March 28, 1996
Dear Shareholder:
The directors and officers of Meridian Insurance Group,
Inc., join me in extending to you a cordial invitation to
attend the Annual Meeting of our shareholders. This meeting
will be held at 2:00 p.m., Wednesday, May 1, 1996, in our
home office at 2955 North Meridian Street, Indianapolis,
Indiana, in the Pennsylvania Room.
At our Annual Meeting, we will review our performance in
1995 and report on other developments at Meridian Insurance
Group, Inc. We intend to make our Annual Meeting as
informative and interesting as we can, and we hope you will
plan to attend.
The formal notice of this Annual Meeting and the Proxy
Statement appear on the following pages. After reading the
Proxy Statement, please mark, sign, and return the enclosed
Proxy Card to ensure that your votes on the business
matters of the meeting will be recorded.
We encourage you to attend this meeting. Whether or not
you attend, we urge you to return your proxy promptly in the
postpaid envelope provided. You may cancel the proxy
anytime before voting at the meeting, or you may vote in
person on all matters brought before the meeting. All of us
look forward to seeing you on May 1.
Sincerely,
Norma J. Oman
President and Chief
Executive Officer
MERIDIAN INSURANCE GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held May 1, 1996
To the Shareholders of
MERIDIAN INSURANCE GROUP, INC.
The Annual Meeting of Shareholders of MERIDIAN
INSURANCE GROUP, INC., will be held at 2:00 p.m.,
Eastern standard time, on May 1, 1996, in the Company's
home office at 2955 North Meridian Street,
Indianapolis, Indiana, in the Pennsylvania Room for the
following purposes:
1. To elect three persons as directors;
2. To consider and vote upon a proposal to establish a
new employee incentive stock plan; and
3. To transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of
business on March 1, 1996, as the record date for
determining the shareholders entitled to notice of and
to vote at the Annual Meeting.
Whether or not you plan to attend the meeting in
person, please complete and return the enclosed proxy
card in the envelope provided so that your shares can
be voted at the meeting in accordance with your
instructions.
A copy of the Annual Report for fiscal year ended
December 31, 1995, is being mailed to shareholders
together with this notice.
By Order of the Board of Directors
J. Mark McKinzie
Vice President, Secretary
and General Counsel
March 28, 1996
Indianapolis, Indiana
MERIDIAN INSURANCE GROUP, INC.
2955 North Meridian Street
P.O. Box 1980
Indianapolis, Indiana 46206
PROXY STATEMENT
This Proxy Statement and the form of proxy
enclosed herewith, which are first being mailed to
shareholders on or about March 28, 1996, are being
furnished in connection with the solicitation by
the Board of Directors of Meridian Insurance
Group, Inc. ("MIGI" or the "Company") of proxies to
be voted at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held at 2:00 p.m.,
Eastern standard time, on May 1, 1996, in the Company's
home office at 2955 North Meridian Street,
Indianapolis, Indiana, in the Pennsylvania Room, or at
any adjournment thereof.
Shares represented by proxies in the accompanying form,
if properly signed and returned, will be voted in
accordance with the specifications made thereon by the
shareholders. The proxy card provides space for a
shareholder to withhold voting for any or all nominees
for the Board of Directors or to abstain from voting
for any proposal if the shareholder chooses to do so.
Any proxy not specifying to the contrary will be voted
for the election of the nominees for director named
below and in favor of the proposal to approve
an employee incentive stock plan. A shareholder who signs
and returns a proxy in the accompanying form may revoke
it at any time before it is voted by giving written notice
thereof to the Secretary of MIGI.
Election of directors will be determined by the vote of
the holders of a plurality of the shares voting on
such election. Approval of Proposal 2 is subject
to the affirmative vote of a majority of the shares present
or represented at the annual meeting and entitled to vote on
the matter. A proxy may indicate that all or a portion
of the shares represented by such proxy are not being
voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to
vote shares held in street name on certain
proposals in the absence of instructions from the
beneficial owner. Shares that are not voted with respect
to a specific proposal will be considered as not present
and entitled to vote on such proposal, even though such shares
will be considered present for purposes of determining a quorum and
voting on other proposals. Abstentions on a specific proposal
will be considered as present, but not as voting in favor of such
proposal. As a result, with respect to Proposal 1, neither
broker non-votes nor abstentions on such proposals will
affect the determination of whether such proposals will be
approved. With respect to Proposal 2, broker non-votes
will have no effect, but an abstention would have the same effect
as a vote against such proposal.
The cost of solicitation of proxies in the
accompanying form will be borne by MIGI, including
expenses in connection with preparing and mailing
this Proxy Statement. Such solicitation will be made by mail
and may also be made on behalf of MIGI by MIGI's officers and
employees in person or by telephone. MIGI, upon request
therefor, will also reimburse brokers or persons
holding shares in their names or in the names of
nominees for their reasonable expenses in sending proxies and
proxy material to beneficial owners.
MIGI has only one class of shares outstanding, its
Common Shares. The holders of MIGI Common Shares of
record at the close of business on March 1, 1996,
will be entitled to notice of and to vote at the Annual
Meeting, with each holder being entitled to one vote for each
share so held. There are no cumulative voting rights.
As of the close of business on March 1, 1996, MIGI had
outstanding 6,779,375 Common Shares. A majority of
the outstanding shares will constitute a quorum at the
Annual Meeting. As of March 1, 1996, Meridian Mutual
Insurance Company ("Meridian Mutual") owned 3,150,000
shares of MIGI's outstanding Common Shares, or
approximately 46.5 percent of MIGI's outstanding Common Shares.
Meridian Mutual has advised MIGI that Meridian Mutual will vote its
shares in favor of the election of Mr. McCarthy, Ms. Rowland, and
Mr. Smith and in favor of the proposal to approve an employee
incentive stock plan.
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table sets forth, as of March 2, 1996,
the number and percentage of MIGI's outstanding Common
Shares beneficially owned by each director of MIGI, each
executive officer listed in the Summary
Compensation Table, all directors and executive
officers of MIGI as a group, and each person who is known
by MIGI to own beneficially more than five percent of its Common
Shares. The persons named in this table have sole
voting and dispositive power with respect to all Common
Shares owned by them, unless otherwise noted.
Percent of
Name of Individual Shares Beneficially Outstanding
or Identity of Group Owned Common Shares
Principal Shareholder:
Meridian Mutual Insurance Co. 3,150,000 46.5%
2955 N. Meridian Street
P.O. Box 1980
Indianapolis, Indiana 46206
Directors and Officers:
Ramon L. Humke 6,000 (1) *
Norma J. Oman 71,131 (2) 1%
Harold C. McCarthy 26,475 (1) *
Sarah W. Rowland 1,200 (1) *
Joseph D. Barnette, Jr. 5,000 (1)(3) *
David M. Kirr 6,000 (1) *
John T. Hackett 3,500 (1) *
Van P. Smith 2,000 (1)(4) *
Thomas H. Sams 1,000 (5) *
Steven R. Hazelbaker 13,126 (6) *
J. Mark McKinzie 18,616 (7) *
Brent Hartman 22,828 (8) *
Timothy J. Hanrahan 19,662 (9) *
All directors and executive 218,230 (10) 3.2%
officers as a group (14 persons)
*Beneficially owns less than one percent of MIGI's
outstanding Common Shares.
(1) Includes options to purchase 1,000 Common Shares
granted under MIGI's 1994 Outside Director Stock Option Plan.
(2) Includes 50,021 Common Shares which Ms. Oman has the
option to purchase under MIGI's Incentive Stock Plan.
(3) Includes 1,000 Common Shares held by Mr. Barnette's wife,
as to which stock he shares voting and dispositive power.
(4) Includes 1,000 Common Shares held by the Van P. Smith
Revocable Trust, as to which shares Mr. Smith has sole voting
and dispositive power.
(5) The Common Shares are owned by Waldemar Industries, Inc.,
which is solely owned by Mr. Sams.
(6) Includes 12,126 Common Shares which Mr. Hazelbaker has
the option to purchase under MIGI's Incentive Stock Plan.
(7) Includes 11,116 Common Shares which Mr. McKinzie has
the option to purchase under MIGI's Incentive Stock Plan.
(8) Includes 15,158 Common Shares which Mr. Hartman has
the option to purchase under MIGI's Incentive Stock Plan.
(9) Includes 9,448 Common Shares which Mr. Hanrahan has
the option to purchase under MIGI's Incentive Stock Plan.
(10) Includes 114,469 Common Shares subject to options
to purchase under MIGI's Incentive Stock Plan or MIGI's 1994
Outside Director Stock Option Plan. Does not include Common
Shares directly owned by Meridian Mutual of which such persons
are officers or directors.
ELECTION OF DIRECTORS
The Board of Directors consists of nine directors divided
into three classes of three directors each, with the
terms of three directors expiring at each Annual
Meeting of Shareholders. Directors serve for terms of
three years. It is the policy of MIGI that at least two
members of the Board of Directors will be persons not
otherwise affiliated with MIGI or Meridian Mutual.
The terms of Mr. Harold C. McCarthy, Ms. Sarah W.
Rowland, and Mr. Van P. Smith will expire at the Annual
Meeting, and Mr. McCarthy, Ms. Rowland, and Mr. Smith have
been nominated for an additional term of three years.
The other directors listed in the table below have
terms of office which expire in 1997 or 1998.
Unless otherwise instructed, proxy holders will vote
the proxies received by them for the election of the
nominees named below. If any nominee becomes
unavailable for any reason, it is intended that the
proxies will be voted for a substitute nominee
designated by the Board of Directors. The Board of
Directors has no reason to believe the nominees named
will be unable to serve if elected. Any vacancy
occurring on the Board of Directors for any reason
may be filled by a majority of the directors then in
office until the expiration of the term of the class
of directors in which the vacancy exists.
Name Age Capacity
Nominees for election as
directors with terms
expiring in 1999:
Harold C. McCarthy 69 Director
Sarah W. Rowland 63 Director
Van P. Smith 67 Director
Directors continuing
in office with terms
expiring in 1998:
Norma J. Oman 48 President, Chief Executive
Officer and Director
David M. Kirr 58 Director
John T. Hackett 63 Director
Directors continuing in office
with terms expiring in 1997:
Joseph D. Barnette, Jr. 56 Director
Ramon L. Humke 63 Director
Thomas H. Sams 54 Director
Mr. Barnette has served as a director of the Company
since 1988. Mr. Barnette is the Chief Executive
Officer and Chairman of the Board of Bank One,
Indianapolis, NA and of Banc One Indiana Corporation.
Mr. Barnette also serves as a director of IWC Resources
Corporation, IPALCO Enterprises, Inc., and Minority Enterprise
Small Business Investment Companies.
Mr. Humke has served as a director of MIGI since 1987
and as Chairman since 1992. He is also Chairman of the
Board of Directors of Meridian Mutual. Mr. Humke
has been the President, Chief Operating Officer,
and a Director of Indianapolis Power and Light Company
since 1990. Mr. Humke is also a director of IPALCO
Enterprises, Inc., LDI Management, Inc., and NBD Bank, N.A.
