SCHEDULE 14A
Rule 14a-101
INFORMATION REQUIRED IN PROXY
STATEMENT SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant
< Check the appropriate box:
< Preliminary Proxy Statement
<
Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
X Definitive Proxy Statement
< Definitive Additional Materials
< Soliciting Material Pursuant to Rule 14a-11 (c) or
Rule 14a-12
Meridian Insurance Group, Inc.
(Name of Registrant as Specified in its Charter)
Meridian Insurance Group, Inc.
(Name of Person(s) Filing Proxy Statement, if other than
Registrant)
Payment of filing fee (Check the appropriate box):
x No fee required.
< Fee computed on table below per Exchange Act Rules 14a-6
(i) (1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
__________________________________________________________
(2) Aggregate number of securities to which
transaction applies:
__________________________________________________________
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-
11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee Paid:
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< Fee paid previously with preliminary materials.
< Check box if any part of fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement number:
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(4) Date filed:
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April 7, 1997
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 14, 1997, 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
1996 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 14.
Sincerely,
Norma J. Oman
President and
Chief Executive
Officer
MERIDIAN INSURANCE GROUP, INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To be Held May 14, 1997
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 14, 1997, in
the Company's home office at 2955 North
Meridian Street, Indianapolis, Indiana, in the
Pennsylvania Room for the following purposes:
1. To elect four persons as directors;
2. To consider and vote upon a proposal to amend
the Company's Restated Articles of Incorporation
to create a new class of preferred shares; 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 14, 1997, 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, 1996, 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
April 7, 1997
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 April 7, 1997, 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 14, 1997, 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 amend the Company's
Restated Articles of Incorporation to create a new class
of preferred shares. 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. Proposal 2 will be approved at the Annual
Meeting if a quorum is present and votes cast in
favor of the proposal exceed votes cast against the
proposal. 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, neither broker nonvotes nor abstentions will
affect the determination of whether a nominee is
elected as a director or whether Proposal 2 is
approved.
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 14, 1997, 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 14, 1997, MIGI had
outstanding 6,779,375 Common Shares. A majority of
the outstanding shares, present in person or by proxy,
will constitute a quorum at the Annual Meeting. As of
March 14, 1997, Meridian Mutual Insurance Company
("Meridian Mutual") owned 3,150,000 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
Messrs. Barnette, Broughton, Humke, and Sams and in favor
of the proposal to amend the Company's Restated Articles of
Incorporation.
1
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table sets forth, as of March 14, 1997,
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
Union Automobile Insurance 677,000(1) 9.9%
Company
303 E. Washington Street
Bloomington, Illinois 61701
Franklin Resources, Inc. 400,000 (2) 5.9%
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin Advisory Services, Inc.
One Parker Plaza, 16th Floor
Ft. Lee, New Jersey 07024
Directors and Officers:
Ramon L. Humke 7,000(3) *
Norma J. Oman 96,142(4) 1.4%
Harold C. McCarthy 27,475(3) *
Sarah W. Rowland 2,200(3) *
Joseph D. Barnette, Jr. 7,000(3)(5)
*
Scott S. Broughton 21,000(6) *
David M. Kirr 7,000(3) *
John T. Hackett 4,500(3) *
Van P. Smith 3,000(3)(7) *
Thomas H. Sams 2,000(8)(9) *
Steven R. Hazelbaker 19,189(10) *
J. Mark McKinzie 24,174(11) *
Brent Hartman 30,407(12) *
Timothy J. Hanrahan 24,387(13) *
All directors and executive 301,966(14) 4.3%
officers as a group (15 persons)
*Beneficially owns less than one percent of
MIGI's outstanding Common Shares.
(1) According to information contained in a Schedule 13G
filing with the Securities and Exchange Commission made
by Union Automobile Insurance Company ("Union") dated
December 27, 1996, Union has sole voting and sole
dispositive power with respect to 677,000 Common Shares
beneficially owned by Union through its wholly-owned
subsidiaries, American Union Life Insurance Company
and Prairie State Farmers Insurance Company. Union
is owned by American Union Financial
Corporation, whose common stock is owned 50 percent
by Gregory M. Shepard and 50 percent by Tracy M.
Shepard.
