SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
( X )Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1997.
( )Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission File Number: 0-11413
MERIDIAN INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1689161
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2955 North Meridian Street
P.O. Box 1980
Indianapolis, IN 46206-1980
(Address of principal executive offices)
Registrant's telephone number, including area code: (317) 931-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Shares
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (X)
The aggregate market value of voting stock owned by non-affiliates at
March 13, 1998, based on the closing sales price, was $62,563,363.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date: 6,637,853
Common Shares at March 13, 1998.
The Index of Exhibits is located at page 48 in the sequential
numbering system. Total number of pages, including cover page: 380.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document have been incorporated by reference
into this Annual Report on Form 10-K:
Parts of Form 10-K into Which
Identity of Document Document is Incorporated
Definitive Proxy Statement Part III
with respect to the 1998
Annual Meeting of Shareholders
of Registrant
<PAGE>
MERIDIAN INSURANCE GROUP, INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1997
PART I PAGE
ITEM 1. BUSINESS 4
ITEM 2. PROPERTIES 16
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS 17
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 44
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 45
ITEM 11. EXECUTIVE COMPENSATION 45
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 45
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 46
<PAGE>
PART I
ITEM 1: BUSINESS
General:
Meridian Insurance Group, Inc. ("the Company"), is a regional holding
company principally engaged in the business of underwriting property
and casualty insurance through its wholly-owned subsidiaries, Meridian
Security Insurance Company ("Meridian Security"), Citizens Fund
Insurance Company ("Citizens Fund") and Insurance Company of Ohio
("ICO"). Citizens Fund and ICO, along with their holding company,
Citizens Security Group, Inc. ("CSGI"), were purchased by Meridian
Security on July 31, 1996. During the first quarter of 1997, the
Company dissolved CSGI. The assets and liabilities of CSGI were
merged into Meridian Security. The Company also owns a small service
support company, Meridian Service Corporation, whose results of
operations are insignificant to the total operations of the Company.
Approximately 47.5 percent of the Company's outstanding common shares
are owned by Meridian Mutual Insurance Company ("Meridian Mutual"), a
mutual property and casualty insurance company headquartered in
Indianapolis, Indiana. Since August 1, 1996, Meridian Security,
Citizens Fund, ICO, Meridian Mutual and Citizens Security Mutual
Insurance Company ("Citizens Security Mutual"), the former majority
shareholder of CSGI, have been parties to a reinsurance pooling
agreement ("pooling agreement") under which all business written,
except those Meridian Mutual policies that are solicited through
direct response marketing, is shared by the companies on the basis of
their percentage participation defined in the pooling agreement.
Prior to August 1, 1996, Meridian Security and Meridian Mutual were
the only participants in this pooling arrangement.
Meridian Mutual writes a broad line of property and casualty
insurance, including personal and commercial automobile; homeowners,
farmowners and commercial multi-peril; and workers' compensation.
Business is written through approximately 1,075 independent insurance
agencies in the states of Illinois, Indiana, Iowa, Kentucky, Michigan,
Ohio, Pennsylvania, Tennessee, and Wisconsin. During the fourth
quarter of 1997, Meridian Mutual began offering business through
direct response marketing in the state of Washington. Meridian
Security writes personal, farm and workers' compensation lines through
approximately 625 independent insurance agencies, many of which are
cross-licensed with Meridian Mutual. Meridian Security writes
business primarily in rural areas of the states in which Meridian
Mutual is licensed. Citizens Security Mutual offers a variety of
personal and commercial insurance products in the states of Iowa,
Minnesota, Missouri, North Dakota, Ohio, South Dakota, Tennessee, and
Wisconsin through a network of approximately 400 independent insurance
agencies. Citizens Security Mutual has also been recently granted
licenses to write business in the states of Illinois and Indiana,
however, no direct premiums were written in 1997. Citizens Fund
writes pimarily personal lines through approximately 80 independent
agencies in the states of Iowa, Minnesota, North Dakota, Ohio, South
Dakota, and Wisconsin. ICO formerly offered personal and commercial
products in the state of Ohio, but discontinued directly writing
business during 1997. The in-force business previously written by ICO
is currently being renewed through Meridian Security.
Relationships with Meridian Mutual and Citizens Security Mutual:
All of the Company's corporate officers are officers of Meridian
Mutual and six of the ten members that constitute the Company's Board
of Directors are also directors of Meridian Mutual. Of the directors
and officers of Citizens Security Mutual, five of the six individuals
are corporate officers of the Company. Effective January 1, 1997, the
Company became the employer for all of the employees of Meridian
Mutual and Citizens Security Mutual and the related employee benefit
plans were merged into the Company's plans. Prior to January 1, the
Company had no employees and was dependent upon Meridian Mutual and
Citizens Security Mutual for the sale and underwriting of insurance,
the servicing of policyholder claims and all other aspects of the
Company's operations. Underwriting expenses are shared under the
pooling agreement between each entity in accordance with the
participation percentages of the parties. Other expenses which can be
directly identified with Meridian Mutual, Citizens Security Mutual or the
<PAGE>
Company are paid by the company to which the expense is attributable. All
other operating expenses relating to the business of each company (which
have not been and are not expected to be significant in amount) are
allocated in accordance with policies established in good faith by their
Boards of Directors.
Pooling Agreement:
The pooling agreement covers all of the property and casualty
insurance written by Meridian Mutual, Citizens Security Mutual,
Meridian Security, Citizens Fund, and ICO, with the exception of non-
standard automobile insurance and business written via direct response
marketing, which Meridian Mutual began to offer in January, 1998 and
November 1997, respectively. Under the pooling agreement, essentially
all premiums, losses, loss adjustment expenses and other underwriting
and administrative expenses of each company are shared in accordance
with the participation percentages established under the pooling
agreement. Since August 1, 1996, the participation percentages of the
Company's insurance subsidiaries totaled 74 percent. The participation
rates were fixed with reference to the relative historical net written
premiums of the companies. Therefore, each company's relative share
of underwriting revenues, losses, and expenses was not significantly
altered as an immediate result of the acquisition. Prior to August 1,
Meridian Mutual and Meridian Security were the only participants in
the pooling agreement, under which Meridian Security had assumed 74
percent of the combined underwriting income and expenses since May 1, 1993.
The Boards of Directors of the Company, Meridian Mutual and Citizens
Security Mutual have delegated to their respective Audit Committees
the responsibility of monitoring the relationships between each of the
participants under the pooling agreement pursuant to such procedures
as those Committees may deem necessary and appropriate to allocate the
pool participation percentages to each participant of the agreement.
The Audit Committees have established guidelines for reviewing the
participation percentages at least annually and for referring to the
Pooling Committees of each company any decision to change the
participation percentages. Future events that could affect the
participation percentages among the parties include 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, Meridian Security, Citizens Security Mutual, Citizens Fund, or
ICO, different effective rates of income taxation, or other factors
which disproportionately affect the surplus of any of the participants.
The Company, Meridian Mutual and Citizens Security Mutual have
conflicting interests with respect to the establishment of the
respective ratios of each company under the pooling agreement, and
conflicts may arise between the Company, Meridian Mutual and Citizens
Security Mutual relating to the allocation of expenses not related to
insurance underwriting, business and investment philosophies, profit
objectives, cash management, dividend policy and other matters. The
business and operations of the Company are integrated with and largely
dependent upon the business and operations of Meridian Mutual and
Citizens Security Mutual. Management of Meridian Mutual determines
which expenses are associated with underwriting operations (and
therefore shared by each of the entities under the pooling agreement),
and also selects and values the assets and liabilities transferred
between the companies 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
and/or Citizens Security 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 and Citizens Security Mutual also owe fiduciary duties
to the policyholders of Meridian Mutual and Citizens Security 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 participants dependent on the results of the
total business covered by the pooling agreement.
<PAGE>
The pooling agreement has no fixed term and provides that it is to
remain in force until canceled by the mutual consent of Meridian
Security, Citizens Fund, ICO or Citizens Security Mutual and Meridian
Mutual. The pooling agreement may be amended or terminated without
the necessity of a vote by the shareholders of the Company or the
policyholders of any of the parties. In the event of a termination of
the pooling agreement, the terminating party or parties 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 the terminating party, and each party would
receive from the other assets in an amount equal to the amount of the
policy liabilities received. If the pooling agreement had been
terminated at December 31, 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 Meridian
Security, Citizens Fund and ICO. The Company would maintain the
employee force but would have limited sales operations through a much
smaller independent agency force.
Regulatory approvals of the states of domicile are 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 the
participating companies and not for the protection of the Company's
shareholders. The Company intends that its insurance subsidiaries
will continue their participation in the pooling agreement, absent
some unforeseen change in circumstances.
A. M. Best Company, Inc., Ratings:
Since 1993, Meridian Mutual and Meridian Security have maintained a
group rating of "A" (excellent) by A. M. Best Company, Inc. ("Best").
Subsequent to the July 31, 1996 acquisition, the Meridian group rating
of "A" was also given to Citizens Fund, ICO and Citizens Security
Mutual. Best is an independent company which rates insurance
companies on the basis of their opinion as to the financial position
and operating performance. Best's ratings are based upon factors
related to the capacity of the insurer to make payment of its
obligations to policyholders and do not relate to the protection of
investors or indicate expected investment results.
Operations:
In the following discussion of operations, the term "Meridian" refers
to the operations of the property and casualty insurance business of
Meridian Mutual and Meridian Security and the term "Citizens Security
Group" refers to the operations of Citizens Security Mutual, Citizens
Fund and ICO covered by the pooling agreement. The operations of
Citizens Fund and ICO have been included in the Company's results of
operations since August 1, 1996.
As a result of the Citizens Security Group acquisition, the Company's
operating territory expanded into four additional states (Minnesota,
Missouri, South Dakota, and North Dakota) and enlarged the premium
base in Iowa, Ohio and Wisconsin. This geographic expansion has
enabled the Company to spread its risk across a larger region. Also,
certain economies of scale and expense efficiencies have resulted from
this acquisition with the anticipation that more will result over time.
Underwriting-Meridian:
The underwriting of Meridian is separated into personal, commercial
and farm lines of business. The underwriting personnel are
responsible for establishing risk-selection guidelines for Meridian's
agents and underwrite and monitor policy issuance to insure adherence
to the established guidelines. The underwriting departments also
determine the pricing of Meridian's products and are responsible for
the development of new products and enhancements. The underwriting
personnel work closely with Meridian's sales representatives and
consult regularly with Meridian's agents to assess current market
conditions.
In establishing prices, Meridian's underwriting personnel analyze
studies of statistical and actuarial data concerning the impact of
price changes in the markets served by Meridian and consider data
compiled by industry organizations. This allows Meridian to more
accurately assess the anticipated costs of risks underwritten.
<PAGE>
Over the past several years, Meridian has emphasized efforts to
improve underwriting in order to reduce its loss ratio. Processes
such as re-underwriting the existing book of business, monitoring
unprofitable agents, improving rate adequacy and consolidating four
district offices into the home office facility have all contributed to
reducing the Company's statutory combined ratio. The Company's 1997
combined ratio of 107.1 percent was lower than 1996's 108.0 percent,
however, both years ratios were unfavorably affected by catastrophe
and other weather-related non-catastrophic claims. The Company has
also focused considerable resources on reducing per-unit costs and
other expenses in order to improve its loss adjustment and
underwriting expense ratios. Beginning in 1994, Meridian began to re-
engineer and re-design certain core processes. In 1996 and 1997,
Meridian installed an automated personal lines underwriting system
that enables policies meeting certain criteria to be issued without
manual review. This allows the Company to process a larger volume of
business without proportionally expanding the size of the underwriting
staff, thereby reducing per-unit costs. The Company currently issues
certain new private passenger automobile and homeowners lines of
business via the automated underwriting system.
Underwriting-Citizens Security Group:
Citizens Security Group has its own underwriting personnel. The
underwriters for Citizens Security Group underwrite only standard
lines of property and casualty insurance for persons and businesses in
the "preferred risk" category rather than those lines which are
considered higher risk, such as aviation, pollution and liquor
liability. The underwriting personnel of Citizens Security Group
perform basically the same functions as those of Meridian, but operate
within their own set of established guidelines and procedures.
Products and Marketing-Meridian:
Meridian Mutual writes a broad line of property and casualty insurance
including personal and commercial automobile; homeowners, farmowners
and commercial multi-peril; and workers' compensation. During the
fourth quarter of 1997, Meridian Mutual began offering business
through direct response marketing in the state of Washington.
Meridian Security writes private passenger automobile, homeowners,
farmowners, and other personal lines coverages primarily in rural
areas of its operating territory. In 1997, Meridian Security also
began offering workers' compensation business within selected states.
Meridian markets primarily all of its insurance through independent
insurance agents, and development and maintenance of a strong agency
system is essential. Meridian seeks to provide its agents and
policyholders a level of service that surpasses industry standards.
Meridian Mutual's agency network numbers approximately 1,075
independent insurance agencies spread throughout nine states.
Meridian Security maintains its own agency network of approximately
625 independent insurance agencies in ten states, many of which are
cross-licensed with Meridian Mutual. Meridian's independent agencies
are primarily small to medium-sized firms with no agency producing
more than 2 percent of the total written premium. Meridian
continuously monitors its agencies, giving special attention to the
volume and profitability of business written by each agency. Agencies
which consistently write unprofitable business may be terminated by
Meridian, subject to compliance with applicable state laws.
Each agency enters into a standard agency agreement, under which the
agency is authorized to sell and bind insurance coverage in accordance
with procedures specified in the agreement and in accordance with
Meridian's underwriting guidelines, as well as to collect and remit
premiums. The agency receives as a commission a percentage of the
premium for each policy written. Meridian offers a direct billing
service to its agents, under which premium statements are provided to
the insured and the insured pays the premiums directly to Meridian.
Meridian pays the same commission rates on company-billed and agency-
billed policies, thereby allowing agencies to reduce administrative
costs without a reduction in commission income. Approximately 80
percent of Meridian's net written premium is derived from company-
billed business. Meridian also offers an agency profit-sharing
agreement in which agencies attaining prescribed premium volume and
meeting prescribed profitability requirements receive a bonus.
Meridian has developed separate growth strategies with respect to the
personal, commercial and farm lines of business. With respect to
personal lines, Meridian believes that continued improvements in
service to agents and policyholders and the development of additional
<PAGE>
product enhancements will increase penetration of existing markets. By
emphasizing strict adherence to underwriting guidelines and targeting
selected lines of business, Meridian believes moderate growth in personal
lines business is achievable without significantly increasing risk exposure.
Meridian has identified several segments of its commercial lines
markets in which management believes Meridian can compete effectively.
Meridian has and will continue to focus on the mid-sized accounts in
the $15,000 to $100,000 range of annual premium volume in addition to
its traditional business with smaller accounts.
The strategy with respect to farm lines emphasizes increased
penetration of existing markets by targeting farms which meet
Meridian's underwriting guidelines. Management believes Meridian
enjoys a competitive advantage in the farmowners market because of its
years of experience, regional focus and the fact that some national
insurers have vacated this market.
Products and Marketing-Citizens Security Group:
The Citizens Security Group offers a variety of personal and
commercial products including homeowners, personal and commercial
automobile, commercial multi-peril, workers' compensation, tenant,
inland marine, general liability and umbrella lines of business. The
commercial products are oriented toward retail stores, restaurants,
trade contractors and members of various trade associations, including
funeral directors, newspaper publishers and veterinarians. Citizens
Security Mutual markets its products through a network of
approximately 400 independent insurance agencies throughout eight
states and Citizens Fund solicits business through a network of
approximately 80 independent agencies in six states. ICO offered
business only in the state of Ohio through an agency force of
approximately 80. During 1997, any new business related to ICO's
products was written through its parent, Meridian Security and the
inforce business previously written by ICO was renewed through
Meridian Secuity on the anniversary date. Citizens Security Group's
independent agencies are primarily small to medium-sized firms with no
one agency or group of related agencies accounting for more than 3.5
percent of premiums written. The process by which the Citizens
Security Group selects and retains its insurance agencies is basically
the same as that of Meridian. The insurance agencies retained by
Citizens Security Group receive a commission on the direct business
written by each agency and participate in an agency profit sharing
program that is based on profitability, retention and growth of
business, with additional compensation being provided to agencies that
exceed certain productivity levels.
Citizens Security Group strives to offer excellent service to its
agents and policyholders by providing rapid claim settlement and
turnaround of rate quotations, policy issuance and policy
endorsements. As an incentive to agents to sell its products, the
Citizens Security Group emphasizes policyholder service, multi-line
insurance coverage packages and a policyholder-oriented premium
payment plan. The premium payment plan is a direct billing service
known as the "Citizens Account Plan", or "CAP", and is designed to
offer policyholders a convenient and flexible method in paying
premiums. Under the plan, policyholders are billed directly for
premiums on a monthly basis and have the option of making a minimum
monthly payment or prepaying all or a portion of the premium. A
single, easy-to-read bill covering the aggregate amount of premiums
for all policies written by the Citizens Security Group is sent to the
policyholders. Approximately 94 percent of direct premiums received
in 1997 were billed directly to the policyholders.
The Citizens Security Group markets their insurance products so that
the products of one company are distinguishable from those of the
other companies. The personal insurance products are designed to be
marketed in a comprehensive package that includes personal automobile,
homeowners, inland marine and umbrella insurance. Citizens Security
Group's commercial products are marketed through various state trade
associations, such as funeral directors, newspaper publishers and
veterinarians, in which the company is the endorsed property and
casualty insurance provider. The broad line of retail store,
restaurant and trade contractor coverages are designed to be tailored
to the customers' needs into one convenient package.
<PAGE>
The following table sets forth for the periods indicated the net
premiums written, the net underwriting gain (loss), loss and loss
adjustment expense ("LAE") ratios, expense ratios and combined ratios
for the Company's insurance operations, prepared in accordance with
statutory accounting principles. The combined ratio does not reflect
investment income, federal income taxes, or other non-underwriting
income or expense, all of which are included in determining net income.
Year Ended December 31,
1997 1996 1995 1994 1993
(Dollars in thousands)
Net Premiums Written
Personal lines:
Automobile $ 78,270 $ 68,219 $ 59,444 $ 54,205 $ 55,291
Homeowners 28,051 21,964 19,526 16,667 17,407
Other 5,995 5,678 5,190 4,035 3,894
Total personal lines 112,316 95,861 84,160 74,907 76,592
Farmowners 8,731 8,441 8,166 7,099 7,544
Commercial lines:
Automobile 19,702 16,227 13,107 11,972 11,556
Workers' compensation 23,901 23,380 22,438 21,894 19,264
Commercial multi-peril 27,766 23,453 19,548 19,414 18,842
Other 2,103 1,833 1,323 859 995
Total commercial lines 73,472 64,893 56,416 54,139 50,657
Total premium written $194,519 $169,195 $148,742 $136,145 $134,793
Net Underwriting Loss $(13,726) $(13,868) $ (1,610) $ (2,751) $ (5,536)
Loss and Loss Adjustment Expense Ratio
Personal lines:
Automobile 78.7% 75.0% 75.0% 69.2% 65.8%
Homeowners 104.2 110.7 81.2 82.9 77.8
Other 52.5 55.1 43.7 53.9 64.7
Total personal lines 83.4% 81.8% 74.6% 71.5% 68.4%
Farmowners 61.6% 98.4% 69.6% 64.4% 68.5%
Commercial lines:
Automobile 84.1% 79.6% 89.1% 80.0% 65.3%
Workers' compensation 52.8 54.2 58.6 62.7 79.9
Commercial multi-peril 75.0 85.5 45.8 70.3 67.4
Other 43.6 14.3 47.4 (14.0) 35.1
Total commercial lines 68.8% 70.0% 61.0% 68.1% 71.0%
Total loss & LAE ratio 76.8% 78.0% 69.2% 69.8% 69.4%
Expense Ratio 30.3% 30.0% 31.0% 32.0% 32.4%
Combined Ratio 107.1% 108.0% 100.2% 101.8% 101.8%
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Claims-Meridian and Citizens Security Group:
Meridian's claim division is responsible for developing and
implementing policies and procedures for the payment and disposition
of claims and for establishing claim reserves on policies written by
Meridian and Citizens Security Group. In connection therewith, it
resolves questions concerning policy coverage and manages reinsurance
recoveries and salvage and subrogation matters. Claims litigation is
managed in conjunction with Meridian's legal division.
All claim services for Meridian are handled through claim service
centers in Indianapolis, Indiana; Louisville, Kentucky; and East
Lansing, Michigan. Insurance claims on policies underwritten by
Meridian are normally investigated and settled by Meridian claim
adjusters. For policies underwritten by Citizens Security Group,
certain independent insurance agents are given authority to settle
small property claims on behalf of the companies. Other claims were
initially investigated and settled through an outside claim adjustment
firm, VIS'N, Inc. Beginning in January, 1998, the investigation and
settlement of claims is being done by claim adjusters who are
employees of the Company. Independent adjusters are employed as
needed to handle the occasional overload of claims and in territories
in which the volume of claims is not sufficient to justify having
company claim adjusters.
The Company's claim adjusters have authority to settle claims within
policy limits, subject to direction and control by a claim manager or
supervisor. All claims estimated to have a potential value of $50,000
or more are supervised by examiners at the home office, and all claims
in excess of $100,000 must be approved by the claim division director
and, if litigation is involved, the legal division director. A claim
review committee provides for the periodic evaluation of larger claims
to enhance the investigation and decision-making process. The
committee reviews claims reserved in excess of $100,000, and any other
claims involving special circumstances in order to make decisions as
to investigations and/or settlement values.
Reserves-Meridian and Citizens Security Group:
Loss reserves are estimates at a given time, based on facts then
known, of what an insurer predicts its exposure to be in connection
with incurred losses. Loss adjustment expense reserves are estimates
of the ultimate liability of the expenses in settling all claims,
including investigation and litigation costs resulting from such
claims. The ultimate liability of the insurer for all losses and loss
adjustment expenses reserved at any point in time may be greater or
less than these estimates.
Meridian and Citizens Security Group maintain reserves for the
eventual payment of losses and loss adjustment expenses with respect
to both reported and unreported claims. Two principal methods are
followed in establishing reserves. For coverages which involve a
large volume of claims of relatively small amounts such as automobile
property damage, comprehensive and collision insurance, reserves are
maintained on an average basis by reference to the number and amount
of paid claims. Adjustments to average reserves are made quarterly,
based on the claims experience for the prior quarter. Reserves for
other claims are established on a case-by-case basis pursuant to which
a reserve amount is assigned to each claim when reported, based
primarily upon an investigation of the circumstances surrounding each
claim, consideration of the liability and the damages, and the
insurance policy provisions relating to the claim. During the claim
settlement process, it may become necessary to adjust estimates of
future liability as additional facts regarding individual claims
become known.
Meridian and Citizens Security Group also establish reserves for
claims which have been incurred but which have not been reported,
utilizing statistical models based on historical experience. Reserves
established pursuant to the statistical models also are designed to
correct historical deficiencies or redundancies in the reserves
established on an average or a case-by-case basis. Meridian and
Citizens Security Group consult with an independent actuarial firm on
a quarterly basis concerning the adequacy of reserves.
Management believes that reserves for losses and loss adjustment
expenses are adequate to cover the ultimate cost of settling reported
and unreported claims, net of reinsurance, anticipated salvage and
subrogation receipts, and other recoveries. Loss reserves are not
discounted to present value. Inflation is implicitly provided for in
calculating reserves through analysis of cost trends and review of
historical reserve estimates.
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The following table sets forth a three-year reconciliation of the
beginning and ending reserves for losses and loss adjustment expenses
for the Company. The net reserves acquired through acquisition
represent the loss and loss adjustment expense reserves, net of
reinsurance, for Citizens Fund and ICO at the date of acquisition.
Year Ended December 31,
1997 1996 1995
(In thousands)
Balance at beginning of period $161,309 $123,577 $123,755
Less reinsurance recoverables 41,819 31,204 31,815
Net balance at beginning of period 119,490 92,373 91,940
Net reserves acquired through acquisition --- 20,685 ---
Incurred related to:
Current year 165,577 137,817 104,585
Prior years (16,358) (7,716) (5,461)
Total incurred 149,219 130,101 99,124
Paid related to:
Current year 97,448 93,199 61,792
Prior years 50,332 30,470 36,899
Total paid 147,780 123,669 98,691
Net balance at end of period 120,929 119,490 92,373
Plus reinsurance recoverables 48,872 41,819 31,204
Balance at end of period $169,801 $161,309 $123,577
The reconciliation for 1997 shows an approximately $16.4 million
reduction in previously established loss reserves. Favorable loss
developments resulting from decreases in the frequency and severity of
claims in 1996 and prior accident years for the Company's commercial
automobile liability, workers' compensation lines and commercial
multiple-peril lines of business were the primary factors in the most
recent period reduction. The Company also experienced favorable
underwriting trends from its involvement in the involuntary National
Workers' Compensation Pool.
The following table shows the calendar-year development of the unpaid
losses and loss adjustment expenses of the Company's pooled business
for each of the last ten years. The top line of the table shows the
estimated reserves for losses and loss adjustment expenses, net of
reinsurance recoveries, as recorded by the Company for each of the
indicated years. These reserves represent the estimated amount of net
unpaid losses and loss adjustment expenses for claims arising on or
before December 31 of each year, including claims that had not yet
been reported. The data in the upper portion of the table reflect the
cumulative payments made as they have developed through time. The
payments are expressed as a percentage of the year-end reserves shown
in the top line. The data in the lower portion show the change in the
reserve estimate over time.
A redundancy in reserves means that reserves established in prior
years exceeded actual losses and loss adjustment expenses or were re-
evaluated to less than the originally reserved amount. A deficiency
in reserves means that the reserves established in prior years were
less than actual losses and loss adjustment expenses or were re-
evaluated at more than the originally reserved amount.
In evaluating the following information for the Company, it should be
noted that each amount includes the effects of all changes in amounts
for prior periods. For example, the amount of redundancy related to
losses settled in 1997 but incurred in 1991 is included in the
cumulative redundancy amount for each of the years from 1991 through
1996. The table does not present accident or policy-year development
<PAGE>
data. Reserves increased significantly from 1987 to 1989 principally
as a result of an increase in private passenger automobile as a
percentage of the total business written by the Company, and related
increases in the frequency and severity of claims. Additionally,
reserves in 1988 were increased by approximately $5.0 million to
adjust for the adverse loss development trends experienced in 1985
through 1987. Increases in the Company's share of the pooled loss and
loss adjustment expense reserves also contributed significantly to the
increase in reserves. The Company's participation increased from 44
percent in 1986, to 62 percent on April 1, 1987, and to the current
level of 74 percent on May 1, 1993. In 1996, the Company acquired
approximately $20.7 million in loss and loss adjustment expense
reserves from the acquisition of Citizens Fund and ICO. Additionally,
payments received on the acquired reserves since the acquisition were
spread out over the ten years based on the accident year in which the
original acquired reserve was set up. The participation percentage
from the pooling agreement for the combined insurance operations of
the Company totaled 74 percent. Conditions and trends that have
affected development of the reserves in the past may not necessarily
occur in the future. Accordingly, the data in the table may not be
indicative of future redundancies or deficiencies.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net reserves for losses
& loss adjustment
expenses $120,929 $119,490 $92,373 $91,940 $89,630 $72,006 $68,102 $64,742 $62,281 $53,569 $43,899
Cumulative paid as
a percent of year-
end reserves:
One year later 42.1% 40.7% 39.0% 40.7% 29.0% 42.4% 46.6% 46.1% 47.2% 57.4%
Two years later 65.4% 59.0% 59.0% 51.7% 55.0% 68.5% 68.9% 68.1% 79.7%
Three years later 70.9% 68.9% 62.6% 67.5% 74.7% 81.3% 81.3% 90.3%
Four years later 74.6% 67.8% 74.9% 81.6% 84.1% 87.4% 97.0%
Five years later 71.3% 77.4% 85.7% 88.0% 88.6% 99.9%
Six years later 79.9% 87.5% 90.1% 90.7% 100.1%
Seven years later 88.9% 91.8% 92.3% 101.4%
Eight years later 93.0% 93.5% 102.7%
Nine years later 94.7% 103.7%
Ten years later 104.4%
Reserves re-estimated
as a percent of
year-end reserves:
One year later 91.1% 96.6% 92.9% 92.3% 93.6% 97.5% 103.2% 99.7% 102.3% 112.8%
Two years later 103.4% 94.9% 89.0% 84.6% 93.0% 99.0% 100.7% 100.6% 112.7%
Three years later 93.1% 89.2% 83.3% 89.0% 97.9% 99.2% 100.4% 109.5%
Four years later 89.2% 83.6% 89.3% 95.3% 99.3% 99.7% 110.0%
Five years later 83.8% 89.2% 96.3% 97.9% 100.3% 109.2%
Six years later 89.7% 95.4% 98.4% 99.5% 110.6%
Seven years later 96.5% 97.9% 100.0% 109.9%
Eight years later 99.5% 100.2% 110.6%
Nine years later 101.9% 110.9%
Ten years later 112.4%
Redundancy (deficiency) 8.9% -3.4% 6.9% 10.8% 16.2% 10.3% 3.5% 0.5% -1.9% -12.4%
</TABLE>
Reinsurance-Meridian and Citizens Security Group:
Meridian and Citizens Security Group follow the customary industry
practice of limiting exposure by ceding to reinsurers a portion of the
premiums received and risks assumed under the policies reinsured.
Reinsurance is purchased to reduce a net liability on individual risks
to predetermined limits and to protect against multiple losses from a
single catastrophe or a series of catastrophes. Although reinsurance
does not discharge an insurer from its primary liability for claims up
to the full limits of the policies, it makes the assuming reinsurer
liable to the insurer to the extent of the reinsurance ceded.
Employers Reinsurance Corporation, rated "A++" by Best, is the
Company's main reinsurer providing property and liability excess of
loss coverage. Meridian and Citizens Security Group use a large
number of reinsurers for property catastrophe and facultative
<PAGE>
coverages to reduce the effect of a default by any one reinsurer.
Most of these companies are rated "A-" or better by Best, or an
equivalent rating by other recognized independent rating agencies.
Reinsurers not rated by Best or another independent agency are
analyzed and approved by Meridian and Citizens Security Group's
reinsurance broker, E. W. Blanch, and by Company personnel.
The reinsurance purchased includes contracts under which certain types
of policies are automatically reinsured up to the contract limits
("treaty reinsurance") and contracts which provide reinsurance on an
individual risk basis which require specific agreement of the
reinsurer as to limits of coverage provided ("facultative
reinsurance"). Meridian Mutual, Meridian Security, Citizens Security
Mutual, Citizens Fund, and ICO were each named as insured parties
under the treaty reinsurance contracts, and the coverages under those
contracts applied to all risks written by each of the companies.
Treaty reinsurance coverage was purchased to cover property and
liability exposures in excess of $200,000 and $250,000, respectively,
up to the limits set forth in the individual treaty. For 1998, the
liability retention will be increased to $350,000. In 1996, the
retention was $200,000 per loss occurrence for both property and
liability exposures. Facultative reinsurance was purchased to cover
exposures on both property and liability coverages from losses over
and above the limits provided by the treaty reinsurance.
Catastrophe reinsurance provided coverage for multiple losses caused
by a single catastrophic event such as a windstorm or earthquake. The
combined retention under this contract was $6,000,000 plus five
percent of losses up to contractual limits for windstorms of
$65,000,000 and for earthquakes of $115,000,000. The 1996 limit for
both windstorms and earthquakes was $65,000,000. Two other
catastrophe reinsurance treaties provided coverage when losses
sustained from multiple catastrophic events aggregate beyond a
specified retention. Under these two treaties, the combined retention
was 2.5 percent of subject earned premiums, plus five percent of
losses up to the $22,000,000 contractual limit. The combined
retention will be increased to 3.0 percent for 1998.
As of December 31, 1997, the Company had approximately $48.9 million
of reinsurance recoverable on unpaid losses. Of this amount,
approximately $29.4 million was recoverable from Employers Reinsurance
Corporation and approximately $13.1 million was recoverable from the
Michigan Catastrophic Claims Association, a mandatory state-
administered personal injury protection reinsurance pool in which all
insurers writing automobile business in that state must participate.
The cost of the reinsurance contracts are renegotiated annually. If
the relationships were to be terminated with the current reinsurers,
management believes that, under current circumstances, relationships
with other reinsurers could be established without a material adverse
effect on its business.
Meridian and Citizens Security Group assume a limited amount of
reinsurance from third parties. This business accounted for less than
one percent of net premiums written in 1997.
Investments:
Investments of the Company are principally held by Meridian Security,
Citizens Fund and ICO, which are subject to regulation by their
respective departments of insurance. The investment decisions are
made pursuant to guidelines established by the Company's Finance and
Investment Committee. This committee is made up of five directors of
the Company, three of whom are also directors of Meridian Mutual. All
investment transactions are reviewed by this committee.
The investment guidelines established by the Finance and Investment
Committee are intended to reflect a prudent approach to managing
invested assets. Investments are required to be diversified by type
of issuer, type of security and type of industry. Specific
restrictions prohibit investments in real estate mortgages unless the
related credit instruments are collateralized by federal or government
agencies, and also limit the amount which may be invested in common
stocks, based upon the premium-to-surplus ratio of the Company.
The Company's fixed maturity portfolio, which is made up of bonds and
sinking fund preferred stocks, consists almost entirely of investment
grade securities, the average quality of which is rated Aa/AA. The
fixed maturity securities at December 31, 1997 and 1996 were made up
entirely of securities classified as available for sale, which are
<PAGE>
carried on the Company's balance sheet at fair market value. The
Company invests in both taxable and tax-exempt securities as part of
its strategy to maximize after-tax income. This strategy considers,
among other factors, the impact of the alternative minimum tax. Tax-
exempt bonds, on a carrying value basis, made up approximately 29.5
percent and 31.6 percent of the total fixed maturity portfolio at
December 31, 1997 and 1996, respectively. On a carrying value basis,
sinking fund preferred stocks made up approximately 14.2 percent of
the total fixed maturity portfolio of the Company at December 31, 1997
and 1996.
The Company also holds investments in mortgage-backed pass-through
securities and collateralized mortgage obligations ("CMO") which had a
carrying value of $43.4 million and $54.7 million at December 31, 1997
and 1996, respectively. The Company has attempted to reduce the
prepayment risks associated with mortgage-backed securities by
investing a majority of the Company's CMO holdings in planned
amortization and very accurately defined tranches. These investments
are designed to alleviate the risk of prepayment by providing
predictable principal prepayment schedules within a designated range
of prepayments. If principal is prepaid earlier than originally
anticipated, investment yields may decrease due to reinvestment of
these funds at lower current interest rates and capital gains or
losses may be realized since the book value of securities purchased at
premiums or discounts may be different than the prepayment amount.
As a result of the number of early calls and prepayments, the
estimated weighted average duration of the fixed maturity portfolio is
approximately 4.3 years.
The Company, as approved by the investment committee, has increased
its equity security holdings over the past four years. Equity
securities primarily consist of common stocks and had a fair market
value of $54.4 million and $40.6 million at December 31, 1997 and
1996, respectively. Equity securities accounted for 17.6 percent and
14.4 percent of the total investment portfolio at December 31, 1997
and 1996, respectively.
Regulation:
Numerous aspects of the business and operations of the Company's
insurance subsidiaries and affiliates are subject to supervision and
regulation in each state in which they transact business. The primary
purpose of state supervision and regulation is the protection of
policyholders. The extent of such regulation varies among states but
generally derives from state statutes which delegate regulatory,
supervisory, and administrative authority to state insurance
departments. The authority of state insurance departments generally
extends to the establishment of solvency standards which must be met
and maintained by insurers, the licensing of insurers and agents, the
nature of and limitations on investments and premium rates, the
provisions which insurers must make for current losses and future
liabilities, the deposit of securities for the benefit of
policyholders, the approval of policy forms, the payment of dividends,
the establishment of premium rates and the settlement of claims.
State insurance departments also conduct periodic examinations of
insurance companies and require the filing of annual and other reports
relating to the financial condition of insurance companies.
The regulatory agencies of each state have statutory authority to
enforce their laws and regulations through various administrative
orders, civil and criminal enforcement proceedings, and the suspension
or revocation of certificates of authority. In extreme cases,
including insolvency, impending insolvency and other matters, a
regulatory authority may take over the management and operation of an
insurer's business and assets.
Meridian Mutual and Meridian Security are admitted as insurers in the
states of Illinois, Indiana, Iowa, Michigan, Minnesota, Kentucky,
Ohio, Pennsylvania, Tennessee, and Wisconsin. Meridian Mutual also
has a licence to transact business in the state of Washington.
Citizens Fund and Citizens Security Mutual hold licenses to write in
Iowa, Minnesota, North Dakota, Ohio, South Dakota, and Wisconsin.
Citizens Security Mutual is also licensed to write insurance in
Illinois, Indiana, Missouri, and Tennessee. ICO is admitted as an
insurer in the state of Ohio. Under insolvency or guaranty laws in
the states in which the above companies operate, insurers doing
business in those states can be assessed up to prescribed limits for
losses incurred by policyholders of insolvent insurance companies. The
<PAGE>
maximum amounts that can be assessed against an insurer in any one year
under the insolvency or guaranty laws of the states named above are limited
to a specified percentage of the annual direct premiums written by the
company in the state in question with respect to the affected lines of
business. Additionally, the companies are required to participate in
various mandatory pools or underwriting associations.
The Company is subject to statutes governing insurance holding
companies. Typically, such statutes require the Company to file
information periodically concerning its capital structure, ownership,
financial condition, and material transactions between the Company and
its insurance subsidiaries not in the ordinary course of business.
The Company's insurance subsidiaries are subject to periodic
examination by the insurance departments of the states in which they
do business, and the payment of dividends by the insurance
subsidiaries to the Company is subject to certain limitations. (See
Note 12 of Notes to Consolidated Financial Statements.) Certain
transactions between the Company and its insurance subsidiaries
including changes in the terms of the pooling agreement and certain
loan transactions, if any, may be effected only upon prior approval
thereof by state regulatory authorities in the insurance company's
state of domicile. Certain transactions deemed to constitute a
"change in control" of the Company, including a party's purchase of 10
percent or more of the outstanding common shares, are all subject to
approval by state regulatory authorities.
Changes in the laws or regulations to which the Company is subject
could adversely affect the operations of the Company. Specific
regulatory developments which could materially adversely affect the
operations of the Company include, but are not limited to, the
potential repeal of the McCarran-Ferguson Act (which exempts insurance
companies from a variety of federal regulatory requirements) and rate
rollback legislation. The Company will continue to monitor current
developments closely.
Competition:
The property and casualty insurance industry is highly competitive.
Price competition has been particularly intense during recent years
and is expected to continue for the foreseeable future. Meridian
Mutual, Meridian Security, Citizens Security Mutual, Citizens Fund,
and ICO all compete with other property and casualty insurers, both in
the recruitment and retention of qualified agents and in the sale of
insurance products to consumers. The Company believes the principal
competitive factors in its markets to be service to agents and
policyholders and price. Success in recruiting and retaining agents
is dependent upon the administrative support provided to agents,
commission rates, and the ability of the insurer to provide products
that meet the needs of the agent and the agent's customers.
In selling its insurance products, Meridian Mutual, Meridian Security,
Citizens Security Mutual, Citizens Fund, and ICO compete with other
insurers writing through independent agents (including insurers
represented by the independent agents who represent Meridian and
Citizens Security Group), with insurers having their own agency
organizations and with direct sellers of insurance products. There
are numerous companies competing for business in the geographic areas
in which the Company, Meridian Mutual and Citizens Security Mutual
operate. No single company dominates the marketplace, but many of
Meridian's and Citizens Security Group's competitors have more
established national reputations and substantially greater financial
resources and market share.
