation and the Board of
Trustees of Delta Agricultural and Industrial Trust.
The Trust was created to take advantage of Section 71-3-75 (3) of
the Mississippi Code of 1972, as amended, which allows employers to
form a pool for the purpose of self-insuring their liabilities
under the Mississippi Workers' Compensation Law, versus purchasing
insurance coverage from a commercial insurance company. Each
member's contribution of funds to the Trust is computed similarly
to the method employed by commercial insurance companies in
determining premium rates. However, should the Trust be unable to
sufficiently discharge all of its obligations, it would assess the
members amounts needed to make up the deficiency. The members of
the Trust are jointly and severally liable for the obligations of
the trust.
Due to changes in the Mississippi workers compensation market in
early 1996, the Trust determined that the interests of its
members would best be served by converting into a Mississippi
domestic insurance company in which the members of the Trust
could become stockholders. The Trust entered into an arrangement
with a commercial insurance company whereby the Trust would
discontinue writing coverage for its members effective July 1,
1996 and would encourage its members to move their workers'
compensation insurance to the commercial carrier. Consequently,
the Trust had no premium revenue for the period July 1 through
December 31, 1996.
The Trust began the process of forming a stock insurance company
with the objective of allowing the members of the Trust to become
shareholders in the stock company. Under the plan, qualifying
insureds of the Trust would receive stock in the new company with
a book value equivalent to the book value in the Trust at the
date of conversion. The plan also provides for the elimination
of the joint and several liability of the Trust's insureds. As
of the balance sheet date, the process was not complete.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles. The
significant accounting policies used to prepare the financial
statements are summarized below:
TRADING SECURITIES
Bonds, notes, common stocks and mutual fund shares held
principally for resale in the near term are classified as trading
account securities and recorded at their fair values. Realized
and unrealized gains and losses on trading account securities are
included in other income.
SECURITIES HELD-TO-MATURITY
Bonds, notes and certificates of deposit (with maturities of more
than three months) for which the Trust has the intent and ability
to hold to maturity are reported at amortized cost, adjusted for
amortization of premiums or discounts and other than temporary
declines in fair value.
SECURITIES AVAILABLE-FOR-SALE
Bonds, notes, common stock and certificates of deposit (with
maturities of more than three months) not classified as either
trading or held-to-maturity are reported at fair value, adjusted
for other than temporary declines in fair value, with unrealized
gains and losses excluded from losses and reported as a separate
component of trust equity. Realized gains and losses are
determined on the specific identification method.
CASH EQUIVALENTS
For the purpose of presentation in the Trust's statement of cash
flows, cash equivalents are short-term, highly liquid investments
that are both (a) readily convertible to known amounts of cash
and (b) so near to maturity that they present insignificant risk
of changes in value due to changing interest rates.
PREMIUM REVENUE RECOGNITION
Insurance premiums are recognized as revenue on a pro rata basis
over the policy term. The portion of premiums that will be earned
in the future are deferred and reported as unearned premiums.
CAPITAL EQUIPMENT LEASES
Certain assets of the Trust were acquired under capital lease
arrangements. Such assets are recorded at their original cost and
depreciated under the straight-line method over the estimated
useful lives of the respective assets. Depreciation expense is
included in "General Expenses".
INSURANCE LIABILITIES
The liability for losses and loss-adjustment expenses includes an
amount determined from loss reports and individual cases and an
amount, based on past experience, for losses incurred but not
reported. Such liabilities are necessarily based on estimates and,
while management believes that the amount is adequate, the ultimate
liability may be in excess of or less than the amounts provided.
The methods for making such estimates and for establishing the
resulting liability are continually reviewed and any adjustments
are reflected in earnings currently. The reserve for losses and
loss-adjustment expenses is reported net of receivables from
subrogation, excess policies and expected recoveries.
INCOME TAXES
Income tax provisions are based on the asset and liability method.
A deferred tax asset or liability is provided for temporary
differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements. Such
differences are related principally to the unrealized loss in the
market value of available-for-sale securities.
<TABLE>
<CAPTION>
NOTE 3: INVESTMENTS
Major categories of net investment income are summarized as
follows:
1996 1995
------ ------
<S> <C> <C>
Fixed Maturities $169,037 $180,645
Equity Securities 105,291 128,638
Short-term Investments 22,748 18,743
--------- ---------
Total $297,096 $328,027
========= =========
</TABLE>
The aggregate fair value, gross unrealized holding gains, gross
unrealized holding losses, and amortized cost for available-for-sale and
held-to-maturity securities by major security type at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES AS OF DECEMBER 31, 1996 AND 1995
DECEMBER 31, 1996
-------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------
<S> <C> <C> <C> <C>
Bank certificates of
deposit $524,166 $ 889 $ 2,915 $522,140
Obligations of states
and political
subdivisions 626,574 13 7,223 619,364
-----------------------------------------------------
Total $1,150,740 $ 902 $ 10,138 $1,141,504
=====================================================
DECEMBER 31, 1995
--------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------------------------------------------------------
Equity securities $ 2,580,183 $ 1,026 $ 111,517 $ 2,469,692
-------------------------------------------------------
Total $ 2,580,183 $ 1,026 $ 111,517 $ 2,469,692
========================================================
</TABLE>
<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES AS OF DECEMBER 31, 1996 AND 1995
DECEMBER 31, 1996
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
the U.S.
Government $ 98,966 $ 0 $ 944 $ 98,022
Bank certificates
of deposit 423,918 0 0 423,918
--------------------------------------------------------
Total $ 522,884 $ 0 $ 944 $521,940
=======================================================
DECEMBER 31, 1995
--------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------------------------------------------------------
U.S. Treasury
securities
and obligations
of the U.S.
Government $ 94,829 $ 0 $ 1,758 $ 93,071
Bank certificates
of deposit 1,973,896 1,210 0 1,975,106
Obligations of states
and political
subdivisions 178,420 256 0 178,676
---------------------------------------------------------
Total $2,247,145 $ 1,758 $ 1,466 $2,246,853
=======================================================
</TABLE>
Gross realized gains and losses on sales of available-for-sale securities
were:
<TABLE>
1996 1995
--------------------
<S> <C> <C>
Gross realized gains:
Fixed maturities $ 2,407 $ 7,481
Equity securities 30,502 14,192
--------------------
Total $32,909 $ 21,673
====================
Gross realized losses:
Bank certificates of deposit $ 6,039 $ 0
Equity securities 64,155 181,231
--------------------
Total $70,194 $181,231
====================
</TABLE>
The trust also realized net losses in trading securities in the
amount of $415,929 in 1996. Trading security gains and losses are
included in "Other Income"
<TABLE>
<CAPTION>
NOTE 4: RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
Reserves for losses and loss adjustment expenses at December 31,
1996 and 1995 consisted of the following:
1996 1995
-------------------------
<S> <C> <C>
Case-basis reserves $1,392,371 $ 1,675,040
Incurred but unreported
claims 727,763 1,234,374
Service company fees 53,100 6,000
-------------------------
Total Reserves $2,173,234 $ 3,005,414
=========================
</TABLE>
NOTE 5: RESERVE FOR PREMIUM ADJUSTMENT
The premium amounts paid by members of the Trust are determined
initially each policy year from member provided estimates of their
annual payroll by worker classification code. The member is then
subject to an audit of their payroll data to determine the accuracy
of their estimate. Any necessary premium adjustments are made
based on audited payroll information. For the period ended June
30, 1996, management elected to audit less than 100% of the Trust
membership. Due to the limited number of audits performed, a
reserve was established for premium adjustments that management
estimates could be due in the event members who were not audited
request such an audit.
<TABLE>
<CAPTION>
NOTE 6: MINIMUM LEASE PAYMENTS
The Trust leases certain business equipment that are treated as
capital leases in accordance with FAS-13. Following are the
present values of the minimum lease payments under these leases as
of December 31, 1996 and 1995.
1996 1995
-----------------------
<S> <C> <C>
1996 $6,095
1997 3,172 2,450
1998 1,208 1,174
------- --------
$4,380 $9,719
======= ========
</TABLE>
NOTE 7: EXCESS INSURANCE
The Trust acquired excess coverage insurance for accidents
occurring during the period January 1, 1996 through June 30, 1996.
The specific coverage limits the Trust's liability to $350,000 per
claim incurred during this period. The reserve for losses and loss
adjustment expenses is shown net of expected recoveries on this
coverage. For claims incurred prior to January 31, 1992, the claim
retention level was $200,000 with a maximum benefit of $10,000,000.
Claims incurred from February 1, 1992 through July 31, 1992 have a
retention level of $250,000 and a maximum benefit of $10,000,000.
No claims are expected to exceed the maximum benefit.
NOTE 8: INCOME TAXES
The Trust is a taxable entity subject to Internal Revenue Code
Section 831 and related provisions. The provision for federal
income tax for the year ended December 31, 1996 and 1995 is $81,142
and $549,712 respectively. The provision for state income is
$17,626 and $93,948 respectively. Additionally, due to a temporary
unrealized decline in the market value of its equity securities,
the Trust has recorded a deferred tax asset in the amount of
$43,331 for 1995. This amount represents the tax benefit the Trust
would receive if such securities were sold at the current market
value. This amount was also applied to the gross decline in the
market value of investments to arrive at the net unrealized
depreciation of equity securities after income tax effects.
NOTE 9: NOTES RECEIVABLE
At December 31, 1996 the balance sheet of the Trust reflects a note
receivable of $20,000. This note is due on demand from Stoneville
Insurance Company. Under the plan described in Note 1, Stoneville
would be the successor of the Trust in its conversion to a stock
insurance company.
NOTE 10: CONCENTRATION OF CREDIT RISK
At December 31, 1996 the Trust had cash account balances in excess
of the federally insured limit at its primary depository
institution.
NOTE 11: CONTINGENCIES
In the normal course of operations, the Trust is involved in
litigation related to certain claims. In the opinion of management,
the reserve for losses and loss adjustment expenses is sufficient
to cover these claims. Therefore, it believes the disposition of
these matters will not have a material adverse effect on the
Trust's financial position.
STONEVILLE INSURANCE COMPANY
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
<PAGE>
RICHARD L. EATON
CERTIFIED PUBLIC ACCOUNTANT
(A PROFESSIONAL CORPORATION)
POST OFFICE BOX 16603
JACKSON, MISSISSIPPI 39236
MEMBER OF:
AMERICAN INSTITUTE OF
TELEPHONE: (601) 956-9751 CERTIFIED PUBLIC
FAX: (601) 956-7415 ACCOUNTANTS
MISSISSIPPI SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Stoneville Insurance Company
Jackson, Mississippi
I have audited the accompanying balance sheet of Stoneville
Insurance Company as of December 31, 1996 and the related
statements of income, changes in stockholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements present fairly, in all
material respects, the financial position of Stoneville Insurance
Company as of December 31, 1996 and the results of its operations
and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Richard L. Eaton
Jackson, Mississippi
March 6, 1997
<PAGE>
<TABLE>
<CAPTION>
STONEVILLE INSURANCE COMPANY
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<S> <C>
Cash in Bank $19,970
-------
Total Assets $19,970
=======
Liabilities
Notes Payable $20,000
Accrued Interest Payable 407
-------
Total Liabilities 20,407
-------
Stockholders' Equity
Common Stock 0
Retained Earnings (437)
-------
Total Stockholders' Equity (437)
-------
Total Liabilities and
Stockholders' Equity $19,970
=======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STONEVILLE INSURANCE COMPANY
STATEMENT OF INCOME
FOR THE YEAR ENDING DECEMBER 31, 1996
<S> <C>
REVENUE $0
------
Expenses
Bank Charges 30
Interest Expense 407
------
Total Expenses 437
------
Net Income ($437)
======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STONEVILLE INSURANCE COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
Total
Common Retained Stockholders'
Stock Earnings Equity
------------------------------------
<S> <C> <C> <C>
Balance at Beginning of
Year $0 $ 0 $ 0
Net Income (Loss) $0 $437 $437
-----------------------------------
Balance at End of Year $0 $437 $437
===================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STONEVILLE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Bank charges paid ($30)
--------
Net Cash Provided by Operating Activities (30)
--------
Cash Flows From Financing Activities
Loan proceeds 20,000
--------
Net Cash Provided by Financing Activities 20,000
--------
Net Increase (Decrease) in Cash and
Cash Equivalents 19,970
Cash and Cash Equivalents at Beginning of Year 0
--------
Cash and Cash Equivalents at End of Year $19,970
========
Reconciliation of Net Income to Cash Flows
Provided by Operating Activities
Net income ($437)
Increase in accrued interest payable 407
--------
Net Cash Provided by Operating Activities ($30)
========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STONEVILLE INSURANCE COMPANY
Notes to Financial Statements
For the Year Ended December 31, 1996
NOTE 1: DESCRIPTION AND OPERATION OF THE COMPANY
Stoneville Insurance Company (The Company) is a developmental stage
insurance company formed in August, 1996 to become the successor to
the Delta Agricultural and Industrial Trust, (The Trust), a
Mississippi self-funded workers compensation insurance trust.
The Trust has been in operation since August, 1991 providing
workers compensation insurance coverage initially to agricultural
and industrial concerns in the Mississippi Delta region, and later
to numerous industries throughout Mississippi. The Trust was an
alternative to the high cost of insurance acquired through the
Mississippi assigned risk pool or through commercial carriers.
Each member's contribution of funds to the Trust was computed
similarly to the method employed by commercial insurance companies
in determining premium rates. However, if the Trust was unable to
sufficiently discharge all of its obligations, it would assess
members the amount needed to make up any deficiency. The insureds
of the Trust are jointly and severally liable for the obligations
of the Trust.
Due to changes in the Mississippi workers compensation market in
early 1996, the Trust determined that the interests of its members
would best be served by converting into a Mississippi domestic
insurance company in which the members of the Trust could become
shareholders. The Trust entered into an arrangement with a
commercial insurance company whereby the Trust discontinued
writing coverage for its members effective July 1, 1996 and
encouraged its members to move their workers' compensation insurance
to the recommended commercial carrier. The Trust or any successor
to the Trust has the right to reinsure as much of the business
transferred to the commercial carrier as they deem appropriate.
The Trust began the process of forming a stock insurance company
(Stoneville Insurance Company) with the objective of allowing the
members of the Trust to become shareholders in the stock company.
Under the plan, qualifying insureds of the Trust would receive
stock in the new company with a book value equivalent to the book
value in the Trust at the date of conversion and all remaining
assets and liabilities of Trust would be transferred to Stoneville
Insurance Company. The plan also provides for the elimination of
the joint and several liability of the Trust's insureds. Although
Stoneville has been formed, the conversion process had not been
completed. Upon completion of the conversion process, the Company
is expected to be licensed by the Mississippi Department of
Insurance.
Other than the opening of a checking account with funds borrowed
from the Trust, the Company had no activity during 1996.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles. No
significant accounting policies are described due to the absence of
activity.
NOTE 3: NOTES PAYABLE
At December 31, 1996 the balance sheet of the Company reflects a
note payable of $20,000. This is a demand note due to the Trust
that provides for interest at the applicable federal rate. Accrued
and unpaid interest at December 31, 1996 amount to $407. This note
would be eliminated upon the completion of the plan of conversion
described in Note 1.
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF REORGANIZATION AND CONVERSION
OF DELTA AGRICULTURAL AND INDUSTRIAL TRUST
This Plan and Agreement of Reorganization and Conversion (the
"Conversion Agreement") is made and entered into as of this 20th day
of March, 1997, by and between Delta Agricultural and Industrial
Trust, a Mississippi workers' compensation self insured trust (the
"Trust") and Stoneville Insurance Company ("Stoneville").
1. DEFINITIONS
a. Board" means the board of directors of Stoneville.
b. "Commercial Program" means the Trust's program of
commercial insurance written through TIG Insurance
Company which commenced on July 1, 1996.
c. "Continental" means Continental Casualty Company, an
Illinois stock insurance company.
d. "Dissenters" means those Former Members who dissent from
the Plan and who have perfected their dissenters' rights
as set forth herein.
e. "Former Members" means those Persons who at any time have
had workers' compensation insurance provided by the Trust
for one or more full Fund Years which Fund Years resulted
in positive net income for the Trust.
f. "Fund Year" means a complete accounting year of the
Trust. A list of Fund Years is set forth on Exhibit A
attached hereto.
g. "Person" means any individual, corporation, partnership,
joint venture, association or other form of organization.
h. "Plan" means this Plan and Agreement of Reorganization
and Conversion of the Trust.
i. "Proportionate Earned Premium" means the percentage
derived by dividing (a) the net earned premium derived by
the Trust from each Former Member for all Fund Years
during which the Trust had positive net income from the
inception of the Trust through December 31, 1996 by (b)
the total net earned premium of the Trust derived from
all Former Members for all Fund Years during which the
Trust had positive net income from the inception of the
Trust through December 31, 1996.
j. "Registration Statement" means the registration statement
for certain shares of Stoneville stock to be filed with
the Securities and Exchange Commission on Form S-4.
k. "Reinsurance Agreement" means that certain Assumption
Reinsurance Agreement by and among the Trust, Stoneville,
and Continental.
l. "Stoneville" means Stoneville Insurance Company, a
Mississippi stock insurance company.
m. "Trust" means Delta Agricultural and Industrial Trust, a
Mississippi workers' compensation self insured trust.
n. "Trustees" shall mean the board of Trustees of the Trust.
o. "Trust Unit" means Four Dollars ($4.00) of equity of the
Trust.
2. EFFECTIVE DATE. The Trust shall begin taking the actions as
set forth herein as of the date hereof. The effective date of
the Plan shall be, and the capitalization of Stoneville and
the liquidation and dissolution of the Trust (Sections 5, 7
and 8) shall be deemed to have occurred simultaneously and
completely as of the close of business on the last day of the
month during which the conditions precedent as set forth in
Section 11 hereof have been satisfied or waived (the
"Effective Date").
3. CERTIFICATE OF AUTHORITY. On or prior to the Effective Date,
the Trust will surrender its Certificate of Authority to serve
as a workers' compensation self insurance trust to the
Mississippi Workers' Compensation Commission.
4. RESERVE FOR EXPENSES. On or prior to the Effective Date, all
known or ascertainable liabilities of the Trust shall be
promptly paid or provided for. There shall also be set aside,
in cash, securities, or other assets, a reserve fund in an
amount of Four Hundred Tweny Four Thousand, One Hundred Sixy
Three Dollars ($424,163) for the payment of estimated
expenses, taxes and payment of Dissenters.
5. CAPITALIZATION OF STONEVILLE. As of the Effective Date, the
Trust will transfer to Stoneville all of the assets of the
Trust other than amounts required to consummate the
Reinsurance Agreement and the reserve for expenses as set
forth in Section 4 hereof in return for that number of shares
of capital stock of Stoneville equal to the Trust equity
transferred by the Trust to Stoneville [measured by Four
Dollars ($4.00) of Trust equity (one Trust Unit) per share of
Stoneville common stock], which shall be all the issued and
outstanding shares of stock of Stoneville.
6. DISSENTER'S RIGHTS. Members and Former Members may dissent
from the Plan and receive Four Dollars ($4.00) in cash for
each Trust Unit allocable to such Persons upon perfection of
dissenters' rights pertaining to such Trust Units allocable to
such Persons. Payments to Dissenters shall be paid by the
Trust up to an aggregate amount not to exceed Two Hundred
Thousand Dollars ($200,000). In the event that Former Members
as a group perfect dissenters' rights resulting in an
obligation to pay dissenters an amount in excess of Two
Hundred Thousand Dollars ($200,000), the excess over that
amount due to Dissenters shall be paid by Stoneville out of
operating funds and not out of assets transferred to
Stoneville from the Trust pursuant to the Plan. In order to
perfect dissenters' rights, a Former Member wishing to dissent
must deliver to the Trust's office at 833 Washington Avenue,
Greenville, Mississippi 38704-5037 written notice of such
Former Member's intent to demand payment within thirty (30)
days after the effective date of Stoneville's Registration
Statement.