(2) Franklin Advisory Services, Inc., Franklin Resources,
Inc., Charles B. Johnson, and Rupert H. Johnson, Jr.,
filed a Schedule 13G with the Securities and Exchange
Commission in February 1997 with regard to
400,000 Common Shares of MIGI. The Schedule 13G states
that those 400,000 Common Shares are beneficially owned by
one or more open or closed-end investment companies or
other managed accounts which are advised by direct and
indirect investment advisory subsidiaries ("Adviser
Subsidiaries") of Franklin Resources, Inc. ("FRI"). Such
advisory contracts grant to such Adviser Subsidiaries all
voting and investment power over the securities
owned by such advisory clients. Therefore, such Adviser
Subsidiaries may be deemed to be
beneficial owners of the Common Shares covered by the
Schedule 13G filing. Charles B. Johnson and Rupert H.
Johnson, Jr. ("Principal Shareholders") each own in
excess of 10 percent of the outstanding
common stock of FRI and are the principal shareholders of
FRI. FRI and the Principal Shareholders may be deemed to
be the beneficial owner of securities held by persons
and entities advised by FRI or its subsidiaries. FRI,
the Principal Shareholders, and each of the Adviser
Subsidiaries disclaim any economic interest or beneficial
ownership in any of the Common
Shares covered by the Schedule 13G filing.
(3) Includes options to purchase 2,000 Common Shares
granted under MIGI's 1994 Outside Director Stock Option
Plan.
(4) Includes 75,032 Common Shares which Ms. Oman has the
option to purchase under MIGI's Incentive Stock Plan.
(5) Includes 2,000 Common Shares held by Mr. Barnette's
wife, as to which stock he shares
voting and dispositive power.
(6) In connection with the Company's acquisition of
Citizens Security Group Inc.
("CSGI"), of which Mr. Broughton was President and
Chief Operating Officer, Mr. Broughton
entered into a Consulting Services Agreement with
the Company which,among other matters, provided for the
grant to Mr. Broughton of an option to purchase 20,000
Common Shares of the Company.
(7) 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.
(8) Includes 1,000 Common Shares owned by Waldemar
Industries, Inc.,which is solely owned by Mr. Sams.
(9) Includes options to purchase 1,000 Common Shares
granted under MIGI's 1994 Outside Director Stock Option
Plan.
(10) Includes 18,189 Common Shares which Mr. Hazelbaker
has the option to purchase under MIGI's Incentive Stock
Plan.
(11) Includes 16,674 Common Shares which Mr. McKinzie
has the option to purchase under MIGI's Incentive Stock
Plan.
(12) Includes 22,737 Common Shares which Mr. Hartman
has the option to purchase under MIGI's Incentive Stock
Plan.
(13) Includes 14,173 Common Shares which Mr. Hanrahan
has the option to purchase under MIGI's Incentive Stock
Plan.
(14) Includes 196,205 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 ten directors
divided into three classes of at least three directors
each, with the terms of one class of 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 Messrs. Joseph D. Barnette, Jr., Scott
S. Broughton, Ramon L. Humke, and Thomas H. Sams will
expire at the Annual Meeting, and Messrs. Barnette,
Broughton, Humke, and Sams 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 1998 or 1999.
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 2000:
Joseph D. Barnette, Jr. 57 Director
Scott S. Broughton 42 Director
Ramon L. Humke 64 Director
Thomas H. Sams 55 Director
Directors continuing in office
with terms expiring in 1999:
Harold C. McCarthy 70 Director
Sarah W. Rowland 64 Director
Van P. Smith 68 Director
Directors continuing in office
with terms expiring in 1998:
Norma J. Oman 49 President, Chief
Executive Officer
and Director
David M. Kir 59 Director
John T. Hackett 64 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, Indiana,
NA, and Banc One Indiana Corporation. He also serves as a
director of IPALCO Enterprises, Inc.
Mr. Broughton has served as a director of MIGI since
July 31, 1996. Mr. Broughton was President and Chief
Operating Officer of CSGI and its insurance subsidiaries
from 1992 through July 1996 when those companies were
acquired by MIGI. Since August 1996, he has been
Chairman and Chief Executive Officer of VIS'N, Inc., of
Red Wing, Minnesota, which provides claims and
information technology services to property and casualty
insurance 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. 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 1996, the MIGI Board of Directors held six
meetings. During 1996, 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, with the exception of
Mr. Smith. 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 1996.
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. As discussed under
"Description of Pooling Agreement," the Audit
Committee monitors the parties' relationships under the pooling
agreement.
The Compensation Committee, currently comprised of
Messrs. Smith, Humke, and Sams, met twice during 1996.
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. A committee
composed of Messrs. Smith, Humke, and Sams also
administers the 1996 Employee Incentive Stock Plan.