Mr. Sams has served as a director of the Company
since 1994. Mr. Sams has been President, Chief
Executive Officer, and a director of Waldemar Industries,
Inc., an investment holding company in Indianapolis, Indiana,
since 1967. He is also a director of NBD Bank, N.A., IPALCO
Enterprises, Inc., and Mid-America Capital Resource,
Inc.
Ms. Oman was elected President and Chief Executive
Officer of MIGI in 1991, having served as an Executive
Vice President since 1990. She became President and
Chief Executive Officer of Meridian Mutual and
Meridian Security Insurance Company ("Security")
in 1990 after functioning as an executive officer of both companies
since 1983. Ms. Oman has served as a director of MIGI since 1991 and is
also a director of Meridian Mutual and Bank One, Indianapolis, NA.
Mr. Kirr has served as a director of MIGI since 1992. Mr. Kirr has
been the President of Kirr, Marbach & Company, a Columbus, Indiana,
investment advisory firm, since 1975.
Mr. Hackett has served as a director of the Company since 1992
and is also a director of Meridian Mutual. Since 1991, Mr. Hackett has
been a Managing General Partner of CID Equity Partners, L.P., a venture
capital firm. Previously, Mr. Hackett served as the Vice President
Finance and Administration of Indiana University from 1988 to
1991. Mr. Hackett also serves as a director of Ball Corporation,
Irwin Financial Corporation, and Wabash National Corporation.
Mr. McCarthy has served as a director of MIGI since 1986 and is also
a director of Meridian Mutual. Mr. McCarthy is now retired but previously
served as President and Chief Executive Officer of the Company, Meridian
Mutual, and Security.
Ms. Rowland has served as a director of the Company since 1994 and is
also a director of Meridian Mutual. Ms. Rowland was elected Chief
Executive Officer and Chairman of the Board of Rowland Design, Inc., an
Indianapolis, Indiana, interior design and space planning firm in 1993.
From 1968 to 1993, Ms. Rowland served as President and Chief Executive
Officer of The Rowland Associates, Inc. She also is a director of
NBD Bank, N.A., and IPALCO Enterprises, Inc.
Mr. Smith has served as a director of MIGI since 1993
and is also a director of Meridian Mutual. Since 1963, Mr. Smith
has been the Chairman of the Board of Ontario Corporation, a
holding company headquartered in Muncie, Indiana, whose subsidiaries
provide metallurgically based services, computer software, and
computer hardware component manufacturing. Mr. Smith
also serves as a director of Lilly Industries, Inc.,
CINergy Corp., and P.S.I. Energy, Inc.
BOARD OF DIRECTORS' MEETINGS
During 1995, the MIGI Board of Directors held
five meetings. During 1995, each director attended at
least 75 percent of the aggregate of (1) the
total number of meetings of the Board of Directors and
(2) the total number of meetings held by all committees on
which he or she served. The Board of Directors has an
Audit Committee, a Finance and Investment Committee, a Compensation
Committee, a Pooling Agreement Committee, and a Nominating Committee,
each of which normally holds joint meetings with
similar committees of the Meridian Mutual Board of
Directors.
The Audit Committee held four meetings during 1995.
It presently consists of Messrs. Barnette, Hackett, and
Humke. The Audit Committee reviews and acts on reports to
the Board with respect to various auditing and accounting
matters, the scope of the audit procedures and the
results thereof, the internal accounting and control
systems of MIGI, the nature of services performed for
MIGI by and the fees to be paid to the independent
auditor, the performance of MIGI's independent and
internal auditors and the accounting practices of MIGI.
The Audit Committee also recommends to the Board of Directors
the independent auditor to be appointed by the Board.
The Compensation Committee, currently comprised of
Messrs. Smith, Humke, and Sams, met two times
during 1995. The main functions of this committee are
to establish and administer the executive compensation program
and any incentive compensation plans and also to review salary
and employee benefit programs. If the proposed 1996
Employee Incentive Stock Plan is adopted by the
shareholders, the Plan will be administered by a
committee composed of Messrs. Smith, Humke, and Sams.
The Finance and Investment Committee presently consists
of Directors Barnette, Hackett, Humke, Kirr, and Oman.
The committee held six meetings during 1995. The main
functions of the Finance and Investment Committee are to
establish investment policy and guidelines and to review and
approve any investment transactions of MIGI.
The Nominating Committee presently is composed
of Directors Humke, McCarthy, and Oman but did not meet
during 1995. The Nominating Committee recommends to
the Board candidates for nomination as directors. The
committee will consider nominees recommended by
shareholders for election to the Board of Directors.
The names of such nominees, accompanied by relevant
biographical information, should be submitted to the
Secretary of MIGI.
The Pooling Agreement Committee presently consists
of Messrs. Barnette, Hackett, Humke, and Kirr but did not
meet during 1995. At the request of the Audit
Committee, the Pooling Agreement Committee, together
with Meridian Mutual's Pooling Agreement Committee, will
review the relationships between Security and
Meridian Mutual under the pooling agreement and
determine whether the percentage participation of the
parties needs to be amended so that it continues to bear
an appropriate relationship to the insurers' respective surplus
accounts.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
MIGI was formed by Meridian Mutual in 1986 and was
a wholly-owned subsidiary of Meridian Mutual until March
1987. At that time MIGI sold 1,700,000 Common Shares in
a public offering, which reduced Meridian Mutual's
ownership of MIGI's outstanding Common Shares from
100 percent to approximately 65 percent. On May 5, 1993,
MIGI completed a public offering of an additional 1,725,000
Common Shares, thereby reducing Meridian Mutual's ownership
of MIGI's outstanding Common Shares to approximately
46.8 percent. MIGI's operations through its wholly-owned subsidiaries
are interrelated with the operations of Meridian
Mutual, an Indiana mutual property and casualty company.
MIGI believes that its various transactions with
Meridian Mutual, which are summarized herein, have been
on terms no less favorable to MIGI than the terms that
could have been negotiated with an independent third
party.
MIGI obtains the majority of its insurance
business pursuant to a pooling agreement with Meridian
Mutual. In addition, Meridian Mutual provides the facilities,
employees and most services required to conduct the
business of MIGI. During 1995, MIGI paid $281,700 to
Meridian Mutual for administrative and other services
provided to MIGI.
Description of Pooling Agreement
Since January 1, 1981, MIGI's wholly-owned subsidiary, Security,
has been a party to a reinsurance pooling agreement with
Meridian Mutual which covers all of the property and casualty insurance
written by the parties. All premiums, losses, loss adjustment
expenses and the underwriting and administrative expenses of Meridian
Mutual and Security are shared between the parties in
accordance with the participation percentages
established under the pooling agreement. The current
participation percentages of 74% for Security and
26% for Meridian Mutual were established effective
May 1, 1993, following the receipt by Security of $18
million in proceeds from the second public offering of
Common Shares by the Company. The participation
percentages were fixed with reference to the
respective surplus accounts of Meridian Mutual and
Security, on the assumption that each company's
capacity to underwrite premium income (and, therefore,
its share of any gain or loss on insurance
underwriting operations) bore a direct relationship to
that company's surplus.
The Boards of Directors of the Company and Meridian Mutual have
delegated to their respective Audit Committees the
responsibility of monitoring the relationships between
Security and Meridian Mutual under the pooling agreement
pursuant to such procedures as those committees may deem
necessary and appropriate to assure that the participation of
the parties will continue to bear an appropriate
relationship to their respective surplus accounts. The
Audit Committee of the Company is comprised of Messrs.
Barnette, Hackett, and Humke; the Audit Committee of
Meridian Mutual is comprised of Messrs. Hackett, Humke, and
James D. Price, a member of the Board of Directors of Meridian
Mutual who is not otherwise affiliated with the Company.
The Audit Committees have established guidelines
for reviewing the participation percentages at least
annually and for referring to the Pooling Agreement
Committees of MIGI and Meridian Mutual any decision to
change the participation percentages. MIGI's Pooling
Agreement Committee consists of Messrs. Barnette, Hackett,
Humke, and Kirr while Meridian Mutual's Pooling Agreement
Committee is composed of Messrs. Hackett and Humke. Future
events that could affect the relationship between the
surplus accounts of the parties include the receipt by
Meridian Mutual of dividends on the Common Shares of the
Company held by it, further changes in the capital structure of
Security, changes in the asset values of Meridian Mutual or
Security, or different effective rates of income taxation which
disproportionately affect the surplus of Security and Meridian
Mutual.
The Company and Meridian Mutual have conflicting interests with
respect to the establishment of the respective ratios of
Security and Meridian Mutual under the pooling agreement,
the allocation of expenses not related to insurance underwriting,
business and investment philosophies, profit objectives, cash
management, dividend policy and possibly other matters.
The business and operations of the Company are
integrated with and dependent upon the business and
operations of Meridian Mutual. Management of Meridian
Mutual determines which expenses are associated with
underwriting operations (and therefore shared by
Meridian Mutual and Security under the pooling
agreement), and also selects and values the assets
and liabilities transferred between Meridian Mutual and
Security pursuant to the pooling agreement. The
pooling agreement contains no specific provisions
regarding the procedures to be followed in making these decisions.
In arriving at decisions involving matters in which
Meridian Mutual has an interest, the directors of
the Company will be governed by their fiduciary duties
to the Company and its shareholders, but those
directors who also are directors of Meridian Mutual
also owe fiduciary duties to the policyholders of
Meridian Mutual, and no procedures have been
established under which those decisions would be made by
disinterested directors. The terms of the pooling
agreement preclude conflicts which could arise in
deciding which risks are to be insured by each of
the participants by making the results of the operations
of both participants dependent on the results of the
total business covered by the pooling agreement.
Because the pooling agreement covers all of the
property and casualty business of the parties, both companies
will have identical underwriting ratios from the pooled business as
long as the pooling agreement remains in effect.
The pooling agreement has no fixed term and provides that
it is to remain in force until canceled by the mutual
consent of Security and Meridian Mutual. The pooling agreement may be
amended or terminated without the necessity of a vote by the shareholders
of the Company. In the event of termination of the pooling
agreement, Security would transfer back to Meridian Mutual
the liabilities ceded to it by Meridian Mutual and Meridian Mutual would
transfer back to Security the liabilities ceded to it by
Security, and each party would receive from the other
assets in an amount equal to the amount of the
policy liabilities received by it. If the pooling
agreement had been terminated at the end of February
1996, approximately nine percent of the assets and
liabilities subject to the pooling agreement would have
been transferred to Security. The Company would
continue to own all of the outstanding Common Shares of
Security, and the Company's assets would consist of
investments and other assets in an amount approximately
equal to consolidated shareholders' equity. In the event
of termination of the business relationships between
the Company and Meridian Mutual, Security would
have no underwriting, sales, claims processing, data
processing operations, or other administrative services.
The approval of the Indiana Insurance Commissioner
is required to change the participation percentages of
the parties to the pooling agreement or to terminate the
pooling agreement; however, the requirement for such
approvals is for the protection of the policyholders
of Security and Meridian Mutual and not for the
protection of shareholders of the Company. The
Company intends that Security will continue its
participation in the pooling agreement, absent some
unforeseen change in circumstances.
