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Filed Pursuant to Rule
424(b)(3)
Registration No.: 333-08951
PROSPECTUS
Merchants Group, Inc.
AGENTS STOCK OPTION PROGRAM
22,500 shares of common stock
par value $.01
The Agents Stock Option Program (the "Plan") described herein
established a plan whereby selected independent insurance agencies of Merchants
Group, Inc.'s subsidiary insurance company received as of June 1, 1994, options
to purchase shares of common stock, $.01 par value, ("Option" or "Options") from
Merchants Group, Inc. (the "Company") under terms set forth in the Plan. As of
the date of this Prospectus, a total of 22,500 Options are outstanding. The
exercise price of $16.38 per share with respect to each Option represents the
average closing price of the Company's common stock as reported on the American
Stock Exchange, Inc. ("American Stock Exchange") for the five trading days prior
to June 1, 1994.
There will be no brokerage commissions or service charges upon the
purchase of shares under the Plan. The Company will bear the costs of
administering the Plan. KeyCorp Shareholder Services, Inc. is the Transfer
Agent for the Company.
The shares of common stock are listed on the American Stock Exchange
under the symbol MGP.
It is recommended that this Prospectus be retained for future
reference.
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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 OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON
OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
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<TABLE>
<CAPTION>
===============================================================================================================
Price to Commissions Proceeds to
public Company (1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit $16.38 0 $16.38
- ---------------------------------------------------------------------------------------------------------------
Total $368,550 0 $368,550
===============================================================================================================
<FN>
(1) Before deducting expenses payable by the Company estimated at $10,000.
</TABLE>
The date of this Prospectus is August 26, 1996
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information........................................................................................... 2
Incorporation Of Certain Documents By Reference................................................................. 3
The Company..................................................................................................... 4
Description Of The Plan......................................................................................... 4
Use Of Proceeds................................................................................................. 7
Determination Of Offering Price................................................................................. 7
Experts......................................................................................................... 7
Legal Opinion................................................................................................... 8
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the Regional Offices
of the Commission at Seven World Trade Center, Suite 1300, New York, New York
10048, and copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Further, the Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Commission's Web
site can be found at (http://www.sec.gov).
The Company's shares of common stock are listed on the American Stock
Exchange, 86 Trinity Place, New York, New York 10006-1881 and reports, proxy
statements and other information filed by the Company can also be inspected in
the library of such exchange.
This Prospectus, which constitutes a part of a registration statement
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act, omits certain of the information set forth in the
Registration Statement. Reference is hereby made to the Registration Statement
and to the exhibits thereto for further information with respect to the Company
and the securities offered under the Plan. Statements contained herein
concerning the provisions of such documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the Commission. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission
described above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
a. Annual Report on Form 10-K for the year ended December 31,
1995 filed by the Company pursuant to Section 13(a) of the
Exchange Act.
b. Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996 filed by the Company pursuant to Section 13(a)
of the Exchange Act.
c. Definitive Proxy Statement dated April 5, 1996 for the
Company's May 8, 1996 Annual Meeting of the Stockholders filed
by the Company pursuant to Section 14(a) of the Exchange Act.
d. The description of the Company's common stock set forth in
response to Item 9 of the Registration Statement on Form S-2
(No. 33-62006) filed by the Company and any amendment to such
registration statement filed for the purpose of updating such
description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15 (d) of the Exchange Act prior to the termination of the
offering of Common Stock covered by this Prospectus shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated herein by reference,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all documents incorporated herein by reference, other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
therein. Written requests should be directed to:
Merchants Group, Inc.
Attn: Investor Relations Department
250 Main Street
Buffalo, New York 14202
Telephone requests may be directed to the Company at (716) 849-3333.
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THE COMPANY
The Company, a Delaware corporation, was organized in 1986 and is a
regional insurance holding company with its principal office in Buffalo, New
York. The Company's wholly-owned subsidiary, Merchants Insurance Company of New
Hampshire, Inc. ("MNH"), offers a broad range of property and casualty insurance
products through independent agents to preferred risk individuals and businesses
in the Northeast United States.