7. COMPUTATION AND PAYMENT OF LIQUIDATING DISTRIBUTION. For
purposes of computing the number of shares of Stoneville
common stock (or in the case of Dissenters, cash)
distributable from the Trust to each Former Member, each
Former Member of the Trust will have allocated to it a number
of Trust Units determined by multiplying the total number of
Trust Units by the Proportionate Earned Premium of each Former
Member. Upon liquidation of the Trust, each Former Member
shall thereupon receive one share of Stoneville common stock
for each Trust Unit allocable to such Former Member, except
Dissenters, who shall receive Four Dollars ($4.00) in cash for
each Trust Unit allocable to such Dissenter in accordance with
Section 6 above (collectively, the "Liquidating Distribution").
The Liquidating Distribution shall be disbursed to Former
Members as of the Effective Date.
8. DISSOLUTION. As of the Effective Date, following the
Liquidating Distribution as set forth in Section 7, the Trust
shall be dissolved and shall furnish notice of such
dissolution to the Mississippi Workers' Compensation
Commission and take any other such action as the Trustees
shall deem necessary or appropriate including the completion
of distribution of any remaining funds subsequent to
dissolution.
9. DISTRIBUTION OF REMAINING FUNDS. At such time as the Trustees
of the Trust (as dissolved) may determine that all liabilities
of the Trust have been paid or provided for and there is no
need for the reserve fund established pursuant to Section 4
above, the Trustees of the Trust (as dissolved) shall transfer
any amounts remaining in such fund to Stoneville as an
additional contribution to capital.
10. TERMINATION. This Plan may be terminated and abandoned (i) at
any time by vote of the Trustees or the Board; or (ii) if all
conditions precedent as set forth in Section 11 have not been
satisfied or waived by December 31, 1997.
11. CONDITIONS PRECEDENT. The Plan shall not become effective
until all the following conditions have been either satisfied
or waived by the Trustees: (i) the Reinsurance Agreement is in
effect; (ii) receipt of a favorable opinion from Watkins
Ludlam & Stennis, P.A. to the effect that the consummation of
the Plan will be treated, for federal income tax purposes, as
a tax free transaction as to the Trust, the Company, and to
those Former Members who receive Stock of the Company; and
(iii) dissenters' rights shall not have been perfected by
holders of more than twenty percent (20%) of Trust Units.
12. DISSEMINATION OF SHARE CERTIFICATES AND PAYMENT OF DISSENTERS.
Promptly after the Effective Date, each Person who was insured
by the Trust at any time will be sent an assumption
certificate (the "Assumption Certificate") pursuant to the
Reinsurance Agreement. Each Former Member must sign and
return the Assumption Certificate to the Trust at which time
the Former Member shall receive such Person's liquidating
Distribution.
13. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of Mississippi.
IN WITNESS WHEREOF, the parties have executed this Plan as of
the day and year set forth above.
TRUST: STONEVILLE:
DELTA AGRICULTURAL AND STONEVILLE INSURANCE COMPANY
INDUSTRIAL TRUST
By: /s/ William H. Kennedy By: /s/ Harry E. Vickery
Name/Title: Chairman Name/Title: President
<PAGE>
EXHIBIT A
LIST OF FUND YEARS
8/1/91 - 7/31/92
8/1/92 - 7/31/93
8/1/93 - 12/31/94
1/1/95 - 12/31/95
1/1/96 - 12/31/96
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of Mississippi.
Subarticle E of Article 8 of the Mississippi Business Corporation
Act prescribes the conditions under which indemnification may be
obtained by a present or former director or officer of the
Company who incurs expenses or liability as a consequence of
matters arising out of his activities as a director or officer.
Article VII of the Company's Bylaws also provides for
indemnification of officers and directors under certain
circumstances. The Company has purchased a liability policy
which, subject to any limitations set forth in the policy,
indemnifies the Company's directors and officers for damages that
they become legally obligated to pay as a result of any negligent
act, error or omission committed by such person in his capacity
as an officer or director.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits and financial statement schedules are
furnished as a part of this Registration Statement:
Exhibit Number Description
2 Plan and Agreement of Reorganization and
Conversion of the Trust included as
Exhibit A to the Prospectus contained
herein
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
5 Opinion of Watkins Ludlam & Stennis,
P.A. regarding legality of common stock
registered hereby
8 Opinion of Watkins Ludlam & Stennis,
P.A. regarding tax matters
10.1 Assumption Reinsurance Agreement dated
as of March 20, 1997 between the Trust,
Continental, and the Company
10.2 Insurance Placement Agreement dated as
of June 10, 1996 between the Trust, TIG
and TIG Reinsurance Company
10.3 Representative Agreement dated as of
July 1, 1996 between Mississippi Risk
Management, Inc. and the Trust
10.4 Assignment and Assumption Agreement
dated as of March 20, 1997 between the
Trust and the Company
23.1 Consent of Richard L. Eaton, CPA,
independent accountant, with respect to
consolidated financial statements of the
Trust and the Company
23.2 Consent of Watkins Ludlam & Stennis,
P.A. is contained in their opinion filed
as Exhibit 5 to this Registration
Statement
24 Power of attorney previously filed
27.1 Financial Data Schedule Stoneville
Insurance Company Period 12/31/96
27.2 Financial Data Schedule Delta Agricultural
and Industrial Trust Periods 12/31/96 and
12/31/95
99.1 Financial Statement Schedules of The Trust
99.2 Financial Statement Schedules of Stoneville
Insurance Company
<PAGE>
ITEM 22. UNDERTAKINGS
(g) Registration on Form S-4 or Form F-4 of Securities
offered for resale.
(1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of
the applicable form.
(2) The registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately
preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and issued in connection with an
offering of securities subject to Rule 415, will be filed as a
part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(h) Request for acceleration of effective date or filing of
registration statement on Form S-8
Insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described
under Item 20 above, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration
statement through the date of responding to the request.
The registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Company certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and
has duly caused this Amendment Number 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Jackson, State of Mississippi on
this the 17th day of April, 1997.
STONEVILLE INSURANCE COMPANY
BY: Harry E. Vickery
President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment Number 1 to the Registration Statement has been
signed by the following persons in the capacities and on the
date indicated.
NAME TITLE DATE
* William L. Kennedy Chairman of the Board April 17, 1997
William L. Kennedy and Director (Chief
Executive Officer)
Harry E. Vickery President and Director April 17, 1997
Harry E. Vickery
* David R. White Secretary, Treasurer, April 17, 1997
David R. White Vice President,
Director Officer
* By /s/ Harry E. Vickery
Attorney in Fact
INDEX TO EXHIBITS
Exhibit Description
Number
2 Plan and Agreement of Reorganization
and Conversion of the Trust included
as Exhibit A to the Prospectus
contained herein
3.1 Articles of Incorporation
of the Company
3.2 Bylaws of the Company
5 Opinion of Watkins Ludlam & Stennis,
P.A. regarding legality of common
stock registered hereby
8 Opinion of Watkins Ludlam & Stennis,
P.A. regarding tax matters
10.1 Assumption Reinsurance Agreement dated
as of March 20, 1997 between the Trust,
Continental, and the Company
10.2 Insurance Placement Agreement dated as
of June 10, 1996 between the Trust, TIG
and TIG Reinsurance Company
10.3 Representative Agreement dated as of
July 1, 1996 between Mississippi Risk
Management, Inc. and the Trust
10.4 Assignment and Assumption Agreement
dated March 20, 1997 between the Trust
and the Company
23.1 Consent of Richard L. Eaton, CPA,
independent accountant, with respect to
consolidated financial statements of the
Trust and the Company
23.2 Consent of Watkins Ludlam & Stennis, P.A.
is contained in their opinion filed as
Exhibit 5 to this Registration
Statement
24 Power of attorney previously filed
27.1 Financial Data Schedule Stoneville Insurance
Company Period 12/31/96
27.2 Financial Data Schedule Delta Agricultural and
Industrial Trust Periods 12/31/96 and 12/31/95
99.1 Financial Statement Schedules of The Trust
99.2 Financial Statement Schedules of Stoneville
Insurance Company
ARTICLES OF ASSOCIATION
OF
STONEVILLE INSURANCE COMPANY
We, the undersigned residents of the State of Mississippi,
having associated ourselves together for the purpose of forming a
corporation under and by virtue of Chapter 19, Title 83,
Mississippi Code of 1972, as amended, hereby adopt the following
Articles of Association:
ARTICLE I
NAME
The name of the corporation shall be Stoneville Insurance
Company.
ARTICLE II
DURATION
The period of its duration shall be ninety-nine (99) years.
ARTICLE III
PURPOSES
The purposes for which the corporation shall be organized,
and the powers of the corporation, shall be as follows:
1. To insure houses, buildings, vehicles, and all other
kinds of property against direct or consequential loss or damage
by fire, lightning, theft, explosion, or storm; to insure against
loss or damage to any goods or premises by water, arising from
the breakage or leakage of sprinklers or water pipes; and to make
any and all kinds of insurance against loss or damage to goods,
merchandise, or other property caused by fire, risks of inland
transportation or navigation, the action of the elements, or
adverse manifestations of nature, as well as all and every risk
or peril to property or interest in property or which may arise
from the ownership, maintenance, or use of property to which the
subject of insurance may be exposed, against which it is not
contrary to public policy to insure, including every insurable
interest therein or in the use thereof, or profit or income
therefrom, or legal liability therefor, but not to include injury
to the person.
2. To insure vessels, craft, cars, aircraft, automobiles
and other vehicles, whether operated on or under water or land or
in the air, in any place or situation, and whether complete, or
in process of, or awaiting construction; also all goods,
freights, cargoes, merchandise, effects, disbursements, profits,
money, bullion, precious stones, securities, chooses in action,
evidences of debt, including money loaned on bottomry or
respondentia, valuable papers, and all other kinds of property
and interest therein, including liabilities and liens of every
description, in respect to any and all risks and perils while in
course of navigation, transit, travel or transportation on or
under any seas or other waters, on land, in the air, or while in
preparation for or while awaiting the same, or during any delays,
storage, transshipment or reshipment incident thereto, including
builders' risks, war risks, and for loss of or damage to property
or injury or death of any person, whether legal liability results
therefrom or not, during, awaiting, or arising out of navigation,
transit, travel, transportation, or the construction or repair of
vessels.
3. To guarantee the fidelity of persons in positions of
trusts, private or public, and to act as surety on official bonds
and for the performance of other obligations, and to insure
against loss through wrongful conversion, concealment, and
disposal of personal property.
4. To insure against loss or damage to property of the
assured, or loss or damage to the life, person, or property of
another for which the assured is liable, caused by the explosion
of steam boilers.
5. To insure any person against bodily injury or death by
accident, or any person, firm, or corporation against loss or
damage on account of the bodily injury or death by accident of
any person for which loss or damage said person, firm, or
corporation is responsible.
6. To insure against the breakage of plate glass, local or
in transit.
7. To insure against loss or damage by water or steam to
any goods or premises, arising from leakage of sprinklers and
water pipes, plumbing, leaking roofs, heating systems, and other
similar causes.
8. To insure against loss or damage to property arising
from accidents to elevators, bicycles, and vehicles, including
aircraft, except rolling stock of railways.
9. To carry on the business commonly known as credit
insurance or guaranty, either by agreeing to purchase
uncollectible debts or otherwise to insure against loss or damage
from the failure of persons indebted to the assured to meet their
liabilities.
10. To carry on the business commonly known as health
insurance.
11. To insure against loss or damage by bombardment,
invasion, insurrection, riot, civil war, or commotion, military,
or usurped power.
12. To insure against loss or damage by insects or disease
to farm crops or products, and loss of rental value of land
producing such crops or products.
13. To insure against loss or damage of personal property,
local or in transit.
14. To provide any and all other types of insurance
permitted by law.
15. To enter into reinsurance agreements of all kinds with
other insurance companies, to reinsure its own insurance risks of
all types with other insurance companies and to reinsure the
insurance risks of other insurance companies.
16. To provide coverage for an employer's liability for
injuries, disability or death to persons in their employment,
without regard to fault, as prescribed by state workers'
compensation laws.
17. Without limiting the generality of the foregoing powers
and purposes, to do every other thing or act permitted by law.
ARTICLE IV
AUTHORIZED STOCK
The authorized amount of capital stock of the corporation
shall be one hundred million (100,000,000) shares of common stock
of the par value of One Dollar ($1.00) per share.
ARTICLE V
REQUIRED CAPITAL
No insurance policies shall be issued until the corporation
shall have met capital and surplus statutory requirements and
shall have obtained a license to engage in business issued by the
Commissioner of Insurance of the State of Mississippi.
ARTICLE VI
LIMITATION OF LIABILITY
No director shall be liable to the corporation or its
shareholders for money damages for any action taken, or any
failure to take any action, as a director, except liability for:
(i) The amount of a financial benefit received by a
director to which he is not entitled;
(ii) An intentional infliction of harm on the
corporation or the shareholders;
(iii) A violation of Section 79-4-8.33 of the
Mississippi Code of 1972, as amended, or any successor
section thereto; or
(iv) An intentional violation of criminal law.
ARTICLE VII
REGISTERED OFFICE AND AGENT
The address of the corporation's initial registered office
is 633 North State Street, Jackson, Mississippi 39202, and the
name of its initial registered agent at such address is David L.
Martin. The home office of the corporation shall be located in
Jackson, Hinds County, Mississippi.
ARTICLE VIII
NAMES OF CORPORATORS
The name and address of each proposed incorporator is:
NAME ADDRESS
S. H. Barret, Jr. P. O. Box 718
Belzoni, MS 39038
Bruce J. Brumfield P. O. Box 165
Inverness, MS 38753
William L. Kennedy P. O. Box 264
Inverness, MS 38753
David L. Martin P. O. Box 427
Jackson, MS 39205
Chip Morgan P. O. Box 257
Stoneville, MS 38776
Merlin Richardson P. O. Box 220
Rolling Fork, MS 39159
W. T. Robertson P. O. Box 95
Holly Ridge, MS 38749
Harry E. Vickery P. O. Box 5037
Greenville, MS 38704
David R. White P. O. Drawer 14067
Jackson, MS 39236
Aven Whittington Rt. 3, Box 65
Greenwood, MS 38930
William F. Winter P. O. Box 427
Jackson, MS 39205
IN WITNESS WHEREOF, we hereunto affix our signatures as of
the 2nd day of December, 1996.
/S/ /S/
S. H. Barret, Jr. W. T. Robertson
/S/ /S/
Bruce J. Brumfield Harry E. Vickery
/S/ /S/
William L. Kennedy David R. White
/S/ /S/
David L. Martin Aven Whittington, Jr.
/S/ /S/
Chip Morgan William F. Winter
/S/
Merlin Richardson
EXHIBIT 5
OPINION OF WATKINS LUDLAM & STENNIS, P.A. REGARDING LEGALITY
TO BE GIVEN AT CLOSING
, 1997
Board of Directors
Stoneville Insurance Company
633 North State Street, Suite 200
Jackson, Mississippi 39202
Gentlemen:
We have acted as counsel to Stoneville Insurance Company in
connection with the preparation of its Registration Statement on
Form S-4 for registration of a maximum of 650,000 shares of
Common Stock, $1.00 par value, under the Securities Act of 1933.
Such shares are to be issued pursuant to the Plan and Agreement
of Reorganization and Conversion of Delta Agricultural and
Industrial Trust (the "Plan"), dated as of March 20, 1997.
We have examined the Plan, the Articles of Incorporation and
the amendments thereto of Stoneville Insurance Company, and such
other documents as we deemed relevant.
Based on the foregoing, it is our opinion that the maximum
of 650,000 shares of Common Stock of Stoneville Insurance Company
to be registered under the Securities Act of 1933 (i) when issued
pursuant to the Plan will be legally issued, fully paid and non-assessable
shares of Common Stock of Stoneville Insurance
Company; and (ii) such shares which are not issued pursuant to
the Plan, when duly delivered against payment therefor as
contemplated by the Prospectus comprising Part I of the
Registration Statement, will be validly issued, fully paid, and
nonassessable.
We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of our name under the
heading "Legal Matters" and other such locations as it may appear
in the Prospectus comprising Part I of the Registration
Statement.
Sincerely,
WATKINS LUDLAM & STENNIS, P.A.
EXHIBIT 8
OPINION OF WATKINS LUDLAM & STENNIS, P.A. REGARDING TAX MATTERS
FORM OF TAX OPINION TO BE GIVEN AT CLOSING
The tax opinion will contain the following individual
opinions (or opinions substantially similar thereto):
, 1997
Board of Directors Board of Trustees
Stoneville Insurance Company Delta Agricultural and
633 North State Street, Suite 200 Industial Trust
Jackson, Mississippi 39202 833 Washington Avenue
Greenville, Mississippi 38704-
5037
Re: The Federal Income Tax Consequences of Certain Matters
Arising Under the Corporate Reorganization Provisions of the
Internal Revenue Code of 1986, as amended.
Gentlemen:
We have acted as special counsel to Delta Agricultural and
Industrial Trust, a Mississippi workers' compensation self
insurance trust (the "Trust"), and Stoneville Insurance Company,
a Mississippi corporation (the "Company"), in connection with
certain federal income tax matters relating to the transactions
described in the Plan and Agreement of Reorganization and
Conversion of Delta Agricultural and Industrial Trust (the
"Plan"), dated as of March 20, 1997. This opinion is furnished
to you pursuant to Section 11(ii) of the Plan. Except as
otherwise defined herein, all capitalized terms herein have the
meanings set forth in the Plan.
In connection with this opinion, we have examined and are
familiar with originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement on
Form S-4, the Plan and such other documents as we have deemed
necessary or appropriate in order to enable us to render the
opinion below. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of all natural
persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents submitted to us
as certified, conformed or photostatic copies and the
authenticity of the originals of such copies. In rendering the
opinion set forth below, we have relied upon certain written
representations and covenants of the parties to the Plan set
forth in the Certificates which are attached hereto as Exhibits
"A" and "B." In rendering our opinion, we have considered the
applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, pertinent judicial
authorities, interpretive rulings of the Internal Revenue Service
(the "Service") and such other authorities as we have considered
relevant.
<PAGE>
I. DESCRIPTION OF PROPOSED PLAN OF REORGANIZATION
AND CONVERSION
The proposed Plan will be structured in accordance with the
laws of the State of Mississippi, the statements and
representations of the parties to the transaction, and the
following descriptions:
(1) Former Members of the Trust may dissent from the Plan upon
perfection of dissenters' rights. Former Members as a group
holding not more than twenty percent (20%) of the Trust
Units may perfect dissenters' rights.
(2) On the Effective Date, the following events shall be deemed
to have occurred simultaneously.
(a) The Trust will transfer substantially all its
assets, less an amount sufficient to pay the Trust's
remaining costs and expenses including amounts required
to consummate the Reinsurance Agreement and amounts due
to dissenters, to the Company in exchange for Company
Stock. After this exchange, the Trust will own all the
issued and outstanding shares of stock of the Company.
(b) The Trust will distribute to Former Members
perfecting dissenters' rights, if any, four dollars
($4.00) in cash in redemption of each Trust Unit held
by such Former Members up to an aggregate amount
payable to all Former Members perfecting dissenters'
rights not to exceed two hundred thousand dollars
($200,000.00).
(c) The Trust will be liquidated and will distribute to
Former Members all the Company stock at one (1) share of Company
Stock for each Trust Unit allocable to such Former Member at
December 31, 1996, except for those Trust Units with respect to
which rights of dissent have been exercised.