Employees:
On January 1, 1997, the Company became the employer of all employees
that were formerly employed by Meridian Mutual and Citizens Security
Mutual. This transfer allows for more freedom in compensation
planning, such as flexibility in the use of the Company's common stock
as compensation, and improves internal efficiencies by combining
employee benefit plans. Prior to the change, the Company had no
employees and relied upon Meridian Mutual and Citizens Security Mutual
to provide all management and administrative services required by the
Company. The Company employs approximately 600 people and believes
that its relationship with its employees is satisfactory.
<PAGE>
Audit Practices:
The Board of Directors has an Audit Committee composed of three
directors who are not employees of the Company or its affiliates.
Usually meeting in conjunction with the Meridian Mutual Audit
Committee, the committee monitors the Company's financial reporting
and internal control systems and reviews the work of the Company's
internal audit function.
The Company retains the firm of Coopers & Lybrand L.L.P. as
independent accountants to perform an independent audit of the
financial statements of the Company and its affiliates. The audit is
conducted in accordance with generally accepted auditing standards.
The independent accountants have unlimited access to, and meet
regularly with, the Audit Committees.
ITEM 2: PROPERTIES
The headquarters building of the Company and Meridian Mutual is owned
by Meridian Mutual and is located near downtown Indianapolis, Indiana.
The building is a multi-level structure containing approximately
205,000 square feet of office space. During 1995, construction was
completed on a 75,000-square-foot addition to the home office
facility. This expansion allowed the Company and Meridian Mutual to
enhance and enlarge its operational work areas and create a brighter,
more open environment. The expansion also allowed Meridian to
consolidate the two Indianapolis satellite offices, which were being
leased, into the home office facility. Meridian Mutual also lease a
district service office facility in Columbus Ohio and claim service
centers in Lansing, Michigan and Louisville, Kentucky.
The principal office space for the operations of Citizens Security
Group is located in Red Wing, Minnesota and is being leased by
Citizens Security Mutual. The space consists of approximately 30,000
square feet with the lease expiring on December 31, 2002. In August,
1996, Citizens Security Mutual subleased approximately 8,200 square
feet of this office space to VIS'N, Inc. Citizens Security Mutual
also leases an additional office in Red Wing, Minnesota, consisting of
approximately 3,300 square feet under a lease that expires on June 30,
1998. In September, 1996, approximately 2,900 square feet of this
office space was subleased to Design Ink Plus, Ltd.
ITEM 3: LEGAL PROCEEDINGS
The Company's insurance subsidiaries are parties to litigation arising
in the ordinary course of their business. The Company believes that
the resolution of these lawsuits will not have a material adverse
effect on its financial condition.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the fourth
quarter of the fiscal year covered by this report.
<PAGE>
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Market Information:
The Company's common stock has traded on the NASDAQ Stock Market under
the symbol "MIGI" since completing an initial public offering of
1,700,000 shares in March 1987 at a price of $12 per share. On May 5,
1993, the Company completed a second public offering of 1,725,000
common shares at $12 per share. As of March 13, 1998, approximately
47.5 percent of the common stock was owned by Meridian Mutual and the
balance was spread among approximately 240 common shareholders of
record, including many brokers holding shares for their individual
clients. The number of individual shareholders on the same date was
approximately 1,300. The number of Common Shares outstanding on March
13, 1998, totaled 6,637,853. Information relating to the common stock
is available through the NASDAQ Stock Market System and the following
table sets forth the high, low and closing sale prices of the common
stock for each quarter of 1997 and 1996.
1997 1996
Quarter Ended High Low Close High Low Close
March 31 $16.13 $13.50 $14.00 $15.25 $13.50 $14.75
June 30 $15.63 $13.25 $15.25 $15.25 $13.25 $13.69
September 30 $19.25 $14.88 $18.13 $14.50 $13.25 $14.25
December 31 $18.75 $15.63 $16.75 $15.13 $13.13 $14.75
Dividend Policy:
Since the first quarter of 1996, the Company has paid quarterly cash
dividends of $0.08 per common share. In 1995 and 1994, the Company
paid quarterly dividends of $0.07 and $0.06 per share, respectively.
The continued payment of dividends is reviewed quarterly by the Board
of Directors in relation to changes in the financial condition and
results of operations of the Company. The ability of the Company to
pay dividends is dependent upon the receipt of dividends from its
insurance company subsidiaries, which are subject to state laws and
regulations which restrict their ability to pay dividends. (See Note
12 of the Notes to Consolidated Financial Statements.)
<PAGE>
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data is derived from the consolidated
financial statements of the Company. The data should be read in
conjunction with the consolidated financial statements, related notes,
and other financial information included elsewhere in this document.
Year Ended December 31,
1997 1996 1995 1994 1993
(In thousands, except per share data and ratios)
Operating data:
Premiums earned $194,587 $167,304 $143,866 $135,002 $125,902
Net investment income 16,372 14,908 14,564 13,996 13,569
Realized investment gains 4,477 3,794 1,538 286 890
Other income (expense) 1,042 563 (146) 54 (115)
Total revenues 216,478 186,569 159,822 149,338 140,246
Losses and loss adjustment
expenses 149,219 130,101 99,124 93,971 86,622
General operating expenses 16,505 13,767 14,156 14,527 14,935
Interest expense 732 308 --- --- ---
Amortization expenses 42,894 36,443 30,820 29,304 27,039
Total expenses 209,350 180,619 144,100 137,802 128,596
Income before taxes and change
in accounting method 7,128 5,950 15,722 11,536 11,650
Income taxes 207 150 4,105 2,415 2,765
Income before change in
accounting method 6,921 5,800 11,617 9,121 8,885
Changes in accounting method:
Accounting for income taxes --- --- --- --- 526
Net income $ 6,921 $ 5,800 $ 11,617 $ 9,121 $ 9,411
Weighted average shares
outstanding 6,684 6,779 6,770 6,740 6,139
Basic earnings per share $ 1.04 $ 0.86 $ 1.72 $ 1.35 $ 1.53
Diluted earnings per share $ 1.03 $ 0.85 $ 1.71 $ 1.35 $ 1.53
Dividends declared per share $ 0.32 $ 0.32 $ 0.28 $ 0.24 $ 0.24
Underwriting ratios
(statutory basis):
Loss and loss adjustment
expense ratio 76.8% 78.0% 69.2% 69.8% 69.4%
Expense ratio 30.3 30.0 31.0 32.0 32.4
Combined ratio 107.1% 108.0% 100.2% 101.8% 101.8%
Balance sheet data at end
of period:
Total investments $308,427 $281,689 $254,694 $219,461 $221,197
Total assets 413,586 397,798 322,588 291,406 285,936
Total liabilities 281,692 275,624 204,346 197,154 191,490
Shareholders' equity 131,894 122,174 118,243 94,252 94,447
Shareholders' equity per
share $ 19.90 $ 18.02 $ 17.45 $ 13.98 $ 14.02
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview:
The 1997 year has been a period of positioning for Meridian Insurance
Group, Inc. New product enhancements, systems automation, and
underwriting programs implemented during 1997 enable the Company to
move forward into 1998 with renewed momentum. Rate action taken in
1997 for several lines of business should help to improve loss ratio
results for 1998. The Company continually evaluates rate adequacy for
all lines of business. The Company recently began to integrate the
Citizens Security claims operations with the home office claims
division. This integration is expected to reduce overall claims-
related expenses while providing high quality service. The Company is
also focused on reducing its expense ratio with a stringent review of
all underwriting expenses.
Automation continues to play an integral part in positioning the
Company for future success. During 1997 the Company completed
development of an automated Personal Lines Underwriting System for the
homeowners and auto lines of business. This allows risks that meet
specific underwriting parameters to be processed by the system with
little or no manual intervention. The system will "kick out" policies
that fail the underwriting criteria. By allowing those policies with
good experience to "pass through" the system, the Company's
underwriters can concentrate their review on those policies that have
loss experience or exposure beyond the specified parameters, thereby
allocating more of their time to those risks that need additional
analysis. It is anticipated that such underwriting and workflow
enhancements will enable the Company to expand its business without
increasing the employee base. The Company continues to examine new
ways for automation to enhance the workflow processes and increase
overall efficiency.
The Year 2000 Automation Issue is the result of computer programs being
written using two digits rather than four to define the applicable year.
Computer programs that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations.
By early 1996, the Company's Year 2000 project plan was developed and change
efforts were underway. Both internal and external resources are utilized
in reprogramming, replacing, and/or testing the software for Year 2000
modifications. Much progress has been made and the Company expects its
core business processing system to be completely Year 2000 compliant before
the end of 1998. The Company estimates it has incurred incremental costs
to address the Year 2000 Issue of approximately $350,000 and $150,000 in
1997 and 1996, respectively. Estimates of incremental costs to complete
the project in 1998 are $350,000.
The Company has initiated communications with its agents to determine the
extent to which the Company is vulnerable to those parties' potential
failure to remediate their own Year 2000 issues. There can be no guarantee
that the systems of agents or other third parties will be timely converted,
or that a widespread failure to convert by others would not adversely affect
the Company. The Company does not issue insurance policies covering risks
related to the Year 2000 Issue. However, there can be no certainty
regarding future judicial or legislative interpretations of coverage.
During 1997, Meridian Mutual became licensed in the state of
Washington and launched a new direct response marketing effort for
private passenger automobile products. This direct response program
represents Meridian's initial efforts to supplement its distribution
channels. Historically, Meridian has sold insurance only through its
strong independent agency force. During the start-up phase, the
direct response business will be conducted only in Meridian Mutual and
will be excluded from the reinsurance pooling agreement with its
affiliates. Affinity marketing relationships with banking or other
financial institutions are expected to evolve, creating additional
distribution vehicles.
During the 1990's, premium writings for non-standard automobile
insurers generally enjoyed greater growth and profitability than the
standard automobile marketplace. Effective January 1998, Meridian
Mutual began offering a non-standard automobile product in the state
of Indiana. Initial response from the Company's independent agency
force was positive, as many of these agents have been writing non-
<PAGE>
standard automobile products through other insurers. The non-standard
product is expected to be offered in as many as eight states over the
course of 1998. Similar to the direct response business, non-standard
automobile writings will be retained by Meridian Mutual outside of the
reinsurance pooling agreement during the start-up phase.
The Company continues to focus on its core business, while remaining
competitive in the dynamic marketplace. The 1996 Citizens Security
Group acquisition allowed for the opportunity to spread underwriting
risk over more states. In 1998, the Company will focus efforts on
policy rating, agency profitability management, and enhanced
underwriting efforts to improve the operating results. State
expansion will complement other efforts underway to grow the Company's
business competitively while continuing to manage risk exposure.
Expansion into the state of Virginia is anticipated in 1998.
Results of Operations:
1997 Compared to 1996
For the year ended December 31, 1997, the Company recorded net income
of $6.9 million, or $1.04 basic earnings per common share ($1.03
diluted earnings per share). This compares to 1996 net income of $5.8
million, or $0.86 basic earnings per share ($0.85 diluted earnings per
share). Included in the 1997 results was an entire year of operations
from the 1996 acquisition of the Citizens Security companies, compared
to five months of Citizens Security operations for the prior period.
Earnings for both periods were negatively impacted by a large volume
of property damage claims associated with severe weather that occurred
throughout the Company's operating territory. Weather-related
catastrophe losses were estimated to be approximately $7.2 million, or
$0.72 per share, in 1997 and $10.6 million, or $1.03 per share, in
1996. The Company's 1997 statutory combined ratio was 107.1 percent
versus 108.0 percent for 1996.
The Company's total revenues for 1997 increased 16.0 percent to $216.5
million from $186.6 million for 1996. Premiums earned increased 16.3
percent to $194.6 million for 1997 in comparison to $167.3 million for
the previous year. The acquisition of the Citizens Security companies
accounted for approximately $25.0 million of the increase. Aside from
the acquisition, net premiums earned from the Meridian book of
business increased approximately 3.3 percent, excluding its
participation in the National Workers' Compensation Pool ("NWCP").
Personal and farm lines of business were the primary contributors to
the increase with 6.1 percent growth, offset partially by a 1.7
percent decline in commercial lines. Commercial lines of business
continue to be affected by highly competitive market conditions in the
Company's operating territory. The earned premium volume in the
Company's workers' compensation line was reduced by an approximately
$2.6 million decline in assumed earned premiums from its involuntary
participation in the NWCP. This was principally due to reduced
participation in the assigned risk pools for the states of Kentucky
and Tennessee. Partially offsetting the NWCP reduction was a refund
of premiums previously ceded to the Minnesota Workers' Compensation
Reinsurance Association of approximately $863,000. Direct written
premiums for the Meridian and Citizens Security insurance companies
during 1997 experienced growth of 3.1 percent and 1.8 percent,
respectively, when compared to 1996 volume.
Net investment income for 1997 increased 9.8 percent to $16.4 million
in comparison to $14.9 million for 1996. This was attributed to a
larger asset base resulting primarily from the acquisition of Citizens
Security Group. The Company's pre-tax net investment yield for 1997
improved slightly to 6.0 percent from 5.9 percent one year ago. The
average yield of the Company's fixed maturity portfolio at December
31, 1997 was 6.7 percent compared to 6.8 percent at year end 1996.
During 1997, the Company realized net gains on the sale of investments
of $4.5 million, or approximately $0.44 per common share, versus $3.8
million, or $0.37 per share in 1996. Nearly all of the realized gains
recognized over the last two years were generated from the sale of
equity securities and have an insignificant effect on future
investment yields.
Losses and loss adjustment expenses incurred of $149.2 million for
1997 were 14.7 percent higher than the previous year's $130.1 million.
Approximately $33.8 million of the 1997 incurred amount relates to the
<PAGE>
operations of Citizens Security Group, versus approximately $9.1
million for the five months of operations in the 1996 total. The
statutory loss and loss adjustment expense ratio of the Citizens
Security companies for the 1997 period was 85.1 percent compared to
70.9 percent for the five months of operations in 1996. Deteriorations
in the Citizens Security homeowners, private passenger automobile and
commercial multi-peril lines of business were the primary factors in
the loss and loss adjustment expense increase. Partially offsetting
these increases were improved experience in the commercial automobile
and workers' compensation lines. Exclusive of Citizens Security's
operations, incurred losses and loss adjustment expenses for the
Meridian book of business reflected a 4.6 percent reduction from
approximately $121.0 million in 1996 to $115.4 million in 1997. The
Meridian lines of business for 1997 produced a statutory loss and loss
adjustment expense ratio of 74.7 percent, a 4.0 percentage point
improvement from 78.7 percent for 1996. Meridian's farmowners,
homeowners and commercial multi-peril lines of business were the major
contributors to the reduced loss and loss adjustment expense ratio,
due largely to a reduction in weather-related catastrophe losses. The
impact of such catastrophes on the Company's loss ratio in 1997 and
1996 was estimated to be 3.7 and 6.4 percentage points, respectively.
General operating and amortization expenses of $59.4 million for the
year ended December 31, 1997 increased 18.3 percent over the
comparable 1996 total of $50.2 million. Substantially contributing to
the increase was an additional seven months of operating expenses in
1997 related to the Citizens Security companies. Also contributing to
the increased expenses were higher costs related to the Company's
employee medical plan, and programming and other system costs
associated with Year 2000 compliance. Relative to net earned
premiums, the Company's expense ratio for 1997 was approximately 30.5
percent compared to 30.0 percent for 1996. The Company also incurred
approximately $732,000 of interest expense in 1997 on the bank loan
used to finance the Citizens Security Group acquisition.
For the year ended December 31, 1997, the Company recorded income tax
expense of $207,000 compared to $150,000 for 1996. The low effective
tax rate resulted primarily from the amount of tax-exempt investment
income in relation to pre-tax income.
1996 Compared to 1995
In 1996, the Company reported net income of $5.8 million, or $0.86
basic earnings per common share ($0.85 diluted earnings per share).
This compares to 1995 net income of $11.6 million, or $1.72 basic
earnings per share ($1.71 diluted earnings per share). 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
weather-related catastrophe claims was estimated to be approximately
$1.03 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 Company's statutory combined
ratio for 1996 was 108.0 percent versus 100.2 percent for the
comparable 1995 period. 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. The effect of the Citizens Security
Group acquisition on total revenues was approximately $15.8 million,
including approximately $14.7 million of net earned premiums and $1.1
million of net investment income. Incremental net income from the
Citizens Security Group operation for the five month period ended
December 31, 1996 was approximately $0.25 million, or $0.04 per share,
net of goodwill amortization and interest expense.
The Company's largest source of revenue, net earned premiums,
increased 16.3 percent in 1996 to $167.3 million compared to $143.9
million for 1995. Aside from the 10.2 percent increase in premium
volume that resulted from the Citizens Security Group acquisition,
premiums earned by the Meridian operation increased approximately 6.1
percent, or $8.8 million, over the 1995 total. The Meridian growth
was attributed to nearly all lines of business, with personal lines
production increasing 6.8 percent, commercial lines 5.6 percent and
farmowners achieving growth of 2.8 percent in earned premium volume.
Commercial and personal automobile and homeowners were the primary
lines of business contributing to the increased premium volume.
Depressing the commercial lines growth was a reduction of
approximately $1.2 million in assumed earned premiums from the
National Workers' Compensation Pool.
<PAGE>
Net investment income of $14.9 million in 1996 increased 2.4 percent
over 1995's total of $14.6 million. The pre-tax net investment yield
declined slightly to 5.9 percent from 6.1 percent in 1995. The
reduced portfolio yield resulted primarily from a greater proportion
of assets being invested in equity securities and tax-exempt bonds.
The average yield of the fixed maturity portfolio is 6.8 percent. The
investment income generated from the acquired Citizens Security Group
investment portfolio was partially offset by a reduction in the
Meridian portfolio to help fund the purchase. In 1996, the Company
realized net gains of $3.8 million on the disposition of invested assets,
or $0.37 per share net of tax, compared to $1.5 million, or
$0.15 per share after tax, for the 1995 period. Nearly all of the
realized gains recognized in 1996 were generated from the sale of
equity securities which are expected to have little impact on future
investment yields.
Heavily impacted by catastrophe losses in 1996, the Company's incurred
losses and loss adjustment expenses of $130.1 million were 31.3
percent higher than the $99.1 million reported for the comparable 1995
period. Approximately $12.2 million of the current year losses
resulted from catastrophe and other weather-related non-catastrophic
claims. This compares to approximately $4.4 million for the 1995
period. The acquisition of the Citizens Security Group business
contributed approximately $9.1 million to the current year loss and
loss adjustment expense total, accounting for over 9 percent of the
increase. Also contributing to the high volume of losses was an
increase in claim severity for Meridian's private passenger automobile
and commercial multiple-peril lines of business. Partially offsetting
these losses were improved results in the Company's workers'
compensation and personal and commercial automobile liability lines of
business. The Company's statutory loss ratio for 1996 deteriorated to
68.9 percent from 1995's 60.2 percent. The statutory loss adjustment
expense ratio of 9.1 percent remained virtually unchanged from 1995 ratio.
The Company's general operating and amortization expenses of $50.2
million for the year ended December 31, 1996 were 11.6 percent higher
than the $45.0 million reported for 1995. Relative to earned premium
volume, the Company's expense ratio for 1996 improved to 30.0 percent
from 31.3 percent for the prior year. Factors leading to the reduced
expense ratio include certain economies of scale and decreases in
employee incentive compensation, agent profit-sharing and assessments
from certain boards and bureaus. As a result of the Citizens Security
Group acquisition, the Company incurred approximately $252,000 of
additional expense in 1996 for goodwill amortization and incurred
interest expense of approximately $308,000 on the related bank loan.
For the most recent year, the Company recorded income tax expense of
$150,000. The low effective tax rate results primarily from the
amount of tax-exempt investment income in relation to pre-tax income.
Liquidity and Capital Resources:
The Company's primary need for liquidity is to pay shareholder
dividends, and its main source of liquidity is the receipt of
dividends from its subsidiaries. The Company's subsidiaries are
subject to state laws and regulations which restrict their ability to
pay dividends. During 1997, Meridian Security declared and paid
dividends to the Company of $5.0 million. In 1996 and 1995, dividends
paid to the Company were $3.9 million and $2.4 million, respectively.
The principal need of the Company's insurance subsidiaries for liquid
funds is the payment of claims and general operating expenses in the
ordinary course of business. The funds of the Company's insurance
subsidiaries are generally invested in securities with maturities
intended to provide adequate cash to pay such claims and expenses
without forced sales of investments. The average duration of the
fixed maturity portfolio is approximately 4.3 years. Over the next
year, a relatively small portion of the Company's bond portfolio is
scheduled to mature. Given the current interest rate environment,
reinvestment of the matured proceeds is likely to be at somewhat lower
yields.
Approximately 81 percent of the Company's investment assets are held
in fixed maturities, substantially all of which are believed to be
readily marketable. Within the fixed maturity portfolio, the Company
holds approximately 17 percent in mortgage-backed pass-through
securities and collateralized mortgage obligations. The Company has
attempted to reduce the prepayment risks associated with mortgage-
backed securities by investing a majority of the collateralized
mortgage obligations in planned amortization and very accurately
<PAGE>
defined tranches. These investments are designed to alleviate the
risk of prepayment by providing predictable principal prepayment
schedules within a designated range of prepayments. The Company has
no exposure to high risk derivatives in its portfolio.
The Company's fixed income investment portfolio consists almost
entirely of investment grade securities, the average quality of which
is rated Aa / AA. The Company currently holds all of its fixed
maturity investments in the "available-for-sale" category carried at
market value. The Company at December 31, 1997 recorded unrealized
gains in the bond portfolio of approximately $5.7 million, net of
deferred income taxes. At year-end 1996, the Company recorded
unrealized gains on the bond portfolio of approximately $2.7 million,
net of deferred income taxes. The Company's equity security
portfolio, which accounts for approximately 17.6 percent
of invested assets, produced unrealized gains, net of deferred income
taxes, of approximately $8.4 million in 1997, compared to approximately
$4.5 million in 1996. Net unrealized appreciation of investments
added $2.17 to the Company's $19.90 book value per share at December
31, 1997. Net unrealized appreciation added $1.05 per share to the
$18.02 book value at December 31, 1996.
On May 6, 1997, the Company announced that its Board of Directors had
authorized the repurchase of up to 350,000 common shares, or
approximately five percent of the Company's outstanding common stock.
As of December 31, 1997, the Company had repurchased 154,500 shares,
or approximately 44 percent of the authorized total, at a cost of $2.3
million.
In July 1996, the Company completed the acquisition of Citizens
Security Group Inc. of Red Wing, Minnesota. The Company purchased all
of the outstanding shares of Citizens Security Group Inc. and its
wholly-owned property and casualty insurance subsidiaries, Citizens
Fund Insurance Company and Insurance Company of Ohio, for
approximately $30.3 million in cash, including capitalized acquisition
costs, and became affiliated with Citizens Security Mutual Insurance
Company. Approximately 60 percent of the purchase price was generated
from the sale of a portion of the Company's investment portfolio. The
remaining $12 million was financed through bank debt and is being
amortized over seven years with a variable interest rate of LIBOR plus
50 basis points. The acquisition was accounted for as a purchase with
the assets acquired and liabilities assumed being recorded at their
estimated fair value at the date of acquisition. The excess cost over
the fair value of the net assets of approximately $14.5 million was
recorded as goodwill, which is being amortized on a straight-line
basis over a 25 year period.
Beginning in 1994, state insurance regulators required companies to
calculate Risk Based Capital ("RBC"). RBC is the capital required to
cover the varying degrees of risk inherent in a company's assets, loss
reserves, underwriting, and reinsurance. The "company action level"
RBC is the minimum amount of capital required in order to avoid
regulatory action. In 1997, the adjusted capital of the Company's
insurance subsidiaries was well above the required minimum.
Impact of Inflation:
Inflation can have a significant impact on property and casualty
insurers because premium rates are established before the amount of
losses and loss adjustment expenses is known. The Company attempts to
anticipate increases from inflation in establishing rates, subject to
limitations imposed for competitive pricing.
The Company considers inflation when estimating liabilities for losses
and loss adjustment expenses, particularly for claims having a long
period between occurrence and settlement. The liabilities for losses
and loss adjustment expenses are management's estimates of the
ultimate net cost of underlying claims and expenses and are not
discounted for the time value of money. In times of inflation, the
normally higher investment yields available may partially offset
potentially higher claims and expenses.
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS Page
Report of Independent Accountants 25
Financial Statements:
Consolidated Statement of Income 26
Consolidated Balance Sheet 27
Consolidated Statement of Shareholders' Equity 28
Consolidated Statement of Cash Flows 29
Notes to Consolidated Financial Statements 30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Meridian Insurance Group, Inc.
We have audited the accompanying consolidated balance sheet of
Meridian Insurance Group, Inc., and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Meridian Insurance Group, Inc., and Subsidiaries as of December 31,
1997 and 1996, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 25, 1998
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the Years Ended December 31, 1997, 1996 and 1995
December 31,
1997 1996 1995
Premiums earned $194,586,632 $167,304,414 $143,865,821
Net investment income 16,371,711 14,908,285 14,563,820
Net realized investment gains 4,477,580 3,793,778 1,538,281
Other income (expense) 1,042,350 562,198 (146,345)
Total revenues 216,478,273 186,568,675 159,821,577
Losses and loss adjustment expenses 149,218,731 130,101,192 99,123,849
General operating expenses 16,505,515 13,766,868 14,155,631
Interest expense 732,047 307,887 ---
Amortization expenses 42,893,857 36,442,635 30,820,058
Total expenses 209,350,150 180,618,582 144,099,538
Income before taxes 7,128,123 5,950,093 15,722,039
Income taxes (benefit)
Current 1,067,000 702,141 3,554,000
Deferred (860,000) (552,000) 551,000
Total income taxes 207,000 150,141 4,105,000
Net income $ 6,921,123 $ 5,799,952 $ 11,617,039
Weighted average shares outstanding 6,683,536 6,779,284 6,770,081
Per share data:
Basic earnings per share $ 1.04 $ 0.86 $ 1.72
Diluted earnings per share $ 1.03 $ 0.85 $ 1.71
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of December 31, 1997 and 1996
December 31,
1997 1996
ASSETS
Investments:
Fixed maturities--available for sale, at market
value (cost $239,662,000 and $234,356,000) $248,404,304 $238,343,040
Equity securities, at market
(cost $41,430,000 and $33,779,000) 54,378,947 40,629,633
Short-term investments, at cost, which
approximates market 3,996,232 1,326,634
Other invested assets 1,647,102 1,390,176
Total investments 308,426,585 281,689,483
Cash 1,188,423 3,128,154
Premium receivable, net of allowance for bad debts 4,343,157 4,674,984
Accrued investment income 3,130,712 3,241,125
Deferred policy acquisition costs 17,651,544 16,690,275
Goodwill 15,479,456 16,848,829
Reinsurance receivables 48,850,066 45,850,830
Prepaid reinsurance premiums 3,861,507 5,020,605
Due from Meridian Mutual Insurance Company 7,723,277 8,973,672
Other assets 2,931,077 11,679,744
Total assets $413,585,804 $397,797,701
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses $169,801,326 $161,309,239
Unearned premiums 82,839,333 84,065,751
Other post-employment benefits 1,933,181 1,417,814
Bank loan payable 11,375,000 11,875,000
Reinsurance payables 9,078,076 8,664,358
Other liabilities 6,664,653 8,291,558
Total liabilities 281,691,569 275,623,720
Shareholders' equity:
Common shares, no par value, Authorized-20,000,000
Issued-6,781,364 and 6,779,375, Outstanding-
6,626,864 and 6,779,375 at December 31, 1997
and 1996, respectively 44,110,416 44,077,846
Treasury shares, at cost; 154,500 shares (2,308,188) ---
Contributed capital 15,058,327 15,058,327
Unrealized appreciation of investments, net of
deferred income taxes 14,349,232 7,141,846
Retained earnings 60,684,448 55,895,962
Total shareholders' equity 131,894,235 122,173,981
Total liabilities and shareholders' equity $413,585,804 $397,797,701
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<TABLE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
Unrealized
Appreciation
Common Treasury Contributed (Depreciation) Retained
Shares Shares Capital of Investments Earnings
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $43,930,722 $ --- $15,058,327 $(7,281,724) $42,545,114
Net income --- --- --- --- 11,617,039
Unrealized appreciation of
investment securities, net
of deferred income taxes --- --- --- 14,123,969 ---
Dividends ($0.28 per share) --- --- --- --- (1,896,743)
Repurchase and retirement
of 6,479 common shares (77,033) --- --- --- ---
Exercise of stock options
for 40,521 common shares 222,996 --- --- --- ---
Balance at December 31, 1995 44,076,685 --- 15,058,327 6,842,245 52,265,410
Net income --- --- --- --- 5,799,952
Unrealized appreciation of
investment securities, net
of deferred income taxes --- --- --- 299,601 ---
Dividends ($0.32 per share) --- --- --- --- (2,169,400)
Repurchase and retirement
of 1,472 common shares (22,080) --- --- --- ---
Exercise of stock options
for 4,042 common shares 23,241 --- --- --- ---
Balance at December 31, 1996 44,077,846 --- 15,058,327 7,141,846 55,895,962
Net income --- --- --- --- 6,921,123
Unrealized appreciation of
investment securities, net
of deferred income taxes --- --- --- 7,207,386 ---
Dividends ($0.32 per share) --- --- --- --- (2,132,637)
Issuance of 1,989 common
shares 32,570 --- --- --- ---
Repurchase of 154,500 common
shares --- (2,308,188) --- --- ---
Balance at December 31, 1997 $44,110,416 $(2,308,188) $15,058,327 $14,349,232 $60,684,448
<FN>
<F1>
The accompanying notes are an integral part of the consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Years Ended December 31, 1997, 1996 and 1995
December 31,
1997 1996 1995
Cash flows from operating activities:
Net income $ 6,921,123 $ 5,799,952 $ 11,617,039
Reconciliation of net income to net
cash provided by operating activities:
Realized investment gains (4,477,580) (3,793,778) (1,538,281)
Amortization 42,893,857 36,442,635 30,820,058
Deferred policy acquisition costs (43,475,066) (39,321,446) (32,068,780)
Increase (decrease) in unearned
premiums (1,226,418) 2,034,199 4,895,409
Increase (decrease) in loss and loss
adjustment expenses 8,492,087 11,054,147 (177,410)
Decrease (increase) in amount due
from Meridian Mutual 1,250,395 385,131 (2,548,320)
Decrease (increase) in reinsurance
receivables (2,999,236) (7,352,448) 234,172
Decrease (increase) in prepaid
reinsurance premiums 1,159,098 (349,547) 2,654
Decrease in other assets 5,549,960 2,064,651 66,763
Increase in other post-employment
benefits 515,367 119,436 197,223
Increase in reinsurance payables 413,718 1,800,732 972,951
Increase (decrease) in other
liabilities (1,839,705) (1,866,664) 116,619
Other, net 769,010 (61,732) 1,193,850
Net cash provided by operating
activities 13,946,610 6,955,268 13,783,947
Cash flows from investing activities:
Purchase of fixed maturities (54,141,776) (47,518,736) (39,897,557)
Proceeds from sale of fixed maturities 26,135,592 38,131,207 17,111,272
Proceeds from calls, prepayments and
maturity of fixed maturities 22,393,353 24,843,739 14,404,070
Purchase of equity securities (33,956,533) (19,794,358) (15,735,622)
Proceeds from sale of equity securities 31,160,867 18,633,656 9,556,180
Net (increase) decrease in short-term
investments (2,669,598) 3,300,088 1,641,491
Decrease (increase) in other invested
assets (256,926) (336,271) 31,366
Acquisition of subsidiary --- (30,262,442) ---
Increase (decrease) in securities
payable 401,707 (1,533,830) 1,117,355
Net cash used in investing activities (10,933,314) (14,536,947) (11,771,445)
Cash flows from financing activities:
Repurchase of common stock (2,308,188) (22,080) (77,033)
Exercise of stock options --- 23,241 222,996
Proceeds from bank loan --- 12,000,000 ---
Repayment of bank loan (500,000) (125,000) ---
Dividends paid (2,144,839) (2,101,426) (1,826,933)
Net cash provided by (used in)
financing activities (4,953,027) 9,774,735 (1,680,970)
Increase (decrease) in cash (1,939,731) 2,193,056 331,532
Cash at beginning of year 3,128,154 935,098 603,566
Cash at end of year $ 1,188,423 $ 3,128,154 $ 935,098
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Nature of Operations:
Meridian Insurance Group, Inc. ("the Company"), was organized in
1986 as a subsidiary of Meridian Mutual Insurance Company
("Meridian Mutual"), an Indiana mutual insurance company that
currently owns 47.5 percent of the outstanding common shares of
the Company. The Company is a regional holding company
principally engaged in the business of underwriting property and
casualty insurance through its wholly-owned subsidiaries, Meridian
Security Insurance Company ("Meridian Security"), Citizens Fund
Insurance Company ("Citizens Fund") and Insurance Company of Ohio
("ICO"). Both Citizens Fund and ICO, along with their holding
company, Citizens Security Group Inc. ("CSGI"), were acquired by
the Company on July 31, 1996. CSGI was subsequently dissolved on
February 7, 1997.
Effective August 1, 1996, Citizens Fund, ICO and Citizens Security
Mutual Insurance Company ("Citizens Security Mutual"), the former
majority shareholder of CSGI, became participants in a reinsurance
pooling arrangement with Meridian Mutual and Meridian Security, in
which the underwriting income and expenses of each entity are
shared. The participation percentages of the Company's insurance
subsidiaries total 74 percent. Prior to the change, Meridian
Security and Meridian Mutual were the only participants in the
reinsurance pooling arrangement, of which Meridian Security
assumed 74 percent of the combined underwriting income and
expenses of the two companies. (See Note 5-Related Party
Transactions.)
Meridian Mutual writes a broad line of property and casualty
insurance, including personal and commercial automobile;
homeowners, farmowners and commercial multi-peril; and workers'
compensation. Business is written through approximately 1,075
independent insurance agencies in the states of Illinois, Indiana,
Iowa, Kentucky, Michigan, Ohio, Pennsylvania, Tennessee, and
Wisconsin. Meridian Security writes primarily personal and farm
lines through approximately 625 independent insurance agencies,
many of which are cross-licensed with Meridian Mutual. Meridian
Security is licensed to write business in all states in which
Meridian Mutual is licensed, except for the state of Washington.
Citizens Security Mutual offers a variety of personal and
commercial insurance products in the states of Illinois, Indiana,
Iowa, Minnesota, Missouri, North Dakota, Ohio, South Dakota,
Tennessee, and Wisconsin through a network of approximately 400
independent insurance agencies. Citizens Fund writes primarily
personal lines through approximately 80 independent insurance
agencies in the states of Iowa, Minnesota, North Dakota, Ohio,
South Dakota, and Wisconsin. In 1997, ICO discontinued writing
business in the state of Ohio. The in-force business previously
written by ICO is currently being renewed in Meridian Security.
Basis of Presentation:
The consolidated financial statements have been prepared on the
basis of generally accepted accounting principles which differ in
some respects from those followed in reports to insurance
regulatory authorities. Certain prior year amounts have been
reclassified to conform to the current-year presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
and disclosure of certain assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Principles of Consolidation:
The consolidated financial statements include the accounts of
Meridian Insurance Group, Inc., and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated.
<PAGE>
Investments:
Fixed maturity investments include bonds, notes, mortgage backed
pass-through securities, collateralized mortgage obligations,
other asset backed securities and sinking fund preferred stocks.
The fixed maturity portfolio is invested entirely in securities
classified as available for sale and is carried at quoted market
values. Equity securities, consisting of unaffiliated common and
perpetual preferred stocks, are reported at quoted market values.
Short-term investments are recorded at cost, approximating market
value. Other investments include limited partnerships recorded on
the equity method and a mortgage loan stated at the aggregate
unpaid balance.
Realized gains or losses on disposition of investments are
determined on a specific identification basis. Unrealized gains
and losses resulting from changes in the valuation of both equity
securities and fixed maturities available for sale are recorded as
a component of shareholders' equity, net of applicable deferred
income taxes.
The Company regularly evaluates its investments based on current
economic conditions, past credit loss experience and other
circumstances of the Company. A decline in a security's net
market value that is not a temporary fluctuation is recognized as
a realized loss, and the cost basis of that security is reduced.
Premium Revenue:
Premiums are recognized as revenue on a monthly pro rata basis
over the coverage terms of the respective policies. Any premiums
applicable to the future terms of the policies are included in
liabilities as unearned premiums.
Deferred Policy Acquisition Costs:
Policy acquisition costs, principally commissions, premium taxes,
and variable underwriting and policy issue expenses, have been
deferred. Such costs are amortized as premium revenue is earned.
The method used in computing deferred policy acquisition costs
limits the amount of such deferred costs to their estimated
realizable value, and also considers the effects of anticipated
investment income, losses and loss adjustment expenses, and
certain other costs anticipated to be incurred as the premium is
earned. In connection with the acquisition of Citizens Fund and
ICO, the Company allocated a portion of its cost to an asset
representing the estimated equity in the unearned premium reserve
of the acquired book of business. The asset was amortized in 1996
and 1997 as the related premium revenue was recognized.
Goodwill:
The Company's goodwill represents the excess of cost over the fair
value of identifiable net assets acquired from business
acquisitions and is being amortized on a straight-line basis over
a 25-year period. The Company continually monitors the value of
its goodwill based on estimates of future earnings of the
subsidiaries that were acquired. If it is determined that changes
in such projected earnings no longer supports the recoverability
of goodwill over the remaining amortization period, the carrying
value would be reduced with a corresponding charge to expense or
the amortization period would be shortened. As of December 31,
1997, no material changes have occurred.
Losses and Loss Adjustment Expenses:
Reserves for unpaid losses and loss adjustment expenses are based
on both estimates of the ultimate costs of individual claims and
on other non-discounted estimates, such as claims incurred but not
reported and salvage and subrogation. The methods of making such
estimates are continually reviewed and updated, and any reserve
adjustments are reflected in current operating results.
<PAGE>
Income Taxes:
Deferred income taxes are provided to reflect the estimated future
tax effects of temporary differences between the tax basis of an
asset or liability and the basis recorded in financial statements.
The deferred tax asset or liability is measured by using enacted
tax rates expected to apply to future taxable income in the
periods in which the temporary differences are expected to be
recovered or settled. Accordingly, changes in future tax rates
cause immediate adjustments to deferred taxes.
Earnings Per Share:
The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share", which requires
changes in the computation, presentation, and disclosure of
earnings per share. This Statement requires dual presentation of
basic and diluted earnings per share on the face of the income
statement for all companies with complex capital structures. SFAS
No. 128 also replaces the presentation of primary earnings per
share with a basic earnings per share computation and eliminates
the modified treasury stock method and the three percent
materiality provision as was required under the Accounting
Principles Board Opinion No. 15. This Statement became effective
for financial statements with fiscal years ending after December
15, 1997. All prior period information presented has been restated.
Impact of New Accounting Pronouncements:
In June 1997 the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information". The Statements are effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes
standards for reporting and displaying of comprehensive income and
its components. All items that are required to be recognized
under accounting standards as components of comprehensive income
must be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS No. 131
establishes standards for the way that business enterprises report
information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and
major customers. The Company did not elect early adoption of
either pronouncement but will adopt both Statements as of January
1, 1998, as required. If the Company had adopted SFAS No. 130 as
of December 31, 1997, other comprehensive income would have
consisted of unrealized appreciation of investment securities, net
of deferred income taxes of approximately $7,200,000. The effect
of adopting SFAS No. 131 as not yet been determined in regards to
the impact on the Company's consolidated financial statement disclosures.