The Company is currently authorized to issue 10,000,000 shares of
common stock. As of June 30, 1996, there were 3,189,519 shares issued and
outstanding.
The Company's principal executive offices are located at 250 Main
Street, Buffalo, New York 14202 and its telephone number is (716) 849-3333.
DESCRIPTION OF THE PLAN
The following is a description of the provisions of the Plan offered to
selected independent insurance agencies of MNH.
PURPOSE. The Plan was established to advance the interests of the
Company by providing additional incentives to attract and retain qualified
agents upon whose efforts the success of the Company is dependent.
ADMINISTRATION. The Plan is administered by the Board of Directors of
the Company (the "Board"). Any questions relating to the interpretation of the
Plan or an Option holder's rights under the Plan are conclusively determined by
the Board.
ADOPTION OF THE PLAN. The Board adopted the Plan on March 30, 1994.
SHARES SUBJECT TO THE PLAN. Under the Plan, up to 25,000 shares of
common stock, $.01 par value, were reserved to be issued. On June 1, 1994,
Options on 22,750 shares of common stock were issued. As of June 30, 1996,
Options exist on 22,500 shares.
RECAPITALIZATION OR REORGANIZATION. The existence of an Option does not
affect the right or power of the Board or the stockholders of the Company to
make or authorize the adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting common stock or the rights thereof, the
dissolution or liquidation of the Company or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
The shares with respect to which Options may be granted are shares of
common stock as presently constituted, but if, and whenever, prior to the
expiration of an Option, the Company shall effect a subdivision or consolidation
of shares of common stock or the
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payment of a stock dividend on common stock without receipt of consideration by
the Company, the number of shares of common stock with respect to which such
Option may be exercised (1) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the purchase price
per share shall be proportionately reduced, and (2) in the event of a reduction
in the number of outstanding shares shall be proportionately reduced, and the
purchase price per share shall be proportionally increased.
Unless otherwise set forth in the Plan, the issuance by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment shall be made with respect to, the number of shares of common
stock subject to the Option or the exercise price thereof.
ELIGIBILITY REQUIREMENTS. The only participants in the Plan are those
independent insurance agencies of MNH selected by the Board to receive Option
grants on June 1, 1994 (the "Grantee" or "Grantees").
AWARDS GRANTED AND EXERCISE OF AWARDS. The awards granted under the
Plan are stock options. The Options are evidenced by a written document and are
not intended to qualify for special tax treatment under Section 422 (or any
other section) of the Internal Revenue Code of 1986, as amended.
Subject to certain adjustments, the purchase price of the common stock
subject to an Option is $16.38 per share, which is equal to the average closing
price of the stock as reported on the American Stock Exchange for the five
trading days prior to June 1, 1994. Options must be exercised in their
entirety.
EXERCISE PERIOD OF THE OPTIONS. The Options do not become exercisable
until two (2) years after the date of the grant. Options expire five (5) years
after the day prior to the date of the grant and thus, no option may be
exercised after May 31, 1999. No fractional shares of common stock may be issued
upon the exercise of an Option. Further, an Option is not exercisable if, at the
time of exercise, a Grantee fails to be an agent in good standing with the
Company.
RIGHTS AS A STOCKHOLDER. A Grantee of an Option shall have none of
the rights of a stockholder until the date of issuance of a stock certificate
for the shares. Except as provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
TERMINATION OF OPTIONS. All Options granted under the Plan will expire
on May 31, 1999, provided, however, that an Option will expire immediately if
the Grantee's agency relationship with the Company is terminated for any reason,
or if a Grantee ceases to be an
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agent in good standing with the Company. Further, any attempts to transfer an
Option will render an Option null and void.
TRANSFERABILITY. An Option may not be transferred to any other person
or entity, whether by operation of law or otherwise. Any attempt to transfer
the Option will cause the Option to become null and void.
FEDERAL INCOME TAX TREATMENT. Grantees recognized no income when
Options were granted, nor did the Company receive any deduction for federal
income tax purposes in the year of grant.