EXECUTIVE COMPENSATION
All of the Company's officers also serve as officers
of Meridian Mutual. The following table sets forth
information with respect to the aggregate compensation
paid during each of the last three years by the Company
and Meridian Mutual to the Company's Chief Executive
Officer and each of the four other most highly
compensated executive officers of the Company whose
salary and bonus, for their services to both the Company
and Meridian Mutual, exceeded $100,000 during 1995.
Annual compensation includes amounts deferred at the
officer's election.
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards Payouts
Securi-
ties
Other Under-
Annual lying All Other
Name and Compen- Options/ LTIP Compen-
Principal Salary Bonus sation SARS Payouts sation
Position Year ($) ($)(1) ($)(2) (#)(3) ($)(4) ($(5)
Norma J. Oman 1995 $258,558 $260,000 $135,656 -0- -0- $122,377
President & Chief 1994 244,904 247,500 73,095 75,032 $71,250 2,700
Executive Officer 1993 220,192 67,500 74,841 -0- 60,500 2,698
Steven R. Hazelbaker 1995 124,423 87,500 -0- -0- -0- 1,499
Vice President 1994 108,077 25,000 -0- -0- -0- -0-
Chief Financial 1993(6)
Officer & Treasurer
Brent Hartman 1995 118,846 96,000 2,813 -0- -0- 9,718
Sr. Vice President 1994 100,346 88,000 38,333 22,737 47,500 1,806
1993(6)
J. Mark McKinzie 1995 114,423 80,500 8,292 -0- -0- 2,746
Vice President 1994 109,423 66,000 42,889 16,674 47,500 1,970
Secretary and 1993 104,469 21,000 44,972 -0- 36,300 1,454
General Counsel
Timothy J. Hanrahan 1995 112,251 60,000 29,945 -0- -0- 4,141
Vice President 1994 93,156 56,100 38,828 14,173 47,500 1,676
1993(6)
(1) The bonuses reflect cash earned during the fiscal year
and paid during the next fiscal year.
(2) The 1995 Other Annual Compensation reports a) tax
reimbursement payments of $14, 389, $1,638, $7,117,
and $8,993 for Ms. Oman, Mr. Hartman, Mr. McKinzie, and Mr.
Hanrahan, respectively, and b) the taxable portion of exercised
stock options, that being the difference between the fair market
value of the stock on the date of exercise and the option price,
amounting to $121,267, $1,175, $1,175, and $20,952 for
Ms. Oman, Mr. Hartman, Mr. McKinzie, and Mr. Hanrahan, respectively.
The 1994 Other Annual Compensation reports tax reimbursement
payments. The 1993 Other Annual Compensation includes: (a) car
allowance and gross-up of taxes thereon: Ms. Oman,$16,967;
Mr. McKinzie, $14,134; (b) gross-up payments for tax liabilities
incurred on the vesting of Common Shares under the
February 1992 restricted stock award: Ms. Oman, $47,481; Mr.
McKinzie, $27,248.
(3) Options to acquire Common Shares granted pursuant to
the Employee Incentive Stock Plan.
(4) In 1994 under a December 1992 restricted stock grant,
Ms. Oman and Messrs. McKinzie, Hartman, and Hanrahan became
vested in 6,000, 4,000, 4,000, and 4,000 Common Shares, respectively,
valued at $11.875 per share on the vesting date. In 1993 under a
February 1992 restricted stock award, Ms. Oman and Mr. McKinzie became
vested in 5,500 and 3,300 Common Shares, respectively,
valued at $11.00 per share on the vesting date.
(5) For 1995, consists of Meridian Mutual's matching
contributions of $3,600, $2,852, $1,499, $2,746, and $2,334
to the Section 401(k) deferred compensation accounts of Ms. Oman,
Mr. Hartman, Mr. Hazelbaker, Mr. McKinzie, and Mr. Hanrahan,
respectively; and accruals under theSupplemental Retirement Income
Plan of $118,777, $6,866, and $1,807 for the accounts of Ms.
Oman, Mr. Hartman, and Mr. Hanrahan, respectively. For 1994,
consists of Meridian Mutual's matching contributions of
$2,700, $1,970, $1,806, and $1,676 to the Section 401(k) deferred
compensation accounts of Ms. Oman, Mr. McKinzie, Mr. Hartman,
and Mr. Hanrahan, respectively. For 1993, consists of Meridian
Mutual's matching contributions of $2,698 and $1,454 to
the Section 401(k) deferred compensation accounts of
Ms. Oman and Mr. McKinzie, respectively.
(6) No disclosure is required since he was not an
executive officer of the Company at any time during that
year.
The officers of MIGI serve at the discretion of the
Board of Directors which elects the officers for a
term of one year. There is no family relationship between any
of the officers of the Company.
Mr. McKinzie, age 42, has been an attorney for
MIGI, Meridian Mutual, and Security since 1989, serving
as General Counsel and Secretary of all three companies
since 1992. He was elected a Vice President of the
Company, Meridian Mutual, and Security in 1993.
Mr. Hartman, age 48, was elected a Senior Vice President
of MIGI, Mutual, and Security in 1995. He was
elected a Vice President of MIGI in 1994 and a
Vice President of Meridian Mutual and Security in
1993. Mr. Hartman has been employed by Meridian since 1976.
Mr. Carl W. Buedel, age 49, was elected a Vice President of
MIGI in 1994 and a Vice President of Meridian Mutual and Security
in 1990. Currently serving as Director of the Corporate
Underwriting Division, Mr. Buedel has been a Meridian Mutual
employee since 1981.
Mr. Hanrahan, age 50, was elected a Vice President of
MIGI in 1994 and has been a Vice President of Meridian
Mutual and Security for more than the past five
years. A Meridian Mutual employee since 1981, Mr.
Hanrahan is Director of Strategic Business Development.
Mr. Hazelbaker, age 40, was elected Chief
Financial Officer and Treasurer of MIGI, Meridian
Mutual, and Security in 1994 and a Vice President of
all three companies in 1995. From 1987 until joining
the Company in 1994, he was a partner with Coopers &
Lybrand L.L.P.
AGGREGATED OPTION/SAR EXERCISES IN 1995 AND
1995 YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect
to the executive officers named in the Summary Compensation
Table for options exercised during 1995 and for unexercised options
held at December 31, 1995. The Company does not have
any outstanding stock appreciation rights.
Number of
Securities
Underlying
Unexercised Value of
Options/SARs Unexercised
at Fiscal In-the-Money
Year End(#) Options/SARs
Exer- at Fiscal
Shares Value cisable (E) Year End ($)(2)
Acquired Realized Unexer- Exercisable (E)/
Name On Exercise (#) ($)(1) cisable (U) Unexercisable (U)
Norma J. 25,011 E $ 75,033 E
Oman 19,760 $121,267 50,021 U 150,063 U
Steven R. 6,063 E 18,189 E
Hazelbaker -0- -0- 12,126 U 36,378 U
J. Mark 5,558 E 16,674 E
McKinzie 200 1,175 11,116 U 33,348 U
Brent 7,579 E 22,737 E
Hartman 200 1,175 15,158 U 45,474 U
Timothy J. 4,725 E 14,175 E
Hanrahan 3,492 20,952 9,448 U 28,344 U
(1) Aggregate market value of the Common Shares covered by
the option less the aggregate price paid by the executive.
(2) Amounts reflecting gains on outstanding options are based on
the December 29, 1995, closing stock price which was $14.875.
Pension Plan
Meridian Mutual maintains for the benefit of eligible employees a
defined benefit pension plan, designated as The Meridian Mutual
Insurance Company Pension Plan. Under the plan, all employees of
Meridian Mutual or its subsidiaries completing more than 1,000 hours of
employment in a 12-month period become eligible to participate in the
plan. The following table sets forth the range of estimated annual
benefits payable upon retirement for graduated levels of average annual
earnings and years of service for employees under the plan, based on
retirement at age 65 in 1996. The average annual earnings can not
exceed the $150,000 maximum compensation limit for purposes of pension
calculations.
PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30 35
$120,000 $28,915 $38,553 $48,191 $57,830 $67,468
200,000 36,790 49,053 61,316 73,580 85,843
250,000 36,790 49,053 61,316 73,580 85,843
350,000 36,790 49,053 61,316 73,580 85,843
450,000 36,790 49,053 61,316 73,580 85,843
550,000 36,790 49,053 61,316 73,580 85,843
650,000 36,790 49,053 61,316 73,580 85,843
The plan provides a pension annuity beginning at age 65 of
1.125 percent of the employee's final monthly earnings
(the employee's average monthly base pay during his or
her five highest consecutive salary years out of the
last ten) for each year of credited service, plus
.625 percent of the employee's final monthly earnings
in excess of the monthly Social Security covered
compensation, if any, for each year of credited service
(calendar years during which the employee completes at least
1,000 hours of employment) to a maximum of 35 years.
There are also provisions for delayed retirement benefits,
early retirement benefits, disability and death benefits,
optional methods of benefit payment, payments to an employee who
leaves after a certain number of years of service, and payments to
the employee's surviving spouse. Early retirement
benefits are available after age 55. Benefits listed in
the table are computed based on a straight life annuity
and are not subject to any deduction for Social Security
or other offset amounts. The individual maximum annual
benefit allowed under Section 415 of the Internal
Revenue Code is $120,000 for 1996. The
compensation covered by the plan consists of salary and
cash bonus, which for 1995 for the executives named
in the Summary Compensation Table amounted to: Ms. Oman,
$531,084; Mr. Hazelbaker, $149,423; Mr. Hartman,
$206,846; Mr.McKinzie, $195,409; Mr. Hanrahan, $168,351.
The estimated credited years of service for each of
the individuals named in the Summary Compensation Table
as of January 1996 are as follows:
Estimated Years
of Credited
Service
Norma J. Oman 22
Steven R. Hazelbaker 2
J. Mark McKinzie 7
Brent Hartman 20
Timothy J. Hanrahan 15
Supplemental Retirement Income Plan
The Supplemental Retirement Income Plan (the "Plan") was established
by Meridian Mutual for certain of its employees who participate in
the Meridian Mutual Insurance Company Pension Plan, solely for the
purpose of providing benefits in excess of the limitations
imposed by Section 401(a)(17) and Section 415 of the Internal
Revenue Code on plans to which those Sections apply.
The Supplemental Retirement Benefit payable to an eligible
Participant in the form of a straight life annuity
over the lifetime of the Participant only, commencing on his Normal
Retirement Date, shall be a monthly amount equal to the
difference between (a) the monthly amount of the Qualified Plan
Retirement Benefit to which the Participant would have been
entitled under the Qualified Plan, if such Benefit were computed
without giving effect to the limitations on benefits imposed by
Section 401(a)(17) and Section 415 of the Code, and (b) the monthly
amount of the Qualified Plan Retirement Benefit actually payable
to the Participant under the Qualified Plan.
The following table sets forth the Supplemental Retirement Benefit
payable upon retirement for graduated levels of average annual
earnings and years of service for Participants under the Plan,
based on retirement at age 65 in 1996. The benefits in the table are
not subject to any deduction for Social Security or other offset amounts.
The 1995 compensation covered by the Plan for the executives named
in the Summary Compensation Table is listed above under the
caption "Pension Plan," as are the estimated years of credited
service for the same individuals.