The Finance and Investment Committee presently consists
of Directors Barnette, Hackett, Humke, Kirr, and Oman.
The committee held four meetings during 1996. 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 and met once
during 1996. 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 1996. At the request of the Audit
Committee, the Pooling Agreement Committee, together with
Meridian Mutual's Pooling Agreement Committee, will
review the relationships among the parties under the
pooling agreement and determine whether
the percentage participation of the parties
continues to bear an appropriate relationship.
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. On July 31, 1996, the Company acquired CSGI and its
property and casualty insurance subsidiaries, Citizens Fund
Insurance Company ("Fund") and Insurance Company of Ohio
("ICO"), and became affiliated with Citizens Security
Mutual Insurance Company ("CSM"). References in this
Proxy Statement to "Citizens Security Group" include
Fund, ICO, and CSM.
MIGI's operations through its wholly-owned
subsidiaries, Security, Fund, and ICO, are interrelated
with the operations of CSM and Meridian Mutual, an Indiana
mutual property and casualty company. MIGI believes
that its various transactions with Meridian Mutual and
CSM, 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 and CSM. In addition, through 1996, Meridian Mutual
provided the facilities, employees and most services required
to conduct the business of MIGI. During 1996, MIGI
paid $293,633 to Meridian Mutual for administrative and
other services provided to MIGI.
In connection with the Company's acquisition of CSGI, the
Company entered into a Consulting Services Agreement
with Mr. Scott Broughton. The Consulting Services
Agreement is effective for a five-year period ending July 31,
2001, and provides that MIGI shall pay Mr. Broughton a consulting
fee of $175,000 per year in exchange for his consulting
services and advice regarding the Citizens Security
Group, as requested by the Company. In the event of Mr.
Broughton's disability or death prior to July 31, 2001, the
Company will continue to make the payments to Mr. Broughton
or his estate.
VIS'N, Inc., of which Mr. Broughton is Chairman and
CEO, has agreements with the Citizens Security Group to
provide claims handling and information technology
services to those companies. From the date of their acquisition
by MIGI through the end of 1996, the Citizens Security Group
paid VIS'N, Inc. $389,008 under the information
technology services agreement, which could be terminated
immediately for the reasons specified therein or will
expire July 31, 1999. For the same period during
1996, the Citizens Security Group paid VIS'N, Inc.
$1,242,713 for claims handling and administration. The claims
administration agreement is terminable by Citizens
Security Group immediately for the reasons specified in the
agreement or after July 31, 1999, at the election of Citizens
Security Group. The fees paid to VIS'N under these
agreements are lower that what Citizens Security Group
has spent historically for these services.
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 covering all of the
property and casualty insurance written by the parties.
With the acquisition of Citizens Security Group Inc., and
affiliation with CSM, the reinsurance pooling agreement
was amended effective August 1, 1996, to also include all the
property and casualty insurance written by CSM, Fund, and
ICO. Consequently, all premiums, losses, loss adjustment
expenses and the underwriting and administrative expenses
of Meridian Mutual, Security, CSM, Fund, and ICO are
shared among the parties in accordance with the
participation percentages established under the pooling
agreement: 74 percent for the Company's insurance
subsidiaries, 22 percent for Meridian Mutual, and four
percent for CSM. The participation percentages were fixed with
reference to the relative historical net written premiums of the
companies. Therefore, each company's relative share of
underwriting revenues (and losses and expenses) was not
significantly altered as an immediate result of the
acquisition. The previous 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 Boards of Directors of the Company and Meridian
Mutual have delegated to their respective Audit
Committees the responsibility of monitoring the
parties' relationships under the pooling agreement
pursuant to such procedures as those committees may
deem necessary and appropriate. 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 Mr. Hackett, Mr. Humke, and
Ms. Oman. Future events that could affect the
participation percentages among the parties include,
among others, the receipt by Meridian Mutual of
dividends on the Common Shares of
the Company held by it, changes in the capital structure
or asset values of Meridian Mutual, Security, CSM, Fund, or
ICO, different effective rates of income taxation, or
other factors which disproportionately affect the surplus
of the companies.