(d) In the event that Former Members as a group
perfect dissenters' rights resulting in an obligation
to redeem Trust Units with a value in excess of two
hundred thousand dollars ($200,000.00) at the
redemption rate of four dollars ($4.00) for each Trust
Unit, the excess amount due to such Former Members
perfecting dissenters' rights will be paid to such
Former Members by the Company. Such payments, if any,
paid by the Company to such Former Members perfecting
dissenters rights shall be paid from operating funds of
the Company and not out of assets transferred to the
Company from the Trust pursuant to the Plan.
(3) Subsequent to the liquidation of the Trust, any amounts
remaining with the Trust not needed to pay expenses or
dissenters, if any, shall be contributed to the Company as an
additional contribution to capital.
(4) After the reorganization and conversion, the Company will
continue the historical business of the Trust in a substantially
unchanged manner.
II. DISCUSSION OF APPLICABLE REORGANIZATION PROVISIONS
The parties intend that the Plan will satisfy the
requirements for nonrecognition (i.e., treatment as a tax free
reorganization) under section 368(a)(1)(D) of the Code. This
Code section describes a non-divisive or acquisitive Type "D"
reorganization under which the transferor corporation (the Trust)
transfers substantially all of its assets to a controlled
corporation (the Company), the stock of which the transferor
corporation distributes to its shareholders in pursuance to the
plan of reorganization. The Code describes a Type "D"
reoganization involving the transfer of assets to a controlled
corporation as follows:
1. A transfer by a corporation, of all or part of its assets to
another corporation if immediately after the transfer the
transferor, or one or more of its shareholders (including persons
who were shareholders immediately before the transfer) or any
combination thereof, is in control of the corporation to which
the assets are transferred(1); but only if, in pursuance of the
plan, stock or securities of the corporation to which the assets
are transferred are distributed in a transaction which qualifies
under section 354 (2) . . . or 356, and
2. In effect, a complete liquidation of the transferor
corporation. (Although Code section 354(b) does not explicitly
require a complete liquidation of the transferor, the requisite
distribution of all of the transferor's properties will have the
effect of a complete liquidation).
In addition to the requirements under the Code which have
been generally described above, nonrecognition for the Plan is
subject to several other nonstatutory rules that have been
established through case law and Treasury Regulations. These
requirements involve continuity of proprietary interest,
continuity of business enterprise, and the existence of a valid
business purpose for the transaction. The judicially developed
step transaction doctrine, wherein a series of formally separate
steps are considered together as component parts of an overall
plan, must also be considered when evaluating whether a
transaction, in substance, qualifies as a valid reorganization
under Code section 368(a)(1)(D).
III. OPINION
In reliance upon the foregoing facts and representations of
the parties to the Plan transactions, and based upon our review
of such documents and consideration of such legal matters as we
have deemed relevant and sufficient to enable us to render an
informed opinion, we are of the opinion that the federal income
tax consequences of the proposed Plan will be as follows:
1. The acquisition by the Company of substantially all the
assets of the Trust in exchange for Company Stock and the
liquidation of the Trust and distribution of the Company
Stock to the Former Members will constitute a reorganization
within the meaning of Code section 368(a)(1)(D).
For purposes of this opinion, "substantially all" means
at least 90 percent of the fair market value of the net
assets and at least 70 percent of the fair maket value
of the gross assets of the Trust held immediately prior
to the reorganization and conversion (Rev. Proc. 77-37,
1977-2 C.B. 568, 569 section 3.01). The Trust and the
Company will each be "a party to a reorganization"
within the meaning of section 368(b) of the Code.
2. No gain or loss will be recognized by the Trust upon the
transfer of substantially all of its assets to the Company
in exchange for the Company Stock (all of which will be
distributed to the Former Members) (Code section 361(a).
3. No gain or loss will be recognized by the Company on the
receipt by the Company of substantially all of the assets of
the Trust in exchange for the Company Stock (Code section
1032(a)).
4. No gain or loss will be recognized by the Former Members on
the receipt of Company Stock solely in exchange for their
Trust Units (Code section 354(a)(1)).
5. Where a dissenting Former Member receives solely cash in
exchange for all of his or her Trust Units, such cash will
be treated as having been received by the Former Member as a
distribution in redemption of his or her Trust Units subject
to the provisions and limitations of Code section 302.
6. The basis of the Company Stock to be received by the Former
Members will be the same as the Former Members' basis in the
Trust Units allocable to such Former Members (Code section
358(a)(1)).
7. The holding period of the Company Stock received by the
Former Members will include, in each instance, the period
during which the Former Members held an interest in the
equity of the Trust as determined under the Plan, provided
such Trust equity constituted a capital asset on the date of
the exchange (Code section 1223(1)).
8. The basis of the assets of the Trust in the hands of the
Company will be the same as the basis of those assets in the
hands of the Trust immediately prior to the transfer (Code
section 362(b)).
9. The holding period of the assets of the Trust in the hands
of the Company will include the period during which such
assets were held by the Trust (Code section 1223(2)).
We have qualified our opinions by reference to the Code, the
Treasury Regulations promulgated thereunder, and existing
judicial and administrative interpretations thereof. In so
opining, we have relied upon the foregoing facts and
representations and have reviewed such documents and have
considered such legal matters as we have deemed relevant and
sufficient to enable us to render an informed opinion. While we
have not been requested nor have we undertaken to make
independent investigations to verify the representations and
statements described above or set forth in the Certificates
attached as Exhibits "A" and "B," based upon our discussions with
representatives of the parties and our limited review of certain
background material, we believe that it is reasonable for us to
rely on such representations and statements.
Our opinion is limited to the specific opinions expressed
above, and no other opinions are intended nor should they be
inferred. An opinion of counsel has no binding effect upon the
Service and no assurances can be given that the conclusions
reached in any opinion will not be contested by the Service, or
if contested, will be sustained by a court.
The opinions we have expressed above are based on the facts
and representations outlined herein being correct in all material
respects as of the dates indicated or at the time of the proposed
transactions as the case may be. In the event that one or more
of the facts or representations are incorrect for any such time,
our opinion would likely be substantially different than that
expressed above.
The opinion expressed herein is for the sole benefit of the
Trust and the Company, together with the Former Members for their
use in connection with the proposed Plan of Reorganization and
Conversion, and is not to be used, delivered to or relied upon by
any other party for any other purpose, and may not be circulated,
quoted, or otherwise referred to for any other purpose without
our prior written consent.
Very truly yours,
WATKINS LUDLAM & STENNIS, P.A.
- ------------------------------
(1) The determination of whether a corporation is "controlled"
for this purpose is made using the 50% ownership test of section
304(c) as the "control" threshold, as mandated by Code section
368(a)(2)(H).
(2) Code section 354 shall not apply to an exchange in pursuance
to a Type "D" reorganization unless (1) the corporation to which
the assets are transferred acquires substantially all of the
assets of the transferor of such assets; and (2) the stock or
other property received by the transferor corporation, as well as
the other properties of such transferor, are distributed under
the plan of reorganization, as mandated by Code section
354(b)(1).
<PAGE>
CERTIFICATE OF DELTA AGRICULTURAL AND INDUSTRIAL TRUST
RELATING TO SECTION 368 OPINION ON THE PLAN OF
REORGANIZATION AND CONVERSION
This Certificate has been requested by the law firm of
Watkins Ludlam & Stennis, P.A. in connection with the rendering
of its opinion as to certain federal income tax consequences
relating to the conversion of Delta Agricultural and Industrial
Trust (the "Trust") into Stoneville Insurance Company (the
"Company") (the "Conversion") as such transaction is described in
that certain Plan and Agreement of Reorganization and Conversion
of Delta Agricultural and Industrial Trust dated as of March 20,
1997 (the "Plan"). Watkins Ludlam & Stennis, P. A. will rely on
the representations stated hereinafter, as well as on other
facts, assumptions, and representations described in its opinion
letter dated , 1997 (date of closing) (the
"WL&S Tax Opinion") in opining on the federal income tax issues
stated therein. Accordingly, this Certificate is an integral
part of the WL&S Tax Opinion. Unless otherwise noted, all
defined or capitalized terms used in this Certificate have the
same meaning ascribed to such terms in the Plan or in the WL&S
Tax Opinion.
The following representations are being made in connection
with the Plan:
1. The Trust is classified as a corporation for federal income
tax purposes.
2. The Trust will distribute the Company Stock it receives in
the transaction in pursuance to the Plan.
3. The fair market value of the Company Stock and other
consideration received by each Former Member will be
approximately equal to the fair market value of the Trust
Units surrendered in the exchange.
4. There is no plan or intention by the Former Members who own
one percent (1%) or more of the Trust Units, and to the best
of the knowledge of the management of the Trust, there is no
plan or intention on the part of the nondissenting Former
Members to sell, exchange, or otherwise dispose of a number
of shares of Company Stock received in the transaction that
would reduce the Former Members' ownership of Company Stock
to a number of shares having a value, as of the date of the
transaction, of less than fifty percent (50%) of the value
of all of the formerly outstanding Trust Units of the Trust
as of the same date. For purposes of this representation,
the Trust Units exchanged for cash, surrendered by
dissenters, will be treated as outstanding Trust Units on
the date of the transaction. Moreover, Trust Units and
Company Stock held by Former Members and otherwise sold,
redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this
representation.
5. The Company will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets
held by the Trust immediately prior to the transaction. For
purposes of this representation, amounts paid by the Trust
to dissenters, amounts paid by the Trust to Former Members
who receive cash or other property, amounts used by the
Trust to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal
dividends) made by the Trust immediately preceding the
transfer will be included as assets of the Trust held
immediately prior to the transaction.
6. After the transaction, the Former Members of the Trust will
own at least eighty percent (80%) of the issued and
outstanding Company Stock.
7. The liabilities of the Trust assumed by the Company, if any,
plus the liabilities, if any, to which the transferred
assets are subject were incurred by the Trust in the
ordinary course of its business and are associated with the
assets transferred.
8. The Trust, the Company and the Former Members will pay their
respective expenses, if any, incurred in connection with the
transaction.
9. There is no intercorporate indebtedness existing between the
Trust and the Company that was issued, acquired, or will be
settled at a discount.
10. The Trust is not an investment company as defined in Code
section 368(a)(2)(F)(iii) and (iv).
11. The fair market value of the assets of the Trust transferred
to the Company will equal or exceed the sum of the
liabilities assumed by the Company, if any, plus the amount
of liabilities, if any, to which the transferred assets are
subject.
12. The total adjusted basis of the assets of the Trust
transferred to the Company will equal or exceed the sum of
the liabilities to be assumed by the Company, if any, plus
the amount of liabilities, if any, to which the transferred
assets are subject.
13. The Trust is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Code section
368(a)(3)(A).
The Trust hereby certifies that the officer of the Trust
executing this Certificate has knowledge of the pertinent
information set forth herein and that he has examined the
foregoing representations and, to the best of such officer's
knowledge and belief, the representations made are true, complete
and correct as of the date, , 1997, of this
Certificate, and he further certifies that he is duly authorized
and empowered to execute and deliver this Certificate.
DELTA AGRICULTURAL AND
INDUSTRIAL TRUST
By:
Title:
<PAGE>
CERTIFICATE OF STONEVILLE INSURANCE COMPANY
RELATING TO SECTION 368 OPINION ON THE PLAN OF
REORGANIZATION AND CONVERSION
This Certificate has been requested by the law firm of
Watkins Ludlam & Stennis, P.A. in connection with the rendering
of its opinion as to certain federal income tax consequences
relating to the conversion of Delta Agricultural and Industrial
Trust (the "Trust") into Stoneville Insurance Company (the
"Company") (the "Conversion") as such transaction is described in
that certain Plan and Agreement of Reorganization and Conversion
of Delta Agricultural and Industrial Trust dated as of March 20,
1997 (the "Plan"). Watkins Ludlam & Stennis, P.A. will rely on
the representations stated hereinafter, as well as on other
facts, assumptions, and representations described in its opinion
letter dated , 1997 (date of closing) (the "WL&S
Tax Opinion") in opining on the federal income tax issues stated
therein. Accordingly, this Certificate is an integral part of
the WL&S Tax Opinion. Unless otherwise noted, all defined or
capitalized terms used in this Certificate have the same meaning
ascribed to such terms in the Plan or in the WL&S Tax Opinion.
The following representations are being made in connection
with the Plan:
1. The Company does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly,
any equity of the Trust.
2. The fair market value of the Company Stock and other
consideration received by each Former Member will be
approximately equal to the fair market value of the Trust
Units surrendered in the exchange.
3. There is no plan or intention by the Former Members who own
one percent (1%) or more of the Trust Units, and to the best
of the knowledge of the management of the Company, there is
no plan or intention on the part of the nondissenting Former
Members to sell, exchange, or otherwise dispose of a number
of shares of Company Stock received in the transaction that
would reduce the Former Members' ownership of Company Stock
to a number of shares having a value, as of the date of the
transaction, of less than fifty percent (50%) of the value
of all of the formerly outstanding Trust Units of the Trust
as of the same date. For purposes of this representation,
the Trust Units exchanged for cash, surrendered by
dissenters, will be treated as outstanding Trust Units on
the date of the transaction. Moreover, Trust Units and
Company Stock held by Former Members and otherwise sold,
redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this
representation.
4. The Company will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets
held by the Trust immediately prior to the transaction. For
purposes of this representation, amounts paid by the Trust
to dissenters, amounts paid by the Trust to Former Members
who receive cash or other property, amounts used by the
Trust to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal
dividends) made by the Trust immediately preceding the
transfer will be included as assets of the Trust held
immediately prior to the transaction.
5. After the transaction, the Former Members of the Trust will
own at least eighty percent (80%) of the issued and
outstanding Company Stock.
6. The Company has no plan or intention to reacquire any of its
stock issued in the Conversion.
7. The Company has no plan or intention to sell or otherwise
dispose of any of the assets of the Trust acquired in the
transaction, except for dispostions made in the ordinary
course of business.
8. The liabilities of the Trust assumed by the Company, if any,
plus the liabilities, if any, to which the transferred
assets are subject were incurred by the Trust in the
ordinary course of its business and are associated with the
assets transferred.
9. Following the Conversion, the Company will continue the
historic business of the Trust or use a significant portion
of the Trust's historic business assets in a business.
10. At the time of the Conversion, the Company will not have
outstanding any warrants, options, convertible securities,
or any other type of right pursuant to which any person
could acquire Company Stock that, if exercised or converted,
would affect the Former Members' acquisition or retention of
at least eighty percent (80%) of the issued and outstanding
Company Stock.
11. The Company, the Trust, and the Former Members will pay
their respective expenses, if any, incurred in connection
with the transaction.
12. There is no intercorporate indebtedness existing between the
Trust and the Company that was issued, acquired, or will be
settled at a discount.
13. The Company is not an investment company as defined in Code
section 368(a)(2)(F)(iii) and (iv).
14. The fair market value of the assets of the Trust transferred
to the Company will equal or exceed the sum of the
liabilities assumed by the Company, if any, plus the amount
of liabilities, if any, to which the transferred assets are
subject.
15. The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Code section
368(a)(3)(A).
The Company hereby certifies that the officer of the Company
executing this Certificate has knowledge of the pertinent
information set forth herein and that he has examined the
foregoing representations and, to the best of such officer's
knowledge and belief, the representations made are true, complete
and correct as of the date, , 1997, of this
Certificate, and he further certifies that he is duly authorized
and empowered to execute and deliver this Certificate.
STONEVILLE INSURANCE COMPANY
By:
Title:
EXHIBIT 10.1
ASSUMPTION REINSURANCE AGREEMENT DATED AS OF
MARCH 20, 1997 BETWEEN THE TRUST, CONTINENTAL AND THE COMPANY
<PAGE>
ASSUMPTION REINSURANCE AGREEMENT
THIS ASSUMPTION REINSURANCE AGREEMENT (the "Agreement") is
made and entered into as of this 2oth day of March, 1997, by and
between Delta Agricultural and Industrial Trust, a Mississippi
workers' compensation self insured trust (the "Trust");
Stoneville Insurance Company, a Mississippi stock insurance
company ("Stoneville"); and Continental Casualty Company, an
Illinois stock insurance company ("Continental").
ARTICLE 1
WITNESSETH
WHEREAS, the Trust desires to cede to, and Continental
desires to assume, all rights and obligations pertaining to
workers' compensation insurance issued by the Trust as specified
on Exhibit A (the "Policies") and the joint and several liability
of each insured of the Trust one to the other arising out of the
membership of the insureds in the Trust in accordance with the
terms and conditions hereinafter set forth; and
WHEREAS, subsequent to such cession, the Trust shall be
liquidated and Stoneville shall be the Trust's successor in
interest and be the assignee of the Trust's rights hereunder; and
WHEREAS, Stoneville and Continental desire to create a
relationship whereby Stoneville may reinsure the obligations
Continental previously assumed from the Trust in accordance with
the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and the covenants, provisions and agreements set forth herein,
the parties agree as follows:
ARTICLE 2
DEFINITIONS
2.1 "Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled
by, or under common control with, that Person. For
purposes of this definition, "control" (including with
correlative meanings, the terms "controlling,"
"controlled by," and "under common control with"), as
applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the
direction of the management and policies of that
Person, whether through the ownership of voting
securities or by contract or otherwise.
2.2 "Claims" means Reported Claims and Unreported Claims.
2.3 "Continental Expense" means the sum of Two Hundred
Thousand Dollars ($200,000) which the Trust shall pay
the Continental as a part of the Premium.
2.4 "Covered Obligations" means (i) the Claims and the
Liabilities calculated on, or attributable to, the
Claims; and (ii) the joint and several liability of
each insured of the Trust one to the other arising out
of the membership of the insureds in the Trust.
Covered Obligations shall not include (i) any dividends
payable to members of the Trust, (ii) any obligations
regarding commission payments related to insurance
issued by the Trust; (iii) obligations for premium
taxes attributable to insurance issued by the Trust; or
(iv) any assessments made against the Trust by the
Mississippi Workers' Compensation Self-Insurer Guaranty
Association.
2.5 "Effective Date" means 12:01 a.m., Central Standard
Time, January 1, 1997. This Agreement shall become
effective only upon the satisfaction of the conditions
precedent as set forth in Article 9 hereof.
2.6 "Experience Account" means accounting entries which
shall be created and maintained by Continental which
shall detail the amount of Reserves allocable to each
Fund Year.
2.7 "Fund Year" means an accounting year of the Trust. The
months composing each Fund Year of the Trust are
attached as Exhibit B.
2.8 "Liability" shall mean all liability, including but not
limited to, Loss Expenses incurred by Continental
related to the Covered Obligations, but not including
office expenses or salaries or other compensation and
expenses of employees of Continental or its Affiliates.
2.9 "Loss Expenses" shall mean expenditures by or on behalf
of Continental in the defense, investigation or
settlement of Claims and allocated to an individual
Claim or loss including investigation, appraisal,
adjustment, negotiation and legal expenses, court
costs, costs of award or judgment paid by or on behalf
of Continental, statutory penalties, prejudgment
interest and interest on any judgment or award, but not
including office expenses or salaries or other
compensation and expenses of employees of Continental
or its Affiliates.
2.10 "Person" means any individual, corporation,
partnership, joint venture, association, or other form
of organization, in each case whether or not having a
separate legal identity.
2.11 "Premium" means the Reserves and Continental Expense to
be paid to Continental in return for Continental's
assumption of the Covered Obligations.