2. Investments:
The Company's net investment income for the periods ended
December 31, 1997, 1996 and 1995 are summarized as follows:
1997 1996 1995
Interest on fixed maturities:
Tax-exempt securities $ 3,909,985 $ 3,875,822 $ 3,578,156
Taxable securities 9,905,146 8,686,144 8,727,315
Dividends on redeemable preferred stock 2,078,536 2,489,104 2,402,974
Dividends on equity securities 879,579 773,238 560,390
Interest on short-term investments 156,128 243,837 247,272
Other investment income 187,159 93,861 84,873
Total investment income 17,116,533 16,162,006 15,600,980
Investment expenses 744,822 1,253,721 1,037,160
Net investment income $16,371,711 $14,908,285 $14,563,820
<PAGE>
Net realized and unrealized gains on investments are summarized as
follows:
1997 1996 1995
Realized gains (losses):
Fixed maturities $ 14,108 $ (456,602) $ 87,370
Equity securities 5,052,295 4,559,380 1,458,589
Other invested assets --- --- (7,678)
Total realized investment gains 5,066,403 4,102,778 1,538,281
Investment expenses 588,823 309,000 ---
Net realized investment gains $ 4,477,580 $ 3,793,778 $ 1,538,281
Net change in unrealized appreciation
(depreciation):
Fixed maturities, available for sale $ 4,755,339 $(2,234,493) $16,313,966
Equity securities 6,098,280 2,692,197 5,104,315
Limited partnerships 235,767 83,897 59,688
Deferred income tax expense (3,882,000) (242,000) (7,354,000)
Net change in unrealized
appreciation $ 7,207,386 $ 299,601 $14,123,969
Net change in unrealized depreciation
of fixed maturities, held to maturity $ --- $ --- $ (367,533)
The amortized cost and estimated market values of investments in
fixed maturity securities at December 31, 1997 and 1996, are as
follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
December 31, 1997
Available for sale:
Government and agency
domestic bonds $ 9,992,300 $ 494,746 $ 13,916 $ 10,473,130
Municipal bonds 71,000,487 3,345,436 118,097 74,227,826
Corporate bonds 82,661,920 2,381,660 7,448 85,036,132
Mortgage-backed securities 42,479,390 972,915 99,833 43,352,472
Sinking fund preferred stocks 33,528,199 1,822,517 35,972 35,314,744
Total fixed maturity
securities $239,662,296 $9,017,274 $ 275,266 $248,404,304
December 31, 1996
Available for sale:
Government and agency
domestic bonds $ 11,441,004 $ 317,830 $ 50,708 $ 11,708,126
Municipal bonds 73,550,278 1,954,019 302,450 75,201,847
Corporate bonds 61,810,087 1,141,551 152,224 62,799,414
Mortgage-backed securities 54,090,640 714,993 155,481 54,650,152
Sinking fund preferred stocks 33,464,362 1,080,656 561,517 33,983,501
Total fixed maturity
securities $234,356,371 $5,209,049 $1,222,380 $238,343,040
<PAGE>
The amortized cost and estimated market value of fixed maturity
securities available for sale at December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
Available for sale:
Due in one year or less $ 6,614,936 $ 6,659,349
Due after one year through five years 32,648,148 33,426,698
Due after five years through ten years 61,985,776 64,758,746
Due after ten years through fifteen years 29,646,907 31,089,477
Due after fifteen years through twenty years 8,094,972 8,464,107
Due after twenty years 58,192,167 60,653,455
Subtotal 197,182,906 205,051,832
Mortgage-backed securities 42,479,390 43,352,472
Total fixed maturity securities $239,662,296 $248,404,304
Proceeds from sales of investments in fixed maturity securities
during 1997, 1996 and 1995, respectively, were $26,135,592,
$38,131,207 and $17,111,272. During 1997, 1996 and 1995,
respectively, gross gains of $338,920, $197,320 and $445,260 and
gross losses of $324,812, $653,922 and $357,890 were realized on
those sales.
Unrealized appreciation of equity securities at December 31, 1997
totaled $12,948,869 representing $14,400,487 of gains on certain
securities and $1,451,618 of losses on other securities.
3. Acquisition:
On July 31, 1996, the Company acquired Citizens Security Group
Inc. and its property and casualty insurance subsidiaries,
Citizens Fund Insurance Company and Insurance Company of Ohio, for
a cash purchase price of $30,262,442, including capitalized
acquisition costs. Approximately 60 percent of the purchase price
was generated from the sale of a portion of the Company's
investment portfolio and the remainder was financed through bank
debt. The acquisition was accounted for as a purchase with the
assets acquired and liabilities assumed being recorded at their
estimated fair value at the date of acquisition. The excess cost
over the fair value of the net assets resulted in goodwill of
approximately $14,501,000, which is being amortized over a 25 year
period on the straight-line basis.
The consolidated financial statements include the results of
operations of the acquired entities from the date of acquisition.
Unaudited pro-forma condensed consolidated results of operations
presented below assumed the acquisition and financing of the
transaction had occurred at the beginning of each period presented:
1996 1995
Premiums earned $185,808,000 $174,501,000
Total revenues $206,201,000 $192,416,000
Net income $ 4,138,000 $ 11,310,000
Basic and diluted earnings per share $ 0.61 $ 1.67
These unaudited pro-forma results are not necessarily indicative
of the results of operations that would have occurred had the
acquisition taken place at the beginning of each period, or of
future operations of the combined companies.
<PAGE>
Supplemental cash flow information for the acquisition is as follows:
1996
Fair value of assets acquired $ 77,440,427
Cash paid 30,262,442
Liabilities assumed $ 47,177,985
4. Bank Loan Payable:
The Citizens Security Group acquisition was funded in part through a
$12,000,000 bank loan. The debt has a variable interest rate of LIBOR
plus 50 basis points, which was 6.375 percent and 6.09375 percent at
December 31, 1997 and 1996, respectively. The bank loan will mature on
August 1, 2003. The Company is required to make principal payments in
accordance with the following schedule:
1998 $ 1,250,000
1999 1,625,000
2000 2,000,000
2001 2,125,000
Thereafter 4,375,000
Total payments outstanding $11,375,000
The principal balance of the bank loan as of December 31, 1997
approximates its market value. Interest paid on the loan during 1997
and 1996 amounted to $732,047 and $187,887, respectively. The bank
debt includes certain financial covenants, the most significant of
which concern the amounts of risk based capital, statutory policyholders'
surplus, total debt, debt to capitalization and debt service coverage
(the relationship of dividends available from the Company's insurance
subsidiaries to required principal and interest payments).
5. Related Party Transactions:
Meridian Security, Citizens Fund, ICO, Meridian Mutual and
Citizens Security Mutual are parties to a reinsurance pooling
agreement ("pooling agreement") under which essentially all
premiums, losses and loss adjustment expenses as well as other
underwriting expenses are shared by the companies on the basis of
their percentage participation defined in the pooling agreement.
Other expenses are allocated on the basis of specific
identification or estimated costs. Amounts either due to or due
from Meridian Mutual and Citizens Security Mutual result from
these transactions, and are normally reimbursed on a monthly
basis. Management believes that such expenses would not be
materially different if incurred directly by each company.
Since the acquisition of Citizens Security Group on August 1,
1996, the reinsurance pool participation percentages of the
Company's insurance subsidiaries totaled 74 percent. Prior to
August 1, Meridian Security and Meridian Mutual were the only
participants in the aforementioned pooling arrangement, of which
Meridian Security assumed 74 percent of the combined underwriting
income and expenses of the two companies.
For the year ended December 31, 1997, approximately 88 percent of
the Company's total premium volume was derived from its
participation in the pooling agreement. In 1996 and 1995,
approximately 88 percent and 90 percent, respectively, was derived
from the pooling arrangement.
<PAGE>
Effective January 1, 1997, the Company became the employer of all
employees that were formerly employed by Meridian Mutual and
Citizens Security Mutual. This transfer of employees allowed for
the integration of benefit plans, thus increasing management
efficiencies and allowing for enhanced benefit options, such as
the use of the Company's common stock as compensation.
Also as a result of the employee transfer, the Company assumed the
operations of the previously established benefit plans of Meridian
Mutual. Included in these benefit plans was a non-contributory
pension plan that covers substantially all employees, a non-tax
qualified supplemental retirement plan for certain key employees,
and a multi-employer plan for other post-retirement benefits.
(See Note 9-Pension and Other Post-Retirement Benefit Plans) The
Company also assumed a 401(k) plan whereby employees can contribute
up to 16 percent of their compensation, with the Company
contributing 50 percent of the employee contribution on the first
6 percent. Costs related to these benefit plans are allocated to
each company in accordance with their percentage participation under
the pooling agreement.
The Company's non-insurance subsidiaries are provided office space
and various services by Meridian Mutual and Meridian Security.
Expenses are allocated to such subsidiaries on the basis of
specifically identified or estimated costs.
6. Liability for Losses and Loss Adjustment Expenses:
Activity in the liability for losses and loss adjustment expenses
is summarized as follows:
1997 1996 1995
Balance at beginning of period $161,309,239 $123,577,240 $123,754,650
Less reinsurance recoverables 41,819,308 31,204,462 31,815,440
Net balance at beginning of period 119,489,931 92,372,778 91,939,210
Net reserves acquired --- 20,685,369 ---
Incurred related to:
Current year 165,576,734 137,817,367 104,584,909
Prior years (16,358,003) (7,716,175) (5,461,060)
Total incurred 149,218,731 130,101,192 99,123,849
Paid related to:
Current year 97,447,542 93,199,000 61,791,602
Prior years 50,332,258 30,470,408 36,898,679
Total paid 147,779,800 123,669,408 98,690,281
Net balance at end of period 120,928,862 119,489,931 92,372,778
Plus reinsurance recoverables 48,872,464 41,819,308 31,204,462
Balance at end of period $169,801,326 $161,309,239 $123,577,240
The reconciliation for 1997 shows an approximately $16.4 million
reduction in previously established loss reserves. Favorable loss
developments resulting from decreases in the frequency and
severity of claims in 1996 and prior accident years for the
Company's commercial automobile liability, workers' compensation
lines and commercial multiple-peril lines of business were the
primary factors in the most recent period reduction. The Company
also experienced favorable underwriting trends from its
involvement in the involuntary National Workers' Compensation Pool.
<PAGE>
7. Reinsurance:
The companies that participate in the reinsurance pooling
agreement reduce the maximum net loss that can arise from large
risks or risks in concentrated areas of exposure by reinsuring
their insurance business with unrelated third party insurers. In
accordance with industry practice, the Company in its consolidated
financial statements treats risks, to the extent reinsured, as
though they were risks for which the Company is not liable.
Reinsurance recoverables are estimated in a manner consistent with
the claim liability associated with the reinsured policy.
Insurance ceded by the Company's insurance subsidiaries does not
relieve the subsidiaries' primary liability as the originating insurers.
The reinsurance purchased includes contracts under which certain
types of policies are automatically reinsured up to the contract
limits ("treaty reinsurance") and contracts which provide
reinsurance on an individual risk basis which require a specific
agreement of the reinsurer as to limits of coverage provided
("facultative reinsurance"). Meridian Mutual, Meridian Security,
Citizens Security Mutual, Citizens Fund, and ICO were each named
as insured parties under the treaty reinsurance contracts, and the
coverage under those contracts applied to all risks written by
each of the companies. Treaty coverage was purchased to cover
property and liability exposures in excess of $200,000 and
$250,000, respectively, up to the limits set forth in the
individual treaty. (In 1996, the retention was $200,000 for both
property and liability.) Facultative reinsurance was purchased to
cover exposures on both property and liability coverages from
losses over and above the limits provided by the treaty reinsurance.
Catastrophe reinsurance provided coverage for multiple losses
caused by a single catastrophic event such as a windstorm or
earthquake. The combined retention under this contract was
$6,000,000 plus five percent of losses up to contractual limits
for windstorms of $65,000,000 and for earthquakes of $115,000,000.
(The 1996 limit for both windstorms and earthquakes was
$65,000,000.) Two other catastrophe reinsurance treaties provided
coverage when losses sustained from multiple catastrophic events
aggregate beyond a specified retention. Under these two treaties,
the combined retention was 2.5 percent of subject earned premiums,
plus five percent of losses up to the $22,000,000 contractual limit.
Approximately 92 percent of the Company's ceded reserves for
losses and loss adjustment expenses were with Employers
Reinsurance Corporation, Michigan Catastrophic Claims Association
and Swiss Reinsurance America Corporation. The effect of
reinsurance on premiums written, premiums earned and losses and
loss adjustment expenses for the years ended December 31, 1997,
1996 and 1995 were as follows:
1997 1996 1995
Premiums written:
Direct $210,393,552 $181,680,624 $152,596,128
Assumed 718,004 3,730,504 7,269,782
Ceded (16,592,247) (16,216,479) (11,102,025)
Net $194,519,309 $169,194,649 $148,763,885
Premiums earned:
Direct $211,105,812 $176,718,644 $149,748,331
Assumed 1,232,165 6,425,316 5,222,170
Ceded (17,751,345) (15,839,546) (11,104,680)
Net $194,586,632 $167,304,414 $143,865,821
Losses and loss adjustment
expenses incurred:
Direct $168,173,120 $154,237,419 $100,670,392
Assumed 1,355,214 2,857,470 5,127,784
Ceded (20,309,603) (26,993,697) (6,674,327)
Net $149,218,731 $130,101,192 $ 99,123,849
<PAGE>
On December 29, 1995, Meridian Mutual entered into an indemnity
reinsurance agreement with Celina Mutual Insurance Company
regarding commercial line business in the state of Pennsylvania.
This transaction was recorded as assumed written premium, which
was earned over the succeeding twelve months. Renewals of these
policies are now being recorded as direct business on Meridian
Mutual. Through the pooling agreement, Meridian Security assumed
premiums written of approximately $2,100,000 and ceding
commissions of approximately $409,000.
8. Deferred Policy Acquisition Costs:
Changes in deferred policy acquisition costs are summarized as follows:
1997 1996 1995
Deferred, beginning of period $16,690,275 $13,354,600 $11,977,429
Additions:
Commissions 32,391,959 30,593,227 25,797,651
Equity in acquired unearned
premium reserve --- 2,312,841 ---
Ceding commission --- --- 409,350
Premium taxes 2,375,996 2,458,670 1,625,370
Other 8,707,111 3,956,708 4,236,409
Total additions 43,475,066 39,321,446 32,068,780
Amortization expense 42,513,797 35,985,771 30,691,609
Deferred, end of period $17,651,544 $16,690,275 $13,354,600
9. Pension Plans and Other Post-Retirement Benefit Plans:
Effective January 1, 1997, the Company became the employer of all
employees who were formerly employed by Meridian Mutual and
Citizens Security Mutual. As a result of this transfer, all
employee benefit plans that were previously under Meridian Mutual
and Citizens Security Mutual were merged into the Company plans.
The Company maintains a defined benefit pension plan for the
benefit of eligible employees. Under the plan, all employees of
the Company completing more than 1,000 hours of employment in a 12-
month period become eligible to participate. The plan provides for
a pension annuity beginning at age 65 based on the employee's
average monthly base pay during the five highest consecutive salary
years out of the last ten. Provisions for delayed retirement
benefits, early retirements benefits after age 55, disability and
death benefits, optional methods for benefit payment, payments to
an employee who leaves after a certain number of years of service,
and payments to an employee's surviving spouse are also covered
under the plan.
The Company also maintains a non-tax qualified supplemental
retirement income plan for certain key employees who participate in
the defined benefit pension plan. The plan provides additional
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 benefit is in the form of a straight
life annuity over the lifetime of the participant, and commences
on the participant's normal retirement date.
The following table presents a reconciliation of the funded status
for the Company's defined benefit pension plan and supplemental
retirement income plan and the amounts recognized in the Company's
consolidated balance sheet as of December 31, 1997:
<PAGE>
Defined Supplemental
Pension Retirement
Actuarial present value of benefit obligations:
Vested benefit obligation $17,360,209 $ 342,411
Non-vested benefit obligation 343,764 10,220
Accumulated benefit obligation 17,703,973 352,631
Additional amounts related to projected pay
increases 5,728,743 407,471
Projected benefit obligation 23,432,716 760,102
Plan assets at fair value 31,582,957 ---
Funded Status 8,150,241 (760,102)
Unrecognized transition obligation (7,548,032) ---
Unrecognized prior service costs --- 239,676
Unrecognized net (gain) loss (208,920) 74,012
Prepaid asset/(accrued liability) at December 31,
1997 $ 393,289 $ (446,414)
A 7.0 percent weighted average discount rate was assumed in
determining the accumulated benefit obligation and a 5.0 percent
average salary increase was used to project the additional pay
increase on both plans. The expected return on assets for the
defined pension plan was assumed to be 8.25 percent. Net periodic
pension costs for the defined benefit pension plan and the
supplemental retirement income plan for the year ended December 31,
1997 included the following components:
Defined Supplemental
Pension Retirement
Service costs $ 705,872 $ 21,400
Interest costs 1,098,786 34,016
Actual return on assets (3,176,536) ---
Net amortization and deferral 1,080,844 17,077
Net periodic pension cost/(income) $ (291,034) $ 72,493
In addition to pension benefits, the Company provides certain
health care and life insurance benefits ("post-retirement
benefits") for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age
while working for the Company. The Company also provides medical
benefits for early retirees (eligible upon attainment of age 55 and
five years service up to age 65) and group term life insurance that
phases out over a five year period from the retirement date.
The following table presents the components of the plan's
accumulated post-retirement benefit obligation as of December 31,
1997 reconciled with the plan's funded status and the amount
recognized in the Company's consolidated balance sheet at December
31, 1997:
1997
Accumulated post-retirement benefit obligation:
Retired employees $ 310,545
Active employees:
Not yet eligible 1,308,235
Fully eligible 333,694
Obligation at December 31, 1997 1,952,474
Plan assets at fair value ---
Funded status 1,952,474
Unrecognized net loss (72,418)
Accrued liability at December 31, 1997 $ 1,880,056
<PAGE>
A 7.0 percent weighted average discount rate was used to determine
the accumulated post-retirement benefit obligation at December 31,
1997. Net periodic post-retirement pension costs for the year
ended December 31, 1997 included the following:
1997
Service costs $ 107,313
Interest costs 75,838
Amortization of prior unrecognized gain (29,704)
Total net periodic costs $ 153,447
The assumed rate of future increases in per capita cost of health
care benefits was 8.0 percent for the first year and 6.0 percent
for all years thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rates by one
percentage point would increase the accumulated post-retirement
benefit obligation by approximately $213,000 and the aggregate of
the service and interest cost components of net periodic post-
retirement benefit cost by approximately $34,000.
Prior to January 1, 1997, Meridian Security, Citizens Fund and ICO
had no employees and were dependent on the business and operations
of Meridian Mutual and Citizens Security Mutual. Meridian Mutual
had a defined pension plan covering substantially all employees and
a non-tax qualified retirement plan for certain key employees.
Related pension costs allocated to the Company were immaterial to
the results of operations for the periods ended December 31, 1996
and 1995. The Company also participated in the multi-employer plan
for other post-retirement benefits offered by Meridian Mutual to
employees, including medical benefits for early retirees (eligible
upon attainment of age 55 and five years of service up to age 65)
and group term life insurance that phases out over a five year
period from the retirement date. Related costs allocated to the
Company were approximately $53,000 and $98,000 for 1996 and 1995,
respectively.
10. Income Taxes:
Current tax expense for the following periods differed from the
tax expected solely on pre-tax income by applying the applicable
statutory corporate tax rate to the various differences identified
as follows:
1997 1996 1995
Tax at statutory rate $ 2,381,000 $ 2,023,000 $ 5,403,000
Tax-exempt interest (1,131,000) (1,134,000) (1,005,000)
Dividends received deduction (613,000) (619,000) (598,000)
Loss, LAE and salvage and subrogation
fresh start (137,000) (17,000) (7,000)
Nondeductible expenses 277,000 168,000 109,000
Other (570,000) (270,859) 203,000
Total income taxes $ 207,000 $ 150,141 $ 4,105,000
The Revenue Reconciliation Act of 1990 required insurance
companies to accrue future recoveries of salvage and subrogation
on a discounted basis. A fresh start of 87 percent of the
beginning 1990 discounted balance was provided for by that act,
which was to be amortized over the life of the reserves. The
impact of this provision resulted in an aggregate tax benefit of
approximately $923,000. During 1997, the remaining unamortized
fresh start was fully recognized, resulting in a tax reduction of
approximately $3,000. No amortization was recognized in 1996 and
$7,000 was recognized in 1995.
The Tax Reform Act of 1986 allowed for a fresh start deduction for
reserve discounting requirements, which was to be amortized over
the life of the reserve. This produced an aggregate tax benefit
of approximately $900,000. The remainder of the unamortized fresh
start was fully recognized in 1997, resulting in a tax reduction
of approximately $134,000. In 1996, the tax effect on the
recognized amortization amounted to approximately $17,000 and no
amortization was recognized in 1995.
<PAGE>
Under SFAS No. 109, "Accounting For Income Taxes", the Company
recorded a net deferred tax liability in 1997 and a deferred tax
asset in 1996 and 1995. The net deferred tax asset/liability at
December 31, 1997, 1996 and 1995, is comprised of the following:
1997 1996 1995
Deferred tax assets:
Unearned premium reserves $ 5,528,000 $ 5,533,000 $ 4,336,000
Loss and loss adjustment expense
reserves and salvage and subrogation 6,248,000 6,336,000 4,980,000
Other post-employment benefits 677,000 496,000 454,000
Other 1,431,000 875,000 ---
Total deferred tax assets 13,884,000 13,240,000 9,770,000
Deferred tax liabilities:
Deferred policy acquisition costs 6,178,000 5,842,000 4,674,000
Investments 144,000 327,000 178,000
Unrealized appreciation on investment
securities 7,731,000 3,849,000 3,607,000
Other 56,000 425,000 34,000
Total deferred tax liabilities 14,109,000 10,443,000 8,493,000
Net deferred tax asset (liability) $ (225,000) $ 2,797,000 $ 1,277,000
The Company has paid income taxes during the last three preceding
years of $1,110,000 in 1997, $1,678,000 in 1996 and $3,248,000 in
1995.
11. Earnings Per Share:
The following table reflects the reconciliation of the numerators
and denominators of the Company's basic earnings per share and
diluted earnings per share computations reported on the
Consolidated Statement of Income for the years ended December 31,
1997, 1996 and 1995.
Income Shares Per Share
(Numerator) (Denominator) Amount
December 31, 1997
Basic earnings per share
Income available to common stockholders $ 6,921,123 6,683,536 $ 1.04
Effect of dilutive securities
Stock options --- 45,923
Diluted earnings per share
Income available to common stockholders $ 6,921,123 6,729,459 $ 1.03
December 31, 1996
Basic earnings per share
Income available to common stockholders $ 5,799,952 6,779,284 $ 0.86
Effect of dilutive securities
Stock options --- 28,165
Diluted earnings per share
Income available to common stockholders $ 5,799,952 6,807,449 $ 0.85
December 31, 1995
Basic earnings per share
Income available to common stockholders $11,617,039 6,770,081 $ 1.72
Effect of dilutive securities
Stock options --- 18,813
Diluted earnings per share
Income available to common stockholders $11,617,039 6,788,894 $ 1.71
<PAGE>
12. Statutory Information:
Subsidiary retained earnings available for distribution as
dividends to the Company are limited by law to the statutory
unassigned surplus of the subsidiaries on the previous December 31,
as determined in accordance with the accounting practices
prescribed or permitted by insurance regulatory authorities of the
state of Indiana. Subject to this limitation, the maximum dividend
that may be paid during a 12-month period, without prior approval
of the insurance regulatory authorities is the greater of ten
percent of statutory capital and surplus as of the preceding
December 31 or net income for the preceding calendar year
determined on a statutory basis. Meridian Security declared and
paid dividends to the Company of $5,000,000 in 1997, $3,900,000 in
1996 and $2,400,000 in 1995. As of December 31, 1997, approximately
$10,200,000 was available for distribution to the Company without
prior approval of insurance regulatory authorities.
The following is selected information for the Company's insurance
subsidiaries, as determined in accordance with accounting practices
prescribed or permitted by the Department of Insurance of their
state of domicile:
1997 1996 1995
Statutory capital and surplus $115,280,000 $105,506,000 $ 90,952,000
Statutory net investment income $ 15,212,000 $ 15,809,000 $ 14,733,000
Statutory net income $ 6,140,000 $ 3,307,000 $ 11,625,000
13. Shareholders' Equity:
In May 1997, the Shareholders of Meridian Insurance Group, Inc.
approved an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares from 20,000,000 to
20,500,000, with the additional shares being preferred stock. The
amendment provides that the preferred shares may 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, liquidation
preferences, sinking funds and any other rights, preferences,
privileges, and restrictions applicable to each such series of
preferred shares. As of December 31, 1997, no preferred shares
have been granted or issued.
In 1987, the Company's Board of Directors and Shareholders
approved an Incentive Stock Plan ("Plan") for the purpose of
attracting and retaining key employees. The maximum number of
common shares to be authorized for issuance was limited to 750,000
shares over a 10 year term. Awards under the Plan may include non-
qualified and incentive stock options, stock appreciation rights,
and restricted stock. Options to purchase common shares granted
under the Plan are to have an exercise price of not less than the
fair market value of the Company's common shares on the date of
grant. Options are to be exercisable beginning one year from the
date of grant and are to expire over various periods not to exceed
ten years from the date of grant. Restricted stock awards may be
granted subject to terms and conditions as prescribed by the
committee which administers the Plan. Under the 1987 Plan, which
expired on January 21, 1997, total options with respect to 477,144
shares were granted and 272,856 options had expired. In early
1996, the Board of Directors and Shareholders approved the 1996
Employee Incentive Stock Plan, which would eventually replace the
1987 Plan. Under the 1996 Plan, which became effective on May 8,
1996, the maximum number of shares authorized for issuance is
750,000 shares over the next ten years. During 1997, options with
respect to 247,267 were granted under the 1996 Plan.
The Company also has a Director's Stock Plan that provides for an
aggregate maximum of up to 150,000 common shares to be issued upon
the exercise of stock options granted to outside directors, who are
defined as non-employee directors of the Company or Meridian
Mutual. Each outside director will automatically be granted an
option to purchase 1,000 common shares on the date of each annual
meeting of shareholders up until termination of the plan. 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. Each option
will be exercisable commencing one year after the date of the grant
and will expire no later than 10 years after the date of the grant.
As of December 31, 1997, total options with respect to 64,000
shares have been granted.
<PAGE>
In November 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement encourages, but does not
require, companies to recognize compensation expense for grants of
stock, stock options, and other equity instruments to employees
based on the fair value method of accounting. The Company
continues to account for stock options in accordance with
Accounting Principles Board Opinion No. 25. Had compensation cost
been determined using the fair value of the options at the grant
dates in accordance with SFAS No. 123, the Company's net income and
earnings per share for the periods ended December 31, 1997, 1996
and 1995 would have been reduced by the following pro-forma
amounts: $640,000, $143,000 and $53,000 and $0.10, $0.02 and
$0.01, respectively. The weighted average grant date fair value of
options granted during the year was estimated to be $20.89, $18.24
and $18.22 using the Black-Scholes model with the following
assumptions for 1997, 1996 and 1995, respectively: risk free
interest rates of 6.29 percent, 6.55 percent and 6.70 percent;
dividend yield of 2.29 percent, 2.15 percent and 2.35 percent; and
volatility of 26.38 percent, 31.38 percent and 35.77 percent. As
of December 31, 1997, options outstanding under these plans had an
exercise price that ranged from $11.88 to $18.75 and a remaining
weighted average contractual life of 6 years.
Stock options granted by the Company for the periods ended
December 31, 1997, 1996 and 1995 are summarized in the following
table:
1997 1996 1995
Weighted Weighted Weighted
Price Shares Price Shares Price Shares
Outstanding at January 1 $12.28 303,324 $11.69 313,781 $10.88 328,401
Granted 16.05 259,267 14.04 31,000 14.27 37,000
Exercised during the year --- --- 5.75 (4,042) 5.75 (30,521)
Canceled during the year 14.08 (58,789) 9.51 (37,415) 12.20 (21,099)
Outstanding at December 31 14.01 503,802 12.28 303,324 11.69 313,781
Portion thereof exercisable
at December 31 $13.68 461,802 $12.30 272,324 $11.52 278,781
Available for future grants 588,733 1,120,856 401,856
14. Unaudited Selected Quarterly Financial Data:
(Amounts in thousands except per-share data)
Quarter Ended
March 31 June 30 September 30 December 31
1997
Revenues $ 52,908 $ 54,527 $ 54,592 $ 54,451
Net income $ 310 $ 1,802 $ 3,019 $ 1,790
Basic earnings per share $ 0.05 $ 0.27 $ 0.46 $ 0.27
Diluted earnings per share $ 0.05 $ 0.27 $ 0.45 $ 0.27
1996
Revenues $ 41,400 $ 43,262 $ 48,990 $ 52,917
Net income $ 595 $ 702 $ 1,806 $ 2,697
Basic earnings per share $ 0.09 $ 0.10 $ 0.27 $ 0.40
Diluted earnings per share $ 0.09 $ 0.10 $ 0.26 $ 0.39
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by
reference to the information contained under the captions "Election of
Directors" and "Executive Compensation" in the Company's definitive
proxy statement to be sent to shareholders in connection with the
annual meeting of shareholders to be held May 13, 1998.
ITEM 11: EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the information contained under the caption "Executive
Compensation" in the Company's definitive proxy statement to be sent
to shareholders in connection with the annual meeting of shareholders
to be held on May 13, 1998.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the information contained under the caption "Beneficial
Ownership of Common Shares" in the Company's definitive proxy
statement to be sent to shareholders in connection with the annual
meeting of shareholders to be held on May 13, 1998.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the information contained under the caption "Certain
Relationships and Transactions" in the Company's definitive proxy
statement to be sent to shareholders in connection with the annual
meeting of shareholders to be held on May 13, 1998.
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report.
(1) Financial Statements:
Report of Independent Accountants
Financial Statements:
Consolidated Statement of Income for the years ended December
31, 1997, 1996 and 1995
Consolidated Balance Sheet as of December 31, 1997 and 1996
Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1997, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedules
Financial Statement Schedules:
Schedule I -- Summary of Investments Other Than Investments in
Related Parties
Schedule II -- Condensed Financial Information of Registrant
Schedule IV -- Reinsurance
Schedule VI -- Supplemental Information Concerning Property-Casualty
Insurance Operations
Schedules other than those listed above have been omitted
because the required information is contained in the financial
statements and notes thereto or because such schedules are not
required or applicable.
(3) Exhibits:
See Index to Exhibits
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the year ended December 31,
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Meridian Insurance Group, Inc.
By: /s/ Steven R. Hazelbaker
Steven R. Hazelbaker
Vice President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on March
18, 1998, on behalf of the registrant in the capacities indicated:
/s/ Ramon L. Humke /s/ John T. Hackett
Ramon L. Humke John T. Hackett
Chairman of the Board Director
/s/ Norma J. Oman /s/ David M. Kirr
Norma J. Oman David M. Kirr
President, Chief Executive Director
Officer and Director
/s/ Timothy J. Hanrahan /s/ Sarah W. Rowland
Timothy J. Hanrahan Sarah W. Rowland
Senior Vice President Director
/s/ Carl W. Buedel /s/ Van P. Smith
Carl W. Buedel Van P. Smith
Senior Vice President Director
/s/ J. Mark McKinzie /s/ Thomas H. Sams
J. Mark McKinzie Thomas H. Sams
Senior Vice President, Secretary Director
and General Counsel
/s/ Harold C. McCarthy /s/ Scott S. Broughton
Harold C. McCarthy Scott S. Broughton
Director Director
/s/ Joseph D. Barnette, Jr.
Joseph D. Barnette, Jr.
Director
<PAGE>
MERIDIAN INSURANCE GROUP, INC.
FORM 10-K
for the fiscal year ended December 31, 1997
Index to Exhibits
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
(2) 2.01 Acquisition and Affiliation Agreement by and among
Citizens Security Group, Inc., Citizens Security
Mutual Insurance Company and Meridian Insurance Group,
Inc. (Incorporated by reference to Exhibit 2.01 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
(3) 3.01 Restated Articles of Incorporation of Meridian Insurance
Group, Inc. (Incorporated by reference to Exhibit 3.01
to the registrant's Form S-1 Registration Statement
No. 33-11413.)
3.02 Amendment to Restate Articles of Incorporation of Meridian
Insutance Group, Inc. effective May 14, 1997 *Page 63
3.03 Bylaws of Meridian Insurance Group, Inc. as amended through
December 4, 1996. (Incorporated by reference to Exhibit
3.02 to the registrant's Form 10-K for the fiscal year
ended December 31, 1996; Commission File No. 0-11413.)
(4) 4.01 Text of Certificate for Common Shares of Meridian Insurance
Group, Inc. (Incorporated by reference to Exhibit 4.01 to
the registrant's Form S-1 Registration Statement No.
33-11413.)
(9) No exhibit.
(10) 10.01 Form of Supplemental Pension Agreement between Meridian
Mutual Insurance Company and Harold C. McCarthy.
(Incorporated by reference to Exhibit 10.06 to the
registrant's Form S-1 Registration Statement No.
33-11413.) **
10.02 Form of Addendum to Supplemental Pension Agreement between
Meridian Mutual Insurance Company and Harold C. McCarthy.
(Incorporated by reference to Exhibit 19.07 to the
registrant's Form 10-K for the fiscal year ended December
31, 1991; Commission File No. 0-11413.) **
10.03 Form of Supplemental Retirement Income Plan for Employees
of Meridian Mutual Insurance Company. (Incorporated by
reference to Exhibit 19.02 of the registrant's Form 10-K
for the fiscal year ended December 31, 1994; Commission
File No. 0-11413.) **
10.04 Meridian Insurance Group, Inc., Incentive Stock Plan.
(Incorporated by reference to Exhibit 10.07 to Amendment
No. 1 to the registrant's Form S-1 Registration Statement
No. 33-11413.) **
<PAGE>
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
10.05 Form of 1994 Incentive Stock Option Agreement under 1987
Meridian Insurance Group, Inc., Incentive Stock Plan.
(Incorporated by reference to Exhibit 19.03 to the
registrant's Form 10-K for the fiscal year ended December
31, 1994; Commission File No. 0-11413.) **
10.06 Form of 1994 Non-qualified Stock Option Agreement under
1987 Meridian Insurance Group, Inc., Incentive Stock
Plan. (Incorporated by reference to Exhibit 19.04 to the
registrant's Form 10-K for the fiscal year ended December
31, 1994; Commission File No. 0-11413.) **
10.07 Form of 1995 Non-qualified Stock Option Agreement under
1987 Meridian Insurance Group, Inc., Employee Incentive
Stock Plan. (Incorporated by reference to Exhibit 10.38
to the registrant's Form 10-K for the fiscal year ended
December 31, 1995; Commission File No. 0-11413.) **
10.08 Meridian Insurance Group, Inc., 1996 Employee Incentive
Stock Plan. (Incorporated by reference to Exhibit 10.39
to the registrant's Form 10-K for the fiscal year ended
December 31, 1995; Commission File No. 0-11413.) **
10.09 First and Second Amendments to Meridian Insurance Group,
Inc. 1996 Employee Incentive Stock Plan.** *Page 65
10.10 Form of March 3, 1997 Non-Qualified Stock Option Agree-
ment under Meridian Insurance Group, Inc., 1996 Employee
Incentive Stock Plan. (Incorporated by reference to
Exhibit 10.50 to the registrant's Form 10-K for the fiscal
year ended December 31, 1996; Commission File No.
0-11413.) **
10.11 Form of Amendment No. 1 to the March 3, 1997 Non-Qualified
Stock Option Agreement under Meridian Insurance Group,
Inc., 1996 Employee Incentive Stock Plan.** *Page 67
10.12 Form of March 3, 1997 Incentive Stock Option Agreement
under Meridian Insurance Group, Inc., 1996 Employee
Incentive Stock Plan. (Incorporated by reference to
Exhibit 10.51 to the registrant's Form 10-K for the
fiscal year ended December 31, 1996; Commission File
No. 0-11413.) **
10.13 Form of Amendment No. 1 to the March 3, 1997 Incentive
Stock Option Agreement under Meridian Insurance Group,
Inc., 1996 Employee Incentive Stock Plan.** *Page 68
10.14 Form of December 1, 1997 Non-Qualified Stock Option
Agreement under Meridian Insurance Group, Inc., 1996
Employee Incentive Stock Plan.** *Page 69
10.15 Written Description of 1997 Meridian Insurance Group,
Inc., Executive Incentive Plan. (Incorporated by reference
to Exhibit 10.52 to the registrant's Form 10-K for the
fiscal year ended December 31, 1996; Commission File
No. 0-11413.) **
10.16 Written Description of 1998 Meridian Insurance Group,
Inc., Executive Incentive Plan.** *Page 73
<PAGE>
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
10.17 The Meridian Mutual Insurance Company Non-employee
Director's Pension Plan. (Incorporated by reference to
Exhibit 10.11 to the registrant's Form 10-K for the
fiscal year ended December 31, 1988; Commission File
No. 0-11413.) **
10.18 Meridian Insurance Group, Inc., 1994 Outside Director
Stock Option Plan. (Incorporated by reference to Exhibit
19.05 to the registrant's Form 10-K for the fiscal year
ended December 31, 1993; Commission File No. 0-11413.) **
10.19 Stock Option Agreement between Meridian Insurance Group,
Inc., and Scott S. Broughton. (Incorporated by reference
to Exhibit 10.34 to the registrant's Form 10-K for the
fiscal year ended December 31, 1996; Commission File
No. 0-11413.) **
10.20 Form of Directors' Non-Qualified Stock Option Agreement.
(Incorporated by reference to Exhibit 10.53 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.) **
10.21 Meridian Insurance Group, Inc. 401(k) Plan effective
January 1, 1997.** *Page 75
10.22 Form of Change in Control Agreement between Meridian
Mutual Insurance Company and Norma J. Oman, J. Mark
McKinzie, Brent Hartman, and Steven R. Hazelbaker.
(Incorporated by reference to Exhibit 19.08 to the
registrant's Form 10-K for the fiscal year ended December
31, 1991; Commission File No. 0-11413.) **
10.23 Form of Termination Benefits Agreement executed between
Meridian Insurance Group, Inc. and Norma J. Oman, Steven
R. Hazelbaker, J. Mark McKinzie, Timothy J. Hanrahan, and
Carl W. Buedel.** *Page 153
10.24 Form of Termination Benefits Agreement executed between
Meridian Insurance Group, Inc. and all other Executive
Officers of Meridian Mutual Insurance Company not mentioned
in Exhibit 10.23 above.** *Page 161
10.25 Meridian Insurance Statement of Policy on Inter-Company
Expense Allocation. (Incorporated by reference to
Exhibit 19.06 to the registrant's Form 10-K for the
fiscal year ended December 31, 1992; Commission File
No. 0-11413.)
10.26 Reinsurance Pooling Agreement Amended and Restated as of
August 1, 1996, by and among Meridian Mutual Insurance
Company, Meridian Security Insurance Company, Citizens
Security Mutual Insurance Company, Citizens Fund Insurance
Company, and Insurance Company of Ohio. (Incorporated by
reference to Exhibit 10.30 to the registrant's Form 10-K
for the fiscal year ended December 31, 1996; Commission
File No. 0-11413.)