Supplemental Retirement Income Plan Table
Years of Service
Remuneration 15 20 25 30 35
$170,000 $ 5,250 $ 7,000 $ 8,750 $ 10,500 $ 12,250
200,000 13,125 17,500 21,875 26,250 30,625
250,000 26,250 35,000 43,750 52,500 61,250
350,000 52,500 70,000 87,500 105,000 122,500
450,000 78,750 105,000 131,250 157,500 183,750
550,000 105,000 140,000 175,000 210,000 245,000
650,000 131,250 175,000 218,750 262,500 306,250
Executive Bonus Compensation Plan
Meridian Mutual maintains a bonus compensation plan
for key executive employees. Plan participants are
chosen each year by the President, subject to approval of
the Compensation Committees of the Meridian Mutual and
MIGI Boards of Directors. The purpose of the
plan is to establish compensation commensurate
with corporate performance compared to goal. Criteria for
determining bonus payments generally are established
prior to the commencement of each year. The
performance measure for 1996 is the combined pre-tax
net income of Meridian Mutual and Security, with
graduated amounts of cash bonuses payable if Meridian
Mutual's and Security's financial performance meets the
threshold level of 80 percent of goal or exceeds it up
to a maximum of 120 percent of goal. Performance
relative to the predetermined goals is evaluated as soon
as practicable after the close of the year. Actual
bonus awards are determined on the basis of this
evaluation and paid in cash.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of MIGI's Board of
Directors, together with the Compensation Committee of
Meridian Mutual, is responsible for establishing and
administering the executive compensation program for MIGI
executives, all of whom are Meridian Mutual employees.
Both of these Compensation Committees are composed entirely of
directors who are not employees of the Company.
Compensation Policy
The goal of MIGI's executive compensation policy is
to attract, motivate and retain competent personnel,
while at the same time ensuring that an appropriate
relationship exists between executive pay and the performance
of the Company. In establishing the base salary portion of
executive compensation, the Committee gives
significant consideration to factors such as
maintaining the Company's competitiveness, establishing
efficient and effective use of Company resources,
preserving the Company's good standing with
regulatory and rating agencies, overseeing development
of adequate loss reserves, managing daily operations, and
developing and achieving long-term and strategic objectives, but
the Committee has assigned no relative weights to these
factors. Through bonus compensation plans, the Committee
seeks to reward the attainment of targeted income
goals. The Compensation Committee's philosophy is
to slow the growth in base salary while putting a greater
portion of total compensation at risk through the bonus
plan. Additionally, the Committee seeks to provide equity-
based incentives to further motivate executives over the
long term to respond to MIGI's business challenges and
opportunities as owners rather than just as
employees. It is the intention of the Compensation
Committee that executive annual compensation shall
continue to be tax deductible to the Company.
In determining appropriate levels of
executive compensation, the Compensation Committee annually
evaluates salary surveys produced by independent
compensation consulting firms. For the positions of
Chief Executive Officer and Chief Financial Officer,
the surveys provide data to compare the Company with
other insurance companies, as well as across all industries,
based upon a number of parameters, including comparable
asset levels, direct written premiums, and net written premiums.
For other executive positions, salary surveys comparing
the Company with other insurance companies of similar
asset and premium levels are utilized. Some of the
insurance companies participating in the salary
surveys are included in the Total Return Industry
Index for Nasdaq Insurance Stocks, as shown in the
Stock Performance Chart of this Proxy Statement.
The cash bonus compensation plan is the vehicle by
which executives can earn additional compensation,
depending on the attainment by Meridian Mutual and
Security of certain levels of annual pre-tax income.
See "Executive Bonus Compensation Plan." The size of
the cash bonus awarded as a percentage of base salary
is benchmarked annually against the salary surveys
and other information provided by independent compensation
consulting firms.
The Company's long-term incentive program consists
of grants made under the Employee Incentive Stock Plan.
This plan provides for the grant of incentive stock
options, nonqualified stock options, appreciation rights
and restricted stock awards to key employees of
Meridian Mutual or a subsidiary of MIGI. Options
granted in 1991 could be exercised through February
1996. These option awards were issued at graduated
levels to the Chief Executive Officer, Senior Vice
President, and other executive officers,
commensurate with the amount of responsibility for
their positions. In early 1994 the Compensation Committee adopted a
longterm incentive plan designed by an outside consultant.
Under this plan each member of the executive group received
options which have a ten-year term and become exercisable
in one-third increments beginning March 2, 1995. The size
of the option grant is a percentage of the individual's
base salary, with separate percentages applicable to the
Chief Executive Officer, Senior Vice President, and all
other executive officers, again commensurate with
the amount of responsibility for their positions. In
establishing the size of the grants, the Committee
considered the outstanding 1991 options, as well as
observed market practices for similar positions in stock
insurance companies, some of which are included in the
Total Return Industry Index for Nasdaq Insurance Stocks.
Bases for CEO Compensation
The Company's net income for 1995 was a record-high
$11.6 million, as compared to $9.1 million for
1994. MIGI's insurance operations produced strong
financial results with a 100.2 percent statutory
combined ratio for 1995, better than 1994's combined
ratio of 101.8 percent and significantly better than
the insurance industry average. The Company's total
revenues increased to $159.8 million in 1995 from
$149.3 million in 1994. Net premiums earned in
1995 increased 6.6 percent over 1994 to $143.9
million.
The Chief Executive Officer's base salary was
increased during 1995 to reward individual
accomplishments in, among other things, further
streamlining operations, improving service to
customers, expanding markets and achieving other long-
range business and operating objectives,
without assigning relative weights to these factors.
The new base salary was below the insurance-industry average for
chief executive officers of companies with direct and
net written premiums over $200 million, a benchmark
achieved by the consolidated operations of Meridian
Mutual and Security in 1995. In comparison to
chief executive officers of similarly-sized
companies across all industries, her base salary was
below the average.
In recognition of Ms. Oman's responsibility for the
Company's success in exceeding the maximum established
pretax income target for 1995, the Compensation
Committee awarded her a cash bonus equal to 100 percent
of her base salary. This bonus represented a greater
percentage of base salary than the average bonus paid
for 1994 results (the latest information available) to
chief executive officers in the insurance industry
salary surveys and to chief executive officers across
all industries. Ms. Oman's below-average base salary,
combined with her above-average cash bonus, produced
a total compensation package that was higher than the
average paid to chief executive officers of the
comparison companies. This illustrates the
Compensation Committee's philosophy to reward
exceptional performance and to place a greater portion
of total compensation at risk through the bonus plan.
Compensation of Other Executive Officers
With respect to compensation of other executives of
the Company, the Compensation Committee utilizes salary
surveys by independent consultants to establish
base salaries. During 1995, the executives' base salaries
were adjusted relative to the assignment of internal
responsibility, to their individual contributions to
the Company's performance, and to the results of the
latest salary surveys, without applying relative
weights to these factors. These salaries are below
the competitive range of those persons holding
comparably responsible positions at similarly-
sized insurance companies, both regionally and
nationally; however, the bonus opportunities for
the Company's executives are greater than those
offered by the competition. The Compensation Committee's
philosophy is to put the bonus award at risk and to compensate for
that risk with a slightly-higher-than-average total
compensation package when the bonus is earned.
As described above, bonus compensation is tied to the
attainment of corporate performance goals. In
recognition of the executives' responsibility for the
Company's success in exceeding the maximum established
pre-tax income target for 1995, the Compensation
Committee awarded these officers cash bonuses equal to
from 60 to 80 percent of their base salaries. The
individual bonus amount was determined by the
executive's position of employment and as a percentage
of year-end salary.
The actual levels of salary and bonus paid to
the executives listed in the Summary Compensation
Table were slightly higher than the comparison
companies surveyed because of the bonus payout and the
Compensation Committee's philosophy of putting the bonus
award at risk.
MIGI Compensation Committee Meridian Mutual Compensation Committee
Van P. Smith, Ramon L.Humke, and Van P. Smith, Ramon L. Humke, and
Thomas H. Sams Martha D. Lamkin
Stock Performance Chart
The following chart compares the yearly percentage
change in the cumulative total stockholder return on
the Company's Common Shares during the five fiscal
years ended December 31, 1995, with the cumulative
total return of the Center for Research in Securities
Prices (CRSP) Total Return Index for The Nasdaq Stock
Market (U.S. Companies) and the CRSP Total Return
Industry Index for Nasdaq Insurance Stocks.
The comparison assumes $100 was invested on December
31, 1990, in the Company's Common Shares and in each of
the foregoing indices and assumes reinvestment of
dividends. The CRSP Total Return Industry Index for
Nasdaq Insurance Stocks includes all insurance
companies quoted on the Nasdaq stock market within
the SIC codes 631 and 633. Upon written
request to MIGI's Secretary, the Company will undertake
to make accessible the identity of those companies
listed on the Nasdaq insurance stock index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
MIGI, NASDAQ STOCK MARKET (U.S.), NASDAQ INSURANCE STOCKS
NASDAQ TOTAL NASDAQ
MIGI MARKET (U.S.) INS. STOCKS
1990 $100.00 $100.00 $100.00
1991 152.63 160.56 140.96
1992 223.57 186.86 190.79
1993 240.61 214.51 204.06
1994 229.45 209.68 192.04
1995 339.26 296.30 272.85
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee consists of Van
P. Smith, Thomas H. Sams, and Ramon L. Humke, Chairman
of the MIGI Board of Directors. The bylaws of the Company
provide that the Chairman of the Board is an officer of
the Company, but Mr. Humke is not an employee of the
Company.
Change in Control Agreement
The Board of Directors of Meridian Mutual approved
the execution of a Change in Control Agreement
("Agreement") between Meridian Mutual and Ms. Oman and
Mr. McKinzie on March 18, 1992, and between Meridian Mutual
and Messrs. Hartman and Hazelbaker on June 29, 1994.
Under the Agreement, a "change in control" shall have occurred
if there is a merger or consolidation to be reported
to the Indiana Department of Insurance or if "(a) any
person or entity, other than a trustee or fiduciary
holding securities under an employee benefit plan of the
Company, is or becomes the beneficial owner, directly or
indirectly, of the Company representing fifty percent
(50%) or more of the combined voting power of the
Company's then outstanding voting securities (in the
event of a demutualization); (b) there is a merger
or consolidation of the Company in which the
Company does not survive as an independent Company; (c)
the business or businesses of the Company for which
your services are principally performed are disposed of by
the Company pursuant to a partial or complete liquidation of
the Company, a sale of assets of the Company or otherwise; or
(d) there is a voluntary election to the majority of
the Board of Directors of persons selected by a person
or entity in exchange for any material consideration to
the Company by said person or entity." For purposes
of this paragraph only, the word "Company" refers to
Meridian Mutual.
Upon termination of employment of any of these
executive officers within two years after a "change in control,"
the affected officer shall continue to receive his or her
base salary, at the rate of compensation existing prior to
the "change in control," plus certain other benefits
provided for full-time employees, for two years from
the date of separation of employment, unless
dismissed for "cause." Securing other gainful employment
will reduce or eliminate payments under this Agreement during the
second year after separation of employment. The Meridian Mutual Board
of Directors may not waive or modify any provisions or
conditions of the Agreement without the written
consent of the other party to the Agreement, although
Meridian Mutual may elect not to extend the Agreement,
by notice to the executive officer given prior to
December 31 of the preceding year.