2.12 "Reported Claims" means the claims made by persons
under the Policies, and all rights and obligations and
prerogatives associated therewith, including but not
limited to reserves, premiums paid or payable, unearned
premiums and all Liabilities associated therewith, as
set forth on Exhibit C attached hereto and made a part
hereof. Exhibit C will be amended from time to time by
Continental to reflect the filing of any claims on the
Policies issued by the Trust reported subsequent to the
date hereof which were categorized as Unreported Claims
as of the date hereof.
2.13 "Reserves" means as of the date hereof the sum of Two
Million Two Hundred Thousand Dollars ($2,200,000), less
claims amounts which have been paid between the
Effective Date and the date the Premium is paid to
Continental by the Trust, which sum the Trust will
transfer to Continental as a part of the Premium for
payment of Covered Obligations. The Reserves shall
consist of funds allocated specifically to Reported
Claims as well as funds allocated to Unreported Claims.
2.14 "Stoneville Reinsurance" means the cession by
Continental to Stoneville of the Covered Obligations
for any Fund Year for the provision of reinsurance by
Stoneville to Continental for such Covered Obligations
in accordance with a Reinsurance Agreement acceptable
to Continental with such acceptability criteria to be
based on customary industry practice and with such
acceptance by Continental not to be unreasonably
withheld.
2.15 "Unreported Claims" means claims which may have been
incurred but not yet reported under workers'
compensation insurance Policies issued by the Trust and
all rights and obligations and prerogatives associated
therewith, including but not limited to reserves,
premiums paid or payable, unearned premiums and all
liabilities associated therewith.
ARTICLE 3
CESSION AND ASSUMPTION REINSURANCE
3.1 Cession and Assumption. As of the Effective Date, the
Trust shall cede to Continental, and as of such date
Continental shall assume as direct obligations, 100% of
the Covered Obligations.
3.2 Subrogation. Continental shall accept and assume the
Covered Obligations and shall have the benefit of any
and all rights of action, defenses, recoupments,
setoffs and counterclaims to which the Trust would be
entitled with respect to such Covered Obligations, it
being expressly understood and agreed by the parties
hereto that no such defenses, recoupments, setoffs or
counterclaims are waived by the execution of this
Agreement or the consummation of the transactions
contemplated hereunder and that, on and after the
Effective Date, Continental shall be fully subrogated
to all such defenses, recoupments, setoffs and
counterclaims.
3.3 Liability. The liability of Continental under this
Agreement begins on the Effective Date.
ARTICLE 4
ASSUMPTION CERTIFICATE
4.1 Certificate. Within thirty (30) days after the
Effective Date, the Trust shall issue and send by
first-class mail an Assumption Certificate in the form
as set forth on Exhibit D to each of the Trust's
insureds as shown on the books and records of the
Trust.
ARTICLE 5
USE OF RESERVES AND ADDITIONAL COLLATERAL
5.1 Additional Collateral. Stoneville shall provide to
Continental collateral in the amount of One Million
Five Hundred Thousand Dollars ($1,500,000) for payment
of the Covered Obligations (the "Additional
Collateral"). Stoneville, at its option, may provide
the Additional Collateral either through (i) an
irrevocable letter of credit with a financial
institution acceptable to Continental in a form
acceptable to Continental; or (ii) cash or securities
placed in a trust account, the terms and Trustee of
which are acceptable to Continental and Stoneville.
5.2 Use. The Reserves and Additional Collateral shall be
used by Continental only for payment of Covered
Obligations.
ARTICLE 6
PREMIUM
6.1 Payment. The Trust shall pay to Continental the
Premium which shall be the sole payment due from the
Trust for Continental's assumption of the Covered
Obligations.
ARTICLE 7
CLAIMS AND ADMINISTRATION
7.1 Third Party Claims Administrator. The parties agree
that Sedgwick James of Mississippi, Inc. ("Sedgwick")
shall be appointed as third party claims administrator
to handle Claims arising out of the Covered
Obligations. The Trust shall have Sedgwick perform
such administration at no cost to Continental pursuant
to that certain Continuation of Service Agreement dated
as of May 9, 1996 (the "Service Agreement") between the
Trust and Sedgwick which rights to administration at no
cost shall be assigned to Continental. The Trust
agrees to transfer to Continental all files related to
the Covered Obligations and to cooperate with
Continental with respect to servicing of the Claims.
7.2 Claims. Continental will notify Sedgwick and
Stoneville promptly after the receipt of any
information on a Claim involving the Covered
Obligations. Continental will furnish to Sedgwick and
Stoneville copies of notifications and claim papers as
soon as possible following Continental's receipt of
such documents. Continental agrees to allow Stoneville
to advise and assist Continental in determination of
Claims and the best procedure to follow with respect to
a Claim of doubtful validity and decisions on handling
such claims shall be made jointly. Payments of Claims
shall be made directly to the beneficiary. Stoneville
may, but is not required to, participate with
Continental to contest, compromise, or litigate a
Claim, with such participation to be at Stoneville's
expense.
ARTICLE 8
STONEVILLE REINSURANCE
8.1 Reinsurance. Stoneville shall have the right to cause
Continental to cede to Stoneville all or a portion of
the Covered Obligations for any Fund Year for the
purpose of providing reinsurance to Continental
pursuant to Stoneville Reinsurance. No consideration
shall be paid or due to or from either Stoneville or
Continental for Stoneville Reinsurance.
8.2 Notice of Reinsurance. Stoneville may exercise
Stoneville Reinsurance on January 1 or July 1 of any
year beginning with July 1, 1997, by providing sixty
(60) days' written notice to Continental prior to such
exercise date. Such notice shall contain the amount of
reinsurance Stoneville desires to provide and the
portions of the Covered Obligations it desires to
reinsure. Prior to the effective date of any
Stoneville Reinsurance, Continental and Stoneville
shall enter into a Reinsurance Agreement in a form
acceptable to Continental with such acceptability
criteria to be based on customary industry practice and
with such acceptance by Continental not to be
unreasonably withheld.
8.3 Effect of Stoneville Reinsurance on Reserves.
(1) Upon Stoneville Reinsurance: (i) Continental shall
transfer to Stoneville the amounts of Reserves entered in the
Experience Account which are allocable to the Covered Obligations
for the Fund Year which Stoneville desires to reinsure; and (ii)
the Additional Collateral shall be reduced by a percent equal to
the quotient of the following formula: reduction of Reserves in
Experience Accounts attributable to Stoneville Reinsurance divided by
amount of Reserves in all Experience Accounts for all Fund Years
immediately prior to Stoneville Reinsurance.
(2) Upon Stoneville Reinsurance, Stoneville agrees to place
the amounts of Reserves in the Experience Account for the Fund
Year incident to such Stoneville Reinsurance received from
Continental in a trust account with a financial institution
acceptable to Continental and Stoneville with the terms and
conditions of such trust to comply with the law of Continental's
state of domicile such that Continental shall receive financial
statement credit for such reinsurance.
ARTICLE 9
STONEVILLE RECAPTURE
9.1 Stoneville Recapture.
(1) Stoneville shall have the right to cause Continental to
cede to Stoneville the (i) Reserves allocable to Reported Claims
which have been settled for less than the amount of Reserves
allocated to such Reported Claims ("Reported Claim Recapture");
and (ii) Reserves which are allocated for Unreported Claims and
other contingencies which, in the opinion of Wexford Actuarial &
Consulting Services or such other consulting actuarial firm
mutually agreed to by Stoneville and Continental (the "Actuary"),
are not actuarially needed ("IBNR Recapture"). The Reported
Claim Recapture and IBNR Recapture shall be collectively referred
to as "Stoneville Recapture." Actuarial expenses incurred in
connection with IBNR Recapture with respect to this Section
8.1(a) shall be paid by Stoneville. No consideration shall be
paid or due to or from either Stoneville or Continental for
Stoneville Recapture.
(2) In the event Continental disagrees with the actuarial
review of IBNR Recapture as set forth in Section 8.1(a),
Continental, at its sole expense, may also appoint an actuary or
appraiser to investigate, determine and capitalize Reserves
allocated to Unreported Claims. If both parties then agree,
Continental shall release to Stoneville the amount of Reserves
not actuarially needed.
(3) If the parties, subsequent to the procedures in
Sections 8.1(a) and 8.1(b) above, fail to agree on the amount of
Reserves not actuarially needed regarding IBNR Recapture, the
parties agree to settle any difference using a panel of three
actuaries, one to be chosen by each party and the third by the
two so chosen. If either party refused or neglects to appoint an
actuary within thirty days, the other party may appoint two
actuaries. If the two actuaries fail to agree on the selection
of a third actuary within thirty days of their appointment, each
of them shall name two, of whom the other shall decline one and
the decision shall be made by drawing lots. All the actuaries
shall be regularly engaged in the valuation of insurance or
reinsurance claims and shall be Fellows of the Casualty Actuarial
Society or of the American Academy of Actuaries. All of the
actuaries shall be disinterested, not under the control of either
party to this Agreement, nor have any conflict of interest. Each
party shall submit its case to its actuary within thirty days of
the appointment of the third actuary. The decision in writing of
any two actuaries, when filed with the parties hereto, shall be
final and binding on both parties. The expense of the actuaries
shall be equally divided between the two parties.
9.2 Notice of Recapture. Stoneville may exercise
Stoneville Recapture on January 1 or July 1 of any year
beginning with July 1, 1997 by providing sixty (60)
days' written notice to Continental prior to such
exercise date. In the event of a Reported Claim
Recapture, such notice shall identify the Reported
Claims subject to the Stoneville Recapture and the
amount of Reserves allocable thereto to be recaptured.
In the event of an IBNR Recapture, the notice shall
state the amount of Reserves to be recaptured and
include a copy of the Actuary's report analyzing such
IBNR Recapture.
9.3 Effect of Stoneville Recapture on Reserves. Upon
Stoneville Recapture (i) the Reserves shall be lessened
by the amount of Stoneville Recapture; and (ii) the
Additional Collateral shall be reduced by a percent
equal to the quotient of the following formula:
reduction in Reserves attributable to Stoneville
Recapture divided by amount of all Reserves immediately prior to
Stoneville Recapture.
ARTICLE 10
CONDITIONS PRECEDENT
10.1 Conditions. This Agreement shall become effective upon
satisfaction of the following conditions: (i) the
rights to no cost administration of the Claims arising
out of the Covered Obligations under the Service
Agreement have been assigned to Continental; and (ii)
payment to Continental of the Premium and the funding
of the Additional Collateral.
ARTICLE 11
TERM
11.1 Term. Subject to the satisfaction of the conditions
precedent as set forth in Article 9 hereof, this
Agreement shall commence as of the Effective Date. In
the event that the conditions precedent set forth in
Article 9 have not been satisfied or waived by all
parties prior to December 31, 1997, this Agreement
shall terminate with no further obligation of any party
to the other.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
12.1 Continental Representations.
(1) Continental warrants that it is a corporation duly
organized as a capital stock insurance company, validly existing
and in good standing under the laws of the State of Illinois with
the power and authority to conduct the business in which it is
engaged, and has complete and unrestricted power to enter into
and consummate this Agreement. Continental has full power and
authority to enter into this Agreement and carry out the
transactions contemplated hereby and all necessary corporate
action has been taken by Continental to authorize the execution
and delivery of this Agreement and the performance of the
transactions contemplated hereby.
(2) Continental has all licenses, permits and registrations
necessary under the laws of State of Mississippi to perform the
transactions contemplated herein and is and shall remain in
compliance with all federal and state laws, regulations, and
policies pertaining to the provision of reinsurance and there are
no outstanding, pending or threatened orders, writs, injunctions,
or decrees of any court, governmental agency, or other tribunal
affecting the ability of Continental to enter into this Agreement
or provide the services described herein or relating to the
solvency of Continental.
12.2 Trust Representations.
(1) The Trust warrants that it is a duly organized
Mississippi workers' compensation self insurance trust, validly
existing and in good standing under the laws of the State of
Mississippi with the power and authority to conduct the business
in which it is engaged, and has complete and unrestricted power
to enter into and consummate this Agreement. The Trust has full
power and authority to enter into this Agreement and carry out
the transactions contemplated hereby and all necessary trust
action has been taken by the Trust to authorize the execution and
delivery of this Agreement and the performance of the
transactions contemplated hereby.
(2) The Trust has all licenses, permits and registrations
necessary under the laws of State of Mississippi to perform the
transactions contemplated herein and there are no outstanding,
pending or threatened orders, writs, injunctions, or decrees of
any court, governmental agency, or other tribunal affecting the
ability of the Trust to enter into this Agreement or provide the
services described herein or relating to the solvency of the
Trust. The fair market value of the Trust's assets exceeds the
Trust's liabilities, and the Trust is currently paying its debts
when due. The Trust is not a party to any insolvency or
bankruptcy proceeding, nor is currently making an arrangement for
the benefit of creditors.
12.3 Stoneville Representations.
(1) Stoneville warrants that it is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Mississippi with the power and authority to
conduct the business in which it is engaged, and has complete and
unrestricted power to enter into this Agreement. All necessary
corporate action has been taken by Stoneville to authorize the
execution and delivery of this Agreement.
(2) There are no outstanding, pending or threatened orders,
writs, injunctions, or decrees of any court, governmental agency,
or other tribunal affecting the ability of Stoneville to enter
into this Agreement. Prior to Stoneville Reinsurance, Stoneville
shall be licensed as an insurance company qualified to write
workers' compensation insurance in the State of Mississippi.
12.4 Information. To the best of their respective
knowledge, the Trust and Stoneville warrant that all
information provided by the Trust and Stoneville to
Continental in connection with this Agreement,
including financial and actuarial statements, is
accurate and complete.
ARTICLE 13
MISCELLANEOUS
13.1 Notices. Any notices required or permitted to be given
hereunder shall be deemed to be given if delivered by
hand or if mailed by certified mail, postage prepaid,
return receipt requested or by postal or a commercial
express document delivery service which issues an
individual delivery or receipt, or by facsimile with
reasonable evidence of receipt, to the following
addresses:
If to Continental: Continental Casualty Company
180 Maiden Lane
New York, New York 10038
Attn: Scott Keller
Facsimile: (212) 440-3476
with copy to:
Continental Casualty Company
CNA Plaza
Chicago, Illinois 60685
Attn: Dennis Norton, Esq.
Facsimile: (312) 822-1186
If to Trust: Delta Agricultural and
Industrial Trust
633 North State Street,
Suite 200
Jackson, Mississippi 39202
Attn: Harry Vickery
Facsimile: (601) 355-7822
If to Stoneville: Stoneville Insurance Company
633 North State Street,
Suite 200
Jackson, Mississippi 39202
Attn: Harry Vickery
Facsimile: (601) 355-7822
13.2 Expenses. All expenses of the preparation of this
Agreement shall be borne by the respective parties
incurring such expense.
13.3 Entire Agreement. This Agreement and the Exhibits
delivered pursuant hereto, constitute the entire
contract between the parties hereto pertaining to the
subject matter hereof and supersede all prior and
contemporaneous agreements, understandings,
negotiations and discussions, whether written or oral,
of the parties.
13.4 Governing Law. The validity and construction of this
Agreement shall be governed by the laws of the State of
Mississippi.
13.5 Section Headings. The section headings are for
reference only and shall not limit or control the
meaning of any provision of this Agreement.
13.6 Waiver. No delay or omission on the part of any party
hereto in exercising any right hereunder shall operate
as a waiver of such right or any other right under this
Agreement.
13.7 Amendments. This Agreement may be amended, but only in
writing, signed by the parties hereto.
13.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an
original, but all of which together shall compromise
one and the same instrument.
13.9 Attorneys' Fees. If legal action is commenced to
enforce this Agreement, the prevailing party in such
action shall be entitled to recover its costs and
reasonable attorneys' fees in addition to any other
relief granted.
13.10 Successor and Assigns. Continental shall not assign
its rights hereunder or transfer or otherwise reinsure the
Covered Obligations to or with other persons without the express
written consent of Stoneville. Continental hereby acknowledges
and agrees that it is aware of the Trust's intent to liquidate,
and that upon such liquidation, Continental understands and
agrees that the Trust's rights hereunder shall automatically be
assigned to Stoneville with no further action by any party
required, and Stoneville hereby accepts such assignment.
13.11 Arbitration. In the event of any dispute hereunder,
such dispute shall be settled by arbitration in accordance with
the commercial arbitration rules of the American Arbitration
Association then in effect. Upon the occurrence of a dispute,
the parties shall choose a panel of three arbitrators in the
following manner: one of the arbitrators shall be appointed by
Stoneville, the second by Continental and the third is to be
selected by those two arbitrators before the beginning of the
arbitration. Should one of the parties decline to appoint an
arbitrator for a period of thirty (30) days after being requested
to do so by the other party, or should the two arbitrators be
unable to agree upon the choice of a third, within thirty (30)
days after their appointment, the appointment shall be made by
the American Arbitration Association. The arbitrators shall
decide by a majority of votes and the award of such arbitrators
shall be final and may be entered in any court of competent
jurisdiction. All costs and expenses of such arbitration,
including legal expenses, shall be paid solely by the party
against whom the award is directed, or as directed by the
arbitrators. The arbitration proceedings shall convene and be
held in the City of Jackson, Mississippi, or such other city
mutually agreed upon by the parties. All such arbitrators shall
be distinterested, not under the control of any party to this
Agreement, and shall not have any conflict of interest.
The parties have duly executed this Agreement as of the day
and year first above written.
CONTINENTAL: TRUST:
CONTINENTAL CASUALTY COMPANY DELTA AGRICULTURAL AND INDUSTRIAL
TRUST
By: /s/ Scott Keller By: /s/ Harry E. Vickery
Name/Title: Vice President Name/Title:Administrator
STONEVILLE:
STONEVILLE INSURANCE COMPANY
By:/s/ Harry E. Vickery
Name/Title:/s/ President
<PAGE>
EXHIBIT A
LIST OF POLICIES
[Exhibit not included]
<PAGE>
EXHIBIT B
LIST OF FUND YEARS
8/1/91 - 7/31/92
8/1/92 - 7/31/93
8/1/93 - 12/31/94
1/1/95 - 12/31/95
1/1/96 - 12/31/96
<PAGE>
EXHIBIT C
LIST OF REPORTED CLAIMS
[Exhibit not included]
<PAGE>
EXHIBIT D
ASSUMPTION CERTIFICATE
[Letterhead of Delta Agricultural and Industrial Trust]
, 1997
Policy No.:
Dear Insured:
Continental Casualty Company ("Continental"), pursuant to
that certain Assumption Reinsurance Agreement between
Continental, Delta Agricultural and Industrial Trust (the
"Trust") and Stoneville Insurance Company dated as of March 20,
1997, has assumed as of 12:01 a.m., Central Standard Time,
January 1, 1997, the contractual liability of the Trust under the
worker's compensation insurance policy showing you as insured and
the joint and several liability of each insured of the Trust one
to the other arising out of the membership of the insureds in the
Trust.
Continental is a member of the CNA Insurance Group. The CNA
Insurance Group has a rating by the A.M. Best Company of "A"
(Excellent). Continental will have direct responsibility to you
for the payment of all claims and policy obligations under the
workers' compensation insurance coverage previously provided to
you by the Trust.
To confirm Continental's (i) assumption of the contractual
liability of the Trust for insurance obligations; and (ii)
assumption of and relief from the joint and several liability of
the insureds as set forth above, please sign below and return
this letter to the Trust in the enclosed prepaid, pre-addressed
envelope.
If you have any questions, please contact the undersigned at
(601) 352-7817.