10.27 Reinsurance Pooling Agreement Amended and Restated as of
October 1, 1997, by and among Meridian Mutual Insurance
Company, Meridian Security Insurance Company, Citizens
Security Mutual Insurance Company, Citizens Fund Insurance
Company, and Insurance Company of Ohio. *Page 169
<PAGE>
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
10.28 Management Services Agreement among Meridian Insurance
Group, Inc., Meridian Mutual Insurance Company and their
Affiliates effective January 1, 1997. (Incorporated by
reference to Exhibit 10.32 to the registrant's Form 10-K
for the fiscal year ended December 31, 1996; Commission
File No. 0-11413.)
10.29 Consulting Services Agreement between Meridian Insurance
Group, Inc., and Scott S. Broughton. (Incorporated by
reference to Exhibit 10.33 to the registrant's Form 10-K
for the fiscal year ended December 31, 1996; Commission
File No. 0-11413.) **
10.30 Term Loan Agreement and Business Credit Note between NBD
Bank, N.A., and Meridian Insurance Group, Inc., dated
July 29, 1996. (Incorporated by reference to Exhibit
10.49 to the registrant's Form 10-K for the fiscal year
ended December 31, 1996; Commission File No. 0-11413.)
10.31 Form of Modification of Term Loan Agreement between NBD
Bank, N.A., and Meridian Insurance Group, Inc., effective
December 31, 1997. *Page 175
10.32 Form of Meridian Insurance Agency Profit-Sharing
Agreement. (Incorporated by reference to Exhibit 10.37
to the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.33 Form of Meridian Insurance Agency Profit-Sharing
Agreement. *Page 177
10.34 Form of Meridian Insurance Agency Agreement. (Incorporated
by reference to Exhibit 19.12 to the registrant's Form 10-K
for the fiscal year ended December 31, 1994; Commission
File No. 0-11413.)
10.35 Form of Meridian Insurance New Agent's Incentive
Compensation Agreement. (Incorporated by reference to
Exhibit 10.38 to the registrant's Form 10-K for the fiscal
year ended December 31, 1996; Commission File No. 0-11413.)
10.36 Property Per Risk Excess of Loss Reinsurance Agreement
between Employers Reinsurance Corporation, Meridian Mutual
Insurance Company and Meridian Security Insurance Company
effective January 1, 1992. (Incorporated by reference to
Exhibit 10.26 to the registrant's Form S-2 Registration
Statement, File No. 33-58406.)
10.37 Form of Amendment No. 2 to Property Per Risk Excess of
Loss Reinsurance Agreement between Employers Reinsurance
Corporation, Meridian Mutual Insurance Company, Meridian
Security Insurance Company and Vernon Fire & Casualty
Insurance Company effective January 1, 1997. *Page 181
10.38 Form of Amendment No. 3 to Property Per Risk Excess of
Loss Reinsurance Agreement between Employers Reinsurance
Corporation, Meridian Mutual Insurance Company, Meridian
Security Insurance Company, Vernon Fire & Casualty
Insurance Company, and the Citizens Security Group
effective January 1, 1998. *Page 183
<PAGE>
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
10.39 Multiple Layer Reinsurance Agreement between Employers
Reinsurance Corporation, Meridian Mutual Insurance
Company and Meridian Security Insurance Company effective
January 1, 1991. (Incorporated by reference to Exhibit
10.28 to the registrant's Form S-2 Registration Statement,
File No. 33-58406.) Amendment No. 5 to the Multiple Layer
Reinsurance Agreement effective January 1, 1997.
(Incorporated by reference to Exhibit 10.40 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.40 Commercial and Personal Umbrella Reinsurance Agreement
between Employers Reinsurance Corporation and Meridian
Mutual Insurance Company. (Incorporated by reference to
Exhibit 19.09 to the registrant's Form 10-K for the fiscal
year ended December 31, 1993; Commission File No.
0-11413.) Amendment No. 9 to the Commercial and Personal
Umbrella Reinsurance Agreement effective January 1, 1997.
(Incorporated by reference to Exhibit 10.41 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.41 Personal Excess Liability Reinsurance Agreement between
Employers Reinsurance Corporation and Meridian Mutual
Insurance Company. (Incorporated by reference to Exhibit
19.10 to the registrant's Form 10-K for the fiscal year
ended December 31, 1993; Commission File No. 0-11413.)
Amendment No. 7 to the Personal Excess Liability
Reinsurance Agreement effective January 1, 1997.
(Incorporated by reference to Exhibit 10.39 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.42 Basket Reinsurance Agreement effective January 1, 1997,
among Employers Reinsurance Corporation, Meridian Mutual
Insurance Company, Meridian Security Insurance Company
and Citizens Security Group. (Incorporated by reference
to Exhibit 10.42 to the registrant's Form 10-K for the
fiscal year ended December 31, 1996; Commission File
No. 0-11413.)
10.43 Excess Catastrophe Reinsurance Contract effective January
1, 1997, issued to Meridian Mutual Group by the
Subscribing Reinsurers Executing the Interests and
Liabilities Agreements identified therein. (Incorporated
by reference to Exhibit 10.44 to the registrant's Form
10-K for the fiscal year ended December 31, 1996;
Commission File No. 0-11413.)
10.44 Form of Addendum No. 1 to the Excess Catastrophe
Reinsurance Contract effective January 1, 1997, issued to
Meridian Mutual Group. *Page 185
10.45 Excess Catastrophe Reinsurance Contract effective January
1, 1998, issued to Meridian Mutual Group by the Subscribing
Reinsurers Executing the Interests and Liabilities
Agreements identified therein. *Page 187
10.46 Sixth Excess Catastrophe Reinsurance Program effective
January 1, 1997, issued to Meridian Mutual Group by the
Subscribing Reinsurers Executing the Interests and
Liabilities Agreements identified therein. (Incorporated
by reference to Exhibit 10.47 to the registrant's Form
10-K for the fiscal year ended December 31, 1996;
Commission File No. 0-11413.)
<PAGE>
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
10.47 Form of Addendum No. 1 to the Sixth Excess Catastrophe
Reinsurance Contract effective January 1, 1997, issued to
the Meridian Mutual Group. *Page 245
10.48 Seventh Excess Catastrophe Reinsurance Program effective
January 1, 1997, issued to Meridian Mutual Group by the
Subscribing Reinsurers Executing the Interests and
Liabilities Agreements identified therein. (Incorporated
by reference to Exhibit 10.48 to the registrant's Form
10-K for the fiscal year ended December 31, 1996;
Commission File No. 0-11413.)
10.49 Seventh Excess Catastrophe Reinsurance Program effective
January 1, 1998, issued to Meridian Mutual Group by the
Subscribing Reinsurers Executing the Interests and
Liabilities Agreements identified therein. *Page 249
10.50 Underlying Aggregate Excess Catastrophe Reinsurance
Contract effective January 1, 1997, issued to Meridian
Mutual Group by the Subscribing Reinsurers Executing the
Interests and Liabilities Agreements identified therein.
(Incorporated by reference to Exhibit 10.45 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.51 Underlying Aggregate Excess Catastrophe Reinsurance
Contract effective January 1, 1998, issued to Meridian
Mutual Group by the Subscribing Reinsurers Executing
the Interests and Liabilities Agreements identified
therein. *Page 280
10.52 Second Underlying Aggregate Excess Catastrophe Reinsurance
Contract issued to Meridian Mutual Group effective May,
1996, and Addendum No. 1 effective January 1,1997.
(Incorporated by reference to Exhibit 10.46 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.53 Form of Addendum No. 2 to the Second Underlying Aggregate
Excess Catastrophe Reinsurance Contract effective May 10,
1996 *Page 304
10.54 Property Excess of Loss Reinsurance Binding Agreement
between Meridian Mutual Group and NAC Reinsurance
Corporation effective June 15, 1995 and Endorsement No.1
effective January 1, 1996. (Incorporated by reference to
Exhibit 10.44 to the registrant's Form 10-K for the fiscal
year ended December 31, 1995; Commission File No. 0-11413.)
10.55 Form of Endorsement No. 2, which became effective January
1, 1997, and Form of Endorsement No. 3, which became
effective June 15, 1996, to the Property Excess of Loss
Reinsurance Binding Agreement. *Page 315
10.56 Claims Administration Agreement by and among Citizens
Security Mutual Insurance Company, Citizens Fund
Insurance Company, Insurance Company of Ohio, and VIS'N,
Inc. (Incorporated by reference to Exhibit 10.35 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
<PAGE>
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
10.57 Software and Hardware Support Agreement by and among
Citizens Security Mutual Insurance Company, Citizens Fund
Insurance Company, Insurance Company of Ohio, and VIS'N,
Inc. (Incorporated by reference to Exhibit 10.36 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.58 Form of Agreement for the Transfer of Claim Processing
Services effective December 1, 1997 between the Citizens
Security Companies and VIS'N, Inc. *Page 317
10.59 Form of Citizens Security Group Agency Agreement.
(Incorporated by reference to Exhibit 10.55 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.60 Form of Citizens Security Mutual Insurance Company Agency
Agreement. (Incorporated by reference to Exhibit 10.56 to
the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.61 Form of Insurance Company of Ohio Agency Agreement.
(Incorporated by reference to Exhibit 10.57 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.62 Form of Citizens Security Group Limited Agency Agreement.
(Incorporated by reference to Exhibit 10.58 to the
registrant's Form 10-K for the fiscal year ended December
31, 1996; Commission File No. 0-11413.)
10.63 Form of Citizens Security Mutual Insurance Company
Personal Partner Agency Agreement. (Incorporated by
reference to Exhibit 10.59 to the registrant's Form 10-K
for the fiscal year ended December 31, 1996; Commission
File No. 0-11413.)
10.64 Form of Citizens Security Group Personal Partner
Contingency Plan. (Incorporated by reference to Exhibit
10.60 to the registrant's Form 10-K for the fiscal year
ended December 31, 1996; Commission File No. 0-11413.)
10.65 Form of Citizens Security Group Network Agencies Profit
Sharing Plan. (Incorporated by reference to Exhibit 10.61
to the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.66 Form of Citizens Security Group Individual Agency Profit
Sharing Plan. (Incorporated by reference to Exhibit 10.62
to the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
(11) No exhibit.
(12) No exhibit.
(13) No exhibit.
(16) No exhibit.
(18) No exhibit.
<PAGE>
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
(21) 21.01 Revised list of Subsidiaries of Meridian Insurance Group,
Inc. *Page 321
(22) No exhibit.
(23) 23.01 Consent of Independent Accountants dated March 23,
1998 *Page 322
(24) No exhibit.
(27) 27.01 Financial Data Schedule for Meridian Insurance Group,
Inc., for the year ended December 31, 1997.
27.02 Restated Financial Data Schedule for Meridian Insurance
Group, Inc., for the year ended December 31, 1996.
27.03 Restated Financial Data Schedule for Meridian Insurance
Group, Inc., for the year ended December 31, 1995.
27.04 Restated Financial Data Schedule for Meridian Insurance
Group, Inc., for the period ended September 30, 1997.
(28) 28.01 Combined Statutory Schedule P Loss and Loss Adjustment
Expense Reserves for the Consolidated Insurance
Subsidiaries of Meridian Insurance Group, Inc., as of
December 31, 1997 *Page 323
* Exhibits filed as a part of this document.
** These exhibits represent management contracts, compensatory plans or
arrangements that are required to be filed by Item 601 of Regulation S-K.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Shareholders and
Board of Directors
Meridian Insurance Group, Inc.
Our report on the consolidated financial statements of Meridian
Insurance Group, Inc., and Subsidiaries is included on page 25 of this
Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement
schedules listed in the index on page 57 of this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as
a whole, present fairly, in all material respects, the information
required to be included therein.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 25, 1998
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
FORM 10-K
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
Schedule I Summary of Investments Other than Investments in Related
Parties 58
Schedule II Condensed Financial Information of Registrant 59
Schedule IV Reinsurance 61
Schedule VI Supplemental Information Concerning Property-Casualty
Insurance Operations 62
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE I--SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1997
Amount at
Which Shown
Market in the
Cost Value Balance Sheet
Fixed maturities
Available-for-sale:
Bonds
United States Government and
government agencies and
authorities $ 18,454,575 $ 18,987,767 $ 18,987,767
States, municipalities, and
political subdivisions 100,688,055 104,646,261 104,646,261
Public utilities 4,534,868 4,655,526 4,655,526
All other corporate bonds 82,456,599 84,800,006 84,800,006
Redeemable preferred stocks 33,528,199 35,314,744 35,314,744
Total fixed maturities 239,662,296 248,404,304 248,404,304
Equity securities
Common stocks
Public utilities 2,543,607 3,647,291 3,647,291
Banks, trust, and insurance
companies 5,108,988 7,724,875 7,724,875
Industrial, miscellaneous, and
all other 33,777,482 43,006,781 43,006,781
Total equity securities 41,430,077 54,378,947 54,378,947
Mortgage loan 700,135 700,135 700,135
Other long-term investments 525,000 946,967 946,967
Short-term investments 3,996,232 3,996,232 3,996,232
Total other investments 5,221,367 5,643,334 5,643,334
Total investments $286,313,740 $308,426,585 $308,426,585
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
BALANCE SHEET
as of December 31, 1997 and 1996
ASSETS
1997 1996
Cash and short-term investments $ 2,247,120 $ 2,227,195
Investment in subsidiaries (eliminated in
consolidation) 144,339,653 133,923,863
Other assets 85,749 18,890
Total assets $146,672,522 $136,169,948
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to Meridian Mutual Insurance Company $ 807,194 $ 27,517
Post-employment benefits 1,933,181 1,417,814
Bank loan payable 11,375,000 11,875,000
Dividends payable 530,149 542,350
Other liabilities 132,763 133,286
Total liabilities 14,778,287 13,995,967
Shareholders' equity:
Common shares 44,110,416 44,077,846
Treasury Shares, at cost; 154,500 shares (2,308,188) ---
Contributed capital 15,058,327 15,058,327
Unrealized appreciation of investments, net of
deferred income tax 14,349,232 7,141,846
Retained earnings 60,684,448 55,895,962
Total shareholders' equity 131,894,235 122,173,981
Total liabilities and shareholders' equity $146,672,522 $136,169,948
STATEMENT OF INCOME
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Dividend income from subsidiaries $ 5,000,000 $ 3,900,000 $ 2,400,000
Other income 24,537 24,656 1,928
Less: General operating expenses 773,888 727,648 730,704
Interest expense 732,047 307,887 ---
Current federal income tax benefit (191,110) (265,508) (379,345)
Income before equity in net income of
subsidiaries 3,709,712 3,154,629 2,050,569
Equity in undistributed net income of
subsidiaries 3,211,411 2,645,323 9,566,470
Net income $ 6,921,123 $ 5,799,952 $11,617,039
<PAGE>
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT, Continued
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Cash flows from operation:
Net income $ 6,921,123 $ 5,799,952 $11,617,039
Reconciliation of net income to net
cash provided by operations:
Equity in undistributed net income
of subsidiaries (3,211,411) (2,645,323) (9,566,470)
(Increase) decrease in other assets (66,859) 5,521 (5,465)
Increase (decrease) in due to
Meridian Mutual Insurance Company 779,677 20,966 (54,966)
Increase in post-employment benefits 515,367 119,436 197,223
Increase (decrease) in other
liabilities (524) 132,425 861
Other, net 35,579 (21,848) 243
Net cash provided by operations 4,972,952 3,411,129 2,188,465
Cash flows from investing activities:
Capital contribution to subsidiary --- (12,000,000) ---
Net cash used by investing activities --- (12,000,000) ---
Cash flows from financing activities:
Proceeds from stock options --- 23,241 222,996
Repurchase of common stock (2,308,188) (22,080) (77,033)
Proceeds from bank loan --- 12,000,000 ---
Repayment of bank loan (500,000) (125,000) ---
Dividends paid (2,144,839) (2,101,426) (1,826,933)
Net cash provided (used) by financing
activities (4,953,027) 9,774,735 (1,680,970)
Net increase in cash 19,925 1,185,864 507,495
Cash at beginning of year 2,227,195 1,041,331 533,836
Cash at end of year $ 2,247,120 $ 2,227,195 $ 1,041,331
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE IV--REINSURANCE
For the Years Ended December 31, 1997, 1996 and 1995
Percentage
Ceded Assumed of Amount
Gross to Other from Other Net Assumed
Amount Companies(1) Companies(1) Amount to Net
Property and liability
insurance premiums:
Year ended
December 31, 1997 $211,105,812 $17,751,345 $ 1,232,165 $194,586,632 0.6%
Year ended
December 31, 1996 $176,718,644 $15,839,546 $ 6,425,316 $167,304,414 3.8%
Year ended
December 31, 1995 $149,748,331 $11,104,680 $ 5,222,170 $143,865,821 3.6%
_____________
(1) The amounts for the years ended December 31, 1997, 1996 and
1995 represents the Company's insurance subsidiaries share of third
party reinsurance transactions pursuant to the pooling agreement.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE VI--SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Deferred policy acquisition costs $ 17,651,544 $ 16,690,275 $ 13,354,600
Reserves for losses and loss
adjustment expenses $169,801,326 $161,309,239 $123,577,240
Unearned premiums $ 82,839,333 $ 84,065,751 $ 64,558,695
Earned premiums $194,586,632 $167,304,414 $143,865,821
Investment income $ 16,371,711 $ 14,908,285 $ 14,563,820
Losses and loss adjustment expenses
incurred related to:
Current years $165,576,734 $137,817,367 $104,584,909
Prior years $(16,358,003) $ (7,716,175) $ (5,461,060)
Amortization of deferred policy
acquisition costs $ 42,513,797 $ 35,985,771 $ 30,691,609
Paid losses and loss adjustment
expenses $147,779,800 $123,669,408 $ 98,690,281
Premiums written $194,519,309 $169,194,649 $148,763,885
EXHIBIT 3.02
AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MERIDIAN INSURANCE GROUP, INC.
Effective May 14, 1997, Article IV, Sections 4.01 through 4.04 of
the Restated Articles of Incorporation of Meridian Insurance
Group, Inc. shall read as follows:
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.
EXHIBIT 10.09
FIRST AMENDMENT
TO
MERIDIAN INSURANCE GROUP, INC.
1996 EMPLOYEE INCENTIVE STOCK PLAN
As of December 3, 1997, the 1996 Employee Incentive Stock
Plan is hereby amended to add the following sentence as the
last sentence of Section 4.1:
The number of shares of Meridian Stock which may be
granted under the Plan to any one Key Employee during
any calendar year under all forms of Awards shall not
exceed 500,000.
SECOND AMENDMENT
TO
MERIDIAN INSURANCE GROUP, INC.
1996 EMPLOYEE INCENTIVE STOCK PLAN
As of March 18, 1998, the 1996 Employee Incentive Stock Plan
is hereby amended as follows:
1. Section 5.6(a) and 5.6(b) are deleted and replaced by
the following new Section 5.6(a):
(a) If a Participant shall cease to be employed by a
Company in the Meridian Group for any reason other than
death, any Options of such Participant shall expire and
any right thereunder shall terminate immediately unless
the Participant obtains the written consent of the President
of the Company (or the President's delegate) to retain such
Options. Subject to the President's consent to retain the
Option, 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, the
expiration date of such Option, or the termination date
contained in the terms and conditions of any Stock
Option Agreement.
2. Section 5.6(c) is hereby relabeled as Section 5.6(b).
EXHIBIT 10.11
NON-QUALIFIED STOCK OPTION AGREEMENT
AMENDMENT No. 1
THIS AMENDMENT, made this ____ day of _________, 199___, by
and between Meridian Insurance Group, Inc. (hereinafter
called the "Corporation") and ________________ (hereinafter
called the "Employee"), amends and becomes a part of the Non-
Qualified Stock Option Agreement entered into by the parties
on __________, 199___.
WHEREAS, the Corporation believes that the Employee has made
valuable contributions to the productivity and profitability
of the Corporation; and
WHEREAS, the Corporation desires to encourage the Employee
to continue to make such contributions and not to seek or
accept employment elsewhere; and
WHEREAS, the Corporation desires to assure the Employee of
certain benefits in case of any termination of his
employment with the Corporation subsequent to any Change in
Control of the Corporation (as that term is hereinafter
defined);
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants herein contained and the mutual benefits
herein provided, the Corporation and the Employee hereby
agree as follows:
1. Full vesting of the Option granted by this
Agreement shall occur as of the date first written above.
2. Except as modified by this Amendment, all terms and
conditions of the Non-Qualified Stock Option Agreement
signed by both the Employee and the Corporation shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed and delivered as of the day and year first
above written.
MERIDIAN INSURANCE GROUP, INC.
("Corporation")
By ____________________________
_______________________________
("Employee")
EXHIBIT 10.13
INCENTIVE STOCK OPTION AGREEMENT
AMENDMENT No. 1
THIS AMENDMENT, made this _____ day of __________, 199___,
by and between Meridian Insurance Group, Inc. (hereinafter
called the "Corporation")
________________ (hereinafter called the "Employee"), amends
and becomes a part of the Incentive Stock Option Agreement
entered into by the parties on
__________, 199___.
WHEREAS, the Corporation believes that the Employee has made
valuable contributions to the productivity and profitability
of the Corporation; and
WHEREAS, the Corporation desires to encourage the Employee
to continue to make such contributions and not to seek or
accept employment elsewhere; and
WHEREAS, the Corporation desires to assure the Employee of
certain benefits in case of any termination of his
employment with the Corporation subsequent to any Change in
Control of the Corporation (as that term is hereinafter
defined);
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants herein contained and the mutual benefits
herein provided, the Corporation and the Employee hereby
agree as follows:
1. Full vesting of the Option granted by this
Agreement shall occur as of the date first written above.
2. In Section 9(a) and 9(c) of the Agreement each
reference to "three months" is changed to "three years."
3. The Option granted by this Agreement shall no
longer be classified as an Incentive Stock Option as defined
in the Plan and henceforth shall be classified as a Non-
Qualified Stock Option.
4. Except as modified by this Amendment, all terms and
conditions of the Incentive Stock Option Agreement signed by
both the Employee and the Corporation shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed and delivered as of the day and year first
above written.
MERIDIAN INSURANCE GROUP, INC.
("Corporation")
By ______________________________
_________________________________
("Employee")
EXHIBIT 10.14
NON-QUALIFIED
STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 1st day of December, 1997, between
Meridian Insurance Group, Inc., with its principal office at
Indianapolis, Indiana, (hereinafter called the "Corporation")
and _______________, residing at __________________________,
(hereinafter called the "Employee").
WITNESSETH THAT:
WHEREAS, the directors of the Corporation adopted the 1996
Employee Incentive Stock Plan (the "Plan") on December 6, 1995,
and the shareholders of the Corporation approved the Plan at
their meeting held on May 8, 1996; and
WHEREAS, the Employee has been designated, in accordance
with the terms of the Plan, as a key employee to whom an Option
to purchase shares of the Corporation is to be granted;
NOW, THEREFORE, it is mutually agreed as follows:
1. The Corporation hereby grants to the Employee, on the
terms and conditions hereinafter set forth, an Option to purchase
all or any part of 1,000 shares of the Corporation's common
shares at a price of $18.75 per share. This Option is for all
purposes pursuant and subject to the provisions of the Plan, and
the Employee agrees to be bound by the rules and regulations for
the administration of the Plan as presently prescribed or
hereafter amended, and by any amendment, construction or
interpretation of the Plan adopted by the Board of Directors of
the Corporation.
2. The right to purchase the shares subject to this Option
shall accrue on the following dates provided the Employee is
employed by the Corporation, its parent, subsidiaries or
affiliates on such dates: 50 percent on December 1, 1998, and 50
percent on December 1, 1999. No part of the Option shall lapse
by reason of any omission to exercise the Option or any part
thereof prior to December 1, 2007.
3. This Option may be exercised only by written notice to
the Corporation specifying the number of shares in respect of
which the Option is being exercised and by payment to the
Corporation in cash of the full purchase price for the shares so
specified, or, at the option of the Employee, the purchase price
may be paid in whole or in part through the transfer to the
Corporation of shares of Meridian Stock previously acquired by
the Employee.
4. The Corporation shall take any action required by law
and applicable regulations, including the Indiana Securities Act
and the rules and regulations of the Indiana Securities Division,
to authorize the issuance and delivery of any shares covered by
this Option. Upon completion of such action and the receipt of
payment for the shares in respect of which this Option is
exercised, the Corporation shall deliver to the Employee or his
duly authorized representatives, certificates for such shares,
which shares shall be fully paid and non-assessable.
5. (a) If prior to the delivery by the Corporation of all of
the shares covered by this Option, there shall be any increase or
decrease in the number of issued shares of the Corporation
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 the Corporation
effected without receipt of consideration, there shall be a
proportionate and equitable adjustment of the terms of this
Option with respect to the amount and class of shares remaining
subject to the Option and the purchase price to be paid therefor,
as determined by the Board of Directors or their designated
Committee.
(b) In the event that, prior to the delivery by the
Corporation of all of the shares covered by this Option, there
shall be a capital reorganization or reclassification of the
Corporation resulting in a substitution of other shares for
common shares, there shall be substituted for the shares of the
Corporation the number of substitute shares which would have been
issued in exchange for the common shares then remaining under the
Option if such common shares had been then issued and
outstanding.
(c) If the Corporation shall enter into any agreement
providing for the merger or consolidation of the Corporation with
or into any other person, regardless of whether or not the
Corporation shall be the surviving or resulting Corporation as a
consequence of such merger or consolidation, the Corporation
shall have the right to terminate this Agreement and to thereby
terminate all rights thereunder on thirty (30) days' written
notice to the Employee; provided, however, that if such merger or
consolidation is not consummated within 180 days from the date of
the notice, the Agreement 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 Corporation,
the Corporation shall give thirty (30) days' written notice
thereof to the Employee, and all rights of the Employee under
this Agreement shall be deemed to be terminated upon such
dissolution or liquidation.
6. The Employee shall have no rights or privileges as a
shareholder of the Corporation with respect to the common shares
issuable under this Option until certificates representing such
shares have been delivered to him.
7. The Employee agrees, for himself and his personal
representatives, that any and all shares purchased by him or
them, upon the exercise of any portion of this Option, may be
"restricted securities" within the meaning of Rule 144
promulgated by the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933 (the "1933 Act"), or may
otherwise be subject to the provisions of Rule 144. The Employee
may be required to agree in writing, at any time deemed
appropriate by the Corporation, that there will be no sale or
other disposition of the shares (i) unless a registration
statement is in effect with respect to the resale of such shares,
(ii) unless the Employee has received an opinion from counsel for
the Corporation to the effect that the shares may be sold without
compliance with the registration provisions of the 1933 Act, or
(iii) unless a "no-action" letter to that effect has been
obtained from the staff of the SEC. In this connection, all
certificates representing the shares purchased upon exercise of
this Option may have set forth thereon a legend evidencing the
foregoing restrictions in such form as the Corporation may
determine, and appropriate stop transfer instructions may be
issued to the Corporation's transfer agent in connection
therewith. In addition, the Employee may be required to agree to
any other limitation upon resale deemed appropriate by the
Corporation for the purpose of complying with the then current
rules and regulations of the SEC.
8. This Option shall not be assignable or transferable by
the Employee otherwise than by will or the laws of descent and
distribution and shall be exercisable during his lifetime only by
him.
9. (a) If the Employee shall cease to be employed by a
Company in the Meridian Group (as defined in the 1987 Employee
Incentive Stock Plan) 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 Employee may exercise this Option
at any time within three years after such termination, to the
extent of the number of shares covered by this Option which were
purchasable at the date of such termination; provided, however,
that this 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 the Employee shall cease to be employed by a Company
in the Meridian Group either (i) for cause or (ii) by voluntary
action of the Employee without the written consent of the
President of the Company (or the President's delegate), this
Option shall expire and any rights hereunder shall terminate
immediately.
(c) Should the Employee die either while in the employ of a
Company in the Meridian Group or after termination of such
employment (other than discharge for cause, by voluntary action
of the Employee without the written consent of the President of
the Company, or the President's delegate), the Option rights of
the deceased Employee may be exercised by his or her Personal
Representative until the earlier of one year after the Employee's
death or three years after his or her termination of employment
to the extent of the number of shares covered by this Option
which were purchasable at the date of such death except that this
Option shall not be exercisable on any date beyond the expiration
date of this Option. If the Employee granted an Option should
die within thirty days prior to the expiration date of such
Option, if on the date of death the Employee was then entitled to
exercise such Option, and if the Option expires without being
exercised, the Personal Representative of the Employee 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.
10. A leave of absence for the Employee during the term of
this Option which is authorized by the Corporation shall not be
deemed a termination of employment; however, the Employee may not
exercise any Options hereunder during such leave of absence.
11. Nothing in this Agreement shall be deemed to create any
limitation or restriction upon such rights as the Corporation
would otherwise have to terminate the employment of the Employee
at any time for any reason.
12. Any notice to be given or served under the terms of
this Agreement shall be delivered to the Secretary of the
Corporation and to the Employee at the address shown above, or
such other address or addresses as either party may designate in
writing to the other. Any such notice shall be deemed to have
been duly given or delivered if it is sent by registered or
certified mail, return receipt requested.
13. This Agreement shall be construed in accordance with
the laws of Indiana and shall be binding on and inure to the
benefit of any successor or successors of the Corporation and the
personal representatives of the Employee.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
MERIDIAN INSURANCE GROUP, INC.
By:______________________________
Norma J. Oman, President
EMPLOYEE:
_________________________________
EXHIBIT 10.16
MERIDIAN INSURANCE
PARTICIPANT DESCRIPTION
FISCAL YEAR 1998 ANNUAL INCENTIVE PLAN
Participant Name:
Title:
PURPOSE
Meridian's 1998 Annual Incentive Plan is designed to provide
you with a very competitive opportunity to increase your
cash compensation and your ownership of MIGI stock for the
attainment of the annual financial objectives.
You have been selected to participate in this plan because
you are in a position to substantially influence the
accomplishment of the corporate objectives.
1998 ANNUAL PLAN CONCEPTS
The Plan is structured to pay a cash award based on meeting
or exceeding the 1998 consolidated combined pre-tax income
goals of the property-casualty operations. Each plan
participant's total award is based on how well the companies
do overall.
The size of your cash award may vary from (ThresholdPercent)
percent to (MaximumPercent) percent of your annual base
salary as of December 31, 1998, and is based on meeting at
least the threshold pre-tax income goal.
PLAN DETAILS
The target cash award amount is calculated as a percent of
your 1998 year-end salary. For example, your target cash
bonus is (TargetPercent) percent. Using your salary as of
December 1, 1997, your target award would be $(TargetAward).
No incentive plan payment shall be made to any plan
participant in years when the pre-tax income result fails to
meet a minimum acceptable level. For fiscal year 1998, no
incentives shall be paid if the combined pre-tax income is
less than $XXXXXXXX.
The corporate goals are established each year as part of the
budgeting process. Applicable company goals and your
accompanying awards are as follows:
CORPORATE FINANCIAL PERFORMANCE
Award Payout Schedule as a % of Base Salary
Pre-Tax Income Your Award
Potential
Maximum (XXX% of goal) $XXXXXXX X%of base salary
Target (XXX% of goal) $XXXXXXX X%of base salary
Threshold (XX% of goal) $XXXXXXX X% of base salary
Pre-tax income results must fully reach the threshold level
to result in an award payout. The award will be pro-rated
for results between threshold and maximum pre-tax income
levels. For example, if pre-tax income is $XXXXXXXX
(halfway between target and maximum), then your bonus would
be (ExamplePercent) percent (or halfway between the target
and maximum award).
The Company has been motivated to adopt this plan, in part,
to encourage and allow participants to increase their equity
holdings in MIGI. As always, the timing of stock
purchases(s) should be consistent with the safe harbor
periods permitted by insider trading requirements. The
Legal Department or Human Resources should be contacted in
advance of any MIGI stock transaction to verify permissible
timeframes.
AWARD PAYMENT
Barring unforeseen circumstances, individual cash awards
will be finalized after the close of the fiscal year for
payment in March. Normally, the award will be paid in cash
at that time. All appropriate taxes will be deducted from
the award payment.
TERMINATION OF EMPLOYMENT
No bonuses are payable in the event of a participant's
termination during the Plan year other than by death,
permanent disability or normal retirement, in which event a
discretionary payment may be made. Generally, in order to
be eligible for a bonus payout, the participant must be a
full-time active employee of the Company at the time of the
cash bonus payment. An employee for whom a formal leave of
absence has been granted by the Company may be construed to
be a full-time active employee of the Company at the time of
cash bonus payment with the approval of the President.
The Joint Compensation Committee reserves the right to
modify or terminate this incentive plan as necessary.
EXHIBIT 10.21
THE MERIDIAN INSURANCE GROUP, INC. 401(k) PLAN
TABLE OF CONTENTS PAGE
INTRODUCTION 1
ARTICLE I - DEFINITIONS 2
ARTICLE II - ELIGIBILITY AND PARTICIPATION 11
Section 2.1 Eligibility Requirements. 11
Section 2.2 Participation. 12
ARTICLE III - CONTRIBUTIONS 13
Section 3.1 Employer Contributions. 13
Section 3.2 Employee Elective Deferrals. 13
Section 3.3 After-Tax Employee Contributions. 14
Section 3.4 Rollover Contributions. 14
Section 3.5 Trustee-to-Trustee Transfers. 15
Section 3.6 Deduction Limitation. 15
ARTICLE IV - 401(k) and 401(m) 16
Section 4.1 Distribution of Excess Employee Elective Deferrals. 16
Section 4.2 Actual Deferral Percentage Test. 17
Section 4.3 Distribution of Excess Contributions. 19
Section 4.4 Actual Contribution Percentage Test. 20
Section 4.5 Distribution of Excess Aggregate Contributions. 23
Section 4.6 Recharacterization. 24
ARTICLE V - ALLOCATIONS, VALUATION AND VESTING 25
Section 5.1 Allocation of Contributions. 25
Section 5.2 Participants Who Will Receive an Allocation. 25
Section 5.3 Allocation of Forfeitures. 25
Section 5.4 Allocation Limitations. 25
Section 5.5 Valuation. 33
Section 5.6 Vesting and Accrual. 33
ARTICLE VI - DISTRIBUTIONS 34
Section 6.1 Distributions of Small Account Balances. 34
Section 6.2 Distributions While In-Service. 34
Section 6.3 Distributions Upon Separation From Service. 36
Section 6.4 Distributions Upon Retirement. 37
Section 6.5 Distributions Upon Death. 37
Section 6.6 Distributions Upon Disability. 38
Section 6.7 Special Beneficiary Provisions. 38
Section 6.8 Consent of the Participant Required for Distributions
if Account Balances Greater Than $3,500. 39
Section 6.9 Commencement of Benefits. 40
Section 6.10 Required Distributions. 40
Section 6.11 Joint & Survivor Annuity Requirements 46
Section 6.12 Annuity Contract 52
Section 6.13 Special Distribution Rules for 401(k) Contributions,
Qualified Matching Contributions and Qualified Non-
Elective Contributions. 52
Section 6.14 Form of Distribution. 53
Section 6.15 Trustee-to-Trustee Transfers. 53
Section 6.16 Normal Form of Benefit. 53
Section 6.17 Rollovers to Other Plans or IRAs. 53
Section 6.18 Installment Payments 54
ARTICLE VII - LOANS 55
Section 7.1 Availability of Loans. 55
Section 7.2 Amount of Loans. 55
Section 7.3 Terms of Loans. 55
ARTICLE VIII - PLAN ADMINISTRATION 58
Section 8.1 Duties of the Employer. 58
Section 8.2 The Committee. 58
Section 8.3 Appointment of Advisor. 59
Section 8.4 Powers and Duties of the Committee. 59
Section 8.5 Organization and Operation. 60
Section 8.6 Claims Procedure. 60
Section 8.7 Records and Reports. 61
Section 8.8 Liability. 62
Section 8.9 Reliance and Statements. 62
Section 8.10 Remuneration and Bonding. 62
Section 8.11 Committee Decisions Final. 63
Section 8.12 Participant-Directed Investments. 63
ARTICLE IX - TRUST AGREEMENT 64
Section 9.1 Establishment of Trust. 64
ARTICLE X - AMENDMENT, TERMINATION AND MERGER 65
Section 10.1 Amendment. 65
Section 10.2 Termination. 65
Section 10.3 Merger, Consolidation or Transfer. 66
ARTICLE XI - TOP-HEAVY PROVISIONS 67
Section 11.1 Applicability. 67
Section 11.2 Definitions. 67
Section 11.3 Minimum Allocation. 70
Section 11.4 Nonforfeitability of Minimum Allocation. 70
Section 11.5 Allocation Limitations. 71
Section 11.6 Minimum Vesting Schedules. 71
ARTICLE XII - GENERAL PROVISIONS 72
Section 12.1 Governing Law. 72
Section 12.2 Power to Enforce. 72
Section 12.3 Alienation of Benefits. 72
Section 12.4 Not an Employment Contract. 72
Section 12.5 Discretionary Acts. 73
Section 12.6 Interpretation. 73
ARTICLE XIII - SIGNATURE PAGE 74
INTRODUCTION
Purpose.
The primary purpose of the Meridian Insurance Group, Inc. 401(k)
Plan (the "Plan") is to provide the Employees of Meridian
Insurance Group, Inc. with retirement benefits in recognition of
the contribution of the Employees to the successful operation of
the Employer. The Plan is intended to be a profit sharing plan,
qualified under section 401(a) of the Internal Revenue Code
(the "Code"), which permits salary deferral contributions as
provided by section 401(k) of the Code; and its affiliated Trust
is intended to be exempt from tax under section 501(a) of the
Code. In addition, it is intended that the Plan meet the
applicable requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
Effective Date.
The Plan was originally established effective July 1, 1987.
Pursuant to the terms of the Plan which permit its amendment by
the Employer, this document is a restatement, in its entirety, of
the Plan, generally effective January 1, 1997.
The terms of this document now set forth the controlling
provisions of the Plan for all persons who are Employees on or
after the Effective Date; provided, however, that to the extent
required under section 411(d)(6) of the Code (and related
Treasury Regulations), the applicable provisions of the preceding
Plan documents are incorporated herein by reference.
ARTICLE I - DEFINITIONS
The following words and phrases, wherever capitalized, shall have
the meanings set forth below, unless the context in which they
appear within the Plan clearly indicates otherwise:
Account(s) means the aggregate (or as otherwise specified)
interest of a Participant in the assets of the Trust. Each
Participant's interest will be segregated into one or more of the
following Accounts, which will reflect, in addition to
contributions allocated thereto, appropriate allocations of
earnings, gains, losses and expenses of the Trust:
After-Tax Employee Contribution Account. The separate
Account maintained for each Participant reflecting any
After-Tax Employee Contributions previously made by him
under the Plan.
Employee Deferral Account. The separate Account
maintained for each Participant to which are credited his
Employee Elective Deferrals.
Employer Regular Contribution Account. The separate
Account maintained for each Participant to which are
credited any Employer Regular Contributions allocated to
him and made in accordance with Section 3.1.
Employer Matching Contribution Account. The separate
Account maintained for each Participant to which are
credited any Employer Matching Contributions allocated to
him and made in accordance with Section 3.1.
Qualified Matching Contribution Account. The separate
Account maintained for each Participant to which are
credited any Qualified Matching Contributions allocated to
him and made on his behalf in accordance with Section 3.1.
Qualified Non-Elective Contribution Account. The separate
Account maintained for each Participant to which are
credited any Qualified Non-Elective Contributions
allocated to him and made on his behalf in accordance with
Section 3.1.
Rollover Account. The separate Account maintained for
each applicable Participant to which contributions are
made under Section 3.4.
Transfer Account. The separate Account maintained for
each applicable Participant to which amounts have been
transferred under Section 3.5.