Compensation of Directors
Directors of MIGI who are also salaried employees
of Meridian Mutual receive no fees for services as
directors. MIGI Board members who are not salaried
employees of Meridian Mutual and who do not serve on the
Board of any affiliates are paid an annual retainer of
$10,000. Nonemployee MIGI Board members serving on the Board of
an affiliate receive a $1,000 annual retainer from MIGI.
All directors, other than salaried employees, receive per
diem meeting fees of $600 for each Board or Committee
meeting attended, not to exceed a total of $850 per
day for attendance at two or more Board or Committee
meetings on a single day. The Meridian Mutual
Chairman of the Board receives an additional $10,000
per year while the chairmen of one or more affiliated
Boards or one or more Board committees receive an
additional $1,600 per year for services in such
capacities.
Effective May 1, 1988, Meridian Mutual adopted a
defined benefit pension plan, designated as The
Meridian Mutual Insurance Company Nonemployee Directors'
Pension Plan, for the benefit of eligible nonemployee
directors of Meridian Mutual or any of its subsidiaries.
Nonemployee directors become eligible to participate in the plan
following the completion of five years of "credited
service," defined as all calendar years in which the
director has attended, as a nonemployee director, at
least 50 percent of the regularly scheduled quarterly
meetings for that calendar year. The plan provides a
monthly retirement allowance equal to 1.75 percent of the
final earnings for each year of credited service. Final
earnings mean the five consecutive years with the highest
average annual total fees paid during the period of directorship.
The monthly retirement allowance commences on the
director's retirement date and continues each month
thereafter during his or her lifetime. There are also
provisions for delayed retirement benefits, early
retirement benefits, limited death benefits, and an
optional method of benefit payment. Early retirement
benefits are available after age 55.
On May 4, 1994, MIGI's shareholders approved the 1994
Outside Director Stock Option Plan (the "Director
Plan"). An "Outside Director" is a director of either the
Company or Meridian Mutual who is not on the date of
grant an employee of the Company or Meridian Mutual or any of
their subsidiaries. Each Outside Director was granted an
Option to purchase 1,000 Common Shares on May 4, 1994,
and on May 3, 1995, and each Outside Director
automatically will be granted an Option to purchase
1,000 Common Shares on the date of each annual meeting
of shareholders in the years 1996 through 2003, unless
the Director Plan is terminated earlier. The exercise
price per share for each Option will be equal to the
fair market value of a Common Share on the date of grant
of the Option. No consideration will be paid by the
grantee to the Company for the granting of an Option. Each
Option will be exercisable commencing one year after the
date of grant, and each Option will expire no later than
ten years after the date of grant.
PROPOSAL TO APPROVE 1996 EMPLOYEE INCENTIVE STOCK PLAN
The Board of Directors has adopted, subject to
shareholder approval, the 1996 Employee Incentive
Stock Plan (the "Plan"). The Plan will replace the 1987
Employee Incentive Stock Plan, which expires on January 21, 1997.
The Board believes that over the years the Company's stock
plan has benefited the shareholders by allowing the
Company to attract and retain key employees who have
the ability to enhance the value of the Company and
by aligning the interests of key employees with those
of the shareholders through increased stock
ownership. The Board therefore recommends approval of
the Plan.
The following plan summary is qualified in its entirety
by reference to the full text of the Plan, which is
attached to this Proxy Statement as Exhibit A.
General Information
The Plan will be administered by a Committee of the
Board consisting of not less than three persons to be
appointed by the Board (the "Committee"). The
Committee will be authorized to grant to Key Employees
(as defined in the Plan) up to 750,000 shares of the Company's
Common Shares in the form of options, stock appreciation
rights ("SARs"), tandem SARs, or stock or restricted
stock awards. The Plan will become effective on May
8, 1996, if approved by the shareholders and will
expire on the tenth anniversary of its effective date
unless terminated earlier by the Board of Directors.
Authority of Committee
The Plan will be administered and interpreted by
the Committee, which may establish and amend rules
for the administration of the Plan. The Committee's
decisions shall be final and conclusive with respect
to the interpretation of the Plan and any award made
under it. The Committee will select persons to
receive grants from among the Key Employees, determine
the types of grants and number of shares to be awarded to
Key Employees, and set the terms, conditions, and provisions of
the grants consistent with the Plan. No member of the Committee
is eligible to receive awards under the Plan.
Eligible Employees
The Committee will determine those Key Employees
to receive an award from among the executive,
managerial, insurance professional, and administrative
employees of the Company, its subsidiaries, or
Meridian Mutual. Currently, approximately 500
employees would be eligible, including the Company's
six executive officers. The number of eligible
employees can be expected to vary from year to year.
Shares Subject to Plan
Common Shares offered under the Plan pursuant to
options, tandem SARs, stock or restricted stock
awards may be authorized but unissued Common Shares
or treasury shares. Subject to certain adjustments
under the Plan, no more than an aggregate of 750,000 Common Shares
shall be issuable upon exercise of options and tandem SARs and
pursuant to restricted stock awards and stock awards. SARs with
respect to no more than 250,000 Common Shares may be
granted under the Plan.
Amendment and Termination of Plan
The Board of Directors may suspend, terminate, or
amend the Plan at any time, except that shareholder
approval is required for any amendment that would:
increase the number of Common Shares subject to issue
under the Plan; materially modify the requirements as
to eligibility for participation in the Plan;
materially increase the benefits accruing to
participants under the Plan; make any other change
that would disqualify the Plan for purposes of the
exemption provided by Rule 16(b)-3(d)(3) of the
Securities and Exchange Commission; reduce the exercise price
of options below the fair market value of the Common Shares on the
date of grant; permit the award of tandem SARs other than in tandem
with an option; permit the exercise of an SAR during the first six
months of its term except as otherwise provided; permit the
exercise of an option or tandem SAR without
surrender of the related tandem SAR or option; or
extend the termination date of the Plan. No suspension,
termination, or amendment of the Plan may alter or
impair any outstanding award without the consent
of the participant.
Awards Under the Plan
Stock Options. The Committee may grant
nonqualified options and incentive stock options
("ISOs"). The Committee shall determine the option
price; however, the exercise price of an ISO shall be
not less than 100 percent of the fair market value
of Common Shares on the date of grant. The term of the
option and the period during which it may be exercised
are also established by the Committee, provided that
the term may not exceed ten years. The exercise price
may be paid in cash or, if permitted by the Committee,
by delivering to the Company previously-acquired Common
Shares of the Company having a fair market value
equal to the exercise price. Concurrently with the
award of options, the Committee may authorize reload
options to purchase for cash or shares a number of
Common Shares. At any time prior to six months before
an option's expiration date, the Committee may award
to the participant a tandem SAR related to the option.
Stock Appreciation Rights. The Committee may grant
SARs to Key Employees for a period of six months up to
five years as may be determined by the Committee. At
the end of such period, the participant shall receive
an amount equal to the appreciation in market value of
the SARs as determined in the Plan. That amount
will be payable in cash, Common Shares, or a
combination thereof, as determined by the Committee.
Restricted Stock Award. The Committee may issue
or transfer Common Shares under a restricted stock
grant, setting forth the restriction period
established by the Committee. The stock certificate
would be held in escrow by the Company until the end
of the restriction period. A breach of a
restriction will cause a forfeiture of the restricted
stock award. The grantee could not dispose of
the Common Shares prior to the expiration of the
restriction period although the grantee would be
entitled to vote the Common Shares and receive
dividends during the restriction period. Upon lapse
of the restrictions, the stock certificate would be
delivered to the grantee.
Unrestricted Stock Award. The Committee may
offer a participant who has earned a cash incentive the
right to receive payment of such bonus in the form of Common
Shares. Likewise, the Committee may require a
participant to take payment of such cash incentive in
the form of Common Shares. The stock award will be
valued at the fair market value of Common Shares on
the date the cash compensation would otherwise have
been paid.
Federal Income Tax Consequences of Stock Options
An optionee will recognize income and the Company will
not receive a deduction at the time of grant of an
option. The optionee will have no taxable income upon exercising
an ISO (except that the alternative minimum tax may apply),
and the Company will receive no deduction when an ISO
is exercised. Upon exercising a nonqualified stock
option, the optionee will recognize ordinary income in
the amount by which the fair market value exceeds the
option price; the Company will be entitled to a
deduction for the same amount. The treatment to an
optionee of a disposition of shares acquired through the
exercise of an option is dependent upon the length of time
the shares have been held and on whether such shares
were acquired by exercising an ISO or a nonqualified stock
option. Generally, there will be no tax consequence to the
Company in connection with the disposition of shares acquired
under an option except that the Company may be entitled to
a deduction in the case of a disposition of shares
acquired upon exercise of an ISO before the
applicable ISO holding periods have been satisfied.
The above statements are based upon those laws that are
in force on the date of this Proxy Statement and are
subject to any subsequent changes therein. Each Key
Employee who receives an option should discuss with
his or her tax adviser the anticipated federal and
state tax consequences of the Plan in light of the
employee's personal tax situation.
The Committee has made no determinations with respect
to any awards under this Plan. The closing price
of the Company's Common Shares on March 1, 1996, was $14
13/16 per share.
The Board of Directors recommends that the
shareholders vote FOR approval of the 1996 Employee
Incentive Stock Plan.
APPOINTMENT OF AUDITOR
The firm of Coopers & Lybrand L.L.P. served as
the independent auditor for MIGI for the fiscal year
ended December 31, 1995. The Board of Directors has not selected
an independent auditor for the current fiscal year
ending December 31, 1996. It is anticipated that
the Audit Committee, at its meeting scheduled for April
23, 1996, will recommend to the Board that Coopers &
Lybrand L.L.P. be selected as the independent
auditor for 1996. Representatives of Coopers &
Lybrand L.L.P. will be present at the Annual Meeting
to respond to appropriate questions and to make a
statement if they so desire.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be considered at
the 1997 Annual Meeting of Shareholders must be in
writing and received by MIGI's Secretary at MIGI's
principal executive offices at 2955 N. Meridian
Street, P.O. Box 1980, Indianapolis, IN 46206, not
later than November 29, 1996. Such proposals may
be included in next year's proxy statement if they
comply with certain rules and regulations promulgated
by the Securities and Exchange Commission and represent
a proper subject for shareholder action under Indiana
law.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of
1934 requires MIGI's directors and executive
officers, and persons who own more than ten percent of
a registered class of MIGI's equity securities, to file
with the Securities and Exchange Commission and provide
to MIGI initial reports of ownership and reports of
changes in ownership of Common Shares and other
equity securities of MIGI. To MIGI's knowledge,
based solely on a review of the copies of such reports
furnished to MIGI and written representations that no
other reports were required, during the fiscal year
ended December 31, 1995, its officers, directors and
greater than ten-percent beneficial owners have complied
with all Section 16(a) filing requirements applicable to
them.