DELTA AGRICULTURAL AND
INDUSTRIAL TRUST
Harry E. Vickery, Administrator
TO CONFIRM ASSUMPTION BY CONTINENTAL,
THE INSURED SHOULD SIGN BELOW:
ACCEPTED AND AGREED:
Name of Insured
Authorized Signature
Date:
EXHIBIT 10.2
INSURANCE PLACEMENT AGREEMENT DATED AS OF
JUNE 10, 1996 BETWEEN THE TRUST, TIG AND
AND TIG REINSURANCE COMPANY
<PAGE>
INSURANCE PLACEMENT AGREEMENT
THIS INSURANCE PLACEMENT AGREEMENT (the "Agreement") is made
as of this 10th day of June, 1996, by and between Delta
Agricultural and Industrial Trust, or its assignee or successor
in interest (collectively, the "Trust"), TIG Insurance Company
("TIG") and TIG Reinsurance Company ("TIG Re").
WITNESSETH
WHEREAS, the Trust is a self-insured workers' compensation
trust and TIG and TIG Re are capital stock insurance companies;
and
WHEREAS, the Trust desires to refer its workers'
compensation clients to TIG, and TIG desires to write such
insurance as hereinafter set forth; and
WHEREAS, TIG Re desires to reinsure the insurance written by
TIG and may become a reinsured of a commercial insurance company
to be organized by the Trust.
NOW, THEREFORE, in consideration of the foregoing premises
and the covenants, promises, and agreements set forth herein,
TIG, TIG Re and the Trust agree as follows:
ARTICLE 14
DEFINITIONS
14.1 "Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled
by, or under common control with, that Person. For
purposes of this definition, "control" (including
with correlative meanings, the terms "controlling,"
"controlled by," and "under common control with"), as
applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the
direction of the management and policies of that
Person, whether through the ownership of voting
securities or by contract or otherwise.
14.2 "Effective Date" means 12:01 a.m., Central Standard
Time, July 1, 1996.
14.3 "Existing Clients" means Persons covered by workers'
compensation policies written by the Trust prior to
the Effective Date which shall be offered workers'
compensation insurance through TIG after the
termination of their policies by the Trust as of the
Effective Date.
14.4 "Person" means any individual, corporation,
partnership, joint venture, association, or other
form of organization, in each case whether or not
having a separate legal identity.
14.5 "Potential Clients" means those Persons which request
or are offered workers' compensation insurance through
the Trust or an agent or representative thereof, but
not including Existing Clients.
14.6 "Program" shall mean the marketing and provision of
TIG's workers' compensation insurance to Existing
Clients and Potential Clients in accordance with the
terms of this Agreement.
14.7 "Program Business" shall mean policies of insurance
written by TIG covering Program Clients.
14.8 "Program Clients" means all (i) Existing Clients who
are provided with workers' compensation insurance by
TIG; (ii) and Potential Clients who are provided with
workers' compensation insurance products by TIG under
this Agreement.
14.9 "Reinsurance" shall mean the entering into of a
reinsurance relationship between the Trust through a
commercial insurance company formed by or on behalf
of the Trust and TIG or, at TIG's sole option, TIG Re,
such that the Trust, through the commercial insurance
company, shall act as a reinsurer of Program
Business.
14.10 "Trust" means the Delta Agricultural and Industrial
Trust, or its assignee or successor in interest. As
used herein, the term "Trust" shall also mean a
commercial insurance company formed by or on behalf
of the Trust where the use of the term in such
context is appropriate.
ARTICLE 15
PLACEMENT OF INSURANCE
15.1 Existing Clients. As of the Effective Date, the
Trust shall terminate its existing workers'
compensation policies as to the Existing Clients, and
TIG shall offer to all Existing Clients workers'
compensation insurance written by TIG. The parties
acknowledge that the Existing Clients are under no
obligation to accept workers' compensation insurance
coverage from TIG, but TIG is obligated to offer such
coverage to all Existing Clients.
15.2 Potential Clients. From and after the Effective
Date, TIG shall make its policies of workers'
compensation insurance available to all Potential
Clients in accordance with TIG's underwriting criteria
for the Program as attached hereto as Exhibit A and
any amendments thereto (the "Underwriting Criteria").
TIG may change the Underwriting Criteria by providing
notice thereof to the Trust at least sixty (60) days
prior to the date the revised Underwriting Criteria
are to become effective.
15.3 Premium Rates. From and after the Effective Date,
premium rates charged by TIG to Program Clients shall
not exceed those premium rates filed by TIG which
were approved by the Commissioner of Insurance of the
State of Mississippi on April 11, 1996, to be
effective June 1, 1996 (the "Rates"). TIG may change
the Rates by providing notice thereof to the Trust at
least sixty (60) days prior to the date the revised
Rates are to become effective.
15.4 Renewals. The renewal by TIG of any policy of
workers' compensation insurance issued by TIG to a
Program Client shall be subject to TIG's Underwriting
Criteria for the Program and TIG shall not be
obligated to renew any policy of workers' compensation
insurance issued to a Program Client by TIG that does
not satisfy the Underwriting Criteria.
ARTICLE 16
LIABILITY
16.1 Duration. The duties and obligations of TIG
hereunder with regard to the Program Business shall
begin on the Effective Date.
16.2 Reciprocal Indemnity.
(1) TIG shall not be responsible for any act or omission
of the Trust occurring prior to the Effective Date with respect
to workers' compensation policies issued by the Trust prior to
the Effective Date and the Trust agrees to save, defend,
indemnify and hold harmless TIG (including payment of reasonable
attorney's fees) from any and all suits, claims, hearings,
actions, damages of any kind, liability, fines or penalties
arising out of any act or omission with regard to such workers'
compensation policies.
(2) The Trust shall not be responsible for any act or
omission of TIG occurring on or after the Effective Date with
respect to workers' compensation policies issued by TIG on or
after the Effective Date and TIG agrees to save, defend,
indemnify and hold harmless the Trust (including payment of
reasonable attorney's fees) from any and all suits, claims,
hearings, actions, damages of any kind, liability, fines or
penalties arising out of any act or omission with regard to such
workers' compensation policies.
ARTICLE 17
GENERAL AGENT
17.1 Appointment and Duties. TIG shall appoint
Mississippi Risk Management, Inc. as its general
agent (the "GA") to oversee the sales and marketing
of the Program on behalf of TIG. The duties of the
GA shall be set forth in a separate agreement;
provided, however, that such duties shall include the
authority of the GA to solicit, underwrite, quote,
bind and rate policies of workers' compensation on
TIG's behalf in accordance with the Underwriting
Criteria. Mississippi Risk Management, Inc. shall
continue as the GA so long as it is in compliance
with (i) all applicable laws and regulations of the
states in which the GA conducts business on behalf of
TIG with regard to the Program Business; and (ii) the
terms of the agreement to be entered into between TIG
and the GA.
17.2 Approval. The Trust shall have the right to approve
in advance the GA as well as any subsequent GA
appointed by TIG in substitution for the GA. The
Trust shall have the right to review and approve the
agreement between the GA and TIG and any amendments
or revisions thereto prior to the GA and TIG entering
into such agreement and any amendments or revisions
thereto.
ARTICLE 18
REPORTS AND INFORMATION
18.1 Reports. TIG shall provide to the Trust upon request
all reports and information produced by or on behalf
of TIG dealing with the Program, including but not
limited to reports of third party administrators
retained by TIG.
18.2 Access. Upon ten (10) days prior written notice, the
Trust shall at all times have full and free access
during business hours at the office of TIG to all
books, records and files of TIG relating to Program
Business and the transactions covered by this
Agreement.
ARTICLE 19
ADMINISTRATION
19.1 Administration. From and after the Effective Date,
TIG shall have the sole responsibility and expense
for all matters relating to the administration of
Program Business, including, without limitation,
defense, settlement, and payment of all claims
arising under Program Business. TIG shall pay all
state taxes, licenses, fees and assessments which may
be or become due in connection with the premiums
received by TIG in connection with Program Business
and the operations of TIG as an insurer writing
workers' compensation insurance.
19.2 Third Party Claims Administrator
(1) To assist TIG in the administration of Program
Business as set forth in Section 6.1 above, the parties agree
that Sedgwick James of Mississippi, Inc. shall be appointed as
the third party claims administrator of the Program Business (the
"Administrator") on such terms and conditions as TIG and the
Administrator shall agree upon, subject to the approval of the
Trust. Sedgwick James of Mississippi, Inc. shall continue as the
Program Administrator so long as it is in compliance with (i) all
applicable laws and regulations of the states in which the
Program Administrator conducts operations on behalf of TIG with
regard to the Program Business; and (ii) the terms of the
agreement to be entered into between TIG and the Program
Administrator.
(2) Payment for all services rendered by the
Administrator and those expenses of the Program to be paid by the
Administrator shall be made in accordance with the terms of the
agreement to be entered into between the Administrator and TIG.
ARTICLE 20
REPRESENTATIONS AND WARRANTIES
20.1 Power and Authority. TIG and TIG Re warrant that
they are corporations duly organized as capital stock
insurance companies, validly existing and in good
standing under, respectively, the laws of the States
of California and Connecticut with power and
authority to conduct the business in which they are
engaged, and have complete and unrestricted power to
enter into and consummate this Agreement. TIG and
TIG Re have full power and authority to enter into
this Agreement and carry out the transactions
contemplated hereby and all the necessary corporate
action has been taken by TIG and TIG Re to authorize
the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby.
20.2 Compliance.
(a) TIG has all licenses, permits and registrations
necessary under the laws of State of Mississippi to
write workers' compensation and property and casualty
insurance and perform the transactions contemplated
hereby and is and shall remain in compliance with all
federal and state laws, regulations, and policies
pertaining to the provision of such insurance and
there are no outstanding, pending or threatened
orders, writs, injunctions, or decrees of any court,
governmental agency, or other tribunal affecting the
ability of TIG to enter into this Agreement or
provide insurance in accordance with this Agreement
or relating to the solvency of TIG.
(b) TIG Re has all licenses, permits and registrations
necessary under the laws of the State of Mississippi
to reinsure workers' compensation and property and
casualty insurance and perform the transactions
contemplated hereby and is and shall remain in
compliance with all federal and state laws,
regulations, and policies pertaining to the provision
of such reinsurance and there are no outstanding,
pending or threatened orders, writs, injunctions, or
decrees of any court, governmental agency, or other
tribunal affecting the ability of TIG Re to enter
into this Agreement or provide reinsurance in
accordance with this Agreement or relating to the
solvency of TIG Re.
ARTICLE 21
TERM
21.1 Term. This Agreement shall commence as of the date
hereof, and continue until December 31, 1997 (the
"Initial Term") and shall be automatically renewed for
one year periods thereafter (an "Extension Term")
unless either party shall have given the other notice
of its intent to terminate this Agreement at least
ninety (90) days in advance of the end of the Initial
Term or any Extension Term.
21.2 Automatic Termination. Notwithstanding Section 8.1
hereof, this Agreement shall automatically terminate
with no notice required, upon (i) the violation by
TIG or TIG Re of their respective representations and
warranties set forth herein and TIG or TIG Re fails
to cure such violation within ten (10) days of
receipt of notice of such violation; or (ii) the
insolvency, rehabilitation, bankruptcy, receivership,
assignment for the benefit of the creditors or
similar action of TIG, TIG Re or any Affiliate
thereof or the commencement or filing of any such
proceedings by or against TIG, TIG Re or any
Affiliate thereof.
21.3 Termination on Thirty (30) Days Notice.
Notwithstanding Section 8.1 hereof, this Agreement
may be terminated by (i) TIG upon thirty (30) days
notice to the Trust in the event TIG determines that
due to any referendum, judicial, legislative or
regulatory acts, the Program Business is not
economically feasible; or (ii) the Trust upon thirty
(30) days notice to TIG in the event that the Trust
determines that revisions to the Rates charged by TIG
to Program Clients as set forth in Section 2.3 or
revisions to the Underwriting Criteria as set forth
in Section 2.2 will result in the Program not being a
competitive provider of workers' compensation
insurance to Program Clients.
21.4 Acts Subsequent to Termination. In the event of the
termination of this Agreement by TIG or by the Trust
pursuant to Section 8.3(ii) above, the Program
Business shall be transferred by TIG to the Trust or
to the Trust's designee upon the termination of the
policies of workers' compensation insurance issued to
the Program Clients. The transfer of such business
by TIG to the Trust or its designee shall be in
accordance with and subject to the laws governing the
cancellation and nonrenewal of policies of workers'
compensation insurance in the states in which the
policies were issued to the Program Clients.
ARTICLE 22
REINSURANCE
22.1 Reinsurance. Subject to Section 9.2 hereof, if at
any time during or after the term of this Agreement
the Trust, through a commercial insurance company
formed by the Trust, elects to provide Reinsurance to
TIG or, at TIG's sole option, TIG Re, with respect to
the Program Business, the parties agree to negotiate
in good faith to enter into an agreement for
Reinsurance by the Trust through such commercial
insurance company which Reinsurance, at the Trust's
option, may be up to the limit allowable under
applicable law for it to reinsure and up to the limit
allowable under applicable law for TIG, or TIG Re, to
reinsure.
22.2 Cooperation. TIG and TIG Re agree to fully
cooperate with the Trust in establishing a
reinsurance relationship between TIG or, at TIG's sole
option, TIG Re and any commercial insurance company
organized by the Trust to reinsure the Program
Business. As a condition precedent to TIG or TIG Re
entering into such reinsurance relationship, the
commercial insurance company organized by the Trust
must be authorized or accredited to reinsure the
Program Business in accordance with the insurance
laws and regulations of: (i) the states in which the
Program Business is written; and (ii) TIG's or, as the
case may be, TIG Re's state of domicile. In the event
the commercial insurance company is not so authorized
or accredited in any of the states in which the
Program Business is written and/or in TIG's or TIG
Re's state of domicile, the commercial insurance
company shall comply with such requirements and shall
provide such security to TIG or TIG Re as may be
reasonably necessary in order to permit TIG or TIG Re
to take statutory statement credit for the
reinsurance provided by the commercial insurance
company.
ARTICLE 23
MISCELLANEOUS
23.1 Noncompetition.
(1) During the Term of this Agreement, TIG and its
Affiliates shall not, directly or indirectly, provide workers'
compensation insurance to Persons in the agricultural sector in
Mississippi except in accordance with the terms of this
Agreement. The term "agricultural sector" shall mean those
Persons whose governing class code of business falls within the
class code and classification description in Exhibit B, attached
hereto.
(2) The provisions of paragraph (a), above, shall
automatically terminate: (i) upon the termination of this
Agreement; or (ii) at the end of the Initial Term or at the end
of any subsequent Extension Term in the event the gross written
premium with regard to the Program Business is less than
$6,000,000 at the end of the Initial Term or at the end of any
subsequent Extension Term.
(3) The provisions of Section 10.1(a) shall not apply to
workers compensation insurance provided by TIG or its Affiliates
to Persons in the agricultural sector in Mississippi that is
produced through Ross & Yerger, Inc. or Sedgwick James of
Atlanta, Inc. During the term of this Agreement, TIG and its
Affiliates agree that they will not accept submissions from Ross
& Yerger, Inc. or Sedgwick James of Atlanta, Inc. to provide
workers compensation insurance to Persons in the agricultural
sector in Mississippi that are Program Clients unless the
provisions of paragraph (a), above, automatically terminate
pursuant to paragraph (b)(ii), above.
23.2 Nondisclosure. Except as may be required by law or
any governmental agency, during the Term of this
Agreement and at all times thereafter, TIG and its
Affiliates shall not directly or indirectly reveal,
report, publish, disclose or transfer any
Confidential Information to any Person or utilize any
Confidential Information for TIG's and/or its
Affiliates own benefit or for the benefit of any
other Person. As used herein, the term "Confidential
Information" means documentary information and all
information, ideas, analyses and compilations
provided in writing to TIG by the Trust during the
course of this Agreement regarding the Trust and/or
the business of the Trust including customer lists,
marketing plans and techniques, products and
services, prices, sales, strategic plans and
finances. As used herein, the term "Confidential
Information" shall not include any information: (i)
which is already known to TIG and/or its Affiliates;
or (ii) which is independently developed by TIG
and/or its Affiliates; or (iii) which is or becomes
available to the public through no breach of this
Agreement by TIG.
23.3 Notices. Any notices required or permitted to be
given hereunder shall be deemed to be given if
delivered by hand or if mailed by certified mail,
postage prepaid, return receipt requested or by
postal or a commercial express document delivery
service which issues an individual delivery or
receipt, or by facsimile with reasonable evidence of
receipt, to the following addresses:
If to TIG: TIG Insurance Company
c/o TIG Reinsurance Company
300 First Stamford Place
Stamford, Connecticut 06902
Attn: John Coppinger
Facsimile: 203-356-0196
If to TIG Re: TIG Reinsurance Company
300 First Stamford Place
Stamford, Connecticut 06902
Attn: John Coppinger
Facsimile: 203-356-0196
If to Trust: Delta Agricultural and Industrial Trust
P. O. Box 5037
Greenville, Mississippi 38704-5037
Attn: Harry Vickery
Facsimile: 601-378-3366
23.4 Expenses. All expenses of the preparation of this
Agreement shall be borne by the respective parties
incurring such expense.
23.5 Entire Agreement. This Agreement constitutes the
entire contract between the parties hereto pertaining
to the subject matter hereof and supersedes all prior
and contemporaneous agreements, understandings,
negotiations and discussions, whether written or
oral, of the parties.
23.6 Governing Law. The validity and construction of this
Agreement shall be governed by the laws of the State
of Mississippi.
23.7 Section Headings. The section headings are for
reference only and shall not limit or control the
meaning of any provision of this Agreement.
23.8 Waiver. No delay or omission on the part of any
party hereto in exercising any right hereunder shall
operate as a waiver of such right or any other right
under this Agreement.
23.9 Amendments. This Agreement may be amended, but only
in writing, signed by the parties hereto.
23.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an
original, but all of which together shall compromise
one and the same instrument.
23.11 Attorneys' Fees. If legal action is commenced to
enforce this Agreement, the prevailing party in such
action shall be entitled to recover its costs and
reasonable attorneys' fees in addition to any other
relief granted.
23.12 Successor and Assigns. TIG may assign this Agreement
and its rights hereunder to an Affiliate of equal or
better rating by A. M. Best subject to the express
written consent of the Trust which consent shall not
be unreasonably withheld. TIG and TIG Re hereby
acknowledge and agree that they are aware of the
Trust's intent to form a commercial insurance company
and that the Trust may assign this Agreement and the
rights hereunder to such entity without the consent
of TIG or TIG Re.
23.13 Arbitration. In the event of any dispute hereunder,
such dispute shall be settled by arbitration in
accordance with the commercial arbitration rules of
the American Arbitration Association then in effect.
Upon the occurrence of a dispute, the parties shall
choose a panel of three arbitrators in the following
manner: one of the arbitrators shall be appointed by
the Trust, the second by TIG and TIG Re and the third
is to be selected by those two arbitrators before the
beginning of the arbitration. Should one of the
parties decline to appoint an arbitrator for a period
of thirty (30) days after being requested to do so by
the other party, or should the two arbitrators be
unable to agree upon the choice of a third, within
thirty (30) days after their appointment, the
appointment shall be made by the American Arbitration
Association. The arbitrators shall decide by a
majority of votes and the award of such arbitrators
shall be final and may be entered in any court of
competent jurisdiction. All costs and expenses of
such arbitration, including legal expenses, shall be
paid solely by the party against whom the award is
directed, or as directed by the arbitrators. The
arbitration proceedings shall convene and be held in
the City of Dallas, Texas, or such other city
mutually agreed upon by the parties.
WITNESSED WHEREFORE, the parties have duly executed this
Agreement as of the day and year first above written.