The Administrator may, in its discretion, establish subaccounts
within each separate Account.
Administrative Delegate means one or more persons or institutions
to whom the Committee has delegated certain administrative
functions pursuant to a written agreement.
Administrator means the Committee designated by the Employer to
administer the Plan.
Affiliate means a member of a controlled group of corporations,
within the meaning of section 414(b) of the Code, which includes
the Employer; a trade or business (whether or not incorporated)
which is in common control with the Employer as determined in accordance
with section 414(c) of the Code; or any organization which is a member
of an affiliated service group, within the meaning of section
414(m) of the Code, which includes the Employer; and any other
organization required to be aggregated with the Employer pursuant
to section 414(o) of the Code.
After-Tax Employee Contributions means contributions to the Plan,
if any, made by an Employee on an after-tax, nondeductible basis.
Beneficiary means the person or persons or a trust affirmatively
designated by a Participant to receive all or a portion of such
Participant's benefits in the event the Participant dies leaving
benefits payable to such a Beneficiary in accordance with the
provisions of Article VI.
Code means the Internal Revenue Code of 1986, as amended from
time to time.
Committee means the person or persons described in Section 8.2.
Compensation means all of each Participant's wages as defined in
section 3401(a) of the Code together with all other compensatory
payments to an Employee by the Employer with respect to which the
Employer must furnish to the Employee a written statement
pursuant to sections 6041(d) and 6051(a)(3) of the Code, but
determined without regard to any rules (such as the exception for
agricultural labor in section 3401(a)(2) of the Code) which limit
the remuneration included in wages based on the nature or
location of the employment or services performed.
Notwithstanding the above, Compensation shall include any amount
which is contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in the gross
income of the Employee under sections 125, 402(e)(3), 402(h) or
403(b) of the Code.
Notwithstanding the above, for Employee Deferral purposes and for
purposes other than allocations pursuant to provision(s)
providing for permitted disparity and/or Top-Heavy allocations,
Compensation shall be determined by excluding the following:
Overtime pay
Bonuses
Commissions
Car allowances
Taxable relocation earnings
Taxable fringe benefits
Taxable expense reimbursements
Taxable group term life insurance premiums
Miscellaneous income
Compensation shall include only that Compensation which is
actually paid to the Participant during the determination period.
Except as provided elsewhere in this Plan, the determination
period shall be the Plan Year.
Effective for Plan Years beginning after December 31, 1988, the
annual Compensation of each Participant taken into account for
purposes of determining all benefits provided under the Plan for
any determination period shall not exceed $200,000 as adjusted by
the Secretary at the same time and in the same manner as under
section 415(d) of the Code ("Compensation Limit"), except that
the dollar increase in effect on January 1 of any calendar year
shall be effective for years beginning in such calendar year.
The Compensation Limit for a determination period shall be the
Compensation Limit in effect on the January 1 coinciding with or
preceding such determination period. If Compensation is
determined on the basis of a 12-consecutive-month period ending
within the Plan Year, then the applicable Compensation Limit is
the Compensation Limit in effect for the calendar year in which
such 12-month period begins. If Compensation is determined on
the basis of a period of less than 12 calendar months, the
Compensation Limit shall be the annual Compensation Limit which
would otherwise be applicable multiplied by the ratio obtained by
dividing by 12 the number of full months in the short period. In
determining the Compensation of a Participant for purposes of the
$200,000 limitation, the rules of section 414(q)(6) of the Code shall
apply except that, in applying such rules, the term "family" shall
include only the Spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the close of the
Plan Year. If as a result of the application of such rules the
adjusted $200,000 limitation is exceeded, then (except for
purposes of determining the portion of Compensation up to the
integration level, as defined in Section 5.1, if applicable) the
limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined
prior to the application of this limitation.
Notwithstanding the above, effective for Plan Years beginning
after December 31, 1993, the annual Compensation Limit shall not
exceed $150,000, adjusted for calendar years beginning after 1994
at the same time and in the same manner as under section 415(d)
of the Code, but only if and when the aggregate of such potential
adjustments totals at least $10,000, and then only in amounts of
$10,000, in the manner described in section 401(a)(17) of the Code.
If Compensation for any prior determination period is taken into
account in determining an Employee's allocations or benefits for
the current determination period, the Compensation for such prior
period is subject to the applicable annual Compensation Limit in
effect for that prior period. For this purpose, for years
beginning before January 1, 1990, the applicable annual
Compensation Limit is $200,000.
Defined Benefit Plan means a pension plan maintained by the
Employer which is qualified under section 401(a) of the Code and
which is not a Defined Contribution Plan, except to the extent
that it maintains separate accounts with respect to which it is
treated as a Defined Contribution Plan.
Defined Contribution Plan means a plan qualified under section
401(a) of the Code and maintained by the Employer which provides
for an account for each individual who participates in the plan,
from which account all benefits attributable to amounts allocated
to each such Participant's account (and any income and expenses
or gains or losses attributable to such accounts, both realized
and unrealized) are paid.
Disability means any medically determinable physical or mental
impairment which results in an inability to engage in any
substantial gainful activity by reason thereof and which may be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months. The permanence and degree of such impairment must be
supported by medical evidence. Disability will be determined to
exist if the Participant is receiving disability benefits under
the Social Security Act or Railroad Retirement Act.
Effective Date The provisions of this amendment and restatement
are generally effective January 1, 1997, except for the retroactive
effective dates required by the Tax Reform Act of 1986, the Omnibus Budget
Reconciliation Act of 1986, the Omnibus Budget Reconciliation Act
of 1987, the Technical and Miscellaneous Revenue Act of 1988, the
Omnibus Budget Reconciliation Act of 1989, or any final
Regulations published and effective since the most recent
effective date of this Plan. Further, to the extent the Plan was
operated in accordance with the provisions of this amendment and
restatement as of an effective date earlier than that required by
law, such date shall be the Effective Date.
Employee means any common law employee of the Employer or any
Affiliate. The term Employee shall also include any Leased
Employee deemed to be an Employee of the Employer or any
Affiliate as provided in section 414(n) or (o) of the Code.
Employee Elective Deferrals means contributions to the Plan from
an Employee's salary, which the Employee could have received
currently in Compensation.
Employer means Meridian Insurance Group, Inc., any successor
through merger, consolidation or purchase of substantially all of
the assets or business of the entity which is the Employer
immediately prior to such succession, which successor, within 90
days after such succession, agrees to continue this Plan; and any
Affiliate which adopts the Plan.
Employer Matching Contributions means those contributions made by
the Employer as described under Section 3.1 which are allocated
to Participants' Employer Matching Contribution Accounts, and
does not include Qualified Matching Contributions or Qualified
Non-Elective Contributions (if any).
Employer Regular Contributions means those contributions made by
the Employer as described under Section 3.1 which are allocated
to Participants' Employer Regular Contribution Accounts, and does
not include Qualified Matching Contributions or Qualified Non-
Elective Contributions (if any).
ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
Forfeitures means the nonvested portion, if any, of a
Participant's Account created as a result of termination of
employment by the Participant prior to the time he becomes 100
percent Vested in his Account. A Forfeiture occurs immediately
after the distribution of the entire Vested portion of a
Participant's Account.
Highly Compensated Employee means and includes active highly
compensated Employees and former highly compensated Employees.
An active highly compensated Employee includes any Employee who
performed service for the Employer during the determination year
and who, during the look-back year: (1) received Compensation
from the Employer in excess of $75,000 (as adjusted pursuant to
section 415(d) of the Code, $100,000 for 1996); (2) received
Compensation from the Employer in excess of $50,000 (as adjusted
pursuant to section 415(d) of the Code, $66,000 for 1996) and was
a member of the top-paid group for such year; or (3) was an
officer of the Employer and received Compensation during such
year in an amount greater than 50 percent of the dollar
limitation in effect under section 415(b)(1)(A) of the Code
($60,000 for 1996). The term Highly Compensated Employee also
includes: (1) Each Employee who is (i) described in the
preceding sentence if the term "determination year" is
substituted for the term "look-back year" and
(ii) who is one of the 100 Employees who received the most
Compensation from the Employer during the determination year; and
(2) Employees who are owners of more than 5 percent of the
Employer at any time during the look-back year or determination
year. If no officer has satisfied the Compensation requirement
of (3) above during either a determination year or look-back
year, the highest paid officer for such year shall be treated as
a Highly Compensated Employee. For this purpose, the
determination year shall be the Plan Year. The look-back year
shall be the twelve-month period immediately preceding the
determination year.
A former highly compensated Employee includes any Employee who
separated (or was deemed to have separated) from service prior to
the determination year, who has performed no service for the
Employer during the determination year, and who was a highly
compensated active Employee for either the year of his separation
from service or any determination year ending on or after the
Employee's 55th birthday.
If any Employee is, during a determination year or look-back
year, a member of the family of either (i) an owner of more than
5 percent of the Employer who is an active or former Employee or
(ii) a Highly Compensated Employee who is one of the 10 most
Highly Compensated Employees ranked on the basis of Compensation
paid by the Employer during such year, then the family member and
such owner or Highly Compensated Employee shall be aggregated.
In such case, the family member and owner or Highly Compensated
Employee shall be treated as a single Employee receiving
Compensation and Plan contributions or benefits equal to the sum
of such Compensation and contributions or benefits of the family
member and owner or Highly Compensated Employee. For purposes of
this Section, family members include the Spouse, lineal
ascendants and descendants of the Employee or former Employee and
the Spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee
(including the determination of the number and identity of
Employees in the top-paid group; the top 100 Employees, the
number of Employees treated as officers, and the Compensation
that is considered) will be made in accordance with section
414(q) of the Code and the Regulations promulgated thereunder.
For purposes of this definition, the Employer shall include any
Affiliate.
Hour of Service means:
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer.
These hours will be credited to the Employee for the
computation period in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time
during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including
Disability), layoff, jury duty, military duty or leave of
absence. No more than 501 hours of service will be credited
under this paragraph for any single continuous period
(whether or not such period occurs in a single computation
period). Hours under this paragraph will be calculated and
credited pursuant to section 2530.200b-2 of the Department
of Labor regulations, which section is incorporated herein
by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer.
The same hours of service will not be credited both under
paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours will be credited to
the Employee for the computation period or periods to which
the award or agreement pertains rather than the computation
period in which the award, agreement or payment is made.
For purposes of this definition, Employer includes any Affiliate.
Hours of Service will be credited for employment with other
members of any affiliated service group (under section 414(m) of the
Code), controlled group of corporations (under section 414(b) of the
Code), or group of trades or businesses under common control (under
section 414(c) of the Code) of which the adopting Employer is a member,
and any other entity required to be aggregated with the Employer pursuant
to section 414(o) of the Code and the Regulations promulgated
thereunder.
Hours of Service will also be credited with respect to any
individual considered an Employee for purposes of this Plan under
section 414(n) of the Code and the Regulations promulgated thereunder.
Hours of Service will be credited for all employment with the
Employer regardless of whether the Employee was at the time an
eligible Employee.
Service will be determined on the basis of the actual hours for
which an Employee is paid or entitled to payment.
Late Retirement Date means the date, occurring after Normal
Retirement Age, on which an Employee actually retires from
employment with the Employer.
Leased Employee means any person (other than an Employee of the
Employer) who, pursuant to an agreement between the Employer and
any other person (the "leasing organization"), has performed
services for the Employer (or for the Employer and related
persons determined in accordance with section 414(n)(6) of the
Code) on a substantially full time basis for a period of at least
one year, and such services are of a type historically performed
by Employees in the business field of the Employer. Contributions or
benefits provided to a Leased Employee by the leasing organization
which are attributable to services performed for the Employer shall be
treated as provided by the Employer.
A Leased Employee shall not be considered an Employee of the
Employer if (i) such Employee is covered by a money purchase
pension plan maintained by the leasing organization providing:
(a) a non-integrated employer contribution rate of at least 10
percent of Compensation, as defined in section 415(c)(3) of the
Code, but including amounts contributed pursuant to a salary
reduction agreement which are excludable from the Employee's
gross income under section 125, section 402(e)(3), section 402(h)
or section 403(b) of the Code, (b) immediate participation, and
(c) full and immediate vesting; and (ii) Leased Employees do not
constitute more than 20 percent of the Employer's non-highly
compensated workforce.
Non-Highly Compensated Employee means an Employee who is not a
Highly Compensated Employee.
Normal Retirement Age means age 65.
One-Year Break in Service means a 12-consecutive-month period
during which the Participant does not complete more than 500
Hours of Service.
Solely for purposes of determining whether a One-Year Break in
Service has occurred for participation and vesting purposes, an
individual who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such
absence, or in any case in which such hours cannot be determined,
eight Hours of Service per day of such absence, to a maximum of
501 Hours of Service for any one child-related absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence: (1) by reason of the
pregnancy of the individual; (2) by reason of a birth of a child
of the individual; (3) by reason of the placement of a child with
the individual in connection with the adoption of such child by
such individual; or (4) for purposes of caring for such child for
a period beginning immediately following such birth or placement.
The Hours of Service credited under this paragraph shall be
credited in the computation period in which the absence begins if
necessary to prevent a One-Year Break in Service in that period
or, in all other cases, in the next following computation period.
Participant means an Employee of the Employer who participates in
the Plan pursuant to Article II; a former Employee who participated
in the Plan under Article II and who continues to be entitled to a
Vested benefit under the Plan; or a former Employee who participated
in the Plan under Article II, and who has not yet incurred a One-Year
Break in Service. For purposes of Section 6.17, "Participant" shall
include a former Participant, as well as a former Participant's
Surviving Spouse and Participant's or former Participant's Spouse
or former Spouse who is the alternate payee under a qualified
domestic relations order as defined in section 414(p) of the Code
(who shall be deemed Participants with respect to such Spouse's
interest under the Plan).
Plan means the Meridian Insurance Group, Inc. 401(k) Plan, as set
forth herein.
Plan Year means the 12-consecutive-month period which begins on
January 1 and on each anniversary thereof.
Qualified Preretirement Survivor Annuity and Qualified Joint and
Survivor Annuity shall have the meanings described in Section
6.11 of the Plan.
Regulations means the Treasury regulations pertaining to the
Internal Revenue Code of 1986, as amended from time to time.
Required Distributions shall be as described in Section 6.10 of
the Plan.
Spouse means the Spouse or Surviving Spouse of the Participant,
provided that a former Spouse shall be treated as the Spouse or
Surviving Spouse to the extent provided under a "qualified
domestic relations order" as defined in section 414(p) of the Code.
Top-Heavy shall have the meaning and effect described in Article
XI of the Plan.
Trust means the Trust as established under Article IX and
maintained for purposes of the Plan which is administered by the
Trustee in accordance with the provisions of the agreement of
Trust between the Employer and the Trustee. If the Trust is
governed by a separate agreement entered into between the
Employer and the Trustee (which shall be incorporated by
reference herein and become part of the Plan) to the extent the
terms of such Trust agreement conflict with the Plan, the terms
of such Trust agreement will control except to the extent that it
is necessary to follow the terms of the Plan in order to maintain
the qualified status of the Plan under section 401(a) of the Code.
Trustee means the party or parties named under the Trust who
shall have exclusive authority and discretion to manage and
control the assets of the Plan. Notwithstanding the above, to
the extent the Plan expressly provides, the Trustee shall be
subject to the direction of the Committee and/or Investment Manager.
Trust Fund means all money and other property received or held by
the Trustee under the Trust, plus all income and gains and minus
all losses, expenses, and distributions chargeable to the Trust assets.
Valuation Date means any day on which the New York Stock Exchange
is open for business.
Vested means nonforfeitable.
Year of Service means a 12-consecutive-month period during which
an Employee is credited with at least 1,000 Hours of Service. If
a fractional Year of Service is used in the Plan, there will be
no Hours of Service requirement.
ARTICLE II - ELIGIBILITY AND PARTICIPATION
Section 2.1 Eligibility Requirements.
(a) Only Employees of the Employer will be eligible to
participate in the Plan.
(b) (i) Employees become eligible to participate in the Plan
for purposes of Employer Contributions, upon the completion
of one Year of Service.
(ii) Employees become eligible to make Employee Elective
Deferrals under the Plan regardless of attained age or
completed service.
(c) Notwithstanding any other provision of this Article II, all
Employees and former Employees who are Participants in the
Plan as of the date immediately preceding the Effective Date
of this amendment and restatement and who then have an
Account balance (whether or not nonforfeitable) shall
continue their participation in the Plan as restated. A
former Employee who was a Participant in the Plan and who
received a distribution of his entire nonforfeitable Account
balance on account of termination of employment may become
eligible to participate in the Plan upon reemployment either
as a newly hired Employee or by satisfaction of the
eligibility provisions.
(d) Notwithstanding any other provision of this Plan, Employees
included within the following described classifications are
excluded from participation in this Plan:
(1) Employees in a unit of employees covered by a
collective bargaining agreement between the Employer
and employee representatives, if retirement benefits
were the subject of good faith bargaining and if two
percent or less of the Employees of the Employer who
are covered pursuant to that agreement are
professionals as defined in section 1.410(b)-9(g) of
the Regulations. For this purpose, the term "employee
representatives" does not include any organization more
than half of whose members are Employees who are
owners, officers, or executives of the Employer.
(2) Seasonal Employees. For this purpose the term
"Seasonal Employees" shall mean Employees who are
scheduled to work less than 1,000 Hours of Service per
year; provided, however, that Employees who are
scheduled to work less than 1,000 Hours of Service per year
shall nevertheless become eligible to participate in the Plan
and make Employee Elective Deferrals as provided in Section (b)
of this Section 2.1.
Section 2.2 Participation.
An Employee will begin participation in the Plan on the first day
of the first Plan quarter coincident with or the next following
completion of the eligibility requirements set forth in Section
2.1 above.
In the case of any Participant whose employment with the Employer
terminates and who subsequently is reemployed by the Employer,
such Employee will participate immediately upon returning to
employment.
ARTICLE III - CONTRIBUTIONS
Section 3.1 Employer Contributions.
Employer Matching Contributions:
For each Plan Year, the Employer may make an Employer Matching
Contribution to the Trust based on Employee Elective Deferrals.
The amount of the Employer Matching Contributions shall be
determined for each Plan Year by the Employer.
Employer Regular Contributions:
For each Plan Year, the Employer may make an Employer Regular
Contribution to the Trust based on the total Compensation of all
Participants eligible to receive an allocation. The amount of
the Employer Regular Contribution shall be determined for each
Plan Year by the Employer.
Qualified Matching and Qualified Non-Elective Contributions:
At the discretion of the Employer, Qualified Matching
Contributions or Qualified Non-Elective Contributions may be made
which may be used for purposes of ensuring that the Plan complies
with the nondiscrimination tests of sections 401(k) or 401(m) of
the Code and the Regulations promulgated thereunder. Qualified
Matching Contributions may be made with respect to all
Participants in an amount deemed necessary by the Employer to
pass the applicable nondiscrimination test(s), determined as a
percentage of such Participants' Employee Elective Deferrals.
Qualified Non-Elective Contributions may be made on behalf of all
Participants in the same percentage of Compensation for each
until the nondiscrimination tests of sections 401(k) and/or
401(m) of the Code are met.
Section 3.2 Employee Elective Deferrals.
Each Plan Year, each Participant may elect to defer up to 16
percent of Compensation (Employee Elective Deferrals) which will
be contributed by the Employer to the Plan. New Participants may
commence deferrals as specified in Section 2.2. A Participant
may change his election or make a new election as of any business
day. Reasonable advance notification must be given to the Plan
Administrator or its designee by a Participant prior to the first
pay period affected by a modification.
In addition, a Participant may cease to have Employee Elective
Deferrals made as of any payroll period if reasonable advance
notice is given to the Plan Administrator or its designee prior
to such date. The Plan Administrator may reduce or completely
prohibit Employee Elective Deferrals at any time if the
Administrator determines such action is necessary to ensure
compliance with section 401(k), 402(g), or 415 of the Code.
Employee Elective Deferrals under this and all other qualified
plans maintained by the Employer may not be made on behalf of any
Participant during any taxable year to the extent such would
exceed the dollar limitation of section 402(g) of the Code in
effect at the beginning of the taxable year ($7,000 as adjusted
for cost of living).
Section 3.3 After-Tax Employee Contributions.
After-Tax Employee Contributions are not permitted, but were
permitted previously under the Plan.
Section 3.4 Rollover Contributions.
(a) An Employee, who is eligible to participate in the Plan
under Section 2.1, regardless of whether he has satisfied
the Participation requirements of Section 2.2, may roll over
into the Plan an eligible rollover distribution (as defined
in section 402(c) of the Code) from another qualified plan,
or from an individual retirement account in the manner
described in section 408(d)(3)(A)(ii) of the Code. If such
rollover is not a direct transfer as described in section
401(a)(31) of the Code, it must be received by the Plan
within 60 days of the date it was received by the Participant from
the distributing qualified plan or individual retirement account.
(b) The Plan Administrator shall develop such procedures, and
may require such information from an Employee desiring to
make such a rollover, as he deems necessary or desirable to
determine that the proposed rollover will meet the
requirements of this Section. Upon approval by the Plan
Administrator, the amount rolled over shall be deposited in
the Trust and shall be credited to the Employee's Rollover
Account. Such Account shall share in allocations of
earnings, losses and expenses of the Trust Fund, but shall
not share in allocations of Employer contributions. The
Employee's Rollover Account shall be distributed in
accordance with Article VI.
(c) In the event of a rollover contribution on behalf of an
Employee who is otherwise eligible to participate in the
Plan but who has not yet satisfied the participation
requirements of Section 2.2, such Employee's Rollover
Account shall represent his sole interest in the Plan until
he becomes a Participant.
Section 3.5 Trustee-to-Trustee Transfers.
(a) Subject to Plan Administrator approval, an Employee, not
excluded from participation in the Plan, regardless of
whether he has satisfied any age and service requirements
for participation, may cause assets from the qualified plan
of a prior employer to be transferred directly by the
trustee of such plan to the Trustee of this Plan.
(b) A direct rollover as described in Section 6.17 shall not
constitute a trustee-to-trustee transfer for purposes of the
Plan.
Section 3.6 Deduction Limitation.
Employer contributions made with respect to any Plan Year under
this Article III are conditioned upon such contributions being
deductible by the Employer for such Plan Year under section 404
of the Code.
ARTICLE IV - 401(k) and 401(m)
Section 4.1 Distribution of Excess Employee Elective Deferrals.
(a) Excess Employee Elective Deferrals shall be distributed in
accordance with the provisions of this Section 4.1. Excess
Employee Elective Deferrals are those elective deferrals
that are includible in a Participant's gross income because
they exceed the dollar limitation ($7,000 as adjusted for
cost of living) imposed under Code section 402(g). Excess
Employee Elective Deferrals shall be treated as Annual
Additions under the Plan, except to the extent they are
distributed on or before the April 15 first following the
close of a Participant's tax year.
(b) A Participant may attribute to this Plan any excess Employee
Elective Deferrals made during a taxable year of the
Participant by notifying the Plan Administrator, through
actual or deemed notification, on or before March 1
following the calendar year when the excess Employee
Elective Deferrals are made of the amount of the excess
Employee Elective Deferrals to be attributed to the Plan. A
Participant will be deemed to have notified the Plan
Administrator of any excess Employee Elective Deferrals
which exist when only those elective deferrals made to this
Plan and any other plan(s) maintained by the Employer are
taken into account.
(c) Notwithstanding any other provision of the Plan, excess
Employee Elective Deferrals, plus any income and minus any
loss allocable thereto, shall be distributed no later than
April 15 to any Participant to whose Account excess Employee
Elective Deferrals were attributed for the preceding year
and who claims excess Employee Elective Deferrals for such
taxable year. With respect to any taxable year, a
Participant's Employee Elective Deferrals are the sum of all
Employer contributions made on behalf of such Participant
pursuant to an election to defer under any qualified cash or
deferred arrangement as described in section 401(k) of the
Code, any simplified employee pension cash or deferred
arrangement as described in section 402(h)(1)(B) of the
Code, any eligible deferred compensation plan under section
457 of the Code, any plan described under section 501(c)(18)
of the Code, and any Employer contributions made on the
behalf of a Participant for the purchase of an annuity
contract under section 403(b) of the Code pursuant to a
salary reduction agreement, but shall not include amounts
distributed pursuant to the provisions of Section 5.4(a)(3)
of this Plan.
(d) Excess Employee Elective Deferrals shall be adjusted for any
income or loss during the Plan Year. The income or loss
allocable to excess Employee Elective Deferrals is the
income or loss allocable to the Participant's Employee
Deferral Account for the taxable year multiplied by a
fraction, the numerator of which is such Participant's
excess Employee Elective Deferrals for the year and the
denominator is the Participant's Account balance
attributable to Employee Elective Deferrals without regard
to any income or loss occurring during such taxable year.
Section 4.2 Actual Deferral Percentage Test.
(a) For each Plan Year, the Actual Deferral Percentage (ADP) for
Participants who are Highly Compensated Employees must bear
a relationship to the ADP for Participants who are Non-
Highly Compensated Employees which satisfies either of the
following tests for nondiscrimination:
(1) The ADP for Participants who are Highly Compensated
Employees is not more than the ADP for Participants who
are Non-Highly Compensated Employees multiplied by
1.25; or
(2) The ADP for Participants who are Highly Compensated
Employees is not more than the ADP for Participants who
are Non-Highly Compensated Employees multiplied by two,
and the ADP for Participants who are Highly Compensated
Employees does not exceed the ADP for Participants who
are Non-Highly Compensated Employees by more than two
percentage points.
Actual Deferral Percentage means, for a specified group of
Participants for a Plan Year, the average of the ratios
(calculated separately for each Participant in such group)
of (i) the amount of Employer contributions actually paid over
to the Trust on behalf of such Participant for the Plan Year
to (ii) the Participant's Compensation for such Plan Year.
Employer contributions on behalf of any Participant shall
include: (i) any Employee Elective Deferrals made pursuant
to the Participant's deferral election, including excess
Employee Elective Deferrals of Highly Compensated Employees,
but excluding (A) Excess Employee Elective Deferrals by Non-Highly
Compensated Employees which are attributable solely to
Employee Elective Deferrals made under the Plan or any other
plan(s) of the Employer and (B) Employee Elective Deferrals
that are taken into account in the Contribution Percentage
test (provided the ADP test is satisfied both with and
without exclusion of these Employee Elective Deferrals); and
(ii) at the election of the Employer, Qualified Non-Elective
Contributions and Qualified Matching Contributions made
either to the Plan or another plan of the Employer qualified
under section 401(a) of the Code. For purposes of computing
Actual Deferral Percentages, any Employee who would be a
Participant but for the failure to make Employee Elective
Deferrals shall be treated as a Participant on whose behalf no
Employee Elective Deferrals are made. For Plan Years beginning
before the later of January 1, 1992, or 60 days after the publication
of final Regulations, Compensation may be limited to that
which is received for the period the Employee is a Participant.
(b) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year shall be determined by
aggregating his employee elective deferrals in all plans
maintained by the Employer. If a Highly Compensated
Employee participates in two or more cash or deferred
arrangements having different plan years, all cash or
deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the above, any plans required to be
mandatorily segregated pursuant to Regulations promulgated
under section 401(k) of the Code shall not be aggregated for
purposes of this Section 4.2.
(c) In the event that this Plan satisfies the requirements of
sections 401(k), 401(a)(4), or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more
other Plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this Section
shall be applied by determining the ADP of Employees as if
all such plans were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated in order to
satisfy section 401(k) of the Code only if they have the
same Plan Year.
(d) For purposes of determining the ADP of a Participant who is
a 5-percent owner or one of the ten most highly paid Highly
Compensated Employees, the Employee Elective Deferrals (and
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Employee Elective
Deferrals for purposes of the ADP test) and Compensation of
such Participant shall include, respectively, the Employee
Elective Deferrals (and, if applicable, Qualified Non-
Elective Contributions and Qualified Matching Contributions,
or both) and Compensation for the Plan Year of family
members (as defined in section 414(q)(6) of the Code). Such
family members shall be disregarded as separate Employees in
determining the ADP both for Participants who are Non-Highly
Compensated Employees and for Participants who are Highly
Compensated Employees.
(e) In order to be considered for purposes of performing the ADP
test(s), Employee Elective Deferrals, Qualified Non-Elective
Contributions and Qualified Matching Contributions must be
made before the last day of the twelve-month period
immediately following the Plan Year to which such
contributions relate.
(f) The Employer shall maintain annual records sufficient to
demonstrate satisfaction of the ADP test and identify the
amount of Qualified Non-Elective Contributions or Qualified
Matching Contributions, or both, used in such test.
(g) The determination and treatment of the amounts considered in
determining the ADP with respect to each Participant shall
satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
Section 4.3 Distribution of Excess Contributions.
(a) Discriminatory Employee Elective Deferrals (Excess
Contributions) are, with respect to any Plan Year, the
excess of:
(1) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly
Compensated Employees for such Plan Year, over
(2) The maximum amount of such contributions permitted
pursuant to the ADP test described under Section 4.2(a)
(determined by reducing contributions made on behalf of
Highly Compensated Employees in order, beginning with
the contributions made on behalf of the Employee with
the highest ADP).
(b) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of
each Plan Year to Participants to whose Accounts such Excess
Contributions were allocated for the preceding Plan Year.
Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such Employees,
calculated as described above. Excess Contributions shall
be allocated to Participants who are subject to the family
member aggregation rules of section 414(q)(6) of the Code in
proportion to the Employee Elective Deferrals (and amounts
treated as Employee Elective Deferrals) of each family
member whose Employee Elective Deferrals are included in the
combined ADP. Excess Contributions (including any amounts
recharacterized as After-Tax Employee Contributions as
permitted under Section 4.6) shall be treated as Annual
Additions under the Plan.
(c) Excess Contributions shall be adjusted for any income or
loss during the Plan Year. The income or loss allocable to
Excess Contributions is the income or loss allocable to the
Participant's Employee Deferral Account (and, if applicable,
his Qualified Non-Elective Contribution Account or Qualified
Matching Contributions Account, or both) for the Plan Year
multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions for the year and the
denominator of which is the Participant's Account balance
attributable to Employee Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified Matching
Contributions, or both, if any of such contributions are
included in the ADP test) without regard to any income or
loss occurring during such Plan Year.
(d) Excess Contributions shall be distributed from the
Participant's Employee Deferral Account and Qualified
Matching Contributions Account (if applicable) in proportion
to the Participant's Employee Elective Deferrals and
Qualified Matching Contributions (to the extent used in the
ADP test) for the Plan Year. Excess Contributions shall be
distributed from the Participant's Qualified Non-Elective
Contribution Account only to the extent that such Excess
Contributions exceed the balance of the Participant's
Employee Deferral Account and Qualified Matching
Contributions Account.
Section 4.4 Actual Contribution Percentage Test.
(a) For each Plan Year, the Actual Contribution Percentage (ACP)
of Highly Compensated Employees must bear a relationship to
the ACP for Non-Highly Compensated Employees which satisfies
either of the following tests for nondiscrimination:
(1) The ACP for Participants who are Highly Compensated
Employees is not more than the ACP for Participants who
are Non-Highly Compensated Employees multiplied by
1.25; or
(2) The ACP for Participants who are Highly Compensated
Employees is not more than the ACP for Participants who
are Non-Highly Compensated Employees multiplied by two,
and the ACP for participants who are Highly Compensated
Employees does not exceed the ACP for Participants who
are Non-Highly Compensated Employees by more than two
percentage points.
(b) If any Highly Compensated Employees have both Employee
Elective Deferrals and Matching Contributions and/or After-
Tax Employee Contributions made on their behalf to plans
maintained by the Employer, and the sum of the ADP and ACP
of such Highly Compensated Employees subject to either or
both tests exceeds the Aggregate Limit, then the ACP of each
such Highly Compensated Employee will be reduced (beginning
with that of the Highly Compensated Employee whose ACP is
the highest) so that the limit is not exceeded. The amount
by which each Highly Compensated Employee's Contribution
Percentage Amount is reduced shall be treated as an Excess
Aggregate Contribution. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use does
not occur if either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP
of the Non-Highly Compensated Employees.
(c) For purposes of this Section, the Actual Contribution
Percentage for any Participant who is a Highly Compensated
Employee and who is eligible to have Contribution Percentage
Amounts allocated to his or her Account under two or more
plans described in section 401(a) of the Code, or arrangements
described in section 401(k) of the Code that are maintained by the
Employer, shall be determined as if the total of such Contribution
Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more cash or
deferred arrangements that have different plan years, all
cash or deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the above, to the extent mandatorily
disaggregated pursuant to Treasury Regulations promulgated
under section 401(m) of the Code, applicable plans shall
continue to be treated as separate.
(d) In the event that this Plan satisfies the requirements of
sections 401(m), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this Section
shall be applied by determining the Contribution Percentage
of Employees as if all such plans were a single plan. For
plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy section 401(m) of the Code
only if they have the same plan year.
(e) For purposes of determining the Actual Contribution
Percentage of a Participant who is a five-percent owner or
one of the ten most highly paid Highly Compensated
Employees, the Contribution Percentage Amounts and
Compensation of such Participant shall include the
Contribution Percentage Amounts and Compensation for the
Plan Year of family members as defined in section 414(q)(6)
of the Code. Family members, with respect to Highly
Compensated Employees, shall be disregarded as separate
Employees in determining the Contribution Percentage both
for Participants who are Non-Highly Compensated Employees
and for Participants who are Highly Compensated Employees.
(f) For purposes of determining the ACP test, Employee
Contributions are considered to have been made in the Plan
Year in which contributions were made to the Trust.
Matching Contributions and Qualified Non-Elective
Contributions will be considered made for a Plan Year if
made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
(g) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and identify the
amount of Qualified Non-Elective Contributions or Qualified
Matching Contributions, or both, used in such test.
(h) The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
(i) Definitions:
"Average Contribution Percentage" means, for a specified
group of Participants for a Plan Year, the average of the
ratios (calculated separately for each Participant in such
group) of the Participant's Contribution Percentage Amounts
to the Participant's Compensation for the Plan Year (whether
or not the Employee was a Participant for the entire Plan Year).
"Aggregate Limit" -- In general, for purposes of this
Section, the Aggregate Limit is the greater of:
(1) The sum of:
(A) 1.25 times the greater of the Relevant Actual
Deferral Percentage or the Relevant Actual
Contribution Percentage, and
(B) Two percentage points plus the lesser of the
Relevant Actual Deferral Percentage or the
Relevant Actual Contribution Percentage. In no
event, however, shall this amount exceed twice the
lesser of the Relevant Actual Deferral Percentage
or the Relevant Actual Contribution Percentage; or
(2) The sum of:
(A) 1.25 times the lesser of the Relevant Actual
Deferral Percentage or the Relevant Actual
Contribution Percentage, and
(B) Two percentage points plus the greater of the
Relevant Actual Deferral Percentage or the
Relevant Actual Contribution Percentage. In no
event, however, shall this amount exceed twice the
greater of the Relevant Actual Deferral Percentage
or the Relevant Actual Contribution Percentage.
"Relevant Actual Deferral Percentage" means the Actual
Deferral Percentage of the group of Non-Highly Compensated
Employees eligible under the arrangement subject to
section 401(k) of the Code for the Plan Year, and the term
"Relevant Actual Contribution Percentage" means the Actual
Contribution Percentage of the group of Non-Highly
Compensated Employees eligible under the Plan subject to
section 401(m) of the Code for the Plan Year beginning with
or within the Plan Year of the arrangement subject to
section 401(k) of the Code.
"Contribution Percentage" means the ratio (expressed as a
percentage) of the Participant's Contribution Percentage
Amounts to the Participant's Compensation for the Plan Year
(whether or not the Employee was a Participant for the
entire Plan Year).
"Contribution Percentage Amounts" means the sum of the
Employee Contributions, Matching Contributions, and
Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP test) made under the
Plan on behalf of the Participant for the Plan Year. Such
Contribution Percentage Amounts shall not include Matching
Contributions which are forfeited either in order to correct
Excess Aggregate Contributions or because the contributions
to which they relate are Excess Employee Deferrals, Excess
Contributions, or Excess Aggregate Contributions. The
Employer may include Qualified Non-Elective Contributions in
the Contribution Percentage Amounts. The Employer also may
elect to use Employee Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test is met before the
Employee Elective Deferrals are used in the ACP test and
continues to be met following the exclusion of those
Employee Elective Deferrals that are used to meet the ACP
test.
"Eligible Participant" means any Employee who is eligible to
make an After-Tax Employee Contribution, or an Employee
Elective Deferral (if the Employer takes such contributions
into account in the calculation of the Contribution
Percentage), or to receive a Matching Contribution or a
Qualified Matching Contribution.
"After-Tax Employee Contribution" means any contribution
made to the Plan by or on behalf of a Participant that is
included in the Participant's gross income in the year in
which made and that is maintained under a separate Account
to which earnings and losses are allocated.
"Matching Contribution" means an Employer contribution made
to this or any other Defined Contribution Plan on behalf of
a Participant on account of an Employee Contribution made by
such Participant, or on account of a Participant's Employee
Elective Deferral, under a plan maintained by the Employer.
Section 4.5 Distribution of Excess Aggregate Contributions.
(a) "Excess Aggregate Contributions" means, with respect to any
Plan Year, the excess of:
(1) The Actual Contribution Percentage (ACP) amounts taken
into account in computing the numerator of the
Contribution Percentage actually made on behalf of
Highly Compensated Employees for such Plan Year, over
(2) The maximum contribution percentage amounts permitted
by the ACP test (determined by reducing contributions
made on behalf of Highly Compensated Employees in order
of such Employees' Actual Contribution Percentages
beginning with the highest of such percentages).
(b) Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss
thereto, shall be forfeited if forfeitable or, if not
forfeitable, distributed no later than the last day of each
Plan Year to Participants to whose Accounts such Excess
Aggregate Contributions were allocated for the preceding
Plan Year. Excess Aggregate Contributions of Participants
who are subject to the family member aggregation rules of
section 414(q)(6) of the Code shall be allocated among
applicable family members in proportion to the After-Tax
Employee and Employer Matching Contributions (or amounts
treated as Matching Contributions) of each family member
whose contributions are included in the combined ACP.
Excess Aggregate Contributions shall be treated as Annual
Additions under the Plan.
(c) Excess Aggregate Contributions shall be adjusted for any
income or loss during the Plan Year. The income or loss
allocable to Excess Aggregate Contributions shall be the
Matching Contribution Account (if any, and if all amounts
therein are not used in the ADP test) and, if applicable,
Qualified Non-Elective Contribution Account and Employee
Deferral Account for the Plan Year multiplied by a fraction,
the numerator of which is such Participant's Excess
Aggregate Contributions for the year and the denominator is
the Participant's Account balance(s) attributable to
contribution percentage amounts without regard to any income
or loss occurring during such Plan Year.
(d) Forfeitures of Excess Aggregate Contributions may either be
reallocated to the Accounts of Non-Highly Compensated
Employees or applied to reduce Employer contributions.
(e) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro rata basis from the
Participant's After-Tax Employee Contribution Account,
Matching Contribution Account, and Qualified Matching
Contribution Account (and, if applicable, the Participant's
Qualified Non-Elective Contribution Account or Employee
Deferral Account, or both).
Section 4.6 Recharacterization.
Recharacterization is inapplicable to this Plan because there are
no After-Tax Employee Contributions.
ARTICLE V - ALLOCATIONS, VALUATION AND VESTING
Section 5.1 Allocation of Contributions.
As of the Valuation Date, Employee Elective Deferrals, Employer
Matching Contributions, Qualified Non-Elective Contributions and
Qualified Matching Contributions will be allocated to
Participants' Accounts in the amounts in which they were
contributed to the Plan by the Employer with respect to each
Participant pursuant to Article III.