OTHER MATTERS
Management is not aware of any matters to come before
the meeting which will require the vote of
shareholders other than those matters indicated in the
Notice of Meeting and this Proxy Statement. However,
if any other matters calling for shareholder action
should properly come before the meeting or any
adjournment thereof, those persons named as proxies in
the enclosed Proxy will vote thereon according to their
best judgment.
ANNUAL REPORT
MIGI's Annual Report for its fiscal year ended
December 31, 1995, is being mailed to MIGI's
shareholders with this Proxy Statement.
By Order of the Board of Directors,
Norma J. Oman
President and
Chief Executive Officer
March 28, 1996
INCENT96-16
MERIDIAN INSURANCE GROUP INC.
1996 EMPLOYEE INCENTIVE STOCK PLAN
ARTICLE I
Purpose and Effective Date
1.1. Purpose. The purpose of the Plan is to provide financial
incentives for selected Key Employees of the Meridian Group,
thereby promoting the long-term growth and financial success
of the Meridian Group by (i) attracting and retaining
employees of outstanding ability, (ii) strengthening the
Meridian Group's capability to develop, maintain, and direct
a competent management team, (iii) providing an effective
means for selected Key Employees to acquire and maintain
ownership of Meridian Stock, (iv) motivating Key Employees
to achieve long-range performance goals and objectives, and
(v) providing incentive compensation opportunities
competitive with those of other major corporations.
1.2. Effective Date and Expiration of Plan. The Plan shall be
effective May 8, 1996. Unless earlier terminated by the
Board pursuant to Section 7.3 the Plan shall terminate on
the tenth anniversary of its Effective Date. No Award shall
be made pursuant to the Plan after its termination date, but
Awards made prior to the termination date may extend beyond
that date.
ARTICLE II
Definitions
The following words and phrases, as used in the Plan, shall have
these meanings:
2.1 "Award" means individually or collectively, any Option,
Tandem SAR, SAR, or Stock or Restricted Stock Award.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means a committee of not less than three persons
appointed by the Board from the Compensation Committee of
the Board or from the Executive Committee of the Board, each
of whom shall be a Disinterested Person.
2.5 "Company" means Meridian Insurance Group, Inc. and its
successors and assigns.
2.6 "Disinterested Person" means any person who, at the time
discretion under the Plan is exercised, meets the definition
of a "disinterested person" in Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended, and then
applicable to the Company.
2.7 "Effective Date" means May 8, 1996.
2.8 "Fair Market Value" means, as of any specified date, an
amount equal to the mean between the reported high and low
bid prices of Meridian Stock on the specified date on the
National Association of Securities Dealers, Inc. Automated
Quotation System or any system then in use, or, if no such
quotation is available, the fair market value on the
specified date of the share of such stock as determined by
the Board in good faith, and at such time as the shares are
traded on the National Market System the price for purposes
of this paragraph shall be the last reported sales price on
the specified date.
2.9 "Incentive Stock Option" means an option within the meaning
of Section 422(b) of the Code.
2.10 "Key Employee" means an employee of one of the Companies in
the Meridian Group who occupies a responsible executive,
managerial, insurance professional, or administrative
position and who has the capacity to contribute to the
success of the Meridian Group.
2.11 "Meridian Group" means the Company and each of its'
subsidiaries and Meridian Mutual Insurance Company, on and
after the Effective Date.
2.12 "Meridian Stock" means common shares of the Company.
2.13 "Nonqualified Stock Option" means an Option granted under
the Plan other than an Incentive Stock Option.
2.14 "Option" means both a Nonqualified Stock Option and an
Incentive Stock Option to purchase Meridian Stock.
2.15 "Option Price" means the price at which Meridian Stock may
be purchased under an Option as provided in Section 5.4.
2.16 "Participant" means a Key Employee to whom an Award has been
made under the Plan.
2.17 "Personal Representative" means the person or persons who,
upon the death, disability, or incompetency of a
Participant, shall have acquired, by will or by the laws of
descent and distribution or by other legal proceedings, the
right to exercise an Option or the right to any Restricted
Stock Award theretofore granted or made to such Participant.
2.18 "Plan" means Meridian Insurance Group, Inc. 1996 Employee
Incentive Stock Plan.
2.19 "Reload Option" means an Option described in Section 5.7 of
the Plan.
2.20 "Restricted Stock" means Meridian Stock subject to the terms
and conditions of Sections 6.1 through Section 6.6 of the
Plan.
2.21 "Restricted Stock Award" means an Award granted under
Sections 6.1 through 6.6 of the Plan.
2.22 "Restriction Period" means a period of time determined under
Section 6.2 during which Restricted Stock is subject to the
terms and conditions provided in Section 6.3.
2.23 "SAR" means a stock appreciation right granted under Section 5.10.
2.24 "Stock Award" means an Award in the form of Meridian Stock
as described under Section 6.7 of the Plan.
2.25 "Stock Option Agreement" means an agreement entered into
between a Participant and the Company under Section 5.3.
2.26 "Subsidiary" means a corporation, domestic or foreign, the
majority of the voting stock of which is owned directly or
indirectly by the Company or Meridian Mutual Insurance
Company.
2.27 "Tandem SAR" means a stock appreciation right described in
Section 5.9 of the Plan.
ARTICLE III
Administration
3.1 Committee to Administer. The Plan shall be administered by
the Committee. The Committee shall have full power and
authority to interpret and administer the Plan and to
establish and amend rules and regulations for its
administration. The Committee's decisions shall be final
and conclusive with respect to the interpretation of the
Plan and any Award made under it.
A majority of the members of the Committee shall constitute
a quorum for the conduct of business at any meeting. The
Committee shall act by majority vote of the members present
at a duly convened meeting, which may include a meeting by
conference telephone call held in accordance with applicable
law. Action may be taken without a meeting if written
consent thereto is given in accordance with applicable law.
3.2 Powers of Committee. (a) Subject to the provisions of the
Plan, the Committee shall have authority, in its discretion,
to determine those Key Employees who shall receive an Award,
the time or times when such Award shall be made, and the
type of Award to be granted.
(b) The Committee shall determine the terms,
restrictions, and provisions of the agreement relating
to each Award, including such terms, restrictions, and
provisions as shall be necessary to cause certain
options to qualify as Incentive Stock Options. The
Committee may correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any
agreement relating to an Award, in such manner and to
the extent the Committee shall determine in order to
carry out the purpose of the plan. The Committee may,
in its discretion, accelerate (i) the date on which any
Option or SAR may be exercised, or (ii) the date of
termination of the restrictions applicable to a
Restricted Stock Award, if the Committee determines
that to do so will be in the best interests of the
Company and the Participants in the Plan.
ARTICLE IV
Awards
4.1 Awards. Awards shall be subject to the terms and conditions
of the Plan and to such other terms and conditions
consistent with the Plan as the Committee deems appropriate.
Awards under a particular section of the Plan need not be
uniform and Awards under two or more sections may be
combined in one agreement. Any combination of Awards may be
granted at one time and on more than one occasion to the
same Key Employee.
4.2 Eligibility For Awards. An Award may be made to any Key
Employee selected by the Committee. In making this
selection and in determining the form and amount of the
Award, the Committee may give consideration to the functions
and responsibilities of the respective Key Employee, his or
her present and potential contributions to the success of
the Meridian Group, the value of his or her services to the
Meridian Group, and such other factors deemed relevant by
the Committee.
4.3 Shares Available Under the Plan. The Meridian Stock to be
offered under the Plan pursuant to Options, Tandem SARs,
Restricted Stock Awards, and Stock Awards may be authorized
but unissued Meridian Stock or Meridian Stock previously
issued and outstanding and reacquired by the Company.
Subject to adjustment under Section 7.2, no more than an
aggregate of 750,000 shares of Meridian Stock shall be
issuable upon exercise of Options (including Reload Options)
and Tandem SARs and pursuant to Restricted Stock Awards and
Stock Awards granted under the Plan. SARs with respect to
no more than 250,000 shares of Meridian Stock may be granted
under Section 5.10 of the Plan. Any shares of Meridian
Stock subject to an Option which for any reason is canceled
or terminated without having been exercised, or any shares
of Restricted Stock which are forfeited, shall again be
available for Awards under the Plan. Shares subject to an
Option canceled upon the exercise of an SAR shall not again
be available for Awards under the Plan.
ARTICLE V
Stock Options and Stock Appreciation Rights
5.1 Award of Stock Options. The Committee may, from time to
time, subject to the provisions of the Plan and such terms
and conditions as the Committee may prescribe, award
Incentive Stock Options and Nonqualified Stock Options to
any Key Employee. Awards of Incentive Stock Options and
Nonqualified Stock Options shall be separate and not in
tandem.
5.2 Period of Option. (a) Unless otherwise provided in the
related Stock Option Agreement, an Option granted under the
Plan shall be exercisable only after twelve months have
elapsed from the date of grant. After the twelve-month
waiting period, the Option may be exercised at any time
during the term of the Option, in whole or in installments,
as specified in the related Stock Option Agreement. Subject
to Section 5.6, the duration of each Option shall not be
more than ten years from the date of grant.
(b) Except as provided in Section 5.6, an Option may
not be exercised by a Participant unless such
Participant is then, and continually (except for sick
leave, military service, or other approved leave of
absence) after the grant of the Option has been, an
employee of one of the Companies in the Meridian Group.
5.3 Stock Option Agreement. Each Option shall be evidenced by a
Stock Option Agreement, in such form and containing such
provisions not inconsistent with the provisions of the Plan
as the Committee from time to time shall approve.
5.4 Option Price, Exercise, and Payment. The Option Price of
Meridian Stock under each Option shall be determined by the
Committee, but the Option price of Meridian Stock under an
Incentive Stock Option shall be a price not less than 100
percent of the Fair Market Value of Meridian Stock at the
date such Incentive Stock Option is granted, as determined
by the Committee.
Options may be exercised from time to time by giving written
notice of exercise to the Treasurer of the Company,
specifying the number of shares to be purchased. No Option
may be exercised for less than ten shares unless the issue
of a lesser number is enough to exhaust the Option. The
notice of exercise shall be accompanied by payment in full
of the Option Price in cash or its equivalent, provided,
however, that if the Committee, in its discretion, so
provides in the related Stock Option Agreement, the Option
Price may be paid in whole or in part through the transfer
to the Company of shares of Meridian Stock previously
acquired by the Participant, provided the shares so
transferred have been held by the Participant for a period
of more than one year and, further provided, that no
Restricted Stock may be transferred as payment of the Option
Price. In the event such Option Price is paid, in whole or
in part, with shares of Meridian Stock, the portion of the
Option Price so paid shall be equal to the value, as of the
date of exercise of the Option, of such shares. The value
of such shares shall be equal to the number of such shares
multiplied by the average of the high and low sales prices
of Meridian Stock quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System on the
trading day coincident with the date of exercise of such
Option (or the immediately preceding trading day if the date
of exercise is not a trading day). Such shares must be
delivered (along with the portion to be paid in cash) within
three days after the date of exercise. If the Participant
fails to pay the Option Price within such three-day period,
the Committee shall have the right to take whatever action
it deems appropriate, including voiding the exercise of the
Option. The Company shall not issue or transfer Meridian
Stock upon exercise of an Option until the Option Price is
fully paid.