TRUST:
DELTA AGRICULTURAL AND INDUSTRIAL
TRUST
By:/s/ William F. Kennedy
TIG:
TIG INSURANCE COMPANY
By:/s/ J. Chase
TIG RE:
TIG REINSURANCE COMPANY
By:/s/John Coppinger
<PAGE>
EXHIBIT A
Underwriting Criteria
<PAGE>
EXHIBIT B
CODE CLASSIFICATION DESCRIPTION
0008 Farm: Gardening - Market or Truck - & Drivers
0016 Farm: Orchard & Drivers
0034 Farm: Poultry or Egg Producer & Drivers
0036 Farm: Dairy & Drivers
0037 Farm: Field Crops & Drivers
0042 Landscape Gardening & Drivers
0050 Farm Machinery Operation - by Contractor &
Drivers
0079 Farm: Berry or Vineyard & Drivers
0083 Farm: Cattle or Livestock Raising NOC & Drivers
0106 Tree Pruning, Spraying, Repairing, Trimming or
Fumigating
0169 Farm: Sheep Raising & Drivers
0170 Farm: Animal Raising & Drivers
0401 Cotton Gin Operation & Local Managers
6217 Excavation & Drivers
7409 Aircraft or Helicopter Operation - Aerial
Application, Seeding, Herding
8029 Vegetable Packing & Drivers
8279 Stable or Breeding Farm & Drivers
EXHIBIT 10.3
REPRESENTATIVE AGREEMENT DATED AS OF JULY 1, 1996
BETWEEN MISSISSIPPI RISK MANAGEMENT, INC. AND THE TRUST
<PAGE>
REPRESENTATIVE AGREEMENT
THIS REPRESENTATIVE AGREEMENT (the "Agreement") is made as
of this 1st day of July, 1996, to be effective as of Effective
Date (as defined below) by and between Delta Agricultural and
Industrial Trust or its assignee or successor in interest
(collectively, the "Trust") and Mississippi Risk Management, Inc.
("Representative").
WITNESSETH
WHEREAS, the Trust has entered into that certain Insurance
Placement Agreement (the "Placement Agreement") between the Trust
and TIG Insurance Company ("TIG") and TIG Reinsurance Company
("TIG Re") pursuant to which TIG agrees to provide workers'
compensation insurance pursuant to a program created by TIG and
the Trust; and
WHEREAS, Representative has entered into that certain
General Agency Agreement (the "General Agency Agreement ") with
TIG which appoints Representative as the managing general agent
for the sale of TIG's workers' compensation insurance; and
WHEREAS, the Trust desires that Representative act as its
representative to market TIG's workers' compensation insurance as
further set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises,
covenants, and agreements set forth herein, the parties agree as
follows:
ARTICLE 1
DEFINITIONS
1. "Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or
under common control with, that Person. For purposes of this
definition, "control" (including with correlative meanings, the
terms "controlling," "controlled by," and "under common control
with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
2. "Effective Date" means 12:01 a.m., Central Standard
Time, July 1, 1996.
3. "Existing Clients" means Persons covered by workers'
compensation policies written by the Trust prior to the Effective
Date which shall be offered workers' compensation insurance
through TIG after the termination of their policies by the Trust
as of the Effective Date.
4. "Person" means any individual, corporation,
partnership, joint venture, association, or other form of
organization, in each case whether or not having a separate legal
identity.
5. "Potential Clients" means those Persons which request
or are offered workers' compensation insurance coverage to or
through the Trust or Representative or an agent or representative
thereof, but not including Existing Clients.
6. "Program" shall mean the marketing and provision of
TIG's workers' compensation insurance to Existing Clients and
Potential Clients in accordance with the terms of the Placement
Agreement.
7. "Program Business" shall mean all policies of insurance
written by TIG covering Program Clients.
8. "Program Clients" means all (i) Existing Clients who
are provided with workers' compensation insurance by TIG; (ii)
and Potential Clients who are provided with workers'
compensation insurance by TIG.
9. "Reinsurance" shall mean the entering into of a
reinsurance relationship between the Trust through a commercial
insurance agency formed by or on behalf of the Trust and TIG or,
at TIG's sole option, TIG Re, such that the Trust, through the
commercial insurance company, shall act as a reinsurer of Program
Business and TIG such that the Trust shall act as a reinsurer of
the Program Business.
ARTICLE 2
DUTIES
1. Representative
(a) Representative shall market the Program to
Existing Clients and shall seek and identify Potential
Clients and market the Program to said Persons.
Representative shall at all times be and remain in
compliance with the General Agency Agreement.
(b) The parties agree that of the Collected Premiums
received by Representative, Representative shall pay to
the following Persons not more than the following
percentages of Collected Premiums:
Payee Percent of Total Activity
Accounts/Actuaries 1% Accounting and
Actuarial Services
Harry E. Vickery or a 3.5% Sending bills,
corporation wholly owned collections, liaison,
by him program oversight,
and obtaining
association
endorsements
Mississippi Risk 7.8% Sales commissions,
Management, Inc. ("MRM") marketing,
administration of
Program
TIG 87.7% Provision of
Insurance to Program
Clients
TOTAL 100%
As used herein, the term "Collected Premiums" shall
mean all amounts paid as insurance premiums by a
Program Client, with no deductions for any fees,
assessments or taxes. All amounts paid by
Representative to the Persons set forth above
("Payees") shall be subject to the prior approval of
the Trust. In the event amounts owed to
Accountants/Actuaries are in excess of 1% of Collected
Premiums, MRM agrees to pay such excess from its own
funds.
(c) Representative shall generate bills to Program
Clients, and it shall be the responsibility of Harry E.
Vickery or a corporation wholly owned by him to review
such bills, send them, and collect premiums from
Program Clients and remit the same to TIG's premium
trust account established for the Program from which
the Representative shall draw funds to pay the Payees
as set forth above.
2. Trust. The Trust shall provide Representative with
information regarding Existing Clients and information regarding
Potential Clients to assist Representative in marketing the
Program to such parties.
3. First Right. Representative and the Trust acknowledge
that Representative may serve as a representative or agent for
other providers of workers' compensation insurance; however,
Representative agrees that Representative will at all times
attempt to initially place Persons seeking workers' compensation
with TIG such that such Persons shall become Program Clients.
ARTICLE 3
COMPENSATION
1. Compensation. The parties agree that the compensation
to be received by Representative and its Affiliates in connection
with the Program shall be (i) commissions not to exceed 7.8% of
Collected Premiums earned by the Representative from TIG for
Program Business; (ii) $140 per policy issued to a Program
Client, which shall be paid to Representative by TIG; and (iii)
commissions to be paid to Representative or its Affiliates which
have been fully disclosed to the Trust in connection with (1)
excess reinsurance coverage provided by Wexford Underwriting
Managers, Inc., and (2) provision of director and officer
liability coverage for the Trust. Representative agrees that it
and its Affiliates will receive no other compensation related to
the Program other than that set forth above without the prior
approval of the Trust.
ARTICLE 4
REPORTS AND INFORMATION
1. Reports. On or before the 15th day of each month
following the Effective Date, Representative shall submit to the
Trust (i) a list of the names and addresses and payroll by
classification of all Persons to which Representative and/or its
agents has made a quotation regarding the Program; and (ii) a
copy of the declaration page of each policy issued regarding the
Program. In addition, Representative shall provide the Trust
with all reports or information provided to Representative
produced by or on behalf of TIG or Representative concerning the
Program.
ARTICLE 5
TERM
1. Term. This Agreement shall commence as of the date
hereof, and continue for the term of the Placement Agreement
unless earlier terminated as provided herein.
2. Automatic Termination. This Agreement shall
automatically terminate with no notice required upon (i) the
bankruptcy, receivership, assignment for the benefit of creditors
or similar action of Representative or the commencement of any
such proceedings by or against Representative; (ii) the
termination of the General Agency Agreement between TIG and
Representative; or (iii) the termination of the Placement
Agreement between TIG and the Trust for any reason.
ARTICLE 6
MISCELLANEOUS
1. Approval of General Agency Agreement. The Trust shall
have the right to review and approve the General Agency Agreement
and any amendments or revisions thereto and any subagency or
similar agreement between Representative and other Persons
related to the Program and such review and approval shall be a
condition precedent to the initial and continuing effectiveness
of this Agreement.
2. Noncompetition. During the term of this Agreement,
Representative and its Affiliates shall not, directly or
indirectly, act as a general agent or in any other capacity to
provide workers' compensation insurance to Persons in the
agricultural sector in Mississippi except in accordance with the
terms of this Agreement. The term "agricultural sector" shall
have the meaning as set forth in the Placement Agreement.
3. Nondisclosure. Except as may be required by law or any
governmental agency, during the Term of this Agreement and at all
times thereafter, Representative and its Affiliates shall not
directly or indirectly reveal, report, publish, disclose or
transfer any Confidential Information to any Person or utilize
any Confidential Information for Representative's and/or its
Affiliates own benefit or for the benefit of any other Person.
As used herein, the term "Confidential Information" means
documentary information and all information, ideas, analyses and
compilations provided in writing to Representative by the Trust
during the course of this Agreement regarding the Trust and/or
the business of the Trust including customer lists, marketing
plans and techniques, products and services, prices, sales,
strategic plans and finances. As used herein, the term
"Confidential Information" shall not include any information: (i)
which is already known to Representative and/or its Affiliates;
or (ii) which is independently developed by Representative and/or
its Affiliates; or (iii) which is or becomes available to the
public through no breach of this Agreement by Representative.
4. Notices. Any notices required or permitted to be given
hereunder shall be deemed to be given if delivered by hand or if
mailed by certified mail, postage prepaid, return receipt
requested or by postal or a commercial express document delivery
service which issues an individual delivery or receipt, or by
facsimile with reasonable evidence of receipt, to the following
addresses:
If to Representative: Mississippi Risk Management, Inc.
407 Briarwood Drive, Suite 201
P. O. Box 14067
Jackson, Mississippi 39236
Attn: David R. White
Facsimile: (601) 957-6838
If to Trust: Delta Agricultural and Industrial
Trust
P. O. Box 5037
Greenville, Mississippi 38704-5037
Attn: Harry Vickery
Facsimile: 601-378-3366
5. Expenses. All expenses of the preparation of this
Agreement shall be borne by the respective parties incurring such
expense.
6. Entire Agreement. This Agreement constitutes the
entire contract between the parties hereto pertaining to the
subject matter hereof and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether
written or oral, of the parties.
7. Governing Law. The validity and construction of this
Agreement shall be governed by the laws of the State of
Mississippi.
8. Section Headings. The section headings are for
reference only and shall not limit or control the meaning of any
provision of this Agreement.
9. Waiver. No delay or omission on the part of any party
hereto in exercising any right hereunder shall operate as a
waiver of such right or any other right under this Agreement.
10. Amendments. This Agreement may be amended, but only in
writing, signed by the parties hereto.
11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but
all of which together shall compromise one and the same
instrument.
12. Attorneys' Fees. If legal action is commenced to
enforce this Agreement, the prevailing party in such action shall
be entitled to recover its costs and reasonable attorneys' fees
in addition to any other relief granted.
13. Successor and Assigns. Representative shall not assign
its rights hereunder without the express written consent of the
Trust, which consent shall not be unreasonably withheld.
Representative hereby acknowledges and agrees that it is aware of
the Trust's intent to form a commercial insurance company and
that the Trust may assign this Agreement and the rights hereunder
to such entity without the consent of Representative.
14. Relationship of the Parties. Representative is an
independent contractor of the Trust. This Agreement does not
constitute or create a general agency, joint venture, partnership
or employment relationship.
WITNESSED WHEREFORE, the parties have duly executed this
Agreement as of the day and year first above written.
REPRESENTATIVE: TRUST:
MISSISSIPPI RISK MANAGEMENT, INC. DELTA AGRICULTURAL AND
INDUSTRIAL TRUST
By:/s/ David R. White By:/s/ William L. Kennedy
EXHIBIT 10.4
ASSIGNMENT AND ASSUMPTION AGREEMENT DATED AS OF MARCH 20, 1997
BETWEEN THE TRUST AND THE COMPANY
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement")
is made as of the 20th day of March, 1997, by and between Delta
Agricultural and Industrial Trust, a Mississippi workers'
compensation self insurance trust (the "Trust") and Stoneville
Insurance Company, a Mississippi corporation (the "Company").
WHEREAS, the Board of Trustees of the Trust has approved and
adopted that certain Plan of Reorganization and Conversion of the
Trust (the "Plan") which provides that the Trust will transfer
substantially all its assets to the Company in return for stock
of the Company and that the Trust will thereupon immediately
dissolve and distribute its assets (stock of the Company) to
Former Members of the Trust (as defined in the Plan) all as
described in the Plan; and
WHEREAS, the Trust is a party to certain agreements and the
holder of certain rights which it desires to transfer to the
Company, and which the Company desires to obtain;
1. Effective Date. This Agreement shall become effective
as of the Effective Date of the Plan as defined therein (the
"Effective Date").
2. Assumption of Specific Agreements. As of the Effective
Date, the Trust hereby assigns, transfers, conveys and delivers
to the Company all of its right, title and interest in and to the
agreements listed on Exhibit A attached hereto (the "Specific
Agreements") and the Company accepts the foregoing assignment and
assumes and agrees to perform all of the duties and obligations
of the Specific Agreements.
3. Other Agreements. As of the Effective Date, the Trust
hereby offers to transfer to the Company all of its right, title
and interest in and to all agreements other than the Specific
Agreements, and the Company, at its option, may assume such
agreements by providing written consent on an agreement-by-agreement basis.
4. Assignment of Causes of Action. As of the Effective
Date, the Trust hereby assigns to the Company, and the Company
hereby accepts, all rights of the Trust as a plaintiff in any
cause of action, claim, suit, proceeding, or arbitration,
including but not limited to those involving Bear, Stearns
Securities Corp., Axiom Capital Management, Inc., and/or persons
employed by or affiliated therewith.
5. No Assumption of Other Liability. Other than the
assumption of certain agreements and rights of the Trust as
specifically set forth herein, the Company assumes no liabilities
of the Trust, including but not limited to liabilities arising
out of workers' compensation insurance issued by the Trust, or
any claims, assessments, or proceedings arising thereunder.
6. Successors and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of
the other party.
7. Amendment. This Agreement may be amended only by an
instrument in writing duly executed by each of the parties
hereto.
8. Further Assurances. Consistent with the terms and
conditions hereof, each party hereto will execute and deliver
such instruments, certificates and other documents and take such
other action as any other party hereto may reasonably require in
order to carry out this Agreement and the transactions
contemplated hereby.
9. Governing Law. This Agreement shall be governed by the
laws of the State of Mississippi as to all matters, including,
but not limited to, matters of validity, construction, effect and
performance.
10. Waiver. Any waiver by any party hereto of any breach
of, or failure to comply with, any provision of this Agreement by
any other party hereto shall not be construed as, or constitute,
a continuing waiver of such provision, or a waiver of any other
breach of, or failure to comply with, any other provision of this
Agreement.
11. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the
same agreement and each of which shall be deemed an original.
12. Entire Agreement. This Agreement constitutes the sole
and entire agreement between the parties hereto with respect to
the subject matter hereof and thereof, and supersedes all prior
arrangements or understandings with respect thereto; and there
are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings other than those expressly
set forth herein or therein.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed by its duly authorized officers as
of the day and year first above written.
TRUST: COMPANY:
DELTA AGRICULTURAL AND STONEVILLE INSURANCE COMPANY
INDUSTRIAL TRUST
By: By:
Name: Name:
Title: Title:
<PAGE>
Exhibit A
List of Specific Agreements Assumed
1. Insurance Placement Agreement dated as of June 10, 1996
between Delta Agricultural and Industrial Trust, TIG Insurance
Company, and TIG Reinsurance Company
2. Service Agreement for Administration of a Workers'
Compensation Self Insurance Program dated as of August 1, 1991
between Delta Agricultural and Industrial Trust and Sedgwick
James of Mississippi, Inc. as amended by the Extension of Service
Agreement for an Additional Period dated May 31, 1995, as amended
by that Continuation of Service Agreement dated May 9, 1996
3. Representation Agreement dated as of July 1, 1996
between Delta Agricultural and Industrial Trust and Mississippi
Risk Management, Inc.
4. Agreement between Delta Agricultural and Industrial
Trust and Delta Administration, Inc. regarding administration
(oral)
5. Assumption Reinsurance Agreement between Delta
Agricultural and Industrial Trust, Continental Insurance Company,
and Stoneville Insurance Company
EXHIBIT 23.1
CONSENT OF RICHARD L. EATON, CPA, INDEPENDENT ACCOUNTANT
Independent Auditors' Consent
The Board of Directors
Stoneville Insurance Company
We consent to the use of our audit reports dated (i) January 29,
1997 on the financial statements of Delta Agricultural and
Industrial Trust as of December 31, 1995 and 1996; and (ii) March
6, 1997 on the financial statements for the year ending December
31, 1996, for Stoneville Insurance Company, all of the foregoing
being incorporated herein by reference.
We consent to the use of our name under the heading "Experts" and
other such locations as it may appear in the Prospectus
comprising Part I of the Registration Statement.
RICHARD L. EATON, CPA
Jackson, Mississippi
, 1997
EXHIBIT 3.2
BYLAWS
OF
STONEVILLE INSURANCE COMPANY
ARTICLE I
PRINCIPAL OFFICE
The principal office of the corporation in the State of
Mississippi and the home office of the corporation shall be
located in Jackson, Hinds County, Mississippi.
ARTICLE II
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the
shareholders shall be held on the first Tuesday in the month of
May, in each year at the hour of 10:00 o'clock, A.M., or such
other time and date as may be determined by the directors, for
the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday in the
State of Mississippi, such meeting shall be held on the next
succeeding business day.
If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or
at any adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of the shareholders
as soon thereafter as conveniently may be.
SECTION 2. Special Meetings. The corporation shall hold a
special meeting of shareholders (1) on call of its Board of
Directors, the Chairman thereof, or the President; or (2) unless
the Articles of Association provide otherwise, if the holders of
at least ten percent (10%) of all the votes entitled to be cast
on any issue proposed to be considered at the proposed special
meeting sign, date and deliver to the corporation's Secretary one
or more written demands for the meeting describing the purpose or
purposes for which it is to be held. If not otherwise fixed
under applicable law, the record date for determining
shareholders entitled to demand a special meeting shall be the
date the first shareholder signs the demand.
SECTION 3. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of
Mississippi, for any annual meeting or for any special meeting of
shareholders. A valid waiver of notice signed by all
shareholders entitled to notice may designate any place, either
within or without the State of Mississippi, as the place for any
annual meeting or for any special meeting of shareholders. Unless
the notice of the meeting states otherwise, shareholders'
meetings shall be held at the corporation's principal office.
SECTION 4. Notice of Meeting. The corporation shall notify
shareholders of the date, time and place of each annual and
special shareholders' meeting no fewer than ten (10) nor more
than sixty (60) days before the meeting date. Unless applicable
law or the Articles of Association require otherwise, the
corporation shall give notice only to shareholders entitled to
vote at the meeting.
Unless applicable law or the Articles of Association require
otherwise, notice of an annual meeting need not include a
description of the purpose or purposes for which the meeting is
called. Notice of a special meeting must include a description
of the purpose or purposes for which the meeting shall be called.
Only business within the purpose or purposes described in the
meeting notice may be conducted at a special shareholders'
meeting.
Unless these Bylaws require otherwise, if an annual or
special shareholders' meeting is adjourned to a different date,
time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting
before adjournment. If a new record date for the adjourned
meeting is or must be fixed under applicable law or Article II,
Section 5 of these Bylaws, however, notice of the adjourned
meeting must be given under this section to persons who are
shareholders as of the new record date.