As of the Valuation Date, Employer Regular Contributions made
under Section 3.1, if any, shall be allocated to the Account of
each Participant described in Section 5.2 according to either the
ratio that such Participant's Compensation for the Plan Year
bears to the Compensation of all Participants for such Plan Year.
Section 5.2 Participants Who Will Receive an Allocation.
(a) An allocation of Employer Regular Contributions made under
Section 3.1 shall only be made with respect to those
Participants who have performed at least 1 Hour of Service
during the Plan Year.
(b) An allocation of Employer Matching Contributions made under
Section 3.1 shall only be made with respect to those
Participants who have performed at least 1 Hour of Service
during the Plan Year.
Section 5.3 Allocation of Forfeitures.
There are no Forfeitures under the Plan since all Plan
contributions are 100 percent Vested.
Section 5.4 Allocation Limitations.
(a) If the Participant does not participate in, and has never
participated in another qualified plan maintained by the
Employer, or a welfare benefit fund, as defined in section
419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in section 415(l)(2)
of the Code, maintained by the Employer, which provides an
Annual Addition as defined in subsection (d)(1), the
following provisions shall apply:
(1) The amount of Annual Additions which may be credited to
the Participant's Account for any Limitation Year shall
not exceed the lesser of the Maximum Permissible
Amount, as defined in subsection (d)(9), or any other
limitation contained in this Plan. If contributions
that would otherwise be contributed or allocated to the
Participant's Account would cause the Annual Additions
for the Limitation Year to exceed the Maximum
Permissible Amount, the amount contributed or allocated
will be reduced (Employee Elective Deferrals first) so
that the Annual Additions for the Limitation Year will
equal the Maximum Permissible Amount.
(2) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount
for the Limitation Year will be determined on the basis
of the Participant's actual Section 415 Compensation
for the Limitation Year.
(3) If there is an excess Annual Addition due to a
reasonable error in estimating a Participant's
Compensation or in determining permissible Employee
Elective Deferrals, or any other facts and
circumstances as determined by the Committee and which
are found by the Commissioner of Internal Revenue to
justify the availability of the procedures for
correcting the excess as set forth in this subsection,
the excess will be corrected as follows:
(A) Any After-Tax Employee Contributions, to the
extent their return would reduce the excess, will
be returned to the Participant;
(B) Any portion of the excess directly attributable to
and arising from Employee Elective Deferrals, to
the extent its return would reduce the excess,
will be returned to the Participant;
(C) If after the application of paragraphs (A) and (B)
an excess still exists, and the Participant is
covered by the Plan at the end of the Limitation
Year, the excess in the Participant's Account will
be used to reduce Employer contributions beginning
with Employee Elective Deferrals, if any, for the
next Limitation Year, and each succeeding
Limitation Year if necessary;
(D) If after the application of paragraphs (A) and (B)
an excess still exists, and the Participant is not
covered by the Plan at the end of a Limitation
Year, the excess will be held unallocated in a
suspense account. The suspense account will be
applied to reduce future contributions beginning
with Employee Elective Deferrals, if any, for all
remaining Participants for the next Limitation
Year, and each succeeding Limitation Year if
necessary;
(E) If a suspense account is in existence at any time
during a Limitation Year pursuant to this Section,
it will not receive any allocation of the
investment gains and losses of the Trust. If a
suspense account is in existence at any time
during a particular Limitation Year, all amounts
in the suspense account must be allocated and
reallocated to Participants' Accounts before any
Employer or any After-Tax Employee Contributions
may be made to the Plan for that Limitation Year.
The excess amount may not be distributed to
Participants or former Participants.
(b) If, in addition to this Plan, a Participant is covered under
another qualified Defined Contribution Plan maintained by
the Employer, a welfare benefit fund (as defined in section
419(e) of the Code) maintained by the Employer, or an
individual medical account (as defined in section 415(l)(2)
of the Code) maintained by the Employer, which provides an
Annual Addition as defined in subsection (d)(1), during any
Limitation Year, the following provisions shall apply:
(1) The Annual Additions which may be credited to a
Participant's Account under this Plan for any such
Limitation Year may not exceed the Maximum Permissible
Amount reduced by the Annual Additions credited to such
Participant's account under such other plans and/or
welfare benefit funds for the same Limitation Year. If
the Annual Additions with respect to the Participant
under other Defined Contribution Plans and welfare
benefit funds maintained by the Employer are less than
the Maximum Permissible Amount and the Employer
contribution that would otherwise be contributed or
allocated to the Participant's Account under this Plan
would cause such Participant's Annual Additions for the
Limitation Year to exceed this limitation, the amount
contributed or allocated will be reduced so that the
Annual Additions under all such plans and funds for the
Limitation Year will equal the Maximum Permissible
Amount. If the Annual Additions with respect to the
Participant under such other Defined Contribution Plans
and welfare benefit funds in the aggregate are equal to
or greater than the Maximum Permissible Amount, no
amount will be contributed or allocated to the
Participant's Account under this Plan for the
Limitation Year.
(2) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount
for the Limitation Year will be determined on the basis
of the Participant's actual Section 415 Compensation
for the Limitation Year.
(3) If, as a result of a reasonable error in estimating
compensation, Employee contributions or other facts and
circumstances as determined by the Committee, a
Participant's Annual Additions under this Plan and such
other plans would include an amount in excess of the
Maximum Permissible Amount for a Limitation Year, the excess
will be deemed to consist of the Annual Additions last allocated,
except that Annual Additions attributable to a welfare benefit
fund or individual medical account will be deemed to have been
allocated first regardless of the actual allocation date.
(4) If an amount in excess of the Maximum Permissible
Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation
date of another plan, the excess attributed to this
Plan will be the product of
(A) the total excess allocated as of such date and
(B) the ratio of (i) the Annual Additions allocated to
the Participant for the Limitation Year as of such
date under this Plan to (ii) the total Annual
Additions allocated to the Participant for the
Limitation Year as of such date under this and all
other qualified Defined Contribution Plans
maintained by the Employer.
(5) Any excess Annual Addition attributed to this Plan will
be disposed of in the manner described in subsection
(a)(3).
(c) If the Employer maintains, or at any time maintained, a
qualified Defined Benefit Plan covering any Participant in
this Plan, the sum of a Participant's Defined Benefit
Fraction and Defined Contribution Fraction shall not exceed
1.0 in any Limitation Year. If the sum of the fractions
exceeds 1.0, the annual benefit provided under the Defined
Benefit Plan will be reduced until the sum of the fractions
equals 1.0.
(d) Definitions:
(1) Annual Additions: The sum of the following amounts
which are credited to a Participant's Account for the
Limitation Year:
(A) Employer contributions,
(B) After-Tax Employee Contributions (if any), and
(C) Amounts allocated, after March 31, 1984, to an
individual medical account, as defined in section
415(1)(2) of the Code, which is part of a pension
or annuity plan maintained by the Employer, as
well as amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years
ending after such date, attributable to post-
retirement medical benefits and allocated to the
separate account of a Key Employee, as defined in
section 419(d)(3) of the Code, under a welfare
benefit fund, as defined in section 419(e) of the
Code, maintained by the Employer.
For this purpose, any excess applied under Sections (a)(3)
or (b)(5) in the Limitation Year to reduce Employer
contributions will be considered Annual Additions for
such Limitation Year.
(2) Section 415 Compensation: For purposes of this
Section, a Participant's Earned Income (if any), wages,
salaries, and fees for professional services and other
amounts received for personal services actually
rendered in the course of employment with the Employer
maintaining the Plan (including, but not limited to,
commissions paid salesmen, compensation for services on
the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or expense allowances under a
nonaccountable plan as described in Treasury Regulation
Section 1.62-2(c)), and excluding the following:
(A) Employer contributions to a plan of deferred
compensation which are not includible in the
Employee's gross income for the taxable year in
which contributed, or Employer contributions under
a simplified employee pension plan to the extent
such contributions are deductible by the Employee,
or any distributions from a plan of deferred
compensation;
(B) Amounts realized from the exercise of a non-
qualified stock option, or when restricted stock
(or property) held by the Employee either becomes
freely transferable or is no longer subject to a
substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified
stock option; and
(D) Other amounts which received special tax benefits,
or contributions made by the Employer (whether or
not under a salary reduction agreement) toward the
purchase of an annuity contract described in
section 403(b) of the Code (whether or not the
contributions are actually excludable from the
gross income of the Employee).
For Limitation Years beginning after December 31, 1991,
for purposes of applying the limitations of this
Article, Section 415 Compensation for a Limitation Year
is the compensation actually paid or made available
during such Limitation Year. Section 415 Compensation
does not include accrued compensation unless it is
uniform and consistent and paid within two weeks.
Notwithstanding the preceding sentence, Section 415
Compensation for a Participant in a Defined
Contribution Plan who is permanently and totally
disabled (as defined in section 22(e)(3) of the Code)
is the compensation such Participant would have
received for the Limitation Year if the Participant had
been paid at the rate of compensation at which he was paid
immediately before becoming permanently and totally
disabled; such imputed compensation for the disabled
Participant may be taken into account only if the
Participant is not a Highly Compensated Employee (as
defined in section 414(q) of the Code) and
contributions made on behalf of such Participant are
nonforfeitable when made.
(3) Defined Benefit Fraction: A fraction, the numerator of
which is the sum of the Participant's Projected Annual
Benefit under all Defined Benefit Plans (whether or not
terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of
the dollar limitation determined for the Limitation
Year under sections 415(b) and (d) of the Code or 140
percent of the highest average Section 415
Compensation, including any adjustments under section
415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant, as of the first day of the first
Limitation Year beginning after December 31, 1986, in
one or more Defined Benefit Plans maintained by the
Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125
percent of the sum of the annual benefits under such
plans which the Participant had accrued as of the close
of the last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and
conditions of the plan(s) after May 5, 1986. The
preceding sentence applies only if the Defined Benefit
Plans individually and in the aggregate satisfied the
requirements of section 415 of the Code for all
Limitation Years beginning before January 1, 1987.
(4) Defined Contribution Dollar Limitation: $30,000 or, if
greater, one-fourth of the defined benefit dollar
limitation set forth in section 415(b)(1) of the Code,
as indexed, as in effect for the applicable Limitation
Year.
(5) Defined Contribution Fraction: A fraction, the
numerator of which is the sum of the Annual Additions
to the Participant's Account under this and all other
Defined Contribution Plans (whether or not terminated)
maintained by the Employer for the current and all
prior Limitation Years (including the annual additions
attributable to the Participant's nondeductible
Employee contributions to all Defined Benefit Plans,
whether or not terminated, maintained by the Employer,
and the annual additions attributable to all welfare
benefit funds, as defined in section 419(e) of the
Code, and individual medical accounts, as defined in
section 415(1)(2) of the Code, maintained by the
Employer), and the denominator of which is the sum of
the maximum aggregate amounts for the current and all
prior Limitation Years which also constituted Years of
Service with the Employer (regardless of whether a
Defined Contribution Plan was maintained by the
Employer). The maximum aggregate amount for any
Limitation Year is the lesser of (A) 125 percent of the
dollar limitation determined under sections 415(b) and (d)
of the Code in effect under section 415(c)(1)(A) of the
Code or (B) 35 percent of the Participant's Section 415
Compensation for such year.
If the Employee was a Participant as of the end of the
first day of the first Limitation Year beginning after
December 31, 1986 in one or more Defined Contribution
Plans maintained by the Employer which were in existence on
May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount
equal to the product of (1) the excess of the sum of the
fractions over 1.0, multiplied by (2) the denominator of
this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated
using the fractions as they would be computed as of the end
of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but
using the Code section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning
before January 1, 1987, shall not be recomputed to
treat all Employee contributions as Annual Additions.
In determining the Defined Contribution Fraction under
section 415(e)(3)(B) of the Code and pursuant to this
Section of the Plan, "100 percent" shall be substituted
for "125 percent" unless the minimum allocation
percentage under section 416(c)(2)(A) of the Code and
Section 11.3(a) of the Plan is increased from "three
percent" to "four percent" and the Plan would not be a
Top-Heavy Plan if the phrase "90 percent" were
substituted for each reference to the phrase
"60 percent" in Section 11.2(b) of the Plan.
(6) Employer: For purposes of this Article, any entity
that adopts this Plan, and all members of a controlled
group of corporations (as defined in section 414(b) of
the Code as modified by section 415(h) of the Code),
all commonly controlled trades or businesses (as
defined in section 414(c) of the Code as modified by
section 415(h) of the Code) or affiliated service
groups (as defined in section 414(m) of the Code) of
which the adopting Employer is part, and any other
entity required to be aggregated with the Employer
pursuant to Regulations under section 414(o) of the Code.
(7) Highest Average Compensation: The average Section 415
Compensation for the three consecutive Years of Service
with the Employer which produces the highest average.
(8) Limitation Year: The Limitation Year is the Plan Year.
All qualified plans maintained by the Employer must use
the same Limitation Year. If the Limitation Year is
amended to a different 12-consecutive-month period, the
new Limitation Year must begin on a date within the
Limitation Year in which the amendment is made.
(9) Maximum Permissible Amount: The maximum Annual
Addition that may be contributed or allocated to a
Participant's Account under the Plan for any Limitation
Year shall not exceed the lesser of:
(A) the Defined Contribution Dollar Limitation, or
(B) 25 percent of the Participant's Section 415
Compensation for the Limitation Year.
The Section 415 Compensation limitation referred
to in (B) shall not apply to any contribution for
medical benefits (within the meaning of section
401(h) or section 419A(f)(2) of the Code) which is
otherwise treated as an Annual Addition under
sections 415(1)(1) or 419A(d)(2) of the Code.
If a short Limitation Year is created because an
amendment changes the Limitation Year to a
different 12-consecutive-month period, the Maximum
Permissible Amount shall not exceed the Defined
Contribution Dollar Limitation multiplied by the
following fraction:
Number of months in the short Limitation Year
12
(10) Projected Annual Benefit: The annual retirement
benefit (adjusted to an actuarially equivalent straight
life annuity if such benefit is expressed in a form
other than a straight life annuity or qualified joint
and survivor annuity) to which the Participant would be
entitled under the terms of the Plan assuming:
(A) The Participant will continue employment until
Normal Retirement Age under the Plan (or current
age, if later), and
(B) The Participant's Section 415 Compensation for the
current Limitation Year and all other relevant
factors used to determine benefits under the Plan
will remain constant for all future Limitation Years.
Section 5.5 Valuation.
The assets of the Trust will be valued on each Valuation Date at
fair market value. On such date, the earnings and losses of the
Trust will be allocated to each Participant's Account according
to the ratio of such Account balance to all Account balances, or
by utilizing any other formula as is appropriate under the circumstances.
Section 5.6 Vesting and Accrual
All Plan contributions are 100 percent Vested.
ARTICLE VI - DISTRIBUTIONS
Section 6.1 Distributions of Small Account Balances.
If a Participant terminates service, and the value of the
Participant's Vested Account balance derived from Employer and
Employee contributions is not greater than $3,500, the
Participant will receive a distribution of the value of the
entire Vested portion of such Account balance. If the value of a
Participant's Vested Account balance is zero, the Participant
shall be deemed to have received a distribution of such Vested
Account balance.
Section 6.2 Distributions While In-Service.
Subject to the provisions of Section 6.13, in-service
distributions shall be made, at the election of a Participant, in
the following circumstance(s):
(a) The Committee, at the election of the Participant and
with the consent of the Spouse of the Participant,
shall direct the Trustee to distribute to any
Participant his Vested Account balance after he has
attained age 59 1/2.
(1) Age 59 1/2 withdrawals are available from the
following accounts and will be withdrawn from the
Participant's accounts in the following hierarchy:
(A) After-Tax Employee Contribution Account
(B) Employee Deferral Account
(C) Employer Matching Contribution Account
(D) Rollover Account
(E) Qualified Matching Contribution or Qualified
Non-Elective Contribution Accounts
(2) Withdrawals will be taken from the investment
funds on a pro rata basis.
(b) In-service distributions shall be permitted upon a
showing of hardship to the Committee which is permitted
under Code section 401(k) and related regulations. A
hardship withdrawal shall be authorized only upon a
showing of an immediate and heavy financial need. The
amount of an immediate and heavy financial need may
include any amounts necessary to pay any federal,
state, or local income taxes or penalties reasonably
anticipated to result from the distribution.
(1) The following are the only financial needs
considered, for purposes of the Plan, to be
immediate and heavy:
(A) Expenses incurred or necessary for medical
care described in Code section 213(d) for the
Participant, Spouse, or any of his dependents
(as defined in Code section 152);
(B) Purchase (excluding mortgage payments) of a
principal residence for the Participant;
(C) Payment of tuition, related educational fees,
and room and board expenses, for the next 12
months of post-secondary education for the
Participant, his Spouse, children, or
dependents (as defined in section 152 of the
Code); or
(D) The need to prevent the eviction of the
Participant from his principal residence or
foreclosure on the mortgage of the
Participant's principal residence.
(2) A distribution will be considered necessary to
satisfy an immediate and heavy financial need of
the Employee only if:
(A) The Employee has obtained all distributions,
other than hardship distributions, and all
nontaxable loans under all Plans maintained
by the Employer;
(B) All Plans maintained by the Employer provide
that the Employee's Elective Deferrals (and
Employee Contributions) will be suspended for
twelve months after the receipt of the
hardship distribution;
(C) The distribution is not in excess of the
amount of an immediate and heavy financial
need (including amounts necessary to pay any
federal, state or local income taxes or
penalties reasonably anticipated to result
from the distribution); and
(D) All Plans maintained by the Employer provide
that the Employee may not make Employee
Elective Deferrals for the Employee's taxable
year immediately following the taxable year
of the hardship distribution in excess of the
applicable limit under section 402(g) of the Code
for such taxable year less the amount of such Employee's
Elective Deferrals for the taxable year of
the hardship distribution.
(3) Hardship withdrawals are available from the
following accounts and will be withdrawn from the
Participant's accounts in the following hierarchy:
(A) After-Tax Employee Contribution Account
(B) Employee Deferral Account
(C) Rollover Account
(D) Qualified Matching Contribution or Qualified
Non-Elective Contribution Accounts
(E) Employer Matching Contribution Account
(4) Withdrawals will be taken from the investment
funds on a pro rata basis.
(5) Hardship withdrawals are subject to the consent of
the Participant's Spouse.
(c) Notwithstanding anything herein to the contrary, a
former participant of Citizens Security Mutual
Insurance Company 401(k) Plan ("Citizens Plan") may
withdraw from their After-Tax Employee Contributions
Account amounts transferred to this Plan from such
Citizens Plan at any time for any reason; provided,
however, such withdrawals are subject to the consent of
the Participant's Spouse.
Section 6.3 Distributions Upon Separation From Service.
Subject to the provisions of Sections 6.8, 6.9 and 6.11,
following the request of the Participant and after approval of
the Plan Administrator, the Trustee shall distribute the value of
the Participant's Vested Account balance in one lump sum or in
installment payments (as set forth below in Section 6.18) as
elected by the Participant. Such distribution shall begin as
soon as administratively feasible, following the Participant's
separation from service.
Section 6.4 Distributions Upon Retirement.
In the event that an applicable retirement date has been reached,
and subject to the terms of Sections 6.8, 6.9 and 6.11, all
Vested amounts credited to the Participant's Account balance
shall become distributable. The distribution will be made in one
lump sum or in installment payments (as set forth below in
Section 6.18) as elected by the Participant. The distribution
will be made, as soon as administratively feasible, following the
applicable retirement date which will include the attainment of
Normal Retirement Age and after the Plan Administrator has
approved the request of the Participant.
Section 6.5 Distributions Upon Death.
(a) Subject to the provisions of Sections 6.8, 6.9 and 6.11,
upon the death of a Participant, the Committee shall
instruct the Trustee, in accordance with this Article, to
distribute the Account of a deceased Participant to that
Participant's Beneficiary. The Participant shall not name
as his Beneficiary someone other than his Spouse unless and
until the Participant and Spouse designate, in writing on a
valid waiver form provided by the Committee for such
purpose, an alternate Beneficiary, which designation shall
be witnessed by a notary public. In addition, the
Participant may designate a Beneficiary other than his
Spouse if: (1) the Participant is legally separated or has
been abandoned and the Participant has a court order to such
effect (and there is no "qualified domestic relations order"
as defined in section 414(p) of the Code), or (2) the
Participant has no Spouse, or (3) the Spouse cannot be
located. Where the Participant makes no designation, the
Beneficiary shall be the Spouse, and if there is no Spouse,
the Beneficiary shall be the Participant's estate. The
Committee may require such proof of death and such evidence
of the right of other persons to be Beneficiaries as it
shall deem proper under the circumstances. The Committee's
determination of death and of the right of any Beneficiary
to receive payments shall be conclusive.
(b) The designation of a Beneficiary shall be made on a form
approved by the Committee. A Participant may revoke or
change his designation with the Committee by filing a new
designation form with the Committee. In the event that no
valid designation exists at the time of the Participant's
death, and the Participant has no Spouse, the death benefit
shall be payable to the Participant's estate.
(c) If the Participant dies after distribution of his interest
has begun, where the Participant has reached age 70 1/2, the
Trustee shall distribute the remaining portion of such
interest as a lump sum within one year of the Participant's
death.
If the Participant dies before distribution of his interest
has begun or before age 70 1/2, his Account must be
distributed as a lump sum within five years of the December
31st following the death of the Participant for all non-
Spouse Beneficiaries. Notwithstanding the above, if the
Spouse is the Beneficiary, the distribution may be delayed
at the election of the Beneficiary until the date on which
the Participant would have attained age 70 1/2.
Section 6.6 Distributions Upon Disability.
In the event of a Participant's total and permanent Disability,
the Trustee, as directed by the Plan Administrator, shall
distribute, subject to the provisions of Sections 6.8, 6.9 and
6.11, the value of the Participant's Vested Account balance. The
distribution will be made, after the request of the Participant
and the approval of the Plan Administrator, in one lump sum or in
installment payments (as set forth below in Section 6.18) as
elected by the Participant. The distribution will be made as
soon as administratively feasible following the determination of
Disability.
Section 6.7 Special Beneficiary Provisions.
(a) Lost Beneficiary. If, after five years have expired
following reasonable efforts of the Committee to locate a
Participant or his Beneficiary, including sending a
registered letter, return receipt requested to the last
known address, the Committee is unable to locate the
Participant or Beneficiary, then the amounts distributable
to such Participant or Beneficiary shall, pursuant to
applicable state and Federal laws, be treated as a
Forfeiture under the Plan. Where a Participant or
Beneficiary is located subsequent to a Forfeiture, such
benefits shall be reinstated by the Committee, and shall not
count as an Annual Addition under section 415 of the Code.
(b) Minor Beneficiary. The Committee may instruct the Trustee
to distribute a sum payable to a minor instead to his or her
legal guardian, or if there is no guardian, to a parent or
other responsible adult who maintains the residence of the
minor. In the alternative such distribution could be made
to the appropriate custodian under the Uniform Gifts to
Minors Act or Gift to Minors Act if applicable under the
state laws of the state in which the minor resides. Any
payment in this format shall discharge all fiduciaries
involved in the distribution including the Trustee,
Employer, and Plan from liability in regard to the transaction.
(c) Alternate Payee. A Participant's rights and benefits shall
be subject to the rights afforded to an alternate payee
under a qualified domestic relations order. In connection
with a proper qualified domestic relations order under
section 414(p) of the Code, a distribution shall be
permitted if such distribution is authorized by the
qualified domestic relations order even if the Participant
has not achieved a distributable event under the Plan.
Section 6.8 Consent of the Participant Required for
Distributions if Account Balances Greater Than
$3,500.
If the value of a Participant's Vested Account balance derived
from Employer and Employee contributions exceeds (or at the time
of any prior distribution exceeded) $3,500, and the Account
balance is immediately distributable, the Participant (or where
the Participant has died and the Surviving Spouse is the
beneficiary, the Surviving Spouse) must consent to any
distribution of such Account balance. An Account balance is
immediately distributable if any part of the Account balance
could be distributed to the Participant (or Surviving Spouse)
before the Participant attains, or would have attained if not
deceased, the later of Normal Retirement Age or age 62.
The consent of the Participant and the Participant's Spouse shall
be obtained in writing within the 90-day period ending on the
annuity starting date. The annuity starting date is the first
day of the first period for which an amount is paid as an annuity
or any other form. The Plan Administrator shall notify the
Participant and the Participant's Spouse of the right to defer
any distribution until the Participant's Account balance is no
longer immediately distributable. Such notification shall
include a general description of the material features, and an
explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would satisfy
the notice requirements of section 417(a)(3) of the Code, and
shall be provided no less than 30 days and no more than 90 days
prior to the annuity starting date.
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a Qualified
Joint and Survivor Annuity while the Account balance is
immediately distributable. (Furthermore, if payment in the form
of a Qualified Joint and Survivor Annuity is not required with
respect to the Participant by the Plan, only the participant need
consent to the distribution of an Account balance that is
immediately distributable.) Neither the consent of the
Participant nor the Participant's Spouse shall be required to the
extent that a distribution is required to satisfy section
401(a)(9) or section 415 of the Code. In addition, upon
termination of this Plan, if the Plan does not offer an annuity
option (purchased from a commercial provider) and if the Employer
or any entity within the same controlled group as the Employer
does not maintain another Defined Contribution Plan (other than
an employee stock ownership plan as defined in section 4975(e)(7)
of the Code), the Participant's Account balance may, without the
Participant's consent, be distributed to the Participant.
However, if any entity within the same controlled group as the
Employer maintains another Defined Contribution Plan (other than
an employee stock ownership plan as defined as in section
4975(e)(7) of the Code, then the Participant's Account balance
will be transferred, without the Participant's consent, to the
plan if the Participant does not consent to an immediate distribution.
If a distribution is one to which sections 401(a)(11) and 417 of
the Code do not apply, such distribution may commence less than 30 days
after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(a) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable,
a particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively
elects a distribution either in writing or by other
permitted electronic medium.
Section 6.9 Commencement of Benefits.
Unless the Participant elects otherwise, distribution of benefits
will begin no later than the 60th day after the latest of the close of
the Plan Year in which:
(a) the Participant attains age 65 (or Normal Retirement Age, if
earlier);
(b) occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or
(c) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant,
Spouse or Beneficiary to consent to a distribution while a
benefit is immediately distributable, within the meaning of
Section 6.8 of the Plan, shall be deemed to be an election to
defer commencement of payment of any benefit sufficient to
satisfy this Section.
Section 6.10 Required Distributions.
(a) The requirements of this Article shall apply to any
distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan.
Unless otherwise specified, the provisions of this Article
apply to calendar years beginning after December 31, 1984.
All distributions shall be determined and made in accordance
with the proposed Regulations promulgated under section 401(a)(9)
of the Code, including the minimum distribution incidental benefit
requirement of section 1.401(a)(9)-2 of the proposed Regulations.
(b) The entire interest of a Participant must be distributed or
must begin to be distributed no later than the Participant's
Required Beginning Date (defined below) which is generally
the April 1st following his attainment of age 70 1/2.
Distributions may not be made over a period which exceeds each of
the following (or a combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a Designated Beneficiary,
(3) a period certain not extending beyond the Life
Expectancy of the Participant, or
(4) a period certain not extending beyond the joint life
and last survivor expectancy of the Participant and a
Designated Beneficiary.
(c) If the Participant's interest is to be distributed in other
than a single sum, the following minimum distribution rules
shall apply on or after the Required Beginning Date:
(1) Distributions During the Participant's Life: If a
Participant's benefit is to be distributed over (1) a
period not extending beyond the Life Expectancy of the
Participant or the joint life and last survivor
expectancy of the Participant and the Participant's
Designated Beneficiary or (2) a period not extending
beyond the Life Expectancy of the Designated
Beneficiary, then the amount required to be distributed
for each calendar year, beginning with distributions
for the first Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's
benefit by the Applicable Life Expectancy.
For calendar years beginning before January 1, 1989, if
the Participant's Spouse is not the Designated
Beneficiary, the method of distribution selected must
assure that at least 50 percent of the present value of
the amount available for distribution is paid within
the Life Expectancy of the Participant.
For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year
shall not be less than the quotient obtained by
dividing the Participant's benefit by the lesser of (1)
the Applicable Life Expectancy or (2) if the
Participant's Spouse is not the Designated Beneficiary,
the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed
Regulations. Distributions after the death of the
Participant shall be made using the Applicable Life
Expectancy above as the relevant divisor without regard
to proposed Regulations section 1.401(a)(9)-2.
The minimum distribution required for the Participant's
first Distribution Calendar Year must be made on or
before the Participant's Required Beginning Date. The
minimum distribution for other calendar years,
including the minimum distribution for the Distribution
Calendar Year in which the Employee's Required
Beginning Date occurs, must be made on or before
December 31 of that Distribution Calendar Year.
(2) Distributions After the Participant's Death: If the
Participant dies after distribution of his interest has
begun and after attaining age 70 1/2, the remaining
portion of such interest, if any, will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
If the Participant dies before distribution of his
interest began or prior to attaining age 70 1/2,
distribution of the Participant's entire interest shall
be completed by the later of December 31 of the
calendar year containing the fifth anniversary of the
Participant's death or, if any portion of the
Participant's interest is payable to a Designated
Beneficiary, distributions may be made over the life or
over a period certain not greater than the Life
Expectancy of the Designated Beneficiary commencing on
or before December 31 of the calendar year immediately
following the calendar year in which the Participant
died notwithstanding the above, however, but if the
Designated Beneficiary is the Participant's Surviving
Spouse, distributions are required to begin not earlier
than the later of (a) December 31 of the calendar year in
which the Participant died, or (b) December 31 of the calendar
year in which the Participant would have attained age 70 1/2.
If the Participant has not made an election pursuant to
this Section by the time of his or her death, the
Participant's Designated Beneficiary must elect the
method of distribution no later than the earlier of (1)
December 31 of the calendar year in which distributions
would be required to begin under this Section, or
(2) December 31 of the calendar year which contains the
fifth anniversary of the date of death of the
Participant. If the Participant has no Designated
Beneficiary, or if the Designated Beneficiary does not
elect a method of distribution, distribution of the
Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
For purposes of the above paragraphs, if the Surviving
Spouse dies after the Participant, but before payments
to such Spouse begin, the provisions above, except for
the spousal exception rule, shall be applied as if the
Surviving Spouse were the Participant.
Any amount paid to a child of the Participant will be
treated as if it has been paid to the Surviving Spouse
if the amount becomes payable to the Surviving Spouse
when the child reaches the age of majority.
Distribution of a Participant's interest is considered
to begin on the Participant's Required Beginning Date
(or, if applicable, the date distribution is required
to begin to the Surviving Spouse pursuant to the
above). If distribution in the form of an annuity
irrevocably commences to the Participant before the
Required Beginning Date, the date distribution is
considered to begin is the date distribution actually
commences.
(3) Definitions:
(A) Applicable Life Expectancy: The Life Expectancy
(or joint life and last survivor expectancy)
calculated using the attained age of the
Participant (or Designated Beneficiary) as of the
Participant's (or Designated Beneficiary's)
birthday in the applicable calendar year reduced
by one (1) for each calendar year which has
elapsed since the date the Life Expectancy was
first calculated. If Life Expectancy is being
recalculated, the Applicable Life Expectancy shall
be the Life Expectancy as so recalculated. The
applicable calendar year shall be the first
Distribution Calendar Year and if Life Expectancy
is being recalculated, such succeeding calendar year.
(B) Designated Beneficiary: An individual
affirmatively elected by the Participant or the
Participant's Surviving Spouse. If no Beneficiary
is elected, the Designated Beneficiary shall be
the Spouse of the Beneficiary under the Plan in
accordance with section 401(a)(9) of the Code and
the proposed Regulations thereunder.
(C) Distribution Calendar Year: A calendar year for
which a minimum distribution is required. For
distributions beginning before the Participant's
death, the first Distribution Calendar Year is the
calendar year immediately preceding the calendar
year which contains the Participant's Required
Beginning Date. For distributions beginning after
the Participant's death, the first Distribution
Calendar Year is the calendar year in which
distributions are required to begin pursuant to
the above.
(D) Life Expectancy: Life Expectancy and joint life
and last survivor expectancy are computed by use
of the expected return multiples in Tables V and VI
of section 1.72-9 of the Regulations.
Unless the Participant or the Surviving Spouse
elects otherwise by the time distributions are
required to begin, life expectancies shall be
recalculated annually. An election shall be
irrevocable as to the Participant or Surviving
Spouse and shall apply to all subsequent years.
The Life Expectancy of a non-Spouse Beneficiary
may not be recalculated.
(E) Participant's Benefits:
(i) The Account balance as of the last Valuation
Date in the calendar year immediately
preceding the Distribution Calendar Year
(valuation calendar year) increased by the
amount of any contributions allocated to the
Account balance as of dates in the valuation
calendar year after the Valuation Date and
decreased by distributions made in the
valuation calendar year after the Valuation Date.
(ii) For purposes of paragraph (a) above, if any
portion of the minimum distribution for the
first Distribution Calendar Year is made in
the second Distribution Calendar Year on or
before the Required Beginning Date, the
amount of the minimum distribution made in
the second Distribution Calendar Year shall
be treated as if it had been made in the
immediately preceding Distribution Calendar Year.
(F) Required Beginning Date:
(i) General Rule. The Required Beginning Date of
a Participant is the first day of April of
the calendar year following the calendar year
in which the Participant attains age 70 1/2
subject to the transitional rules below.
(ii) Transitional rules. The Required Beginning
Date of a Participant who attains age 70 1/2
before January 1, 1988, shall be determined
in accordance with (a) or (b) below:
(a) Non-5-percent owners. The Required
Beginning Date of a Participant who is
not a 5-percent owner is the first day
of April of the calendar year following
the calendar year in which the later of
retirement or attainment of age 70 1/2
occurs.
(b) 5-percent owners. The Required
Beginning Date of a Participant who is a
5-percent owner during any year
beginning after December 31, 1979, is
the first day of April following the
later of:
(I) the calendar year in which the
Participant attains age 70 1/2, or
(II) the earlier of the calendar year
with or within which ends the Plan
Year in which the Participant
becomes a 5-percent owner, or the
calendar year in which the
Participant retires.
(III)The Required Beginning Date of
a Participant who is not a 5-
percent owner who attains age 70
1/2 during 1988 and who has not
retired as of January 1, 1989, is
April 1, 1990.
(iii)5-percent owner. A Participant is
treated as a 5-percent owner for purposes of
this Section if such Participant is a 5-
percent owner as defined in section 416(i) of
the Code (determined in accordance with
section 416 of the Code but without regard to
whether the Plan is Top-Heavy) at any time
during the Plan Year ending with or within
the calendar year in which such owner attains
age 66 1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a 5-percent
owner under this Section, they must continue
to be distributed even if the Participant
ceases to be a 5-percent owner in a
subsequent year.
(d) Transitional Rules for TEFRA Elections:
Notwithstanding the other requirements of this Section and
subject to the joint and survivor annuity requirements,
distribution on behalf of any Employee, including a
5-percent owner, may be made if all of the following requirements
are satisfied (regardless of when such distribution commences):
(1) The distribution by the Trust is one which would not
have disqualified the Trust under section 401(a)(9) of
the Code as in effect prior to amendment by the Deficit
Reduction Act of 1984.
(2) The distribution is in accordance with a method of
distribution designated by the Employee whose interest
in the Trust is being distributed or, if the Employee
is deceased, by a Beneficiary of such Employee.
(3) Such designation was in writing, was signed by the
Employee or the Beneficiary, and was made before
January 1, 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee
or the Beneficiary specifies the time at which
distribution will commence, the period over which
distributions will be made, and in the case of any
distribution upon the Employee's death, the Beneficiaries
of the Employee listed in order of priority.
A distribution upon death will not be covered by this
transitional rule unless the information in the designation
contains the required information described above with
respect to the distributions to be made upon the death of
the Employee.
For any distribution which commences before January 1, 1984,
but continues after December 31, 1983, the Employee or the
Beneficiary to whom such distribution is being made, will be
presumed to have designated the method of distribution under
which the distribution is being made if the method of
distribution was specified in writing and the distribution
satisfied the requirements of (1) and (5) above.
If a designation is revoked, any subsequent distribution
must satisfy the requirements of section 401(a)(9) of the
Code and the proposed Regulations thereunder. If a
designation is revoked subsequent to the date distributions
are required to begin, the Trust must distribute by the end
of the calendar year following the calendar year in which
the revocation occurs the total amount not yet distributed
which would have been required to have been distributed to
satisfy section 401(a)(9) of the Code and the proposed
Regulations thereunder, but for the section 242(b)(2)
election. For calendar years beginning after December 31,
1988, such distributions must meet the minimum distributions
incidental benefit requirements in section 1.401(a)(9)-2 of
the proposed Regulations. Any changes in the designation
will be considered to be a revocation of the designation.
However, the mere substitution or addition of another
Beneficiary (one not named in the designation) under the
designation will not be considered to be a revocation of the
designation, so long as such substitution or addition does
not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example,
by altering the relevant measuring life). In the case in
which an amount is transferred or rolled over from the Plan
to another plan, the rules in Q&A J-2 and Q&A J-3 of the proposed
Regulations shall apply.
Section 6.11 Joint & Survivor Annuity Requirements.
The provisions of subsections (b) through (e) of this Section
6.11 shall apply to any Participant who is credited with at least
one Hour of Service with the Employer on or after August 23, 1984
to the extent such Participant does not come within the safe
harbor described in Section 6.11(a) below:
(a) Safe Harbor: This safe harbor shall apply to a Participant
if the following conditions are satisfied: (1) the
Participant does not or cannot elect payments under this
Plan in the form of a life annuity, and (2) on the death of
a Participant, the Participant's Vested Account Balance will
be paid to the Participant's Surviving Spouse, but if there
is no Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified Election (as
discussed in paragraph (d)(4) in this Section, other than
the notice requirements) then to the Participant's
designated Beneficiary.
The Surviving Spouse must be able to elect the commencement
of distribution of the Vested Account Balance within the 90-
day period following the date of the Participant's death.
The Account balance shall be adjusted for gains or losses
occurring after the Participant's death in accordance with
the provisions of the Plan governing the adjustment of
account balances for other types of distributions. This
Section shall not be operative with respect to a Participant
if and to the extent that the Plan is a direct or indirect
transferee with respect to such Participant of a Defined
Benefit Plan, money purchase pension plan, a target benefit
plan, stock bonus or profit sharing plan which is subject to
the survivor annuity requirements of section 401(a)(11) and
section 417 of the Code.
(b) If this safe harbor is applicable, then the remaining
provisions of this Section 6.11, other than the transitional
rule of subsection (f), shall be inoperative.
(c) Qualified Joint and Survivor Annuity (QJSA): Unless an
optional form of benefit is selected pursuant to a Qualified
Election within the 90-day period ending on the Annuity
Starting Date, a married Participant's Vested Account
Balance will be paid in the form of a QJSA and an unmarried
Participant's Vested Account Balance will be paid in the
form of a life annuity. The Participant may elect to have
such annuity distributed upon attainment of the Earliest
Retirement Age under the Plan.
(d) Qualified Preretirement Survivor Annuity (QPSA): Unless an
optional form of benefit has been selected pursuant to a
Qualified Election within the Election Period, if a
Participant dies before the Annuity Starting Date then 50
percent of the Participant's Account balance derived from
Employer Contributions and Employee Elective Deferrals shall
be used to purchase an annuity for the Surviving Spouse and
the remaining portion shall be paid to other Beneficiaries
of the Participant. To the extent that less than 100 percent
of such Account balance is paid to the Surviving Spouse,
the amount of the Participant's Account balance attributable to
Employee Contributions which is allocated to the Surviving Spouse
shall be in the same proportion as the Account balance derived
from Employer Contributions and Employee Elective Deferrals bears
to the total Account balance of the Participant.