5.5 Limitations on Exercise of Incentive Stock Options. (a)
The aggregate Fair Market value (determined as of the time
such Option is granted) of Meridian Stock with respect to
which Incentive Stock Options are exercisable for the first
time by a Key Employee during any calendar year (under all
plans of the Company, and its Subsidiaries) shall not exceed
$100,000.
(b) An Incentive Stock Option shall not be awarded to
any Key Employee who, at the time of award, owns
Meridian Stock possessing more than ten percent of the
total combined voting power of all classes of stock of
the Company.
5.6 Termination of Employment. (a) If a Participant shall
cease to be employed by a Company in the Meridian Group for
reasons other than (i) death, (ii) discharge for cause, or
(iii) voluntary action of the Participant without the
written consent of the President of the Company (or the
President's delegate), the Participant may exercise an
Option at any time within three years after such
termination, to the extent of the number of shares covered
by such Option which were purchasable at the date of such
termination; provided, however, that an Option shall be so
exercisable only until the earlier of the expiration of such
three-year period or the expiration date of such Option.
(b) If a Participant shall cease to be employed by a Company in
the Meridian Group either (i) for cause or (ii) by voluntary
action of the Participant without the written consent of the
President of the Company (or the President's delegate), any
Options of such Participant shall expire and any rights
thereunder shall terminate immediately.
(c) Should a Participant die either while in the employ of a
Company in the Meridian group or after termination of such
employment (other than discharge for cause or by voluntary
action of the Participant without the written consent of the
President of the Company or the President's delegate), the
Option rights of such deceased Participant may be exercised
by his or her Personal Representative until the earlier of
one year after the Participant's death or three years after
his or her termination of employment to the extent of the
number of shares covered by such Option which were
purchasable at the date of such death except that an Option
shall not be so exercisable on any date beyond the
expiration date of such Option.
If a Participant who was granted an Incentive Stock Option
should die within thirty days prior to the expiration date
of such Option, if on the date of death the Participant was
then entitled to exercise such Option, and if the Option
expires without being exercised, the Personal Representative
of the Participant shall receive in settlement a cash
payment from the Company of a sum equal to the amount, if
any, by which the Fair Market Value (determined on the
expiration date of the Option) of Meridian Stock subject to
the Option exceeds the Option Price.
5.7 Reload Option (a) Concurrently with the award of Options
to a Participant under the Plan the Committee may authorize
Reload Options to purchase for cash or shares a number of
shares of Meridian Stock. The number of Reload Options
shall equal:
(i) the number of shares of Meridian Stock
used to exercise the underlying Options and
(ii) to the extent authorized by the
Committee, the number of shares of Meridian Stock
used to satisfy any tax withholding requirement
incident to the exercise of the underlying
Options. The grant of a Reload Option will become
effective upon the exercise of underlying Options
or Reload Options through the use of shares of
Meridian Stock held by the optionee for at least
12 months or such longer period as determined by
the Committee. Notwithstanding the fact that the
underlying option may be an Incentive Stock
Option, a Reload Option may qualify as an
"incentive stock option" subject to Section 422 of
the Internal Revenue Code of 1986.
(b) Each Stock Option Agreement shall state whether
the Committee has authorized Reload Options with
respect to the underlying Options. Upon the exercise
of an underlying Option or other Reload Option, the
Reload Option will be evidenced by an amendment to the
underlying Stock Option Agreement.
(c) The option price per share of Meridian Stock
deliverable upon the exercise of a Reload Option shall
be the Fair Market Value of a share of Meridian Stock
on the date the grant of the Reload Option becomes
effective.
(d) Each Reload Option is fully exercisable six months
from the effective date of grant. The term of each
Reload Option shall be equal to the remaining option
term of the underlying Option.
(e) The Committee may in its discretion limit the
number of Reload exercises available to a Participant,
or restrict the availability of a Reload Option until a
specified level of stock price appreciation occurs in
the underlying Options.
5.8 Shareholder Rights and Privileges. A Participant shall have
no rights as a shareholder with respect to any shares of
Meridian Stock covered by an Option until the issuance of a
stock certificate to the Participant representing such
shares.
5.9 Award of Tandem SARs. (a) At any time prior to six months
before an Option's expiration date, the Committee may award
to the Participant a Tandem SAR related to the Option.
(b) The Tandem SAR shall represent the right to
receive payment of an amount equal to the amount, if
any, by which the average of the high and low sales
prices of Meridian Stock quoted on the National
Association of Securities Dealers, Inc. Automated
Quotation System on the trading day immediately
preceding the date of exercise of the Tandem SAR
exceeds the Option Price.
(c) Tandem SARs shall be evidenced by either the Stock
Option Agreement or a separate agreement between the
Company and the Participant.
(d) A Tandem SAR shall be exercisable only at the same
time and to the same extent and subject to the same
conditions as the Option related thereto is
exercisable, except that the Committee may prescribe
additional conditions and limitations on the exercise
of any Tandem SAR. A Tandem SAR shall be transferable
only when the related Option is transferable, and under
the same conditions. The exercise of a Tandem SAR
shall cancel the related Option. Tandem SARs may be
exercised only when the value of a share of Meridian
Stock subject to the related Option exceeds the Option
Price. Such value shall be determined in the manner
specified in Section 5.9(b).
(e) A Tandem SAR shall be exercisable only by written
notice to the Treasurer of the Company and only to the
extent that the related Option is exercisable.
However, a Tandem SAR shall in no event be exercisable
during the first six months of its term, except in the
event of death or disability of the Participant prior
to the expiration of such six-month period.
(f) All Tandem SARs shall automatically be exercised
on the last trading day prior to the expiration of the
related Option, so long as the value of a share of
Meridian Stock exceeds the Option Price, unless prior
to such day the holder instructs the Treasurer
otherwise in writing. Such value shall be determined
in the manner specified in Section 5.9(b).
(g) Payment of the amount to which a Participant is
entitled upon the exercise of a Tandem SAR shall be
made in cash, Meridian Stock, or partly in cash and
partly in Meridian Stock, as the Committee shall
determine at the time of the Award. To the extent that
payment is made in Meridian Stock, the shares shall be
valued in the manner specified in Section 5.9(b).
(h) Each Tandem SAR shall expire on a date determined
by the Committee at the time of Award, or, if later,
upon the termination of the related Option.
5.10 Stock Appreciation Rights (a) Participants may be awarded
SARs for a period of five years or such shorter period
greater than six months as may be determined by the
Committee (the "Designated Period"). That Designated Period
may vary as among Participants and as among Awards to a
Participant. At the end of the Designated Period with
respect to a Participant, that Participant shall receive an
amount equal to the appreciation in market value of his or
her SARs as determined in Section 5.10(b) of the Plan. That
amount shall be payable in cash, Meridian Stock, or partly
in cash and partly in Meridian Stock (as determined in its
sole discretion by the Committee). The value of any shares
of Meridian Stock so payable shall be measured by the Fair
Market Value of Meridian Stock on the day on which the
Designated Period ends. No fractional shares shall be
issued but a Participant shall be entitled to a cash
adjustment for a fractional share that would otherwise be
issued.
(b) The market value of one SAR on a valuation date
for purposes of the Plan shall be considered to be the
Fair Market Value of one share of Meridian Stock on
that valuation date. The market value of SARs held by
a Participant on a valuation date shall be determined
by multiplying the number of SARs held by that
Participant by the market value of one SAR on that
valuation date. The appreciation in market value of
SARs for purposes of determining payments to be made to
a Participant shall be measured by determining the
market value of SARs held by that Participant on the
day on which the Designated Period of those SARs ends
and subtracting from that the market value of the same
SARs on the date awarded to that Participant. The
measurement of appreciation shall be made separately
with respect to each separate award of SARs.
(c) The SARs shall be used solely as a device for the
measurement and determination of the amount to be paid
to Participants. The SARs shall not constitute or be
treated as property or as a trust fund of any kind.
All amounts at any time attributable to the SARs shall
be and remain the sole property of the Company and all
Participants' rights hereunder are limited to the
rights to receive cash and shares of Meridian Stock as
provided in this Plan.
(d) In the event of an adjustment of shares of
Meridian Stock pursuant to Section 7.2, the number of
SARs of a Participant and the maximum number of SARs
and shares of Meridian Stock provided in Section 4.3
shall be adjusted in the same manner as shares of
Meridian Stock reflected by those SARs would be
adjusted.
5.11 Rules Relating to Exercise. In the case of a Participant
subject to the restrictions of Section 16(b) of the
Securities Exchange Act of 1934, as amended, no Tandem SAR,
SAR or other stock appreciation right (referred to in Rule
16b-3(e) or any successor rule under the Securities Exchange
Act of 1934, as amended (collectively, a "Stock Appreciation
Right") shall be exercised except in compliance with any
applicable requirements of Rule 16b-3 or any successor rule.
If a full or partial settlement in cash would result, (i)
such a Participant may not exercise a Stock Appreciation
Right or any related Option during the first six months of
the term of the Stock Appreciation Right or Option to be
exercised; and (ii) such a Participant may exercise a Stock
Appreciation Right only either: (A) during the period
beginning on the third business day following the date of
release of quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth
business day following such date, unless a different period
is specified by Rule 16b-3(e) or any successor rule; (B)
pursuant to an irrevocable election to exercise made at
least six months in advance of the effective date of the
election, which election shall be subject to the consent or
disapproval of the Committee; or (C) pursuant to an election
to exercise incident to death, retirement, disability or
termination of employment.
ARTICLE VI
Stock and Restricted Stock Awards
6.1 Award of Restricted Stock. (a) The Committee may make a
Stock Award or Restricted Stock Award or both to any
Participant, subject to this Article VI and to such other
terms and conditions as the Committee may prescribe.
(b) Each certificate for Restricted Stock shall be
registered in the name of the Participant and deposited
by him or her, together with a stock power endorsed in
blank, with the Company.
6.2 Restriction Period. At the time of making a Restricted
Stock Award, the Committee shall establish the Restriction
Period applicable to such Award. The Committee may
establish different Restriction Periods from time to time
and each Restricted Stock Award may have a different
Restriction Period, in the discretion of the Committee.
Restriction Periods, when established for each Restricted
Stock Award, shall not be changed except as permitted by
Section 6.3.
6.3 Other Terms and Conditions. Meridian Stock, when awarded
pursuant to a Restricted Stock Award, will be represented by
a stock certificate registered in the name of the
Participant who receives the Restricted Stock Award. Such
certificate shall be deposited with the Company as provided
in Section 6.1(b). The Participant shall be entitled to
receive dividends during the Restriction Period and shall
have the right to vote such Meridian Stock and all other
shareholder's rights, with the exception that (i) the
Participant will not be entitled to delivery of the stock
certificate during the Restriction Period, (ii) the Company
will retain custody of the Meridian Stock during the
Restriction Period, and (iii) a breach of a restriction or a
breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Award will cause
a forfeiture of the Restricted Stock Award. The Committee
may, in addition, prescribe additional restrictions, terms,
or conditions upon or to the Restricted Stock Award.