The Company and Meridian Mutual have conflicting
interests with respect to the establishment of the
respective ratios of the parties 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 the parties under the
pooling agreement), and also selects and values the
assets and liabilities transferred among Meridian
Mutual, Security, CSM, Fund, and ICO 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 all the
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, all the 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 with respect to any party to the
agreement until canceled by the mutual consent of
Meridian Mutual and the party wishing to terminate the
agreement. 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,
the terminating party would transfer back to Meridian Mutual
the liabilities ceded to it by Meridian Mutual and
Meridian Mutual would transfer back to the terminating
party the liabilities ceded to it by said terminating
party, 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 1997, approximately 12 percent of the assets
and liabilities subject to the pooling agreement would
have been transferred to the Company's insurance
subsidiaries. The Company would continue to own all of the
outstanding Common Shares of Security, ICO, and Fund.
The approval of the Indiana, Minnesota, and Ohio
Insurance Commissioners 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, Fund, ICO, CSM,
and Meridian Mutual and not for the protection of shareholders
of the Company. The Company intends that its insurance
subsidiaries will continue their 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 $100,000 during 1996.
Annual compensation includes amounts deferred at the officer's
election.
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards Payouts
Securities
Other Under- All
Annual lying LTIP Other
Compen- Options/ Pay- Compen-
Name and Salary Bonus sation SARs outs sation
Principal Year ($) ($)(1) ($)(2) ($)(3) ($)(4) ($)(5)
Position
Norma J. Oman 1996 $268,846 -0- $ 97,566 -0- -0- $110,319
President/Chief 1995 258,558 $260,000 135,656 -0- -0- 122,377
Executive Office 1994 244,904 247,500 73,095 75,032 $71,250 2,700
Steven R. Hazelbaker 1996 129,423 -0- -0- -0- -0- 3,883
Vice President 1995 124,423 87,500 -0- -0- -0- 1,499
Chief Financial 1994 108,077 25,000 -0- -0- -0- -0-
Officer and Treasurer
Brent Hartman 1996 128,846 -0- 1,900 -0- -0- 16,913
Senior V.President 1995 118,846 96,000 2,813 -0- -0- 9,718
1994 100,346 88,000 38,333 22,737 47,500 1,806
J. Mark McKinzie 1996 119,423 -0- 64,871 -0- -0- 3,583
Vice President 1995 114,423 80,500 8,292 -0- -0- 2,746
Secretary and 1994 109,423 66,000 42,889 16,674 47,500 1,970
General Counsel
Timothy J. Hanrahan 1996 103,538 -0- 66,723 -0- -0- 14,124
Vice President 1995 112,251 60,000 29,945 -0- -0- 4,141
1994 93,156 56,100 38,828 14,173 47,500 1,676
(1) The bonuses reflect cash earned during the
fiscal year and paid during the next fiscal year.
(2) The 1996 Other Annual Compensation includes
a) the pay-out for termination of executive
car allowance program: Ms. Oman, $45,000; Mr.
McKinzie, $35,000; and Mr. Hanrahan, $35,000; and
b) tax reimbursement payments of $44,434, $1,900, $29,419,
and $28,478 for Ms. Oman, Mr. Hartman, Mr. McKinzie,
and Mr. Hanrahan, respectively. 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.
(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.
(5) For 1996, consists of Meridian Mutual's
matching contributions of $4,500, $3,883, $3,865, $3,583,
and $3,106 to the Section 401(k) deferred compensation
accounts of Ms. Oman, Mr. Hazelbaker, Mr.
Hartman, Mr. McKinzie, and Mr. Hanrahan, respectively;
and accruals under the Supplemental Retirement
Income Plan of $105,819, $13,048, and $11,018 for the
accounts of Ms. Oman, Mr. Hartman, and Mr. Hanrahan,
respectively. 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
the Supplemental 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.
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 43, 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 49, 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 50, 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 Commercial Lines Division, Mr. Buedel has
been a Meridian employee since 1981.
Mr. Hanrahan, age 51, 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 employee since 1981, Mr. Hanrahan is Director
of Strategic Business Development.
Mr. Hazelbaker, age 41, 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 1996 AND
1996 YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect
to the executive officers named
in the Summary Compensation Table for unexercised options
held at December 31, 1996. The named executive officers did
not exercise any options during 1996. The Company does
not have any outstanding stock appreciation rights.
Number of Securities Value of Unexercised
Underlying In-The-Money
Unexercised Options/SARs
Options/SARs at at Fiscal Year
Shares Fiscal Year End(#) End ($)(2)
Acquired Value Exercisable(E)/ Exercisable(E)/
Name on Exercise Realized Unexercisable(U) Unexercisable(U)
(#) ($)(1)
Norma J. Oman -0- -0- 50,021 E $ 143,810 E
25,011 U 71,907 U
Steven R. -0- -0- 12,126 E 34,862 E
Hazelbaker 6,063 U 17,431 U
J. Mark
McKinzie -0- -0- 11,116 E 31,959 E
5,558 U 15,979 U
Brent
Hartman -0- -0- 15,158 E 43,579 E
7,579 U 21,790 U
Timothy J.