(e) Definitions:
(1) Election Period: The period which begins on the first
day of the Plan Year in which the Participant attains
age 35 and ends on the date of the Participant's death.
If a Participant separates from service prior to the
first day of the Plan Year in which he attains age 35,
the Election Period shall begin on the date of
separation with respect to the Account balance as of
such date.
(2) Pre-Age 35 Waiver: A Participant who will not have
reached age 35 as of the end of any current Plan Year
may make a special Qualified Election to waive the
Qualified Preretirement Survivor Annuity for the period
beginning on the date of such election and ending on
the first day of the Plan Year in which the Participant
will attain age 35. Such election shall not be valid
unless the Participant receives a written explanation
of the Qualified Preretirement Survivor Annuity in such
terms as are comparable to the explanation required
under subsection (f). Qualified Preretirement Survivor
Annuity coverage will be automatically reinstated as of
the first day of the Plan Year in which the Participant
attains age 35. Any new waiver on or after such date shall be
subject to the full requirements of this Section.
(3) Earliest Retirement Age: The earliest date on which,
under the Plan, the Participant could elect to receive
retirement benefits.
(4) Qualified Election: An effective waiver of a QJSA or a
QPSA. Any waiver of a QJSA or a QPSA shall not be
effective unless: (a) the Participant's Spouse
consents in writing to the election; (b) the election
designates a specific Beneficiary, including any class
of Beneficiaries or any contingent Beneficiaries, which
may not be changed without spousal consent (or the
Spouse expressly permits designations by the
Participant without any further spousal consent);
(c) the Spouse's consent acknowledges the effect of the
election; and (d) the Spouse's consent is witnessed by
a Plan representative or notary public. Additionally,
a Participant's waiver of the QJSA shall not be
effective unless the election designates a form of
benefit payment which may not be changed without
spousal consent (or the Spouse expressly permits
designations by the Participant without any further
spousal consent). If it is established to the
satisfaction of a Plan representative that there is no
Spouse or that the Spouse cannot be located, a waiver
will be deemed a Qualified Election.
Any consent by a Spouse obtained under this provision
(or establishment that the consent of a Spouse may not
be obtained) shall be effective only with respect to
such Spouse. A consent that permits designations by
the Participant without any requirement of further
consent by such Spouse must acknowledge that the Spouse
has the right to limit consent to a specific
Beneficiary and/or to a specific form of benefit, where
applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation
of a prior waiver may be made by a Participant without
the consent of the Spouse at any time before the
commencement of benefits. The number of revocations
shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has
received notice as provided in subsection (e) below.
(5) QJSA: An immediate annuity for the life of the
Participant with a survivor annuity for the life of the
Spouse which is 50 percent of the amount of the annuity
which is payable during the joint lives of the
Participant and the Spouse and which is the amount of
benefit which can be purchased with the Participant's
Vested Account Balance.
(6) QPSA. An immediate annuity for the life of the Spouse
of a Participant who dies before the annuity starting
date and which is the amount of benefit which can be
purchased with the Participant's Vested Account
Balance.
(7) Spouse (Surviving Spouse): The Spouse or Surviving
Spouse of the Participant, provided that a former
Spouse will be treated as the Spouse or Surviving
Spouse and a current Spouse will not be treated as the
Spouse or Surviving Spouse to the extent provided under
a qualified domestic relations order as described in
section 414(p) of the Code.
(8) Annuity Starting Date: The first day of the first
period for which an amount is paid as an annuity or any
other form.
(9) Vested Account Balance: The aggregate value of the
Participant's Vested Account Balances derived from
Employer and Employee contributions (including
rollovers), whether Vested before or upon death,
including the proceeds of insurance contracts, if any,
on the Participant's life. The provisions of this
Article shall apply to a Participant who has a Vested
Account balance attributable to Employer contributions,
Employee contributions, or both at the time of death or
distribution.
(f) Notice Requirements.
(1) In the case of a QJSA, the Plan Administrator shall,
within the period which ends no less than 30 days and
begins no more than 90 days prior to the Annuity
Starting Date, provide each Participant with a written
explanation of: (1) the terms and conditions of a QJSA;
(2) the Participant's right to make, and the effect of,
an election to waive the QJSA form of benefit; (3) the
rights of a Participant's Spouse; and (4) the right to
make, and the effect of, a revocation of a previous
election to waive the QJSA.
A Participant may waive the requirement that the
written explanation, described above, be provided no
less than 30 days prior to the Annuity Starting Date if
the distribution commences more than 7 days after such
written explanation is provided.
(2) In the case of a QPSA, the Plan Administrator shall
provide each Participant within the applicable period
for such Participant with a written explanation of the
QPSA in such terms and in such manner as would be
comparable to the explanation provided for meeting the
requirements applicable to a QJSA.
The applicable period for a Participant is whichever of
the following periods ends last: (i) the period
beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the
close of the Plan Year preceding the Plan Year in which
the Participant attains age 35; (ii) a reasonable
period ending after the individual becomes a
Participant; (iii) a reasonable period ending after the
Plan no longer fully subsidizes the cost of a QPSA or
QJSA and no longer prohibits the waiver of such
requirements; or (iv) a reasonable period ending after
this Article first applies to the Participant.
Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from
service in the case of a Participant who separates from
service before attaining age 35.
For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events
described in (ii), (iii) and (iv) consists of the two-
year period beginning one year prior to the date the
applicable event occurs and ending one year after that
date. In the case of a Participant who separates from
service before the Plan Year in which he attains age
35, notice shall be provided within the two-year period
beginning one year prior to separation from service and
ending one year after such separation. If the Participant
thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
(3) Notwithstanding the other requirements of this Section,
the respective notices prescribed by this Section need
not be given to a Participant if (i) the Plan fully
subsidizes the costs of a QJSA or QPSA, and (ii) the
Plan does not allow the Participant to waive the QJSA
or QPSA and does not allow a married Participant to
designate a non-Spouse Beneficiary. For purposes of
this Section, a Plan fully subsidizes the costs of a
benefit if no increase in cost, or decrease in benefits
to the Participant may result from the Participant's
failure to elect another benefit.
(g) Transitional Rules.
(1) Any living Participant not receiving benefits on August
23, 1984 who would otherwise not receive the benefits
prescribed must be given the opportunity to elect to
have the prior provisions of this Section apply if such
Participant is credited with at least one Hour of
Service under this Plan or a predecessor plan in a Plan
Year beginning on or after January 1, 1976, and such
Participant had at least 10 years of Vested service
when he or she separated from service.
(2) Any living Participant not receiving benefits on August
23, 1984, who was credited with at least one Hour of
Service under this Plan or a predecessor plan on or
after September 2, 1974, and who is not otherwise
credited with any service in a Plan Year beginning on
or after January 1, 1976, must be given the opportunity
to have his or her benefits paid in accordance with
this Section.
(3) The respective opportunities to elect (as described in
subsections (e)(1) and (e)(2) above) must be afforded
to the appropriate Participants during the period
commencing on August 23, 1984, and ending on the date
benefits would otherwise commence to said Participants.
(4) Any Participant who has elected pursuant to subsection
(f)(2) of this Section and any Participant who does not
elect under subsection (f)(1) or who meets the
requirements of subsection (f)(1) except that such
Participant does not have at least 10 years of vesting
service when he or she separates from service, shall
have his or her benefits distributed in accordance with
all of the following requirements if benefits would
have been payable in the form of a life annuity:
(A) Automatic joint and survivor annuity. If benefits
in the form of a life annuity become payable to a
married Participant who:
(i) begins to receive payments under the Plan on
or after his Normal Retirement Age; or
(ii) dies on or after his Normal Retirement Age
while still working for the Employer; or
(iii)begins to receive payments on or after
his Qualified Early Retirement Age; or
(iv) separates from service on or after reaching
his Normal Retirement Age (or the Qualified
Early Retirement Age) and after satisfying
the eligibility requirements for the payment
of benefits under the Plan and thereafter
dies before beginning to receive such benefits;
then such benefits will be received under
this Plan in the form of a Qualified Joint
and Survivor Annuity, unless the Participant
has elected otherwise during the Election
Period. The Election Period must begin at
least 6 months before the Participant attains
Qualified Early Retirement Age and end not
more than 90 days before the commencement of
benefits. Any election hereunder will be in
writing and may be changed by the Participant
at any time.
(B) Election of early survivor annuity. A Participant
who is employed after attaining the Qualified
Early Retirement Age will be given the opportunity
to elect, during the Election Period, to have a
survivor annuity payable on death. If the
Participant elects the survivor annuity, payments
under such annuity must not be less than the
payments which would have been made to the Spouse
under the Qualified Joint and Survivor Annuity if
the Participant had retired on the day before his
or her death. Any election under this provision
will be in writing and may be changed by the
Participant at any time. The Election Period
begins on the later of (1) the 90th day before the
Participant attains the Qualified Early Retirement
Age, or (2) the date on which participation
begins, and ends on the date the Participant
terminated employment.
(C) For purposes of this subsection:
(i) Qualified Early Retirement Age is the latest of:
(a) the earliest date, under the Plan, on
which the Participant may elect to
receive retirement benefits,
(b) the first day of the 120th month
beginning before the Participant reaches
the Normal Retirement Age, or
(c) the date the Participant begins
participation.
(d) Qualified Joint and Survivor Annuity is
an annuity for the life of the
Participant with a survivor annuity for
the life of the Spouse as described in
subsection (c)(4) of this Section.
Section 6.12 Annuity Contract.
(a) Nontransferability of annuities. Any annuity contract
distributed from the Plan must be nontransferable.
(b) Conflicts with annuity contracts. The terms of any annuity
contract purchased and distributed by the Plan to a
Participant or Spouse shall comply with the requirements of
this Plan.
Section 6.13 Special Distribution Rules for 401(k)
Contributions, Qualified Matching Contributions
and Qualified Non-Elective Contributions.
Employee Elective Deferrals, Qualified Matching Contributions and
Qualified Non-Elective Contributions, and income allocable to
each are not distributable to a Participant or his or her
Beneficiary or Beneficiaries, in accordance with such
Participant's or Beneficiary's or Beneficiaries' election,
earlier than upon separation from service, death, or Disability
other than upon the occurrence of one or more of the following
events:
(a) Termination of the Plan without the establishment of another
Defined Contribution Plan other than an employee stock
ownership plan (as defined in section 4975(e) or 409 of the
Code), or a simplified employee pension plan (as defined in
section 408(k) of the Code).
(b) The transfer by the Employer, if a corporation, to an
unrelated corporation of substantially all of the assets
(within the meaning of section 409(d)(2) of the Code) used
in a trade or business of such corporation if the Employer
continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with
the corporation acquiring such assets.
(c) The transfer by the Employer, if a corporation, to an
unrelated entity of such corporation's interest in a
subsidiary (within the meaning of section 409(d)(3) of the
Code) if the Employer continues to maintain this Plan, but
only with respect to Employees who continue employment with
such subsidiary.
(d) A distribution made pursuant to an event described in
subsection (a), (b), or (c) above shall be made in the form
of a lump sum.
(e) The attainment of age 59 1/2.
(f) Distribution of Employee Elective Deferrals (and earnings
thereon accrued as of the end of the last Plan Year ending
before July 1, 1989) may be made to a Participant in the
event of hardship pursuant to a showing of immediate and
heavy financial need, as described in Section 6.2 of the
Plan.
Notwithstanding any provision herein to the contrary, any
distribution made under this Section shall be subject to the
provisions of Section 6.11.
Section 6.14 Form of Distribution.
Distributions shall be made in cash only, except for the
distribution of an annuity contract.
Section 6.15 Trustee-to-Trustee Transfers.
Subject to Plan Administrator approval, at the direction of a
Participant, the Trustee of this Plan will make a transfer of
such Participant's applicable Account balance to the trustee of
another plan designated by the Participant, and qualified under
section 401(a) of the Code.
Section 6.16 Normal Form of Benefit
The Participant will receive a distribution in the form of lump
sum, as specified in Section 6.3, unless the Participant elects
otherwise as permitted in this Article.
Section 6.17 Rollovers to Other Plans or IRAs.
Effective with respect to any distribution made on or after
January 1, 1993 and notwithstanding any provision of the Plan to
the contrary that would otherwise limit a Participant's election
under this Section, a Participant may elect, at the time and in
the manner prescribed by the Administrator, to have any portion
of an eligible rollover distribution paid, in a direct rollover,
to an eligible retirement plan specified by the Participant.
Definitions:
(a) Eligible rollover distribution. An eligible rollover
distribution is any distribution of all or any portion of
the balance to the credit of the Participant, except:
(1) any distribution that is one of a series of
substantially equal periodic payments (made not less
frequently than annually) made over the life (or life
expectancy) of the distributee or the joint lives (or
joint life expectancies) of the Participant and the
Participant's designated Beneficiary, or over a
specified period of ten years or more;
(2) any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and
(3) the portion of any distribution that is not includible
in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect
to employer securities).
(b) Eligible retirement plan. An eligible retirement plan is an
individual retirement account described in section 408(a) of
the Code, an individual retirement annuity described in
section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described
in section 401(a) of the Code that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the Surviving Spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
(c) Direct rollover. A direct rollover is a payment by the Plan
to the eligible retirement plan specified by the
Participant.
Section 6.18 Installment Payments.
The frequency of the installment payments shall be payable over a
term not exceeding the life expectancy of the Participant, at the
Participant's election as follows:
(a) monthly,
(b) quarterly,
(c) annually.
ARTICLE VII - LOANS
Section 7.1 Availability of Loans.
Loans shall be permitted under this Plan as established by the
policy of the Plan Administrator. Any such loan shall be subject
to such conditions and limitations as the Plan Administrator
deems necessary for administrative convenience and to preserve
the tax-qualified status of the Plan.
Section 7.2 Amount of Loans.
No loan to any Participant or Beneficiary may be made to the
extent that such loan, when added to the outstanding balance of
all other loans to the Participant or Beneficiary, would exceed
the lesser of (a) $50,000 reduced by the excess (if any) of the
highest outstanding balance of loans during the one-year period
ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made, or
(b) one-half the present value of the nonforfeitable accrued
benefit of the Participant. For the purpose of the above
limitation, all loans from all plans of the Employer and other
members of a group of employers described in sections 414(b),
414(c), 414(m), and 414(o) of the Code are aggregated.
Furthermore, any loan shall by its terms require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond
five years from the date of the loan. An assignment or pledge of
any portion of the Participant's interest in the Plan and a loan,
pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this
paragraph.
Section 7.3 Terms of Loans.
(a) Loans shall be made available to all Participants and
Beneficiaries on a reasonably equivalent basis.
(b) Loans shall not be made available to Highly Compensated
Employees (as defined in section 414(q) of the Code) in an
amount greater than the amount made available to other
Employees.
(c) Loans must be adequately secured using not more than 50
percent of the Participant's Vested Account balance, and
bear a reasonable interest rate.
(d) No Participant loan shall exceed the present value of the
Participant's Vested accrued benefit. A Participant loan
for less than $1,000 dollars is not permitted.
(e) In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable
event occurs in the Plan.
(f) No loans will be made to any shareholder-employee. For
purposes of this requirement, a shareholder-employee means
an Employee or officer of an electing small business
(Subchapter S) corporation who owns (or is considered as
owning within the meaning of section 318(a)(1) of the Code)
on any day during the taxable year of such corporation, more
than 5 percent of the outstanding stock of the corporation.
(g) A Participant must obtain the consent of his or her Spouse,
if any, to the use of his Account balance as security for
the loan. Spousal consent shall be obtained no earlier than
the beginning of the 90-day period that ends on the date on
which the loan is to be so secured. The consent must be in
writing, must acknowledge the effect of the loan, and must
be witnessed by a Plan representative or notary public.
Such consent shall thereafter be binding with respect to the
consenting Spouse or any subsequent Spouse with respect to
that loan. A new consent shall be required if the Account
balance is used for renegotiating, extension, renewal, or
other revision of the loan.
If valid spousal consent has been obtained, then,
notwithstanding any other provision of this Plan, the
portion of the Participant's Vested Account balance used as
a security interest held by the Plan by reason of a loan
outstanding to the Participant shall be taken into account
for purposes of determining the amount of the Account
balance payable at the time of death or distribution, but
only if the reduction is used as repayment of the loan. If
less than 100 percent of the Participant's Vested Account
balance (determined without regard to the preceding
sentence) is payable to the Surviving Spouse, then the
Account balance shall be adjusted by first reducing the
Vested Account balance by the amount of the security used as
repayment of the loan, and then determining the benefit
payable to the Surviving Spouse.
(h) Loans granted or renewed on or after the last day of the
first Plan Year beginning after December 31, 1988 shall be
made pursuant to a written Participant loan program
incorporated herein by reference which will include the
following:
(1) the basis on which loans will be approved or denied;
(2) procedures for applying for the loans;
(3) person or positions authorized to administer the
Participant loan program;
(4) limitations, if any, on the types and amounts of loans
offered;
(5) procedures under the program for determining the rates
of interest;
(6) the types of collateral which may secure a Participant
loan; and
(7) the events constituting default and the steps that will
be taken to preserve Plan assets.
(i) Loans are available from the following accounts and will be
withdrawn from the Participant's accounts in the following
hierarchy:
(A) After-Tax Employee Contribution Account
(B) Employee Deferral Account
(C) Employer Matching Contribution Account
(D) Rollover Account
(E) Qualified Matching Contribution or Qualified Non-
Elective Contribution Accounts
(j) Loans will be taken from the investment funds on a pro rata
basis.
ARTICLE VIII - PLAN ADMINISTRATION
Section 8.1 Duties of the Employer.
The Employer shall have overall responsibility for selecting and
appointing the Trustee, and for the establishment, amendment,
termination, administration, and operation of the Plan. The
Employer shall discharge this responsibility by appointing a
Committee, to which shall be delegated overall responsibility for
administering and operating the Plan.
Upon written notice to the Trustee and the Committee, the
Employer may appoint one or more investment managers as described
in ERISA section 3(38), which shall have the power to manage,
acquire, or dispose of all or part of the Trust assets in
accordance with the provisions of the Plan and Trust agreement.
The Committee and investment manager shall execute a written
agreement specifying the Trust assets to be managed and the
investment manager's duties and responsibilities with respect to
such assets, and in such agreement the investment manager shall
acknowledge that it is a fiduciary with respect to the Plan and
Trust. The Committee may authorize the investment manager to
give written instructions to the Trustee with respect to
acquiring, managing, and disposing of assets managed by the
investment manager, and the Trustee shall follow such
instructions and shall be under no duty to make an independent
determination regarding whether the instruction is proper. The
fees and expenses of an investment manager shall be paid by the
Trust except to the extent paid by the Employer.
Section 8.2 The Committee.
(a) The Committee shall be the "named fiduciary" (as defined in
section 402(a)(2) of ERISA), the "Administrator" (as defined
in section 3(16) of ERISA and section 414(g) of the Code),
and an agent for service of process of the Plan.
(b) The Committee shall consist of officers or other Employees
of the Employer, or any other person(s) who shall be
appointed by the Employer. The members of the Committee
shall serve at the direction of the Employer. In the
absence of such appointment, the Employer shall serve as the
Committee. Any member of the Committee may resign by
delivering his written resignation to the Employer and to
the Committee, which shall become effective upon the date
specified therein. In the event of a vacancy on the
Committee, the remaining members shall constitute the
Committee with full power to act until the Employer appoints
a new Committee member. The Employer may from time to time
remove any Committee member with or without cause and
appoint a successor thereto.
Section 8.3 Appointment of Advisor.
The Committee may employ any such person or entity as it deems
necessary to assist in the Administration of the Plan and provide
services including but not limited to tax advice, amendment,
termination and operation of the Plan, and advice concerning
reports filed with the Internal Revenue Service. Any such
advisor shall not be the Administrator of the Plan (as defined in
section 3(16) of ERISA and section 414(g) of the Code).
The Committee shall have the authority and discretion to engage
an Administrative Delegate who shall perform, without
discretionary authority or control, administrative functions
within the framework of policies, interpretations, rules,
practices and procedures made by the Committee or other Plan
fiduciary. Any action made or taken by the Administrative
Delegate may be appealed by an affected Participant to the
Committee in accordance with the claims review procedures
provided in Section 8.6. Any decisions which call for
interpretations of Plan provisions not previously made by the
Committee shall be made only by the Committee. The Administrative
Delegate shall not be considered a fiduciary with respect to the
services it provides.
Section 8.4 Powers and Duties of the Committee.
(a) The Committee, on behalf of the Participants and
Beneficiaries of the Plan, shall enforce the Plan and Trust
in accordance with the terms thereof, and shall have all
powers necessary to carry out such provisions. The
Committee shall interpret the Plan and Trust and shall
determine all questions arising in the administration and
application of the Plan and Trust. Any such interpretation
or determination by the Committee shall be conclusive and
binding on all persons.
The Committee shall establish rules and regulations
necessary for the proper conduct and administration of the
Plan, and from time to time may change or amend these rules
and regulations. The Committee shall also have the power to
authorize all disbursements from the Trust by the Trustee in
accordance with the Plan's terms.
(b) At the direction of the Committee, distributions to minors
or persons declared incompetent may be made by the Trustee
directly to such persons or to the legal guardians or
conservators of such persons. The Employer, the Committee,
and the Trustee shall not be required to see to the proper
application of such distributions made to any of such
persons, but his or their receipt thereof shall be a full
discharge of the Employer, the Committee, and the Trustee of
any obligation under the Plan or the Trust.
Section 8.5 Organization and Operation.
(a) The Committee shall act by a majority of its members then in
office, and such action may be taken either by a vote at a
meeting or by written consent without a meeting. The
Committee may authorize any one or more of its members to
execute any document or documents on behalf of the
Committee, in which event the Committee shall notify the
Employer, in writing, of such authorization and the name or
names of its member or members so designated. The Employer
thereafter shall accept and rely on any documents executed
by said member of the Committee or members as representing
action by the Committee until the Committee shall file with
the Employer a written revocation of such designation.
(b) The Committee may adopt such bylaws and regulations as it
deems desirable for the conduct of its affairs and may
employ and appropriately compensate such accountants,
counsel, specialists, actuaries, and other persons as it
deems necessary or desirable in connection with the
administration and maintenance of the Plan. The Committee
shall have the authority to control and manage the operation
and administration of the Plan.
Section 8.6 Claims Procedure.
(a) A claim for benefits under the Trust shall be filed on an
application form supplied by the Committee. Written notice
of the disposition of the claim shall be furnished to the
claimant within 90 days after an application form is
received by the Committee, unless special circumstances (as
determined by the Committee) require an extension for
processing the claim. If such an extension is required, the
Committee shall render a decision as soon as possible
subsequent to the 90-day period, but such decision shall not
be rendered later than 180 days after the application form
is received by the Committee. Written notice of such
extension shall be furnished to the claimant prior to the
commencement of the extension indicating the special
circumstances requiring such extension and the date by which
the Committee expects to render the decision on the claim.
In the event the claim is denied, the Committee shall set
forth in writing the reasons for the denial and shall cite
pertinent provisions of the Plan and Trust upon which the
decision is based. In addition, the Committee shall provide
a description of any additional material or information
necessary for the claimant to perfect the claim, an
explanation of why such information is necessary, and
appropriate information as to the steps to be taken if the
Participant or Beneficiary wish to submit such claim for
review as provided in (b) below.
(b) A Participant or Beneficiary whose claim described in (a)
above has been denied in whole or in part shall be entitled
to the following rights if exercised within 60 days after
written denial of a claim is received:
(1) to request a review of the claim upon written
application to the Committee;
(2) to review documents associated with the claim; and
(3) to submit issues and comments in writing to the
Committee.
(c) If a Participant or a Beneficiary requests a review of the
claim under (b) above, the Committee shall conduct a full
review (including a formal hearing if desired) of such
request, and a decision on such request shall be made within
60 days after the Committee has received the written request
for review from the Participant or the Beneficiary. Special
circumstances (such as a need for full hearing on request)
can allow the Committee to extend the decision on such
request, but the decision shall be rendered no later than
120 days after receipt of the request for review. Written
notice of such an extension shall be furnished to the
Participant or the Beneficiary prior to the commencement of
the extension. The decision of the Committee on review
shall be set forth in writing and shall include specific
reasons for the decision as well as specific references to
the pertinent provisions of the Plan or Trust on which the
decision is based.
Section 8.7 Records and Reports.
(a) The Committee shall be entitled to rely upon certificates,
reports, and opinions provided by an accountant, tax or
pension advisor, actuary or legal counsel employed by the
Employer or Committee. The Committee shall keep a record of
all its proceedings and acts, and shall keep all such books
of account, records, and other data as may be necessary for
the proper administration of the Plan. The regularly kept
records of the Committee, the Employer, and the Trustee
shall be conclusive evidence of a Participant's service, his
Compensation, his age, his marital status, his status as an
Employee, and all other matters contained therein and
relevant to this Plan; provided, however, that a Participant
may request a correction in the record of his age at any
time prior to his retirement and such correction shall be
made if within 90 days after such request he furnishes a
birth certificate, baptismal certificate, or other
documentary proof of age satisfactory to the Committee in
support of this correction.
(1) Each Participant and each Participant's designated
Beneficiary must notify the Committee in writing of his
mailing address and each change thereof. Any
communication, statement or notice addressed to a
Participant or Beneficiary at the last mailing address
filed with the Committee, or if no address is filed
with the Committee, the last mailing address as shown on the
Employer's records, will be binding on the Participant
and his Beneficiary for all purposes of the Plan.
Neither the Committee nor the Trustee shall be required
to search for or locate a Participant or a Beneficiary.
Section 8.8 Liability.
(a) A member of the Committee shall not be liable for any act,
or failure to act, of any other member of the Committee,
except to the extent that such member:
(1) Knowingly participates in, or undertakes to conceal, an
act or omission of another Committee member, knowing
that such act or omission is a breach of fiduciary duty
to the Plan;
(2) Fails to comply with the specific responsibilities
given him as a member of the Committee, and such
failure enables another member of the Committee to
commit a breach of fiduciary duty to the Plan; or
(3) Has knowledge of a breach of fiduciary duty to the Plan
by another member of the Committee, unless such member
makes reasonable effort under the circumstances to
remedy such breach.
(b) Each member of the Committee shall be liable with respect to
his own acts of willful misconduct or gross negligence
concerning the Plan. The Employer may indemnify the
Committee or each of its members for part or all expenses,
costs, or liabilities arising out of the performance of
duties required by the terms of the Plan or Trust, except
for those expenses, costs, or liabilities arising out of a
member's willful misconduct or gross negligence.
Section 8.9 Reliance and Statements.
The Committee, in any of its dealings with Participants
hereunder, may conclusively rely on any written statement,
representation, or documents made or provided by such
Participants.
Section 8.10 Remuneration and Bonding.
(a) Unless otherwise determined by the Committee, the members of
the Committee shall serve without remuneration for services
to the Plan and Trust. However, all expenses of the
Committee shall be paid by the Trust except to the extent
paid by the Employer. Such expenses shall include any
expenses incidental to the functioning of the Committee,
including but not limited to fees of accountants, legal
counsel, and other specialists, or any other costs entailed
in administering the Plan.
(b) Title I of ERISA requires certain persons with discretion
over Plan assets to be bonded. Except as required by ERISA
or other federal law, the members of the Committee shall
serve without bond.
Section 8.11 Committee Decisions Final.
Any decision of the Committee with respect to matters within its
jurisdiction shall be final, binding, and conclusive upon the
Employer and the Trustee and upon each Employee, Participant,
former Participant, Beneficiary, and every other person or party
interested or concerned.
Section 8.12 Participant-Directed Investments.
The Committee authorizes the Trustee to accept investment
direction from Participants. The Trustee shall invest in the
Investment Funds in accordance with investment directions given
by the Participants and Beneficiaries for whose accounts such
assets are held, to the extent authorized. All such directions
by the Participants or Beneficiaries to the Trustee will be made
by electronic media or in such other manner as is acceptable to
the Trustee. Participants and Beneficiaries will be deemed
responsible for purposes of such investment selection and
allocation.
Where the Committee, a Participant, a Beneficiary or an
Investment Manager other than the Trustee has the power and
authority to direct the investment of assets of the Trust Fund,
the Trustee does not have any duty to question any direction, to
review any securities or other property, or to make any
suggestions in connection therewith. The Trustee will promptly
comply with any direction given by the Committee, a Participant,
a Beneficiary or Investment Manager. The Trustee will neither be
liable for failing to invest any assets of the Trust Fund under
the management and control of the Committee, a Participant, a
Beneficiary or an Investment Manager in the absence of investment
directions regarding such assets. The Trustee and the Committee
shall be indemnified by the Participant from and against any
personal liability to which the Trust and the Committee may be
subject due to carrying out an elective investment directed by
the Participant or for failure to act in absence of restrictions
from the Participant.
ARTICLE IX - TRUST AGREEMENT
Section 9.1 Establishment of Trust.
The Employer and the Trustee have entered into a trust agreement
which is set forth in a separate document and is incorporated
herein. The trust agreement establishes a Trust consisting of
such sums of money and other property as may from time to time be
contributed or transferred to the Trustee under the terms of the
Plan, along with any property to which the Trust Fund may from
time to time be converted, and which provides for the investment
of Plan assets and the operation of the Trust. The trust
agreement, as amended from time to time, shall be deemed part of
the Plan, and all rights and benefits provided to persons under
the Plan shall be subject to the terms of the trust agreement.
ARTICLE X - AMENDMENT, TERMINATION AND MERGER
Section 10.1 Amendment.
(a) The Employer shall have the right to amend the Plan and
Trust at any time to the extent permitted under the Code and
ERISA.
(b) No amendment affecting the rights or duties of the Trustee
shall be effective without the written consent of the
Trustee.
(c) No amendment to the Plan shall be effective to the extent
that it has the effect of decreasing a Participant's accrued
benefit. Notwithstanding the preceding sentence, a
Participant's Account balance may be reduced to the extent
permitted under section 412(c)(8) of the Code. For purposes
of this paragraph, a Plan amendment which has the effect of
decreasing a Participant's Account balance or eliminating an
optional form of benefit, with respect to benefits
attributable to service before the amendment, shall be
treated as reducing an accrued benefit.
Section 10.2 Termination.
(a) The Employer intends to continue the Plan indefinitely and
to fund the Plan as required by law and its terms. However,
the Employer shall have the right to terminate the Plan at
any time.
(b) If the Plan is totally or partially terminated, or in the
event of a complete discontinuation of contributions under
the Plan, a Participant whose participation in the Plan is
terminated as a result of such total or partial termination
or who is affected by the complete discontinuation of
contributions to the Plan shall be 100 percent Vested with
respect to his Accounts, determined as of the date of such
total or partial termination.
(c) Upon termination of the Plan, the Employer shall allocate
the assets of the Plan, after the payment of or set aside
for the payment of all expenses, among the Participants and
their Beneficiaries in accordance with the Code and ERISA.
(d) Upon termination of the Plan, and after all liabilities of
the Plan to Participants and Beneficiaries have been
satisfied, any residual assets of the Plan which are
attributable to a contribution in excess of Code section 415
limits shall be distributed to the Employer, provided such
distribution does not contravene any provision of the law or
the Plan.
(e) The allocation of benefits under this Article shall be
accomplished either through the continuance of the Trust,
the creation of a new Trust, the payment of the benefits to
be provided to the Participants or Beneficiaries, or the
purchase of annuity contracts, as determined by the
Employer.
Section 10.3 Merger, Consolidation or Transfer.
The Employer shall have the right at any time to merge or
consolidate the Plan with any other plan, or transfer the assets
or liabilities of the Trust to any other plan provided each
Participant would (if the Plan were then terminated) receive a
benefit immediately after such merger, consolidation or transfer
which would equal or exceed the benefit the Participant would
have been entitled to immediately before such merger,
consolidation or transfer (if the Plan were then terminated).
ARTICLE XI - TOP-HEAVY PROVISIONS
Section 11.1 Applicability.
The provisions of this Article shall not apply to the Plan with
respect to any Plan Year in which the Plan is not Top-Heavy. If
the Plan is or becomes Top-Heavy in any Plan Year, the provisions
of this Article will supersede any conflicting provisions in the
Plan.
Section 11.2 Definitions.
(a) Key Employee: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
"Determination Period" was (1) an officer of the Employer if
such individual's Annual Compensation exceeds 50 percent of
the dollar limitation under section 415(b)(1)(A) of the
Code, (2) an owner (or considered an owner under section 318
of the Code) of one of the ten largest interests in the
Employer if such individual's Annual Compensation exceeds
100 percent of the dollar limitation under section
415(c)(1)(A) of the Code, (3) a more-than-5-percent owner of
the Employer, or (4) a more-than-1-percent owner of the
Employer who has annual Compensation of more than $150,000.
Annual Compensation means compensation as defined in section
415(c)(3) of the Code, but including amounts contributed by
the Employer pursuant to a salary reduction agreement which
are excludable from the Employee's gross income under
section 125, section 402(e)(3), section 402(h) or section
403(b) of the Code. The "Determination Period" is the Plan
Year containing the Determination Date and the four (4)
preceding Plan Years.
The determination of who is a Key Employee will be made in
accordance with section 416(i)(1) of the Code and the Regulations
thereunder.
(b) Top-Heavy Plan: For any Plan Year beginning after December
31, 1983, this Plan is Top-Heavy if any of the following
conditions exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60 percent
and this Plan is not part of any Required Aggregation
Group or Permissive Aggregation Group of plans.
(2) If this Plan is a part of a Required Aggregation Group
of plans, but not part of a Permissive Aggregation
Group of plans and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60 percent.
(3) If this Plan is a part of a Required Aggregation Group
and part of a Permissive Aggregation Group of plans and
the Top-Heavy Ratio for the Permissive Aggregation
Group exceeds 60 percent.
(c) Super-Top-Heavy Plan: A plan is Super-Top-Heavy if such a
plan would be Top-Heavy if "90 percent" were substituted for
"60 percent" each place it appears in (b) above.
(d) Top-Heavy Ratio:
(1) If the Employer maintains one or more Defined
Contribution Plans (including any simplified employee
pension plan) and the Employer has not maintained any
Defined Benefit Plan which during the 5-year period
ending on the Determination Date(s) has or has had
accrued benefits, the Top-Heavy Ratio for this Plan
alone or for the required or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator of
which is the sum of the Account balances of all Key
Employees as of Determination Date(s) (including any
part of any Account balance distributed in the 5-year
period ending on the Determination Date(s)), and the
denominator of which is the sum of all Account balances
(including any part of any Account balance distributed
in the 5-year period ending on the Determination
Date(s)), both computed in accordance with section 416
of the Code and the Regulations thereunder. Both the
numerator and denominator of the Top-Heavy Ratio are
increased to reflect any contribution not actually made
as of the Determination Date, but which is required to
be taken into account on that date under section 416 of
the Code and the Regulations thereunder.
(2) If the Employer maintains one or more Defined
Contribution Plans (including any simplified employee
pension plan) and the Employer maintains or has
maintained one or more Defined Benefit Plans which
during the 5-year period ending on the Determination
Date(s) has or has had any accrued benefits, the Top-
Heavy Ratio for any required or Permissive Aggregation
Group as appropriate, is a fraction, the numerator of
which is the sum of account balances under the
aggregated Defined Contribution Plan or Plans for all
Key Employees, determined in accordance with (1) above,
and the Present Value of accrued benefits under the
aggregated Defined Benefit Plan or Plans for all Key
Employees as of the Determination Date(s), and the
denominator of which is the sum of the account balances
under the aggregated Defined Contribution Plan or Plans
for all Participants, determined in accordance with (1)
above, and the Present Value of accrued benefits under
the Defined Benefit Plan or Plans for all Participants
as of the Determination Date(s), are determined in
accordance with section 416 of the Code and the
Regulations thereunder. The accrued benefits under a
Defined Benefit Plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for
any distribution of an accrued benefit made in the five-
year period ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of account
balances and the Present Value of accrued benefits will
be determined as of the most recent Valuation Date that
falls within or ends with the 12-month period ending on
the Determination Date, except as provided in section
416 of the Code and the Regulations thereunder for the
first and second plan years of a Defined Benefit Plan.
The account balances and accrued benefits of a
Participant (a) who is not a Key Employee but who was a
Key Employee in a prior year, or (b) who has not been
credited with at least one Hour of Service with any
Employer maintaining the Plan at any time during the 5-
year period ending on the Determination Date will be
disregarded. The calculation of the Top-Heavy Ratio,
and the extent to which distributions, rollovers and
transfers are taken into account will be made in
accordance with section 416 of the Code and the
Regulations thereunder. Employee contributions
previously deductible under section 219 of the Code
will not be taken into account for purposes of
computing the Top-Heavy Ratio. When aggregating plans,
the value of account balances and accrued benefits will
be calculated with reference to the Determination Dates
that fall within the same calendar year.
The accrued benefit of a Participant other than a Key
Employee shall be determined under either (a) the
method, if any, that uniformly applies for accrual
purposes under all Defined Benefit Plans maintained by
the Employer, or (b) if there is no such method, as if
such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule of
section 411(b)(1)(C) of the Code.
(e) Permissive Aggregation Group: The Required Aggregation
Group of plans plus any other plan or plans of the Employer
which, when considered as a group with the Required
Aggregation Group, would continue to satisfy the
requirements of sections 401(a)(4) and 410 of the Code.
(f) Required Aggregation Group: (1) Each qualified plan of the
Employer in which at least one Key Employee participates or
participated at any time during the Determination Period
(regardless of whether the plan has terminated), and (2) any
other qualified plan of the Employer which enables a plan
described in (1) to meet the requirements of sections
401(a)(4) or 410 of the Code.
(g) Determination Date: For any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year.
For the first Plan Year of the Plan, the last day of that
year.
(h) Valuation Date: The date as defined in Article I of the
Plan as of which Account balances or accrued benefits are
valued for purposes of calculating the Top-Heavy Ratio.
(i) Present Value: Present Value shall be determined using the
interest and mortality rates specified in the applicable
plans. Notwithstanding the foregoing, all determinations
shall be made in accordance with section 416 of the Code and
the Regulations promulgated thereunder.
Section 11.3 Minimum Allocation.
(a) Except as otherwise provided in (c) and (d) below, Employer
contributions, not including Employee Elective Deferrals,
allocated on behalf of any Participant who is not a Key
Employee shall not be less than the lesser of three percent
(four percent if the Plan is super-Top-Heavy) of such
Participant's Compensation or, in the case where the
Employer has no Defined Benefit Plan which designates this
Plan to satisfy section 401 of the Code, the largest
percentage of Employer contributions, as a percentage of the
first $200,000 of the Key Employee's Compensation, allocated
on behalf of any Key Employee for that year. The minimum
allocation is determined without regard to any Social
Security contribution. This minimum allocation shall be
made even though, under the Plan provisions, the Participant
would not otherwise be entitled to receive an allocation, or
would have received a lesser allocation for the year because
of (1) the Participant's failure to complete 1,000 hours of
service (or any equivalent provided in the Plan), or (2) the
Participant's failure to make mandatory Employee
contributions to the Plan or (3) Compensation less than a
stated amount.
(b) For purposes of computing the minimum allocation,
Compensation means Compensation as defined in Article I of
the Plan.
(c) The provision in (a) above shall not apply to any
Participant who was not employed by the Employer on the last
day of the Plan Year.