SECTION 5. Closing of Transfer Books or Fixing of Record
Date. The Board of Directors of the corporation may fix the
record date for one or more voting groups in order to determine
shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote or to take any other action. A
record date may not be more than seventy (70) days before the
meeting or action requiring a determination of shareholders. If
not otherwise fixed by law, the record date for determining
shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting shall be the day before the first
notice is delivered to shareholders. If the Board of Directors
does not fix the record date for determining shareholders
entitled to a distribution (other than one involving a purchase,
redemption or other acquisition of the corporation's shares), it
shall be the date the Board of Directors authorizes the
distribution. A determination of shareholders entitled to notice
of or to vote at a shareholders' meeting shall be effective for
any adjournment of the meeting unless the Board of Directors
fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred twenty (120) days after
the date fixed for the original meeting.
SECTION 6. Voting Lists. After fixing a record date for a
meeting, the corporation shall prepare an alphabetical list of
the names of all its shareholders who are entitled to notice of a
shareholders' meeting. The list must be arranged by voting group
(and within each voting group by class or series of shares) and
show the address of and number of shares held by each
shareholder.
The shareholders' list must be available for inspection by
any shareholder beginning two (2) business days after notice of
the meeting is given for which the list was prepared and
continuing through the meeting, at the corporation's principal
office or at a place identified in the meeting notice in the city
where the meeting will be held. A shareholder, his agent or
attorney shall be entitled on written demand to inspect and,
subject to the requirements of applicable law, to copy the list
during regular business hours and at his expense, during the
period it shall be available for inspection. The corporation
shall make the shareholders' list available at the meeting, and
any shareholder, his agent or attorney shall be entitled to
inspect the list at any time during the meeting or any
adjournment.
SECTION 7. Quorum. Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a
quorum of those shares exists with respect to that matter.
Unless the Articles of Association or applicable law impose other
quorum requirements, a majority of the votes entitled to be cast
on the matter by a voting group, represented in person or by
proxy, shall constitute a quorum of that voting group for action
on that matter. If less than a majority of the outstanding
shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without
further notice except as may be required by Article II, Section 4
of these Bylaws or by applicable law. At such adjourned meeting
at which a quorum shall be present or represented, any business
may be transacted which might have been transacted at the meeting
as originally noticed. Once a share is represented for any
purpose at a meeting, it shall be deemed present for quorum
purposes for the remainder of the meeting and for any adjournment
of that meeting unless a new record date is or must be set for
that adjourned meeting.
SECTION 8. Proxies. A shareholder may appoint a proxy to
vote or otherwise act for him by signing an appointment form,
either personally or by his attorney-in-fact. An appointment of
a proxy shall be effective when received by the Secretary or
other officer or agent authorized to tabulate votes of the
corporation. An appointment shall be valid for eleven (11)
months unless a longer period is expressly provided in the
appointment form. An appointment of a proxy shall be revocable
by the shareholder unless the appointment form conspicuously
states that it is irrevocable and the appointment shall be
coupled with an interest. Appointments coupled with an interest
include the appointment of (1) a pledgee; (2) a person who
purchased or agreed to purchase the shares; (3) a creditor of the
corporation who extended it credit under terms requiring the
appointment; (4) an employee of the corporation whose employment
contract requires the appointment; or (5) a party to a voting
agreement created under applicable law.
The death or incapacity of the shareholder appointing a
proxy does not affect the right of the corporation to accept the
proxy's authority unless notice of the death or incapacity shall
be received by the Secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under
the appointment. An appointment made irrevocable because it is
coupled with an interest shall be revoked when the interest with
which it is coupled is extinguished. A transferee for value of
shares subject to an irrevocable appointment may revoke the
appointment if he did not know of its existence when he acquired
the shares and the existence of the irrevocable appointment was
not noted conspicuously on the certificate representing the
shares or on the information statement for shares without
certificates.
Subject to applicable law and to any express limitation on
the proxy's authority appearing on the face of the appointment
form, the corporation shall be entitled to accept the proxy's
vote or other action as that of the shareholder making the
appointment.
SECTION 9. Voting of Shares. Except as provided below or
unless the Articles of Association provide otherwise, and subject
to the provisions of Section 12 of this Article II, each
outstanding share, regardless of class, shall be entitled to one
(1) vote on each matter voted on at a shareholders' meeting. If
a quorum exists, action on a matter (other than the election of
directors) by a voting group shall be approved if the votes cast
within the voting group favoring the action exceed the votes cast
opposing the action, unless the Articles of Association or
applicable law require a greater number of affirmative votes.
Unless otherwise provided in the Articles of Association,
directors shall be elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which
a quorum is present.
SECTION 10. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by such
officer, agent or proxy as the Bylaws of such corporation may
prescribe, or, in the absence of such provision, as the Board of
Directors of such corporation may determine.
Absent special circumstances, shares of this corporation
shall not be entitled to vote if they are owned, directly or
indirectly, by a second corporation, domestic or foreign, and
this corporation owns, directly or indirectly, a majority of the
shares of the second corporation entitled to vote for the
directors of the second corporation. This does not limit the
power of this corporation to vote any shares, including its own
shares, held by it in a fiduciary capacity.
Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing
in the name of a trustee may be voted by him, either in person or
by proxy, but no trustee shall be entitled to vote shares held by
him without a transfer of such shares into his name. Shares
standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his name
if authority so to do be contained in an appropriate order of the
court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
SECTION 11. Informal Action by Shareholders. Action
required or permitted by applicable law to be taken at a
shareholders' meeting may be taken without a meeting if the
action is taken by all the shareholders entitled to vote on the
action. The action must be evidenced by one or more written
consents describing the action taken, signed by all the
shareholders entitled to vote on the action, and delivered to the
corporation for inclusion in the minutes or filing with the
corporate records. If not otherwise determined under applicable
law, the record date for determining shareholders entitled to
take action without a meeting shall be the date the first
shareholder signs such consent. A consent signed under this
section has the effect of a meeting vote and may be described as
such in any document.
If applicable law requires that notice of proposed action be
given to nonvoting shareholders and the action is to be taken by
unanimous consent of the voting shareholders, the corporation
must give its nonvoting shareholders written notice of the
proposed action at least ten (10) days before the action is
taken. The notice must contain or be accompanied by the same
material that, under applicable law, would have been required to
be sent to nonvoting shareholders in a notice of meeting at which
the proposed action would have been submitted to the shareholders
for action.
SECTION 12. Cumulative Voting. Shareholders shall have the
right to cumulate their votes for directors unless the Articles
of Association provide otherwise, and the shareholders shall be
entitled to multiply the number of votes they are entitled to
cast by the number of directors for whom they are entitled to
vote and cast the product for a single candidate or distribute
the product among two (2) or more candidates.
SECTION 13. Shares Held by Nominees. The corporation may
establish a procedure by which the beneficial owner of shares
that are registered in the name of a nominee shall be recognized
by the corporation as the shareholder. The extent of this
recognition may be determined in the procedure. The procedure
may set forth: (1) the types of nominees to which it applies;
(2) the rights or privileges that the corporation recognizes in a
beneficial owner; (3) the manner in which the procedure shall be
selected by the nominee; (4) the information that must be
provided when the procedure is selected; (5) the period for which
selection of the procedure shall be effective; and (6) other
aspects of the rights and duties created.
SECTION 14. Corporation's Acceptance of Votes. If the name
signed on a vote, consent, waiver or proxy appointment
corresponds to the name of the shareholder, the corporation, if
acting in good faith, shall be entitled to accept the vote,
consent, waiver or proxy appointment and give it effect as the
act of the shareholder.
If the name signed on a vote, consent, waiver or proxy
appointment does not correspond to the name of its shareholder,
the corporation, if acting in good faith, shall nevertheless be
entitled to accept the vote, consent, waiver or proxy appointment
and give it effect as the act of the shareholder if: (1) the
shareholder is an entity and the name signed purports to be that
of an officer or agent of the entity; (2) the name signed
purports to be that of an administrator, executor, guardian or
conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent,
waiver or proxy appointment; (3) the name signed purports to be
that of a receiver or trustee in bankruptcy of the shareholder
and, if the corporation requests, evidence of this status
acceptable to the corporation has been presented with respect to
the vote, consent, waiver or proxy appointment; (4) the name
signed purports to be that of a pledgee, beneficial owner or
attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been
presented with respect to the vote, consent, waiver or proxy
appointment; (5) two (2) or more persons are the shareholders as
cotenants or fiduciaries and the name signed purports to be the
name of at least one (1) of the co-owners and the person signing
appears to be acting on behalf of all the co-owners.
The corporation shall be entitled to reject a vote, consent,
waiver or proxy appointment if the Secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature on
it or about the signatory's authority to sign for the
shareholder.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. All corporate powers shall be
exercised by or under the authority of, and the business and
affairs of the corporation managed under the direction of, its
Board of Directors, subject to any limitation set forth in the
Articles of Association.
SECTION 2. Number, Election, Tenure and Qualifications.
The number of directors of the corporation shall be not fewer
than three (3) nor more than seven (7), the exact number to be
established at the time of the election of directors. Directors
are elected at the first annual shareholders' meeting and at each
annual meeting thereafter unless their terms are staggered in the
Articles of Association. The terms of the initial directors of
the corporation expire at the first shareholders' meeting at
which directors shall be elected. The terms of all other
directors expire at the next annual shareholders' meeting
following their election unless their terms shall be staggered in
the Articles of Association. A decrease in the number of
directors does not shorten an incumbent director's term. The
term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors shall be elected.
Despite the expiration of a director's term, he continues to
serve until his successor shall be elected and qualifies or until
there shall be a decrease in the number of directors. A director
need not be a resident of this state or a shareholder of the
corporation.
SECTION 3. Resignation of Directors; Removal of Directors
by Shareholders.
(a) A director may resign at any time by delivering written
notice to the Board of Directors, to its Chairman or to the
corporation. A resignation shall be effective when the notice is
delivered unless the notice specifies a later effective date.
(b) The shareholders may remove one or more directors with
or without cause unless the Articles of Association provide that
directors may be removed only for cause. If a director is
elected by a voting group of shareholders, only the shareholders
of that voting group may participate in the vote to remove him.
If cumulative voting is authorized, a director may not be removed
if the number of votes sufficient to elect him under cumulative
voting is voted against his removal. If cumulative voting is not
authorized, a director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast not to remove
him. A director may be removed by the shareholders only at a
meeting called for the purpose of removing him and the meeting
notice must state that the purpose, or one () of the purposes, of
the meeting shall be removal of the director.
SECTION 4. Regular Meetings. Unless the Articles of
Association or these Bylaws provide otherwise, a regular meeting
of the Board of Directors shall be held without other notice than
this bylaw immediately after, and at the same place as, the
annual meeting of shareholders.
SECTION 5. Special Meetings. Special meetings of the Board
of Directors may be called by or at the request of the Chairman
of the Board of Directors, the President or a majority of the
directors. Unless the Articles of Association or these Bylaws
provide for a longer or shorter period, special meetings of the
Board of Directors must be preceded by at least two (2) days'
notice of the date, time and place of the meeting. If no place
for the meeting has been designated in the notice, the meeting
shall be held at the principal office of the corporation. The
notice need not describe the purpose of the special meeting
unless required by the Articles of Association or these Bylaws.
SECTION 6. Place of Meetings. The Board of Directors may
hold regular or special meetings in or out of this state.
SECTION 7. Quorum. Unless the Articles of Association or
these Bylaws require a greater number, a quorum of the Board of
Directors consists of a majority of the number of directors fixed
by Article III, Section 2, or a majority of the number of
directors prescribed, or if no number is prescribed, the number
in office immediately before the meeting begins, if the
corporation has a variable-range size board. If less than such
number necessary for a quorum shall be present at a meeting, a
majority of the directors present may adjourn the meeting from
time to time without further notice.
SECTION 8. Manner of Acting. If a quorum is present when a
vote is taken, the affirmative vote of a majority of directors
present is the act of the Board of Directors unless the Articles
of Association or Bylaws require the vote of a greater number of
directors.
SECTION 9. Action Without A Meeting. Unless the Articles
of Association or Bylaws provide otherwise, action required or
permitted to be taken at a Board of Directors' meeting may be
taken without a meeting if the action is taken by all members of
the board. The action must be evidenced by one or more written
consents describing the action taken, signed by each director,
and included in the minutes or filed with the corporate records
reflecting the action taken. Action taken under this section
shall be effective when the last director signs the consent,
unless the consent specifies a different effective date. Such a
consent has the effect of a meeting vote and may be described as
such in any document.
SECTION 10. Vacancies. Unless the Articles of Association
provide otherwise, if a vacancy occurs on the Board of Directors,
including a vacancy resulting from an increase in the number of
directors, (i) the shareholders may fill the vacancy, (ii) the
Board of Directors may fill the vacancy, or (iii) if the
directors remaining in office constitute fewer than a quorum of
the board, they may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant
office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group
shall be entitled to fill the vacancy if it is filled by the
shareholders. A vacancy that will occur at a specific later date
(by reason of a resignation effective at a later date or
otherwise) may be filled before the vacancy occurs, but the new
director may not take office until the vacancy occurs.
SECTION 11. Compensation. Unless the Articles of
Association or these Bylaws provide otherwise, the Board of
Directors may fix the compensation of directors. By resolution
of the Board of Directors, each director may be paid his
expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as a director or a
fixed sum for attendance at each meeting of the Board of
Directors or both. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 12. Executive and Other Committees. Unless the
Articles of Association or Bylaws provide otherwise, the Board of
Directors may create an executive committee and one or more other
committees and appoint members of the Board of Directors to serve
on them. Each committee must have two (2) or more members, who
serve at the pleasure of the Board of Directors. The creation of
a committee and appointment of members to it must be approved by
the greater of (1) a majority of all the directors in office when
the action is taken or (2) the number of directors required by
the Articles of Association or Bylaws to take action. To the
extent specified by the Board of Directors or in the Articles of
Association or Bylaws, each committee may exercise the authority
of the Board of Directors. A committee may not, however,
authorize distributions; approve or propose to shareholders
action required by applicable law to be approved by shareholders;
fill vacancies on the Board of Directors or on any of its
committees; amend Articles of Association pursuant to applicable
law authorizing amendment by the Board of Directors; adopt,
amend, or repeal Bylaws; approve a plan of merger not requiring
shareholder approval; authorize or approve the reacquisition of
shares, except according to a formula or method prescribed by the
Board of Directors; or authorize or approve the issuance or sale
or contract for sale of shares, or determine the designation and
relative rights, preferences and limitations of a class or series
of shares, except that the Board of Directors may authorize a
committee (or a senior executive officer of the corporation) to
do so within limits specifically prescribed by the Board of
Directors. Provisions of these Bylaws governing meetings, action
without meetings, notice and waiver of notice, and quorum and
voting requirements of the Board of Directors, apply to
committees and their members as well.
SECTION 13. Participation by Telephonic or Other Means.
Unless the Articles of Association or these Bylaws provide
otherwise, the Board of Directors may permit any or all directors
to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which
all directors participating may simultaneously hear each other
during the meeting. A director participating in a meeting by
this means shall be deemed to be present in person at the
meeting.
SECTION 14. Advisory Board. The Board of Directors of the
corporation from time to time may elect not more than twenty-four
(24) individuals who may, but need not, be officers or employees
of the corporation to serve as members of an Advisory Board of
Directors of the corporation. At any time when there are less
than twenty-four (24) members elected to and acting on the
Advisory Board, the Board of Directors may at any regular or
special meeting elect to the Advisory Board such additional
members as they desire, provided that the total membership of
such Advisory Board shall at no time exceed twenty-four (24)
members. The members of such Advisory Board of Directors shall
meet with the Board of Directors at such times as the Board of
Directors, the Chairman thereof, or the President may direct.
The term of office of any member of the Advisory Board of
Directors shall be at the pleasure of the Board of Directors and
shall expire immediately after the annual meeting of shareholders
of the corporation following the election of the Advisory Board
member, regardless of when elected. The function of any such
Advisory Board of Directors shall be to advise the Board of
Directors with respect to the affairs of the corporation.
ARTICLE IV
OFFICERS
SECTION 1. Number. The officers of the corporation shall
be a Chairman of the board, a President, one or more Vice
Presidents, a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers,
assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors. Any two or more
offices may be held by the same person.
SECTION 2. Election and Term of Officers. The officers of
the corporation to be elected by the Board of Directors shall be
elected annually by the Board of Directors at the regular meeting
of the Board of Directors immediately following the annual
meeting of the shareholders. If the election of officers shall
not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall continue to
serve until his successor is elected and qualifies or until his
death or until he shall resign or shall have been removed in the
manner hereinafter provided.
SECTION 3. Resignation or Removal of Officers and Agents.
(a) An officer or agent may resign at any time by
delivering written notice to the Board of Directors, to its
Chairman or to the corporation. A resignation shall be effective
when the notice is delivered unless the notice specifies a later
effective date.
(b) Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the
corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may
be filled by the Board of Directors for the unexpired portion of
the term.
SECTION 5. Chairman of the Board. The Chairman of the
board must be a member of the Board of Directors at the time of
election to such office. When present he shall preside at all
meetings of the shareholders and of the Board of Directors. He
may sign, with the President and Secretary or any other proper
officer of the corporation thereunto authorized by the Board of
Directors, any deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed;
and in general shall perform all duties incident to the office of
Chairman of the board and such other duties as may be prescribed
by the Board of Directors from time to time.
SECTION 6. President. The President shall be the principal
executive officer of the corporation and, subject to the control
of the Chairman and the Board of Directors, shall have general
supervision and control of the business and affairs of the
corporation. In the absence of the Chairman of the Board of
Directors, he shall, when present, preside at all meetings of the
shareholders and of the Board of Directors. He may sign, with
the Secretary or any other proper officer of the corporation
thereunto authorized by the Board of Directors, certificates for
shares of the corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties
incident to the office of President and such other duties as may
be prescribed by the Board of Directors from time to time.
SECTION 7. Vice President. In the absence of the President
or in the event of his death, inability or refusal to act, the
Vice President, or if there shall be more than one (1) Vice
President of the corporation, a Vice President specially
designated by the Board of Directors for such purpose, shall
perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions
upon the President. Otherwise, Vice Presidents shall perform
only such duties as from time to time may be assigned to him by
the President or by the Board of Directors.
SECTION 8. Secretary. The Secretary shall (a) prepare and
keep the minutes of the directors' and shareholders' meetings in
one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be custodian of the corporate
records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly
authorized; (d) authenticate records of the corporation; (e) keep
a register of the post office address of each shareholder which
shall be furnished to the Secretary by such shareholder; (f) sign
with the President, certificates for shares of the corporation,
the issuance of which shall have been authorized by resolutions
of the Board of Directors; (g) have general charge of the stock
transfer books of the corporation; (h) in general perform all
duties incident to the office of Secretary and such other duties
as from time to time may be assigned to him by the President or
by the Board of Directors.
SECTION 9. Treasurer. The Treasurer shall: (a) have
charge and custody of and be responsible for all funds and
securities of the corporation; (b) receive and give receipts for
monies due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the
corporation in such banks, trust companies or other depositories
as shall be selected in accordance with these Bylaws; and (c) in
general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and
with such surety or sureties as the Board of Directors shall
determine.
SECTION 10. Compensation. The Board of Directors may fix
the compensation of the officers. No such payment shall preclude
any officer from serving the corporation in any other capacity
and receiving compensation therefor.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general
or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf
of the corporation and no evidences of indebtedness shall be
issued in its name unless authorized by a resolution of the Board
of Directors. Such authority may be general or confined to
specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or
other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the
corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the
credit of the corporation in such banks, companies or other
depositories as the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Shares shall be
represented by certificates. Certificates representing shares of
the corporation shall be in such form as shall be determined by
the Board of Directors. At a minimum, each share certificate
must state on its face (1) the name of the corporation and that
the corporation is organized under the law of the State of
Mississippi; (2) the name of the person to whom issued; and (3)
the number and class of shares and the designation of the series,
if any, the certificate represents. If the corporation is
authorized to issue different classes of shares or different
series within a class, the designations, relative rights,
preferences and limitations applicable to each class and the
variations in rights, preferences and limitations determined for
each series (and the authority of the Board of Directors to
determine variations for future series) must be summarized on the
front or back of each certificate or the corporation must furnish
the shareholder this information on request in writing and
without charge.