Hanrahan -0- -0- 9,448 E 27,163 E
4,725 U 13,584 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 31, 1996, closing
stock price which was $14.75.
Pension Plan
Through 1996, Meridian Mutual maintained for the
benefit of eligible employees a defined benefit
pension plan, designated as The Meridian Mutual
Insurance Company Pension Plan. (Effective January 1,
1997, the Company became the employer of all Meridian
employees and adopted all Meridian Mutual employee benefit
plans, including this pension plan.) Under the plan, all
Meridian employees 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 pension plan, based on retirement at age 65 in1997.
The annual earnings can not exceed the $160,000 maximum
compensation limit for purposes of pension calculations.
PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30 35
$120,000 $28,753 $38,337 $47,921 $57,506 $67,090
200,000 39,253 52,337 65,421 78,505 91,590
250,000 39,253 52,337 65,421 78,505 91,590
350,000 39,253 52,337 65,421 78,505 91,590
450,000 39,253 52,337 65,421 78,505 91,590
550,000 39,253 52,337 65,421 78,505 91,590
650,000 39,253 52,337 65,421 78,505 91,590
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 $125,000 for 1997. The
compensation covered by the plan consists of salary and cash
bonus, which for 1996 for the executives named in the
Summary Compensation Table amounted to: Ms. Oman, $617,055;
Mr. Hazelbaker, $216,923; Mr. Hartman, $224,846; Mr.
McKinzie, $263,967; Mr. Hanrahan, $224,674.
The estimated credited years of service for each of the
individuals named in the Summary Compensation Table as of
January 1997 are as follows:
Estimated Years
of Credited
Service
Norma J. Oman 23
Steven R. Hazelbaker 3
J. Mark McKinzie 8
Brent Hartman 21
Timothy J. Hanrahan 16
Supplemental Retirement Income Plan
The Supplemental Retirement Income Plan (the "Plan")
was established for certain Meridian employees who
participate in the Meridian Mutual Insurance Company
Pension Plan (now the Meridian Insurance Group, Inc. 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
or her 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 1997. The benefits in the table are not
subject to any deduction for Social Security or other offset
amounts. The 1996 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 $ 2,625 $ 3,500 $ 4,375 $ 5,250 $ 6,125
200,000 10,500 14,000 17,500 21,000 24,500
250,000 23,625 31,500 39,375 47,250 55,125
350,000 49,875 66,500 83,125 99,750 116,375
450,000 76,125 101,500 126,875 152,250 177,625
550,000 102,375 136,500 170,625 204,750 238,875
650,000 128,625 171,500 214,375 257,250 300,125
Executive Bonus Compensation Plan
Meridian 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 was the combined pretax net income of Meridian
Mutual and Security, with graduated amounts of cash
bonuses payable if Meridian Mutual's and Security's
financial performance met the threshold level of 80 percent
of goal or exceeded it up to a maximum of 120 percent of goal.
The performance measure for 1997 is the combined pre-tax net
income of Meridian Mutual, Security, and Citizens Security
Group (composed of CSM, Fund, and ICO), with graduated amounts of
cash bonuses payable if these companies' combined
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 were
Meridian Mutual employees during 1996. (Effective
January 1, 1997, the Company became the employer of
all Meridian 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 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 Meridian employees.
In early 1994 the Compensation Committee adopted a long-term
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 became exercisable in one-
third increments in March of 1995, 1996, and 1997. The
size of the option grant was 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
outstanding options granted in 1991 and 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 total revenues in 1996 were a record high
of $186.6 million, a 16.7 percent increase over 1995's
$159.8 million. The 1996 total includes five months of
premiums and investment income from the Citizens
Security Group companies which were acquired on July 31,
1996. Aside from the increase in premium volume
attributable to the Citizens Security Group, premiums
earned by the Meridian operation increased approximately
6.1 percent, or $8.8 million, over the 1995 total. The
Company's net income for 1996 was $5.8 million, or $0.86
per common share, as compared to a recordhigh $11.6
million, or $1.72 per common share, in 1995. The 1996
results were negatively impacted by a series of severe
storms that produced an unusually large volume of
property damage claims throughout the Company's operating
territory. The after-tax impact of catastrophe and
other weather-related non-catastrophic claims is estimated
to be approximately $1.17 per share in 1996, compared
to approximately $0.42 per share in 1995. The 1996
catastrophe losses represent the largest catastrophe loss
total in the Company's history.