6.4 Restricted Stock Award Agreement. Each Restricted Stock
Award shall be evidenced by a Restricted Stock Award
Agreement in such form and containing such terms and
conditions not inconsistent with the provisions of the Plan
as the Committee from time to time shall approve.
6.5 Termination of Employment. The Committee may, in its sole
discretion, establish rules pertaining to the Restricted
Stock Award in the event of termination of employment (by
retirement, disability, death, or otherwise) of a
Participant prior to the expiration of the Restriction
Period.
6.6 Payment for Restricted Stock. Restricted Stock Awards may
be made by the Committee under which the Participant shall
not be required to make any payment for the Meridian Stock
or, in the alternative, under which the Participant, as a
condition to the Restricted Stock Award, shall pay all (or
any lesser amount than all) of the Fair Market Value of the
Meridian Stock, determined as of the date the Restricted
Stock Award is made. If the latter, such purchase price
shall be paid in cash as provided in the Restricted Stock
Award Agreement.
6.7 Unrestricted Stock Award. (a) Grant or Right to Receive.
The Committee, in its sole discretion, (a) may offer a
Participant who has earned a cash bonus or other cash
incentive award the right to receive payment of such bonus
or incentive award in the form of Meridian Stock, or (b) may
require a Participant who has earned a cash bonus or other
cash incentive award to take payment of such bonus or
incentive award in the form of Meridian Stock. Such Stock
Award of shares of Meridian Stock shall be valued at the
Fair Market Value of such shares on the date or dates the
cash compensation would otherwise be paid and shall not be
subject to the restrictions set forth in Sections 6.1 - 6.6
of the Plan.
(b) Participant Election. With respect to paragraph (a) of
this Section 6.7, the Participant shall communicate his
choice of cash or a Stock Award by an irrevocable written
election delivered to the Company no later than the date or
dates specified by the Committee. With respect to any
Participant who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended, such irrevocable election
shall become effective no earlier than six months and one
day following the date of the election; to change an
election such Participant must make a new irrevocable
election which shall be effective six months and one day
following the date of the new irrevocable election.
ARTICLE VII
Miscellaneous Provisions
7.1 Nontransferability. No Award under the Plan shall be
transferable by the Participant otherwise than by will or
laws of descent and distribution or pursuant to a qualified
domestic relations order. All Awards shall be exercisable
or received during the Participant's lifetime only by such
Participant or his Personal Representative. Any transfer
contrary to this Section 7.1 will nullify the Award.
7.2 (a) Recapitalization. The aggregate number of shares of
Meridian Stock which may be the subject of an Award, the
number of shares covered by each outstanding Award, and the
terms thereof relating to the value of Meridian Stock, shall
all be proportionately adjusted for any increase or decrease
in the number of issued shares of Meridian Stock resulting
from a subdivision or consolidation of shares or any other
capital adjustment, the payment of a share dividend, or
other increase or decrease in the shares of Meridian Stock
effected without receipt of consideration by the Company.
In the event that, prior to the delivery by the Company of
the Meridian Stock remaining under any Award, there shall be
a capital reorganization or reclassification of the Company
resulting in a substitution of other shares for common
shares, there shall be substituted for Meridian Stock the
number of substitute shares which would have been issued in
exchange for the common shares then remaining under the
Award if such common shares had been then issued and
outstanding.
(b) Merger, Dissolution. If the Company shall enter
into any agreement providing for the merger or
consolidation of the Company with or into any other
person, regardless of whether or not the Company shall
be the surviving or resulting corporation as a
consequence of such merger or consolidation, the
Company shall have the right to terminate all
outstanding Agreements entered into pursuant to Awards
and to thereby terminate all rights of the Participants
thereunder on thirty (30) days written notice to each
Participant; provided, however, that if such merger or
consolidation is not consummated within 180 days from
the date of the notice, all Agreements so terminated
shall be deemed to have been continuously in effect
since the date of execution thereof. In the event of a
dissolution or liquidation of the Company, the Company
shall give thirty (30) days written notice thereof to
each Participant, and all rights of the Participants
under all outstanding Agreements entered into pursuant
to an Award shall be deemed to be terminated upon such
dissolution or liquidation.
7.3 Amendment, Suspension, and Termination of Plan. (a) The
Board may suspend or terminate the Plan or any portion
thereof at any time, and may amend the Plan from time to
time in such respects as the Board may deem to be in the
best interests of the Company; provided, however, that no
such amendment shall, without stockholder approval, (i)
except as provided in Section 7.2, materially increase the
number of shares of Meridian Stock which may be issued under
the Plan (ii) materially modify the requirements as to
eligibility for participation in the Plan, (iii) materially
increase the benefits accruing to Participants under the
Plan. (iv) make any other change that would disqualify the
Plan for purposes of the exemption provided by Rule 16b-
3(d)(3) of the Securities and Exchange Commission, (v)
reduce the Option Price of an Incentive Stock Option below
the Fair Market Value of Meridian Stock on the day an
Incentive Stock Option is awarded, (vi) permit the award of
Tandem SARs other than in tandem with an Option, (vii)
permit the exercise of an SAR during the first six months of
its term except as otherwise provided herein, (viii) permit
the exercise of an Option or Tandem SAR without surrender of
the related Tandem SAR or Option, respectively, or (ix)
extend the termination date of the Plan. No such amendment,
suspension, or termination shall alter or impair any
outstanding Award without the consent of the Participant
affected thereby.
(b) With the consent of the Participant affected thereby, the
Committee may amend or modify any outstanding Award in any
manner to the extent that the Committee would have had the
authority under the Plan initially to grant such Award as so
modified or amended, including without limitation, to change
the date or dates as of which such Options, Tandem SARs or
SARs may be exercised or to remove the restrictions on
shares of Restricted Stock.
7.4 Nonuniform Determinations. The Committee's determinations
under the Plan, including without limitation, (i) the
determination of the Key Employees to receive Awards, (ii)
the form, amount, and timing of such Awards, (iii) the terms
and provisions of such Awards and (iv) the agreements
evidencing the same, need not be uniform and may be made by
it selectively among Key Employees who receive, or who are
eligible to receive, Awards under the Plan, whether or not
such Key Employees are similarly situated.
7.5 General Restriction. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee
shall determine that (i) the listing, registration, or
qualification of the shares of Meridian Stock subject or
related thereto upon any securities exchange or under any
state or federal law, (ii) the consent or approval of any
government or regulatory body, or (iii) an agreement by the
Participant with respect thereto, is necessary or desirable,
then such Award shall not become exercisable in whole or in
part unless such listing, registration, qualification,
consent, approval, or agreement shall have been effected or
obtained free of any conditions not acceptable to the
Committee.
7.6 Securities Act of 1933. Upon issuance of Meridian Stock to
the Participant, or his heirs, the recipient of that stock
shall represent that the shares of stock are taken for
investment and not resale and make those other
representations as may be necessary to qualify the issuance
of the shares as exempt from the Securities Act of 1933 or
any applicable state securities laws or to permit
registration of the shares and shall represent that he or
she shall not dispose of those shares in violation of the
Securities Act of 1933. The Company reserves the right to
place a legend on any stock certificate issued under the
Plan to assure compliance with this paragraph. No shares of
Meridian Stock of the Company shall be required to be
distributed until the Company shall have taken such action,
if any, as is then required to comply with the provisions of
the Securities Act of 1933 or any other then applicable
securities law.
7.7 Withholding of Tax. (a) Payment by Participant. Each
Participant shall, no later than the date as of which the
value of an Award or of any Meridian Stock or other amounts
received thereunder first becomes includable in the gross
income of the Participant for federal income tax purposes,
pay to the Company, or make arrangements satisfactory to the
Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with
respect to such income. The Company shall have the right to
deduct any such taxes from the salary of the Participant.
(b) Payment in Meridian Stock. A Participant my elect to
have such tax withholding obligation satisfied, in whole or
in part, by (i) authorizing the Company to withhold from
shares of Meridian Stock to be issued pursuant to any Award
a number of shares with an aggregate Fair Market Value (as
of the date the withholding is effected) sufficient to cover
the amount required to be withheld, or (ii) transferring to
the Company shares of Meridian Stock owned by the
Participant with an aggregate Fair Market Value (as of the
date the withholding is effected) sufficient to cover the
amount required to be withheld. With respect to any
Participant who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended, the following additional
restrictions shall apply:
(A) The election to satisfy tax withholding
obligations relating to an Award in the manner permitted by
this Section 7.7 shall be made either (1) during the period
beginning on the third business day following the date of
release of quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth
business day following such date, or (2) at least six months
prior to the date as of which the receipt of such an Award
first becomes a taxable event for federal income tax
purposes;
(B) Such election shall be irrevocable;
(C) Such election shall be subject to the consent or
disapproval of the Committee; and
(D) The Meridian Stock withheld to satisfy tax
withholding must pertain to an Award which has been held by
the Participant for at least six months from the date of
grant of the Award.
7.8 No Right to Employment. Neither the action of the Company
in establishing the Plan, nor any action taken by it or by
the Board or the Committee under the Plan, nor any provision
of the Plan, shall be construed as giving to any person the
right to be retained in the employ of the Company, Meridian
Mutual Insurance Company, or any Subsidiary of either.
7.9 Insofar as Key Employees who are directors or officers
subject to Section 16 of the Securities Exchange Act of
1934, as amended, are concerned (i) the Plan is intended to
comply with all applicable conditions of Rule 16b-3 and its
successors; (ii) all transactions involving Key Employees
who are directors or
officers are subject to such conditions, regardless of whether
such conditions are expressly set forth in the Plan; and
(iii) any provision of the Plan that is contrary to a
condition of Rule 16b-3 shall not apply to Key Employees who
are directors or officers.
Meridian Insurance
Group, Inc.
2955 North Meridian Street
P. O. Box 1980
Indianapolis, Indiana 46206
This proxy is solicited on behalf of the Board of Directors of the
Corporation.
The undersigned hereby appoints David M. Kirr, John T.
Hackett, and Norma J. Oman and each of them, proxies, with full
power of substitution, to vote as designated below all shares of
Meridian Insurance Group, Inc., which the undersigned would be
entitled to vote if personally present
at the Annual Meeting of Shareholders to be held on May 1, 1996, at
2:00 p.m. EST, and at any adjournment thereof.
1. ELECTION OF DIRECTORS
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all
nominees
Harold C. McCarthy, Sarah W. Rowland, and Van P. Smith
(Instruction: To withhold authority to vote for any
individual nominee, write that nominee's name on the
space provided below.)
2. PROPOSAL TO APPROVE EMPLOYEE INCENTIVE STOCK PLAN
___ FOR ___ AGAINST ___ ABSTAIN
3. In their discretion, the proxies are authorized to vote
upon
such other business as may properly come before the
meeting.
(continued and to be signed on other side)
This proxy when properly executed will be voted in the
manner directed herein by the undersigned
shareholders. If no direction is made, this proxy
will be voted FOR Proposals 1 and 2.
Please sign exactly as name appears below. When
shares are held as joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
Signature _______________________ ____________________________
(Signature if held jointly)
Dated , 1996
PLEASE MARK, SIGN, DATE, AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
REVOCABLE
PROXY