Upon exercise of an Option, a Grantee will be treated as having
received ordinary income at the time of exercise in an amount equal to the
difference between the Option price paid and the then fair market value of the
common stock acquired. The Company is entitled to a deduction at the same time
in a corresponding amount. The Grantee's basis in the common stock acquired upon
exercise of an Option will be equal to the Option price plus the amount of
ordinary income recognized.
Generally, when a Grantee disposes of shares of common stock acquired
under the Plan, any gain or loss recognized will be treated as long-term or
short-term capital gain or loss, depending upon the holding period of the shares
(which begins on the date the Option is exercised).
The foregoing is only a summary of federal income tax consequences and
does not purport to be complete. Because of the complexities of the tax law,
Grantees should consult their own tax advisors for further information.
DELAY IN ISSUANCE OR PURCHASE. All Options awarded under the Plan are
subject to the requirement that if the Board shall determine, in its discretion,
that (1) registration, listing or qualification of the shares of common stock
upon any securities exchange or pursuant to any state or federal law or (2) the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition to or in connection with the granting of such Option or
the issue or purchase of shares of common stock thereunder, the Option may not
be exercised in whole or in part unless such registration, listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board. In connection with the foregoing,
the Company may, if it shall deem it necessary or desirable for any reason
connected with any law or regulation or any governmental authority relating to
the regulation of securities, require the Grantee to represent in writing to the
Company that it is such person's then intention to acquire an Option or common
stock issuable upon the exercise thereof for investment and not with a view
toward the distribution thereof. In such event, no shares of common stock shall
be issued to such person unless and until the Company, in connection with the
foregoing, is satisfied with the accuracy of such representation. The
certificates representing shares of common stock issued by the Company pursuant
to the exercise of an Option may bear a
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legend describing the restrictions on resale thereof under applicable securities
laws and stop transfer orders with respect to such certificates may be entered
in the Company's stock transfer records.
RESTRICTIONS ON RESALE. Shares acquired under the Plan by an
"affiliate", as the term is defined in Rule 405 under the Securities Act, may be
resold only pursuant to the registration requirements of that Act, Rule 144
adopted by the Commission thereunder, or another applicable exemption therefrom.
Generally, sales of securities, including common stock of the Company, are also
subject to anti-fraud provisions contained in federal and state securities law.
In addition, acquisitions (but not generally including acquisitions
under the Plan) and dispositions of common stock of the Company by an executive
officer, director or affiliate of the Company within any six-month period may
give rise to the right of the Company to recapture any profit from such
transactions pursuant to Section 16(b) of the Exchange Act.
It is advisable for a Grantee to consult with legal counsel concerning
the securities and tax law implications of its exercise of Options and
disposition of shares of common stock under the Plan.
Additional information about the Plan may be obtained from the Investor
Relations Department, Merchants Group, Inc., 250 Main Street, Buffalo, New York
14202 (716) 849-3333.
USE OF PROCEEDS
The proceeds to the Company from sales of common stock pursuant to the
Plan will be used for general corporate purposes, including investment in and
advances to MNH.
DETERMINATION OF OFFERING PRICE
The shares to be registered are being offered pursuant to Options
granted in June of 1994. At the time the Options were granted, the average
closing price of the Company's common stock, as reported on the American Stock
Exchange for the five trading days prior to the grant date, was determined to be
$16.38 per share. As of July 25, 1996, the closing price for the Company's
common stock on the American Stock Exchange was $18 5/8, an increase of
approximately $2.25.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 1995 have been
so incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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LEGAL OPINION
The validity of the issuance of the shares of common stock offered
hereby will be passed upon for the Company by Jaeckle, Fleischmann & Mugel,
Buffalo, New York.
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MERCHANTS GROUP, INC.
AGENTS STOCK OPTION PROGRAM
22,500
Shares of
Common Stock
PROSPECTUS
Dated: August 26, 1996
No person has been authorized to give any information or to make any
representation not contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. Neither delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof. This Prospectus does
not constitute an offer to sell, or a solicitation of any offer to buy, any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offering in such jurisdiction.