The Chief Executive Officer's base salary was
increased during 1996 to reward individual accomplishments
during 1995 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 average for chief executive officers of
insurance companies with direct and net written premiums
over $200 million and below the average for chief
executive officers of similarly-sized companies across
all industries.
As described above, bonus compensation is tied to the
attainment of corporate performance goals. Because the
1996 combined pre-tax net income of Meridian Mutual and
Security did not meet the level established under the
executive bonus compensation plan, Ms. Oman did not
receive a bonus under that plan for 1996 results. Ms.
Oman's below-average base salary, combined with the
absence of a cash bonus, produced a total compensation package
lower than the average paid to chief executive officers of the
comparison companies. This illustrates the Compensation Committee's
philosophy 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 1996, 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.
Because the 1996 combined pre-tax net income of
Meridian Mutual and Security was below the level
established under the executive bonus compensation
plan, the Compensation Committee did not award cash
bonuses under that plan for 1996 results. In the
absence of a bonus, the total compensation paid to
the executives listed in the Summary Compensation Table
was lower than the comparison companies surveyed,
demonstrating the Compensation Committee's
commitment to the philosophy of putting a
significant portion of executive compensation at risk.
MIGI Compensation Committee Meridian Mutual Compensation
Committee
Van P. Smith, Ramon L. Humke, & Van P. Smith, Ramon L. Humke &
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, 1996, 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, 1991, 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.
In the Proxy Statement mailed to Company Shareholders,
this space will contain a graph depicting the
following information.
NASD Total NASD
Year MIGI Market (US) Insurance Stocks
1991 100.00% 100.00% 100.00%
1992 146.48 116.38 135.34
1993 157.64 133.60 142.15
1994 150.33 130.59 136.26
1995 222.28 184.67 193.56
1996 225.19 227.16 220.57
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
the Company receive no fees for services as directors.
MIGI Board members who are not salaried Company employees
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.
Meridian Mutual has 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.
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 in May of
1994, 1995, and 1996, 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 1997 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 AMEND THE ARTICLES OF INCORPORATION OF THE
COMPANY
The Board of Directors has unanimously approved
amending Article IV (the "Amendment") of the
Company's Restated Articles of Incorporation to create a
new class of Preferred Shares. The following summary of
the Amendment is qualified in its entirety to the text
of the Amendment, which is attached as
Exhibit A to this Proxy Statement and
incorporated herein by reference. If the proposal
is approved, the Amendment will become effective at the
time the Company files Articles of Amendment with the
Indiana Secretary of State.
The authorized capital stock of the Company
presently consists of 20,000,000 Common Shares. As of
March 14, 1997, there were 6,779,375 Common Shares
issued and outstanding. An additional 750,000 Common
Shares of the Company are reserved for issuance
under the Company's 1996 Employee
Incentive Stock Plan, and 150,000 Common Shares are
reserved for issuance under the 1994 Outside Director
Stock Option Plan.
The Amendment would increase the number of
authorized shares from 20,000,000 to 20,500,000,
20,000,000 being Common Shares and 500,000 being
Preferred Shares. The Amendment provides that the Preferred
Shares could be issued from time to time in one or more
series. The Board of Directors, without further approval of the
holders of Common Shares, would be authorized to fix the dividend
rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences,
sinking funds and any other rights, preferences,
privileges, and restrictions applicable to each such
series of Preferred Shares.
The Board of Directors recommends approving the
Amendment in order to increase the Company's financial
flexibility. The Board believes that the complexity of
modern business financing and acquisition transactions
requires greater flexibility in the Company's capital
structure than exists now. The
Preferred Shares would be available for issuance from
time to time as determined by the Board of Directors
for any proper corporate purpose. Such purposes
might include, without limitation, issuance in public or
private sales for cash as a means of obtaining
additional capital for use in the Company's business and
operations, and issuance as part or all of the
consideration required to be paid by the Company for
acquisitions of other businesses or properties. No
further action or authorization by the Company's
shareholders would be necessary prior to the issuance of
the Preferred Shares unless required by applicable
law or regulatory agencies or by the rules of any stock
exchange on which the Company's securities may then be
listed. Common shareholders would not have preemptive
rights to subscribe for Preferred Shares. The
Company does not have any immediate plans,
agreements, understandings or arrangements which would
result in the issuance of any Preferred Shares.