Each share certificate must be signed (either manually or in
facsimile) by the President or a Vice President and by the
Secretary or an assistant Secretary or by such other officers
designated in the Bylaws or by the Board of Directors so to do,
and may be sealed with the corporate seal. If the person who
signed (either manually or in facsimile) a share certificate no
longer holds office when the certificate is issued, the
certificate is nevertheless valid.
All certificates for shares shall be consecutively numbered
or otherwise identified. The name and address of the person to
whom the shares represented thereby are issued, with the number
of shares and date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered
to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a
like number of shares shall have been surrendered and canceled,
except that in the case of a lost, destroyed, or mutilated
certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the
corporation shall be made only on the stock transfer books of the
corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the
corporation, and on surrender for cancellation of the certificate
for such shares.
ARTICLE VII
INDEMNIFICATION
SECTION 1. Definitions. In this article:
(1) "Corporation" includes this corporation and any
domestic or foreign predecessor entity of the corporation in a
merger or other transaction in which the predecessor's existence
ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director
of the corporation or an individual who, while a director of the
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. A director
shall be considered to be serving an employee benefit plan at the
corporation's request if his duties to the corporation also
impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the
estate or personal representative of a director.
(3) "Expenses" include counsel fees.
(4) "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan), or reasonable expenses
incurred with respect to a proceeding.
(5) "Official capacity" means: (i) when used with respect
to a director, the office of director in the corporation; and
(ii) when used with respect to an individual other than a
director as contemplated in Article VII, Section 7, the office in
the corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the
corporation. "Official capacity" does not include service for
any other foreign or domestic corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise.
(6) "Party" includes an individual who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding.
(7) "Proceeding" means any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal.
SECTION 2. Authority to Indemnify.
(a) Except as provided in subsection (d), the corporation
shall indemnify any individual made a party to a proceeding
because he is or was a director against liability incurred in the
proceeding if:
(1) He conducted himself in good faith; and
(2) He reasonably believed:
(i) In the case of conduct in his official capacity
with the corporation, that his conduct was in its
best interests; and
(ii) In all other cases, that his conduct was at least
not opposed to its best interests; and
(3) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(b) A director's conduct with respect to an employee
benefit plan for a purpose he reasonably believed to be in the
interest of the participants in and beneficiaries of the plan is
conduct that satisfies the requirement of subsection (a)(2)(ii).
(c) The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did
not meet the standard of conduct described in this section.
(d) The corporation may not indemnify a director under this
section:
(1) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the
corporation; or
(2) In connection with any other proceeding charging
improper personal benefit to him, whether or not involving action
in his official capacity, in which he was adjudged liable on the
basis that personal benefit was improperly received by him.
(e) Indemnification permitted under this section in
connection with a proceeding by or in the right of the
corporation shall be limited to reasonable expenses incurred in
connection with the proceeding.
SECTION 3. Mandatory Indemnification. Unless limited by
the Articles of Association, the corporation shall indemnify a
director who was wholly successful, on the merits or otherwise,
in the defense of any proceeding to which he was a party because
he is or was a director of the corporation against reasonable
expenses incurred by him in connection with the proceeding.
SECTION 4. Advance for Expenses.
(a) The corporation shall pay for or reimburse the
reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding if:
(1) The director furnishes the corporation a written
affirmation of his good faith belief that he has met the standard
of conduct described in Article VII, Section 2;
(2) The director furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay the
advance if it shall be ultimately determined that he did not meet
the standard of conduct; and
(3) A determination shall be made that the facts then known
to those making the determination would not preclude
indemnification under this Article.
(b) The undertaking required by subsection (a) (2) must be
an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial
ability to make repayment.
(c) Determination and authorizations of payments under this
section shall be made in the manner specified in Article VII,
Section 6.
SECTION 5. Court Ordered Indemnification. Unless the
corporation's Articles of Association provide otherwise, a
director of the corporation who is a party to a proceeding may
apply for indemnification to the court conducting the proceeding
or to another court of competent jurisdiction.
SECTION 6. Determination and Authorization of
Indemnification.
(a) The corporation may not indemnify a director under
Article VII, Section 2 unless authorized in the specific case
after a determination has been made that indemnification of the
director shall be permissible in the circumstances because he has
met the standard of conduct set forth in Article VII, Section 2.
(b) The determination shall be made:
(1) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the
proceeding;
(2) If a quorum cannot be obtained under subsection (b)(1),
by majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may
participate), consisting solely of two (2) or more directors not
at the time parties to the proceeding;
(3) By special legal counsel:
(i) Selected by the Board of Directors or its
committee in the manner prescribed in subsection (b)(1) or
(b)(2); or
(ii) If a quorum of the Board of Directors cannot be
obtained under subsection (b)(1) and a committee cannot be
designated under subsection (b)(2), selected by a majority vote
of the full Board of Directors (in which selection directors who
are parties may participate); or
(4) By the shareholders, but shares owned by or voted under
the control of directors who are at the time parties to the
proceeding may not be voted on the determination.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as
the determination that indemnification shall be permissible,
except that if the determination shall be made by special legal
counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under
subsection (b)(3) to select counsel.
(d) The corporation agrees to submit requests for
indemnification or advancement of expenses to the Board of
Directors of the corporation or to the shareholders of the
corporation, as applicable, within a reasonable time after the
director requests in writing that the corporation indemnify the
director or advance expenses to him.
SECTION 7. Indemnification of Officers, Employees and
Agents. Unless the corporation's Articles of Association provide
otherwise:
(1) An officer of the corporation who is not a director
shall be entitled to mandatory indemnification under Article VII,
Section 3, and shall be entitled to apply for court-ordered
indemnification under Article VII, Section 5, in each case to the
same extent as a director;
(2) The corporation shall indemnify and advance expenses
under this article to an officer, employee or agent of the
corporation who is not a director to the same extent as to a
director; and
(3) The corporation shall also indemnify and advance
expenses to an officer, employee or agent who is not a director
to the extent, consistent with public policy, that may be
provided by the Articles of Association, Bylaws, general or
specific action of the Board of Directors or contract.
SECTION 8. Right of Corporation to Insure. The corporation
may purchase and maintain insurance on behalf of an individual
who is or was a director, officer, employee or agent of the
corporation or who, while a director, officer, employee or agent
of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise,
against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer,
employee or agent, whether or not the corporation would have
power to indemnify him against such liability under Article VII,
Sections 2 or 3 or applicable law.
SECTION 9. Application of Article.
(a) Unless the Articles of Association or these Bylaws
provide otherwise, any authorization of indemnification in the
Articles of Association or these Bylaws shall not be deemed to
prevent the corporation from providing the indemnity permitted or
mandated by applicable law.
(b) The corporation shall pay or reimburse expenses
incurred by a director in connection with his appearance as a
witness in a proceeding at a time when he has not been made a
named defendant or respondent to the proceeding when his
appearance as a witness is in connection with his serving as a
director of the corporation.
SECTION 10. Right to Bring Action to Enforce. The rights
to indemnification and to the advancement of expenses conferred
under this article shall be contract rights. If a claim under
this article is not paid in full by the corporation within 90
days after a written claim has been received by the corporation,
the director making such claim may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the director shall
be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action that the
director has not met the standards of conduct which make it
permissible under this article or the laws of the State of
Mississippi for the corporation to indemnify the director for the
amounts claimed, but the burden of proving such defense shall be
on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the director
shall be proper in the circumstances because he has met the
applicable standard of conduct set forth under the laws of the
State of Mississippi or under this Agreement, nor an actual
determination by the corporation (including its Board of
Directors, independent legal counsel, or its shareholders) that
the director had not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
director had not met the applicable standard of conduct.
ARTICLE VIII
NOTICE
Notice shall be in writing unless oral notice is reasonable
under the circumstances. Notice may be communicated in person;
by telephone, telegraph, teletype or other form of wire or
wireless communication; or by mail or private carrier. If these
forms of personal notice shall be impracticable, notice may be
communicated by a newspaper of general circulation in the area
where published; or by radio, television or other form of public
broadcast communication.
Written notice to shareholders, if in a comprehensible form,
shall be effective when mailed, if mailed postpaid and correctly
addressed to the shareholder's address shown in the corporation's
current record of shareholders.
Except as provided above with respect to notice to
shareholders, written notice, if in a comprehensible form, shall
be effective at the earliest of the following:
(a) When received;
(b) Five (5) days after its deposit in the United States
mail, as evidenced by the postmark, if mailed postpaid and
correctly addressed;
(c) On the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the
receipt is signed by or on behalf of the addressee.
Oral notice shall be effective when communicated if
communicated in a comprehensible manner.
If applicable law prescribes notice requirements for
particular circumstances, those requirements govern. If the
Articles of Association or these Bylaws prescribe notice
requirements, not inconsistent with this section or other
provisions of applicable law, those requirements govern.
ARTICLE IX
WAIVER OF NOTICE; ASSENT TO ACTIONS
Unless otherwise provided by law, a shareholder or director
of the corporation may waive any notice required by applicable
law, the Articles of Association or these Bylaws, before or after
the date and time stated in the notice. Except as provided
below, the waiver must be in writing, be signed by the
shareholder or director entitled to the notice, and delivered to
the corporation for inclusion in the minutes or filing with the
corporate records.
A director's attendance at or participation in a meeting
waives any required notice to him of the meeting unless the
director at the beginning of the meeting (or promptly upon his
arrival) objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to
action taken at the meeting. A shareholder's attendance at a
meeting (i) waives objection to lack of notice or defective
notice of the meeting unless the shareholder at the beginning of
the meeting objects to holding the meeting or transacting
business at the meeting, and (ii) waives objection to
consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it
is presented.
A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate
action is taken shall be deemed to have assented to the action
taken unless: (1) he objects at the beginning of the meeting (or
promptly upon his arrival) to holding it or transacting business
at the meeting; (2) his dissent or abstention from the action
taken shall be entered in the minutes of the meeting; or (3) he
delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting. The
right of dissent or abstention shall not be available to a
director who votes in favor of the action taken.
ARTICLE X
FISCAL YEAR
The fiscal year of the corporation shall begin on January 1
and end on December 31 in each year.
ARTICLE XI
DISTRIBUTIONS
The Board of Directors may authorize and the corporation may
make distributions to its shareholders, subject to restriction by
the Articles of Association and applicable law.
ARTICLE XII
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed thereon the
name of the corporation and the state of incorporation and the
words "Corporate Seal".
ARTICLE XIII
AMENDMENTS
The provisions of Article VII and this Article XIII of
these Bylaws may be amended or repealed only by a majority vote
of the shareholders. Otherwise, unless the Articles of
Association, applicable law or a resolution of the shareholders
reserves this power exclusively to the shareholders in whole or
part, the corporation's Board of Directors may amend or repeal
these Bylaws and adopt new Bylaws at any regular or special
meeting of the Board of Directors.
Accepted as of the 2nd day of December, 1996.
BY: /s/ David R. White
TITLE: SECRETARY
<PAGE>
As of January 9, 1997, the following amendment was adopted by
written unanimous consent of the directors:
Authorize Amendments to Bylaws
RESOLVED that, pursuant to Article XIII of the Bylaws of the
corporation which govern amendments to the Bylaws of the
Corporation, Article III, Section 12 of the Bylaws of the
Corporation is hereby amended to add the following provisions:
A nominating committee shall be one of the standing
committees of the Board of Directors. The nominating committee
shall recommend to the Board of Directors prior to the annual
shareholder's meeting each year: (a) the appropriate size and
composition of the Board of Directors; (b) a proxy statement and
form of proxy; (c) policies and practices on shareholder voting;
(d) plans for the annual shareholders' meeting; and (e) nominees:
(i) for election to the Board of Directors for whom the
Corporation should solicit proxies; (ii) to serve as proxies in
connection with the annual shareholders' meeting; and (iii) for
election as corporate officers and chairperson and chief
executive officers of the Corporation's business groups. The
nominating committee shall seek suggestions for nominees from the
Delta Council, from the Board of Directors, and from the
shareholders of the Corporation.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<POLICY-LOSSES> 0 0
<UNEARNED-PREMIUMS> 0 1,466,279
<POLICY-OTHER> 2,173,234 3,005,414
<POLICY-HOLDER-FUNDS> 384,863 0
<NOTES-PAYABLE> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 2,453,894 2,365,728
<TOTAL-LIABILITY-AND-EQUITY> 5,072,319 7,448,211
2,077,351 5,659,925
<INVESTMENT-INCOME> 297,076 328,027
<INVESTMENT-GAINS> (37,286) (159,557)
<OTHER-INCOME> (422,850) 0
<BENEFITS> 1,305,774 3,411,027
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 479,507 469,082
<INCOME-PRETAX> 129,010 1,948,286
<INCOME-TAX> 98,768 643,660
<INCOME-CONTINUING> 30,242 1,304,626
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 30,242 1,304,626
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 3,005,414 3,012,742
<PROVISION-CURRENT> 959,032 2,558,087
<PROVISION-PRIOR> (42,440) (109,365)
<PAYMENTS-CURRENT> 369,070 1,197,368
<PAYMENTS-PRIOR> 1,379,702 1,258,682
<RESERVE-CLOSE> 2,173,234 3,005,414
<CUMULATIVE-DEFICIENCY> 2,317,410 2,258,357
</TABLE>
Exhibit 99.1
Financial Statement Schedules of the Trust
Schedule Number Description
- ---------------- ------------
I Summary of Investments - Other than
Investments in Related Parties
II Condensed Financial Information of
Registrant
III Supplementary Insurance Information
IV Reinsurance
V Valuation and Qualifying Accounts
VI Supplemental Information Concerning
Property - Casualty Insurance Operations
<PAGE>
<TABLE>
<CAPTION>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
SCHEDULE I - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1996 AND 1995
1996
Balance
Sheet
Type of Investment Cost Value Amount
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States
Government and
government agencies
and authorities $98,966 $98,022 $98,966
States, municipalities
and political
subdivisions 626,574 619,364 619,364
Certificates of deposit 948,084 946,058 946,058
--------- --------- ---------
Total fixed maturities 1,673,624 1,663,444 1,664,388
--------- --------- ---------
Equity securities:
Common stocks:
Industrial,
miscellaneous and
all other 1,696,944 1,696,944 1,696,944
--------- --------- ---------
Total investments $3,370,568 $3,360,388 $3,361,332
========= ========= =========
1995
Fixed maturities:
Bonds:
United States
Government and
government agencies
and authorities $94,829 $93,071 $94,829
States, municipalities
and political
subdivisions 178,420 178,676 178,420
Certificates of deposit 1,973,896 1,975,106 1,973,896
--------- --------- ---------
Total fixed maturities 2,247,145 2,246,853 2,247,145
--------- --------- ---------
Equity securities
Common stocks:
Industrial,
miscellaneous and
all other 2,580,183 2,469,692 2,469,692
--------- --------- ---------
Total investments $4,827,328 $4,716,545 $4,716,837
========= ========= =========
</TABLE>
<PAGE>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
DECEMBER 31, 1996 AND 1995
Schedule II is not applicable. The registrant has no
subsidiaries.
<PAGE>
<TABLE>
<CAPTION>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
DECEMBER 31, 1996 AND 1995
Future Other
Deferred Policy Policy
Policy Benefits, Claims and
Acquisition Claims and Unearned Benefits
Segment Costs Loss Exp. Claims Payable
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
See Note $0 $0 $0 $2,173,234
1995
See Note $0 $0 $1,466,279 $3,005,414
</TABLE>
<TABLE>
Benefits, Amorti-
Claims, zation of
Net loss and Deferred
Invest- Settle- Policy Other
Premium ment ment Acq. Operating Premiums
Revenue Income Expenses Costs Expenses Written
- -----------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$2,077,351 $297,076 $1,305,774 $0 $479,507 $2,077,351
$5,659,925 $328,027 $3,411,027 $0 $469,082 $5,659,925
</TABLE>
<PAGE>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
SCHEDULE IV - REINSURANCE
DECEMBER 31, 1996 AND 1995
Schedule IV is not applicable. There was no reinsurance ceded or
assumed in 1996 or 1995.
<PAGE>
<TABLE>
Delta Agricultural and Industrial Trust
Schedule V - Valuation and Qualifying Accounts
December 31, 1996 and 1995
Additions
---------------------
Balance Charged Charged Balance
Beginning to Costs to Other End of
Description Period & Expense Accounts Deductions Period
- --------------------------------------------------------------------------
<C> <C> <S> <S> <C> <C>
Allowance
deducted from
asset to which
it applies:
Allowance for
doubtful
accounts:
Year ended
December
31, 1995
(Note A) $97,332 - - $80,555 $16,777
Year ended
December
31, 1996
(Note A) 16,777 - - 16,777 0
Allowance
for Unrealized
losses on securities
available-for-sale
Year ended
December
31, 1995
(Note C) 158,987 - - 48,496 110,491
Year ended
December
31, 1996
(Note B) 110,491 - - 101,255 9,236
Note A - Uncollected receivables written off net of recoveries.
Note B - Loss recognized on securities sold or reclassified as
"Trading Securities".
Note C - Loss recognized on securities sold and write-up of
marketable securities previously written down.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DELTA AGRICULTURAL AND INDUSTRIAL TRUST
SCHEDULE VI - SUPPLEMENTAL INFORMATION
CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS
DECEMBER 31, 1996 AND 1995
Deferred Reserve for
Affiliation Policy Unpaid Claims Net
with Acquisition and Claim Unearned Earned Investment
Registrant Costs Adj. Expense Discount Premiums Premiums Income
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Registrant $0 $2,173,234 $237,894 $0 $2,077,351 $297,076
1995
Registrant $0 $3,005,414 $251,104 $1,466,279 $5,659,925 $328,027
</TABLE>
<TABLE>
Claims and Claim
Adjustment Expenses
Incurred Related to Amortization Paid Claims
---------------------- of Deferred and Claim
Current Prior Policy Acq. Adjustment Premium
Year Years Costs Expenses Written
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Registrant $959,032 ($42,440) $0 $1,748,772 $2,077,351
1995
Registrant $2,558,087 ($109,365) $0 $2,456,050 $5,659,925
</TABLE>
Exhibit 99.2
Financial Statement Schedules of the Company
Schedule Number Description
- ---------------- ------------
I Summary of Investments - Other than
Investments in Related Parties
II Condensed Financial Information of
Registrant
III Supplementary Insurance Information
IV Reinsurance
V Valuation and Qualifying Accounts
VI Supplemental Information Concerning
Property - Casualty Insurance Operations
<PAGE>
STONEVILLE INSURANCE COMPANY
SCHEDULE 1 - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1996
Schedule I is not applicable. The Company had no investments at
December 31, 1996.
<PAGE>
STONEVILLE INSURANCE COMPANY
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
DECEMBER 31, 1996
Schedule II is not applicable.
<PAGE>
STONEVILLE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
DECEMBER 31, 1996
Schedule III is not applicable. The Company was inactive in
1996.
<PAGE>
STONEVILLE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE
DECEMBER 31, 1996
Schedule IV is not applicable.
<PAGE>
STONEVILLE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996
Schedule V is not applicable.
<PAGE>
STONEVILLE INSURANCE COMPANY
SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY
INSURANCE OPERATIONS
DECEMBER 31, 1996
Schedule VI is not applicable. The Company was inactive in 1996.