It is not possible to state the precise effect of the
Amendment upon the rights of the Common Shareholders
until the Board of Directors determines the respective
preferences, limitations, and relative rights of the
holders of any future series of Preferred Shares.
However, such effects might include (i) restrictions on
dividends; (ii) dilution of the voting power to the
extent that the Preferred Shares were given voting
rights; (iii) dilution of the equity interest and voting
power if the Preferred Shares were convertible into
Common Shares; and (iv) restrictions upon any
distribution of assets to the holders of the
Company's Common Shares upon liquidation or
dissolution until the satisfaction of any liquidation
preference granted to holders of the Preferred Shares.
The issuance of Preferred Shares could, under
certain circumstances, make it more difficult for a third
party to gain control of the Company, discourage
bids for the Company's Common Shares at a premium or
otherwise adversely affect the market price of Common
Shares. Although the Board of Directors has no present
intention of doing so, it could issue Preferred Shares
with voting or conversion privileges intended to make
acquisition of the Company more difficult or more costly.
Such an issuance could be used to discourage or limit
the shareholders' participation in
certain types of transactions that might be proposed
(such as a tender offer), whether or not such
transactions were favored by the majority of the
shareholders. In opposing such transaction, the
Preferred Shares could be privately placed with
purchasers favorable to the Board of Directors. In
addition, the Board of Directors could authorize holders
of a series of Preferred Shares to vote either separately
as a class or with the holders of the
Company's Common Shares
on any merger, sale, or exchange of assets by the Company
or any other extraordinary corporate transaction. The
issuance of new shares also could be used to dilute
the share ownership of a person or entity seeking to
obtain control of the Company, should the Board of
Directors consider the action of such entity or
person not to be in the best interest of the
shareholders and the Company. Such issuance of Preferred
Shares could also have the effect of diluting the
earnings per share, book value per share, and voting
power of Company Common Shares held by shareholders.
As stated above, the Company does not have any immediate
plans, agreements, understandings or arrangements
which would result in the issuance of any Preferred
Shares. Likewise, the Board is unaware of any effort
to obtain control of the Company by means of a merger,
tender offer, solicitation in opposition to
management, or otherwise. Therefore, the terms of any
Preferred Shares subject to this proposal cannot be stated
or estimated with respect to any or all of the
securities authorized.
The Board of Directors recommends that the
shareholders vote FOR approval of the Amendment to the
Company's Articles of Incorporation.
APPOINTMENT OF AUDITOR
The firm of Coopers & Lybrand L.L.P. served as
the independent auditor for MIGI for the fiscal year ended
December 8, 1997. The Board of Directors has not
selected an independent auditor for the current fiscal
year ending December 31, 1997. It is anticipated
that the Audit Committee, at its meeting scheduled for
April 24, 1997, will recommend to the Board that
Coopers & Lybrand L.L.P. be selected as the independent
auditor for 1997.
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 1998 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 December 8, 1997. 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, 1996, 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.
INFORMATION INCORPORATED BY REFERENCE
The following information has been incorporated by
reference into this Proxy Statement: the audited financial
statements of the Company and Management's Discussion and
Analysis of Financial Condition and Results of Operations
contained in the Company's Annual Report to
Shareholders, which was mailed concurrently with this
Proxy Statement. You are encouraged to review the
financial information contained in the Annual Report
before voting on the proposal to amend the Company's
Restated Articles of Incorporation.
By Order of the Board of
Directors,
Norma J. Oman
President and
Chief Executive Officer
EXHIBIT A
MERIDIAN INSURANCE GROUP, INC.
Current Wording of Article IV, Sections 4.01 through 4.04,
of the Company's Restated Articles of Incorporation
Section 4.01. Number. The total number of shares which the
Corporation shall have authority to issue is twenty million
(20,000,000) shares.
Section 4.02. Classes. There shall be one class of shares of
the Corporation, which shall be designated as "Common Shares."
Section 4.03. Preferences, Limitations and Relative Rights of
Common Shares. All Common Shares shall have the same rights,
preferences, limitations and restrictions.
Section 4.04. Voting Rights of Shares. Each holder of Common
Shares shall be entitled to one (1) vote for each share owned of
record on the books of the Corporation on each matter submitted
to a vote of the holders of Common Shares.
Proposed Wording of Article IV, Sections 4.01 through 4.04,
of the Company's Restated Articles of Incorporation
Section 4.01. Number. The total number of shares which the
Corporation has authority to issue shall be twenty million
five hundred thousand (20,500,000) shares.
Section 4.02. Classes. There shall be two (2) classes of shares
of the Corporation, consisting of twenty million (20,000,000)
shares of common stock (the "Common Shares"), and five hundred
thousand (500,000) shares of preferred stock (the "Preferred
Shares").
Section 4.03. Voting Rights, Preferences, Limitations and Other
Rights of Common Shares. Each holder of Common Shares shall be
entitled one (1) vote for each share owned of record on the books
of the Corporation on each matter submitted to a vote of the
holders of Common Shares. All Common Shares shall have the same
rights, preferences, limitations and other rights.
Section 4.04. Voting Rights, Preferences, Limitations and Other
Relative Rights of Preferred Shares. (a) The Preferred
Shares may be issued from time to time in one or more series.
The Board of Directors shall have the authority to determine and
state the designation and the relative preferences, limitations,
voting rights, if any, and other rights of each series of
Preferred Shares by specifying such matters in an amendment to
these Articles of Incorporation, which amendment may be adopted
and become effective without further shareholder approval as
provided by the Act. All Preferred Shares of the same series
shall have the same relative preferences, limitations, voting
rights, if any, and other rights.
(b) Without limiting the generality of the foregoing, the Board
of Directors shall have the authority to determine the following
for each series of Preferred Shares:
(i) The designation of such series, the number of shares which
shall initially constitute such series and the stated value
thereof;
(ii) Whether the shares of such series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the
terms of such voting rights, which may be special, conditional or
limited or no voting rights except as required by law;
(iii) The rate or rates and the time or times at which
dividends and other distributions on the shares of such series
shall be paid, the relationship or priority of such dividends or
other distribution to those payable on Common Shares or to other
series of Preferred Shares, and whether or not any such dividends
shall be cumulative;
(iv) The amount payable on the shares of such series in the event
of the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, and the relative
priorities, if any, to be accorded such payments in liquidation;
(v) The terms and conditions upon which either the Corporation
may exercise a right to redeem shares of such series or upon
which the holder of such shares may exercise a right to require
redemption of such shareholder's Preferred Shares, including any
premiums or penalties applicable to exercise of such rights;
(vi) Whether or not a sinking fund shall be created for the
redemption of the shares of such series, and the terms and
conditions of any such fund;
(vii) Rights, if any, to convert any shares of such series,
either into Common Shares or into other series of Preferred
Shares and the prices, premiums or penalties, ratios and other
terms applicable to any such conversion;
(viii) Restrictions on acquisition, rights of first refusal or
other limitations on transfer as may be applicable to such
series, including any series intended to be offered to a special
class or group; and
(ix) Any other relative rights, preferences, limitations,
qualifications or restrictions on such series of Preferred
Shares, including rights and remedies in the event of default in
connection with dividends, other distributions or redemptions.
PROXY CARD
PROXY CARD
Meridian Insurance Group, Inc.
This proxy is solicited on behalf of the Board of Directors
for the Annual Meeting of Shareholders to be held on May 14, 1997
The undersigned appoints Harold C. McCarthy, Sarah W. Rowland,
and Van P. Smith, or any of them, proxies for the undersigned,
each with full power of substitution, to attend the Annual
Meeting of Shareholders of Meridian Insurance Group, Inc., to be
held on May 14, 1997, at 2:00 p.m., EST, and at any adjournments
or postponements of the Annual Meeting, and to vote as specified
in this Proxy all the Common Shares of the Company which the
undersigned would be entitled to vote if personally present.
This Proxy when properly executed will be voted in accordance
with your indicated directions. If no direction is made, this
Proxy will be voted FOR the election of Directors and FOR
proposal 2. In their discretion the proxies are authorized to
vote upon such other business as may properly come before the
meeting.
The Board of Directors recommends a vote FOR the election of
Directors and FOR proposal 2.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON
THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
(Continued and to be signed on reverse side.)
Meridian Insurance Group, Inc.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK
ONLY.
For Withheld For All For Against Abstain
All All Except
1. Election of Directors_ 2. Approval of
amendment to Articles of Nominees: J. Barnette, S.
Broughton, R. Humke, T. Sams Incorporation to create
class of Preferred Shares
(Except nominee(s) written above.)
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Shareholders and of the Proxy Statement.
Dated: , 1997
Signature(s)
Please sign exactly as your name appears. Joint owners should
each sign personally. When applicable, indicate your official
position or representation capacity.