(d) The provision in (a) above shall not apply to any
Participant to the extent the Participant is covered under
any other plan or plans of the Employer and the minimum
allocation or benefit requirement applicable to Top-Heavy
Plans will be met in the other plan or plans.
Section 11.4 Nonforfeitability of Minimum Allocation.
The minimum allocation required (to the extent required to be
nonforfeitable under section 416(b) of the Code) may not be
forfeited under section 411(a)(3)(D) of the Code.
Section 11.5 Allocation Limitations.
In determining the Defined Contribution Fraction under section
415(e)(3)(B) of the Code and pursuant to Section 5.4 of the Plan
"100 percent" shall be substituted for "125 percent" unless the
minimum allocation percentage under section 416(c)(2)(A) of the
Code and Section 11.3(a) of the Plan is increased from "three
percent" to "four percent" and the Plan would not be a
Top-Heavy Plan if "90 percent" were substituted for "60 percent"
each place it appears in Section 11.2(b) of the Plan.
Section 11.6 Minimum Vesting Schedules.
For any Plan Year during which the Plan is Top-Heavy, the vesting
schedule(s) set forth in Article V of the Plan will be followed,
as such schedule(s) already satisfy the requirements of section
416 of the Code.
ARTICLE XII - GENERAL PROVISIONS
Section 12.1 Governing Law.
(a) The Plan is established under, and its validity,
construction and effect shall be governed by, the laws of
the State of Indiana.
(b) The parties to the Trust intend that the Trust be exempt
from taxation under section 501(a) of the Code, and any
ambiguities in its construction shall be resolved in favor
of an interpretation which will effect such intention.
Section 12.2 Power to Enforce.
The Committee shall have authority to enforce the Plan on behalf
of any and all persons having or claiming any interest in the
Trust or Plan.
Section 12.3 Alienation of Benefits.
Benefits under the Plan shall not be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge the same shall be void, nor
shall any such benefits be in any way liable for or subject to
the debts, contracts, liabilities, engagements or torts of any
person entitled to such benefits. This Section shall also apply
to the creation, assignment or recognition of a right to any
benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in section 414(p)
of the Code, or any domestic relations order entered before
January 1, 1985.
Section 12.4 Not an Employment Contract.
The Plan is not and shall not be deemed to constitute a contract
between the Employer and any Employee, or to be a consideration
for, or an inducement to, or a condition of, the employment of
any Employee. Nothing contained in the Plan shall give or be
deemed to give an Employee the right to remain in the employment
of the Employer or to interfere with the right to be retained in
the employ of the Employer, any legal or equitable right against
the Employer, or to interfere with the right of the Employer to
discharge or retire any Employee at any time.
Section 12.5 Discretionary Acts.
Any discretionary acts to be undertaken under the Plan with
respect to the classification of Employees, contributions, or
benefits shall be nondiscriminatory and uniform in nature and
applicable to all persons similarly situated.
Section 12.6 Interpretation.
(a) Savings Clause. If any provision or provisions of the Plan
shall for any reason be invalid or unenforceable, the
remaining provisions of the Plan shall be carried into
effect, unless the effect thereof would be to materially
alter or defeat the purposes of the Plan.
(b) Gender. Wherever appropriate, pronouns of either gender
shall be deemed synonymous as shall singular and plural
pronouns.
(c) Headings. Headings and titles of sections and subsections
within the Plan document are inserted solely for convenience
of reference. They constitute no part of the Plan itself
and shall not be considered in the construction of the Plan.
ARTICLE XIII - SIGNATURE PAGE
IN WITNESS WHEREOF, this Plan has been restated the day and year
written below.
Signed, sealed, and delivered on this ____ day of ______________, 1997,
in the presence of:
Meridian Insurance Group, Inc.
By
Norma J. Oman
Title
(SEAL)
ATTEST:
J. Mark McKinzie
Title
EXHIBIT 10.23
TERMINATION BENEFITS AGREEMENT
This TERMINATION BENEFITS AGREEMENT (this "Agreement") is
made and
entered into as of _______________, 199___, by and between
MERIDIAN INSURANCE GROUP, INC., an Indiana corporation
(hereinafter referred to as the "Corporation") and
______________, a resident of the State of Indiana (hereinafter
referred to as "Employee").
RECITALS
A. Employee is now serving as a member of the executive
staff of the Corporation.
B. The Corporation believes that Employee has made valuable
contributions to the productivity and profitability of the
Corporation.
C. The Board of Directors of the Corporation has determined
that it is in the best interests of the Corporation and its
shareholders to assure that the Corporation will have the
continued undivided time, attention, loyalty, and dedication of
Employee, notwithstanding the possibility, threat or occurrence
of a Change in Control (as defined in Section 2 hereof) of the
Corporation.
D. The Board believes it is imperative to diminish the
inevitable distraction of Employee by virtue of the personal
uncertainties and risks created by pending or threatened Change
in Control and to encourage Employee's full undivided time,
attention, loyalty, and dedication to the Corporation currently and
in the event of any threatened or pending Change in Control.
E. By this Agreement, the Board intends upon a Change in
Control to assure Employee with compensation and benefits
arrangements if his or her employment terminates as a result of a
Change in Control which are competitive with those of other
corporations similarly situated to the Corporation. Therefore,
in order to accomplish these objectives, the Board has caused the
Corporation to enter into this Agreement.
F. In reliance on this Agreement, Employee is willing to
continue his or her employment with the Corporation on the terms
agreed to by the Employee and Corporation from time to time.
AGREEMENT
In consideration of the foregoing and of the mutual
covenants herein contained and the mutual benefits herein
provided, the Corporation and Employee hereby agree as follows:
Section 1. Term. The initial term of this Agreement shall
be from the date hereof through December 31, 199__. The term of
this Agreement shall be automatically extended for an additional
year on December 31, 199__ (that is, to a term extending through
December 31, 199__) and on December 31 of each year thereafter
unless either party hereto gives written notice to the other
party not to so extend prior to November 30 of the year for which
notice is given, in which case no further automatic extension
shall occur. In addition, if a Change in Control of the
Corporation (as defined in Section 2 below) shall occur during
the term of this Agreement, then the term of this Agreement shall
automatically be extended to a date one year following the
consummation of the Change in Control.
Section 2. Change in Control Defined. As used in this
Agreement, "Change in Control" of the Corporation means:
(A) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act as in effect from time
to time) of fifty percent (50%) or more of either (i) the then
outstanding shares of common stock of the Corporation or (ii) the
combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of
directors; provided, however, that the following acquisitions
shall not constitute a Change in Control: (i) any acquisition by
the Corporation, (ii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by or under common
control with the Corporation, or (iii) any acquisition by
Meridian Mutual Insurance Company ("Meridian Mutual"); or
(B) Individuals who, as of the date hereof, constitute the
Board of Directors of the Corporation (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board of Directors of the Corporation (the "Board"); provided,
however, that any individual becoming a director subsequent to
the date hereof whose election or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
(C) So long as Meridian Mutual owns twenty-five percent
(25%) or more of either (i) the then outstanding shares of common
stock of the Corporation or (ii) the combined voting power of the
then outstanding voting securities of the Corporation entitled to
vote generally in the election of directors: individuals who, as
of the date hereof, constitute the Board of Directors of Meridian
Mutual (the "Incumbent Mutual Board") cease for any reason to
constitute a majority of the Board of Directors of Meridian
Mutual (the "Mutual Board"); provided, however, that any individual
becoming a Director of the Mutual Board subsequent to the date
hereof whose election, or nomination for election by Meridian Mutual's
policyholders, was approved by a vote of at least a majority of
the Directors then comprising the Incumbent Mutual Board shall be
considered as though such individual were a member of the
Incumbent Mutual Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Mutual Board; or
(D) Approval by the shareholders of the Corporation of (i)
a reorganization, merger, consolidation or share exchange, in
each case, unless, following such transaction the conditions
specified in clauses (a), (b) and (c) of this Section 2(D) are
satisfied, or (ii) a complete liquidation or dissolution of the
Corporation or the sale or other disposition of all or
substantially all of the assets of the Corporation, other than to
a corporation with respect to which following such transaction
the conditions specified in clauses (a), (b) or (c) of this
Section 2(D) are satisfied. Such conditions are: (a) more than
sixty percent (60%) of, respectively, the then outstanding shares
of common stock of the corporation resulting from such
transaction and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
outstanding Corporation common stock and outstanding Corporation
voting securities immediately prior to such transaction in
substantially the same proportions as their ownership,
immediately prior to such transaction, of the outstanding
Corporation stock and outstanding Corporation voting securities,
as the case may be, (b) no Person (excluding the Corporation, any
employee benefit plan or related trust of the Corporation or such
corporation resulting from such transaction and any Person
beneficially owning, immediately prior to such transaction,
directly or indirectly, twenty-five percent (25%) or more of the
outstanding Corporation common stock or outstanding voting
securities, as the case may be) beneficially owns, directly or
indirectly, twenty-five percent (25%) or more of, respectively,
the then outstanding shares of common stock of the corporation
resulting from such transaction or the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (c)
at least a majority of the members of the board of directors of
the corporation resulting from such transaction were members of
the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such transaction.
Section 3. Termination of Employment. The Corporation
shall provide Employee with the payment and benefits set forth in
Section 4 of this Agreement upon any termination of Employee's
employment with the Corporation (whether such
termination of employment is initiated by the Corporation or by
Employee) that occurs within the one-year period following a
Change in Control, unless such termination of employment occurs
for any of the following reasons:
(A) Termination by reason of Employee's death.
(B) Termination by reason of Employee's "disability". For
purposes hereof, "disability" shall be deemed to conform to the
definition thereof contained in the Corporation's benefit plan
applicable immediately prior to the Change in Control as defined
in Section 2 of this Agreement.
(C) Termination upon Employee reaching normal retirement
date, which for purposes of this Agreement shall be deemed to
conform to the definition thereof contained in the Corporation's
benefit plan applicable immediately prior to the Change in
Control as defined in Section 2 of this Agreement.
(D) Termination for "cause". As used in this Agreement,
the term "cause" means Employee's conviction for fraud or a
felony involving the Corporation or for theft of corporate
assets.
Section 4. Payments and Benefits. Except for a termination
of employment for a reason specified in subsections (A), (B), (C)
or (D) of Section 3 hereof, the following payments and benefits,
less any amounts required to be withheld therefrom under any
applicable federal, state or local income tax, other tax, or
social security laws or similar statutes, shall be paid to
Employee upon any termination of Employee's employment with the
Corporation that occurs during the term of this Agreement and
within the one-year period following a Change in Control:
(A) Within thirty (30) days following such a termination,
Employee shall be paid: (i) at his or her then-effective salary,
for services performed through the date of termination, and (ii)
any earned and unpaid amount of any bonus or incentive payment
(for example, any bonus earned but not yet paid under the
Corporation's executive bonus compensation plan with respect to
the calendar year preceding the year in which the termination of
employment occurs).
(B) Within thirty (30) days following such a termination,
Employee shall be paid a lump sum payment of an amount equal to
two and ninety-nine hundredths (2.99) times Employee's "Base
Amount." For purposes hereof, Base Amount is defined as
Employee's average includable compensation paid by the
Corporation for the five (5) most recent taxable years ending
before the date on which the Change in Control occurs. The
definition, interpretation and calculation of the dollar amount
of Base Amount shall be in a manner consistent with and as
required by the provisions of Section 280G of the Internal
Revenue Code of 1986, as amended ("Code"), and the regulations
and rulings of the Internal Revenue Service promulgated
thereunder.
Employee acknowledges that payment in accordance with this
Section 4 shall be deemed to constitute a full settlement and
discharge of any and all obligations of the Corporation or Meridian
Mutual to Employee arising out of his or her employment with the
Corporation and the termination thereof, except for any vested
rights Employee may then have under any insurance, pension, supplemental
pension, thrift, employee stock ownership, stock option plans or other
benefit plans sponsored or made available by the Corporation or
Meridian Mutual.
Section 5. Legal Expenses. The Corporation is aware that
upon the occurrence of a Change in Control the Board of Directors
or a shareholder of the Corporation may then cause or attempt to
cause the Corporation to refuse to comply with its obligations
under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may institute, litigation seeking to
have this Agreement declared unenforceable, or may take or
attempt to take other action to deny Employee the benefits
intended under this Agreement. In these circumstances, the
purpose of this Agreement could be frustrated. It is the intent
of the Corporation that Employee not be required to incur the
expenses associated with the enforcement of his or her rights
under this Agreement by litigation or other legal action, nor be
bound to negotiate any settlement of his or her rights hereunder,
because the cost and expense of such legal action or settlement
would substantially detract from the benefits intended to be
extended to Employee hereunder. Accordingly, if following a
Change in Control it should appear to Employee that the
Corporation has failed to comply with any of its obligations
under this Agreement or in the event that the Corporation or any
other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation or other legal action
designed to deny, diminish or to recover from Employee the
benefits entitled to be provided to the Employee hereunder, and
that Employee has complied with all of his or her obligations
under this Agreement, the Corporation irrevocably authorizes
Employee from time to time to retain counsel of his or her
choice, at the expense of the Corporation as provided in this
Section 5, to represent Employee in connection with the
initiation or defense of any litigation or other legal action,
whether such action is by or against the Corporation or any
director, officer, shareholder, or other person affiliated with
the Corporation, in any jurisdiction. Notwithstanding any
existing or prior attorney-client relationship between the Corporation
and such counsel, the Corporation irrevocably consents to Employee
entering into an attorney-client relationship with such counsel,
and in that connection the Corporation and Employee agree that a
confidential relationship shall exist between Employee and such
counsel. The reasonable fees and expenses of counsel selected
from time to time by Employee as hereinabove provided shall be
paid or reimbursed to Employee by the Corporation on a regular,
periodic basis upon presentation by Employee of a statement or
statements prepared by such counsel in accordance with its
customary practices, up to a maximum aggregate amount of Two
Hundred Thousand Dollars ($200,000). Any legal expenses incurred
by the Corporation by reason of any dispute between the parties
as to enforceability of or the terms contained in this Agreement
as provided by this Section 5, notwithstanding the outcome of any
such dispute, shall be the sole responsibility of the
Corporation, and the Corporation shall not take any action to
seek reimbursement from Employee for such expenses.
Notwithstanding any limitation contained in this Section 5 to the
contrary, Employee shall be entitled to payment or reimbursement
of legal expenses in excess of Two Hundred Thousand Dollars
($200,000) if the expenses were incurred as a result of a dispute
under this Agreement in which Employee obtains a final judgment
in his or her favor from a court of competent jurisdiction or his
or her claim is settled by the Corporation prior to the rendering
of a judgment by such a court.
Section 6. No Mitigation. Employee is not required to
mitigate the amount of benefit payments to be made by the
Corporation pursuant to this Agreement by seeking other
employment or otherwise, nor shall the amount of any benefit
payments provided for in this Agreement be reduced by any
compensation earned by Employee as a result of employment by
another employer or which might have been earned by Employee had
Employee sought such employment, after the date of termination of
his or her employment with the Corporation or otherwise.
Section 7. Employee's Covenants. In order to induce the
Corporation to enter into this Agreement, Employee hereby agrees
as follows:
(A) Employee shall keep confidential and not improperly
divulge for the benefit of any other party any of the
Corporation's confidential information or business secrets
including, but not limited to, confidential information and
business secrets relating to such matters as the Corporation's
finances, operations and customer lists. All of the
Corporation's confidential information and business secrets shall
be the sole and exclusive property of the Corporation.
(B) Employee hereby consents to the termination of the
existing "Change in Control Agreement" with Meridian Mutual dated
June 29, 1994.
In the event of a breach or threatened breach by Employee of the
provisions of this Section 7, the Corporation shall be entitled
to an injunction restraining Employee from committing or
continuing such breach. Nothing herein contained shall be
construed as prohibiting the Corporation from pursuing any other
remedies available to it for such breach or threatened breach
including the recovery of damages from Employee. The covenants
of this Section 7 shall run not only in favor of the Corporation
and its successors and assigns, but also in favor of its
subsidiaries and their respective successors and assigns and
shall survive the termination of this Agreement.
Section 8. Successors to Corporation. The Corporation
shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, share exchange or otherwise) to
all or substantially all of the business and/or assets of the
Corporation, by agreement in form and substance satisfactory to
Employee, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Corporation
would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such agreement prior
to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Employee to compensation from
the Corporation in the same amount and on the same terms as
Employee would be entitled hereunder if he or she were to
terminate his or her employment pursuant to Section 3 hereof,
except that for purposes of implementing the foregoing, the date
on which succession becomes effective shall be deemed the date of
termination of Employee's employment with the Corporation. As
used in this Agreement, "Corporation" shall mean corporation as
hereinbefore defined and any successor to the business or assets
of it as aforesaid which executes and delivers the agreement
provided for in this Section 8 or which otherwise becomes bound
by all of the terms and provisions of this Agreement by operation
of law.
Section 9. Effect of Employees Death. Should Employee die
while any amounts are payable to him or her hereunder, this
Agreement shall inure to the benefit of and be enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall be
paid in accordance with the terms of this Agreement to Employee's
devisee, legatee or other designee or if there be no such
designee, to Employee's estate.
Section 10. Notices. For purposes of this Agreement,
notices and all other communications provided for herein shall be
in writing and shall be deemed to have been given when delivered
or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee:
If to Corporation: Meridian Insurance Group, Inc.
2955 North Meridian Street
Indianapolis, Indiana 46208
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other party in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
Section 11. Governing Law. The validity, interpretation,
and performance of this Agreement shall be governed by the laws
of the State of Indiana. The parties agree that all legal
disputes regarding this Agreement will be resolved in
Indianapolis, Indiana, and irrevocably consent to service of
process in such City for such purpose.
Section 12. Waivers. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
Employee and the Corporation. No waiver by any party hereto at
any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representation, oral
or otherwise, express or implied, with respect to the subject
matter hereof have been made by any party which are not set forth
expressly in this Agreement.
Section 13. Partial Invalidity. The invalidity or
unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
Section 14. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same Agreement.
Section 15. Assignment. This Agreement is personal in
nature and neither of the parties hereto shall, without the
consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder, except as provided in Section 8
and Section 9 above. Without limiting the foregoing, Employee's
right to receive payments hereunder shall not be assignable or
transferable, whether by pledge, creation of a security interest
or otherwise, other than a transfer by his or her Will or by the
laws of descent and distribution as set forth in Section 8
hereof, and in the event of any attempted assignment or transfer
contrary to this Section 15, the Corporation shall have no
liability to pay any amount so attempted to be assigned or
transferred.
Any benefits payable under this Agreement shall be paid
solely from the general assets of the Corporation. Neither
Employee nor Employee's beneficiary shall have interest in any
specific assets of the Corporation under the terms of this
Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any
kind or a fiduciary relationship between Employee and the
Corporation.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered as of the day and year first written
above.
MERIDIAN INSURANCE GROUP, INC.
("Corporation")
By:________________________________
EMPLOYEE
___________________________________
EXHIBIT 10.24
TERMINATION BENEFITS AGREEMENT
This TERMINATION BENEFITS AGREEMENT (this "Agreement") is
made and
entered into as of _______________, 199___, by and between
MERIDIAN INSURANCE GROUP, INC., an Indiana corporation
(hereinafter referred to as the "Corporation") and
______________, a resident of the State of Indiana (hereinafter
referred to as "Employee").
RECITALS
A. Employee is now serving as a member of the executive
staff of the Corporation.
B. The Corporation believes that Employee has made valuable
contributions to the productivity and profitability of the
Corporation.
C. The Board of Directors of the Corporation has determined
that it is in the best interests of the Corporation and its
shareholders to assure that the Corporation will have the
continued undivided time, attention, loyalty, and dedication of
Employee, notwithstanding the possibility, threat or occurrence
of a Change in Control (as defined in Section 2 hereof) of the
Corporation.
D. The Board believes it is imperative to diminish the
inevitable distraction of
Employee by virtue of the personal uncertainties and risks
created by pending or threatened Change in Control and to
encourage Employee's full undivided time, attention, loyalty, and
dedication to the Corporation currently and in the event of any
threatened or pending Change in Control.
E. By this Agreement, the Board intends upon a Change in
Control to assure Employee with compensation and benefits
arrangements if his or her employment terminates as a result of a
Change in Control which are competitive with those of other
corporations similarly situated to the Corporation. Therefore,
in order to accomplish these objectives, the Board has caused the
Corporation to enter into this Agreement.
F. In reliance on this Agreement, Employee is willing to
continue his or her employment with the Corporation on the terms
agreed to by the Employee and Corporation from time to time.
AGREEMENT
In consideration of the foregoing and of the mutual
covenants herein contained and the mutual benefits herein
provided, the Corporation and Employee hereby agree as follows:
Section 1. Term. The initial term of this Agreement shall
be from the date hereof through December 31, 199__. The term of
this Agreement shall be automatically extended for an additional
year on December 31, 199__ (that is, to a term extending through
December 31, 199__) and on December 31 of each year thereafter
unless either party hereto gives written notice to the other
party not to so extend prior to November 30 of the year for which
notice is given, in which case no further automatic extension
shall occur. In addition, if a Change in Control of the
Corporation (as defined in Section 2 below) shall occur during
the term of this Agreement, then the term of this Agreement shall
automatically be extended to a date one year following the
consummation of the Change in Control.
Section 2. Change in Control Defined. As used in this
Agreement, "Change in Control" of the Corporation means:
(A) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act as in effect from time
to time) of fifty percent (50%) or more of either (i) the then
outstanding shares of common stock of the Corporation or (ii) the
combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of
directors; provided, however, that the following acquisitions
shall not constitute a Change in Control: (i) any acquisition by
the Corporation, (ii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by or under common
control with the Corporation, or (iii) any acquisition by
Meridian Mutual Insurance Company ("Meridian Mutual"); or
(B) Individuals who, as of the date hereof, constitute the
Board of Directors of the Corporation (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board of Directors of the Corporation (the "Board"); provided,
however, that any individual becoming a director subsequent to
the date hereof whose election or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
(C) So long as Meridian Mutual owns twenty-five percent
(25%) or more of either (i) the then outstanding shares of common
stock of the Corporation or (ii) the combined voting power of the
then outstanding voting securities of the Corporation entitled to
vote generally in the election of directors: individuals who, as
of the date hereof, constitute the Board of Directors of Meridian
Mutual (the "Incumbent Mutual Board") cease for any reason to
constitute a majority of the Board of Directors of Meridian
Mutual(the "Mutual Board"); provided, however, that any individual
becoming a Director of the Mutual Board subsequent to the date
hereof whose election, or nomination for election by Meridian
Mutual's policyholders, was approved by a vote of at least a
majority of the Directors then comprising the Incumbent Mutual
Board shall be considered as though such individual were a
member of the Incumbent Mutual Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Mutual Board;
or
(D) Approval by the shareholders of the Corporation of (i)
a reorganization, merger, consolidation or share exchange, in
each case, unless, following such transaction the conditions
specified in clauses (a), (b) and (c) of this Section 2(D) are
satisfied, or (ii) a complete liquidation or dissolution of the
Corporation or the sale or other disposition of all or
substantially all of the assets of the Corporation, other than to
a corporation with respect to which following such transaction
the conditions specified in clauses (a), (b) or (c) of this
Section 2(D) are satisfied. Such conditions are: (a) more than
sixty percent (60%) of, respectively, the then outstanding shares
of common stock of the corporation resulting from such
transaction and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
outstanding Corporation common stock and outstanding Corporation
voting securities immediately prior to such transaction in
substantially the same proportions as their ownership,
immediately prior to such transaction, of the outstanding
Corporation stock and outstanding Corporation voting securities,
as the case may be, (b) no Person (excluding the Corporation, any
employee benefit plan or related trust of the Corporation or such
corporation resulting from such transaction and any Person
beneficially owning, immediately prior to such transaction,
directly or indirectly, twenty-five percent (25%) or more of the
outstanding Corporation common stock or outstanding voting
securities, as the case may be) beneficially owns, directly or
indirectly, twenty-five percent (25%) or more of, respectively,
the then outstanding shares of common stock of the corporation
resulting from such transaction or the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (c)
at least a majority of the members of the board of directors of
the corporation resulting from such transaction were members of
the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such transaction.
Section 3. Termination of Employment. The Corporation
shall provide Employee with the payment and benefits set forth in
Section 4 of this Agreement upon any termination of Employee's
employment with the Corporation (whether such termination of
employment is initiated by the Corporation or by Employee) that
occurs within the one-year period following a Change in Control,
unless such termination of employment occurs for any of the
following reasons:
(A) Termination by reason of Employee's death.
(B) Termination by reason of Employee's "disability". For
purposes hereof, "disability" shall be deemed to conform to the
definition thereof contained in the Corporation's benefit plan
applicable immediately prior to the Change in Control as defined
in Section 2 of this Agreement.
(C) Termination upon Employee reaching normal retirement
date, which for purposes of this Agreement shall be deemed to
conform to the definition thereof contained in the Corporation's
benefit plan applicable immediately prior to the Change in
Control as defined in Section 2 of this Agreement.
(D) Termination for "cause". As used in this Agreement,
the term "cause" means Employee's conviction for fraud or a
felony involving the Corporation or for theft of corporate
assets.
Section 4. Payments and Benefits. Except for a termination
of employment for a reason specified in subsections (A), (B), (C)
or (D) of Section 3 hereof, the following payments and benefits,
less any amounts required to be withheld therefrom under any
applicable federal, state or local income tax, other tax, or
social security laws or similar statutes, shall be paid to
Employee upon any termination of Employee's employment with the
Corporation that occurs during the term of this Agreement and
within the one-year period following a Change in Control:
(A) Within thirty (30) days following such a termination,
Employee shall be paid: (i) at his or her then-effective salary,
for services performed through the date of termination, and (ii)
any earned and unpaid amount of any bonus or incentive payment
(for example, any bonus earned but not yet paid under the
Corporation's executive bonus compensation plan with respect to
the calendar year preceding the year in which the termination of
employment occurs).
(B) Within thirty (30) days following such a termination,
Employee shall be paid a lump sum payment of an amount equal to
two (2) times Employee's "Base Amount." For purposes hereof,
Base Amount is defined as Employee's average includable
compensation paid by the Corporation for the five (5) most recent
taxable years ending before the date on which the Change in
Control occurs. The definition, interpretation and calculation
of the dollar amount of Base Amount shall be in a manner
consistent with and as required by the provisions of Section 280G
of the Internal Revenue Code of 1986, as amended ("Code"), and
the regulations and rulings of the Internal Revenue Service
promulgated thereunder.
Employee acknowledges that payment in accordance with this
Section 4 shall be deemed to constitute a full settlement and
discharge of any and all obligations of the Corporation or
Meridian Mutual to Employee arising out of his or her employment
with the Corporation and the termination thereof, except for any
vested rights Employee may then have under any insurance, pension,
supplemental pension, thrift, employee stock ownership, stock
option plans or other benefit plans sponsored or made available
by the Corporation or Meridian Mutual.
Section 5. Legal Expenses. The Corporation is aware that
upon the occurrence of a Change in Control the Board of Directors
or a shareholder of the Corporation may then cause or attempt to
cause the Corporation to refuse to comply with its obligations
under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may institute, litigation seeking to
have this Agreement declared unenforceable, or may take or
attempt to take other action to deny Employee the benefits
intended under this Agreement. In these circumstances, the
purpose of this Agreement could be frustrated. It is the intent
of the Corporation that Employee not be required to incur the
expenses associated with the enforcement of his or her rights
under this Agreement by litigation or other legal action, nor be
bound to negotiate any settlement of his or her rights hereunder,
because the cost and expense of such legal action or settlement
would substantially detract from the benefits intended to be
extended to Employee hereunder. Accordingly, if following a
Change in Control it should appear to Employee that the
Corporation has failed to comply with any of its obligations
under this Agreement or in the event that the Corporation or any
other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation or other legal action
designed to deny, diminish or to recover from Employee the
benefits entitled to be provided to the Employee hereunder, and
that Employee has complied with all of his or her obligations
under this Agreement, the Corporation irrevocably authorizes
Employee from time to time to retain counsel of his or her
choice, at the expense of the Corporation as provided in this
Section 5, to represent Employee in connection with the
initiation or defense of any litigation or other legal action,
whether such action is by or against the Corporation or any
director, officer, shareholder, or other person affiliated with
the Corporation, in any jurisdiction. Notwithstanding any
existing or prior attorney-client relationship between the
Corporation and such counsel, the Corporation irrevocably consents
to Employee entering into an attorney-client relationship with such
counsel, and in that connection the Corporation and Employee agree
that a confidential relationship shall exist between Employee and
such counsel. The reasonable fees and expenses of counsel selected
from time to time by Employee as hereinabove provided shall be paid
or reimbursed to Employee by the Corporation on a regular, periodic
basis upon presentation by Employee of a statement or statements
prepared by such counsel in accordance with its customary practices,
up to a maximum aggregate amount of Two Hundred Thousand Dollars
($200,000). Any legal expenses incurred by the Corporation by reason
of any dispute between the parties as to enforceability of or the terms
contained in this Agreement as provided by this Section 5, notwithstanding
the outcome of any such dispute, shall be the sole responsibility of
the Corporation, and the Corporation shall not take any action to
seek reimbursement from Employee for such expenses.
Notwithstanding any limitation contained in this Section 5 to the
contrary, Employee shall be entitled to payment or reimbursement
of legal expenses in excess of Two Hundred Thousand Dollars
($200,000) if the expenses were incurred as a result of a dispute
under this Agreement in which Employee obtains a final judgment
in his or her favor from a court of competent jurisdiction or his
or her claim is settled by the Corporation prior to the rendering
of a judgment by such a court.
Section 6. No Mitigation. Employee is not required to
mitigate the amount of benefit payments to be made by the
Corporation pursuant to this Agreement by seeking other
employment or otherwise, nor shall the amount of any benefit
payments provided for in this Agreement be reduced by any
compensation earned by Employee as a result of employment by
another employer or which might have been earned by Employee had
Employee sought such employment, after the date of termination of
his or her employment with the Corporation or otherwise.
Section 7. Employee's Covenants. In order to induce the
Corporation to enter into this Agreement, Employee hereby agrees
as follows:
(A) Employee shall keep confidential and not improperly
divulge for the benefit of any other party any of the
Corporation's confidential information or business secrets
including, but not limited to, confidential information and
business secrets relating to such matters as the Corporation's
finances, operations and customer lists. All of the
Corporation's confidential information and business secrets shall
be the sole and exclusive property of the Corporation.
In the event of a breach or threatened breach by Employee of the
provisions of this Section 7, the Corporation shall be entitled
to an injunction restraining Employee from committing or
continuing such breach. Nothing herein contained shall be
construed as prohibiting the Corporation from pursuing any other
remedies available to it for such breach or threatened breach
including the recovery of damages from Employee. The covenants
of this Section 7 shall run not only in favor of the Corporation
and its successors and assigns, but also in favor of its
subsidiaries and their respective successors and assigns and
shall survive the termination of this Agreement.
Section 8. Successors to Corporation. The Corporation
shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, share exchange or otherwise) to
all or substantially all of the business and/or assets of the
Corporation, by agreement in form and substance satisfactory to
Employee, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Corporation
would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such agreement prior
to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Employee to compensation from
the Corporation in the same amount and on the same terms as
Employee would be entitled hereunder if he or she were to
terminate his or her employment pursuant to Section 3 hereof,
except that for purposes of implementing the foregoing, the date
on which succession becomes effective shall be deemed the date of
termination of Employee's employment with the Corporation. As
used in this Agreement, "Corporation" shall mean corporation as
hereinbefore defined and any successor to the business or assets
of it as aforesaid which executes and delivers the agreement
provided for in this Section 8 or which otherwise becomes bound
by all of the terms and provisions of this Agreement by operation
of law.
Section 9. Effect of Employees Death. Should Employee die
while any amounts are payable to him or her hereunder, this
Agreement shall inure to the benefit of and be enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall be
paid in accordance with the terms of this Agreement to Employee's
devisee, legatee or other designee or if there be no such
designee, to Employee's estate.
Section 10. Notices. For purposes of this Agreement,
notices and all other communications provided for herein shall be
in writing and shall be deemed to have been given when delivered
or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee:
If to Corporation: Meridian Insurance Group, Inc.
2955 North Meridian Street
Indianapolis, Indiana 46208
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other party in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
Section 11. Governing Law. The validity, interpretation,
and performance of this Agreement shall be governed by the laws
of the State of Indiana. The parties agree that all legal
disputes regarding this Agreement will be resolved in
Indianapolis, Indiana, and irrevocably consent to service of
process in such City for such purpose.
Section 12. Waivers. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
Employee and the Corporation. No waiver by any party hereto at
any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representation, oral
or otherwise, express or implied, with respect to the subject
matter hereof have been made by any party which are not set forth
expressly in this Agreement.
Section 13. Partial Invalidity. The invalidity or
unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
Section 14. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same Agreement.
Section 15. Assignment. This Agreement is personal in
nature and neither of the parties hereto shall, without the
consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder, except as provided in Section 8
and Section 9 above. Without limiting the foregoing, Employee's
right to receive payments hereunder shall not be assignable or
transferable, whether by pledge, creation of a security interest
or otherwise, other than a transfer by his or her Will or by the
laws of descent and distribution as set forth in Section 8
hereof, and in the event of any attempted assignment or transfer
contrary to this Section 15, the Corporation shall have no
liability to pay any amount so attempted to be assigned or
transferred.
Any benefits payable under this Agreement shall be paid
solely from the general assets of the Corporation. Neither
Employee nor Employee's beneficiary shall have interest in any
specific assets of the Corporation under the terms of this
Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any
kind or a fiduciary relationship between Employee and the
Corporation.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered as of the day and year first written
above.
MERIDIAN INSURANCE GROUP, INC.
("Corporation")
By:________________________________
EMPLOYEE
___________________________________
EXHIBIT 10.27
REINSURANCE POOLING AGREEMENT
AMENDED AND RESTATED AS OF OCTOBER 1, 1997
THIS REINSURANCE POOLING AGREEMENT (the "Agreement") made by
and among Meridian Mutual Insurance Company ("Mutual"), Meridian
Security Insurance Company ("Security"), Citizens Security Mutual
Insurance Company ("Citizens"), Citizens Fund Insurance Company
("Fund"), and Insurance Company of Ohio ("ICO")is amended and
restated entered into effective 12:01 a.m. on the first day of
October, 1997, (the "Effective Time") and shall remain in force
continuously thereafter until cancelled at any time by mutual consent.
WHEREAS Mutual and Security have been parties to this
Agreement since January 1, 1981; and
WHEREAS Citizens, Fund, and ICO became parties to this
Agreement effective August 1, 1996, when Meridian Insurance
Group, Inc., acquired Fund and ICO and became affiliated with
Citizens; and
WHEREAS the parties to this Agreement desire to exclude
certain types of insurance business from this Agreement;
NOW, THEREFORE, do Mutual, Security, Citizens, Fund, and ICO
agree to amend and restate this Agreement as follows as witnessed
by their signatures affixed to this Agreement.
ARTICLE I
The Companies are engaged in the insurance business and maintain
a mutual relationship having certain incidents of common
management, and desire to bring about for each other added
economies of operation, uniform underwriting results,
diversification as respects the classes of insurance business
written, and maximization of capacity. To accomplish the
aforesaid, the Companies do by means of this Agreement, pool all
of their insurance business in force as of the Effective Time of
this Agreement or thereafter, except as excluded under ARTICLE XI
of this Agreement, and agree to share in the fortunes of their
pooled insurance business.
ARTICLE II
Mutual hereby reinsures and Security, Citizens, Fund, and ICO
hereby cede and transfer to Mutual all liabilities incurred under
or in connection with all contracts and policies of insurance
issued by Security, Citizens, Fund, and ICO outstanding and in
force as of the Effective Time of this Agreement, or thereafter
issued by them, except as excluded under ARTICLE XI of this
Agreement. Such liabilities shall include Security's, Citizens',
Fund's, and ICO's reserves for unearned premiums, outstanding
losses and loss expenses (including unreported losses), all other
underwriting and administrative expenses which shall include
service fee income and premium balances charged off as
uncollected receivables, and policyholder dividends as evidenced
by their books and records, but shall not include inter-company
balances, service fee income, liabilities for Federal Income
Taxes, or liabilities incurred in connection with Security's,
Citizens', Fund's, and ICO's investment transactions.
ARTICLE III
Security, Citizens, Fund, and ICO hereby assign and transfer to
Mutual all right, title and interest in and to reinsurance ceded
to reinsurers, other than the parties hereto, outstanding and in
force with respect to the liabilities reinsured by Mutual under
Article II hereof.
ARTICLE IV
Each of Security, Citizens, Fund, and ICO agrees to pay to Mutual
amounts equal to the aggregate of all of its liabilities
reinsured by Mutual under Article II hereof.
ARTICLE V
Security, Citizens, Fund, and ICO hereby reinsure, and Mutual
hereby cedes and transfers to each of them the following
percentage of Mutual's net liabilities under all contracts and
policies of insurance (including those reinsured by Mutual under
Article II hereof) on which Mutual is subject to liability and
which are outstanding and in force as of the Effective Time of
this Agreement, or which are issued thereafter, except as
excluded under ARTICLE XI of this Agreement:
61 percent ceded to Security;
4 percent ceded to Citizens;
9 percent ceded to Fund;
4 percent ceded to ICO.
Such liabilities shall include Mutual's reserves for unearned
premiums, outstanding losses and loss expense (including
unreported losses), all other underwriting and administrative
expenses which shall include service fee income and premium
balances charged off as uncollected receivables, and policyholder
dividends but shall not include inter-company balances, service
fee income, liabilities for Federal Income Taxes or liabilities
incurred in connection with Mutual's investment transactions.
ARTICLE VI
Mutual hereby assigns and transfers to each of Security,
Citizens, Fund, and ICO assets in the amount equal to the
aggregate of all liabilities of Mutual reinsured by that specific
company under Article V hereof.
ARTICLE VII
Mutual agrees to pay to Security, Citizens, Fund, and ICO their
specified participation, as listed in Article V, of all premiums
written by the companies after first deducting premiums on all
reinsurance ceded to reinsurers (other than the parties hereto).
Similarly, it is further agreed that all losses, loss expenses
and other underwriting and administrative expenses which shall
include service fee income and premium balances charged off as
uncollected receivables, (with the exceptions noted in Article II
and V hereof) of the companies, less all losses and expenses
recovered and recoverable under reinsurance ceded to reinsurers
(other than the parties hereto), shall be pro-rated among all
five parties on the basis of their respective participations.
ARTICLE VIII
The obligation of the companies under this Agreement to exchange
reinsurance between themselves may be offset by the reciprocal
obligations so that the net amount only shall be required to be
transferred. An accounting on all transactions shall be rendered
quarterly, or more often as may be mutually agreed, and shall be
settled within a reasonable time thereafter. Except as otherwise
required by the context of this Agreement, the amount of all
payments between the companies under this Agreement shall be
determined on the basis of the convention form of annual
statements of the companies. Notwithstanding anything herein
contained, this Agreement shall not apply to the investment
operations of the companies, but this provision shall not
prohibit other agreements pertaining to the intercompany
allocation or sharing of investment expense.
ARTICLE IX
The conditions of reinsurance hereunder shall in all cases be
identical with the conditions of the original insurance or as
changed during the term of such insurance.
ARTICLE X
Each of the companies hereto, as the assuming insurer, hereby
agrees that all reinsurance made, ceded, renewed or otherwise
becoming effective under this Agreement shall be payable by the
assuming insurer on the basis of the liability of the ceding
insurer under the policy or contract reinsured without diminution
because of the insolvency of the ceding insurer; provided that
such reinsurance shall be payable directly to the ceding insurer
or to its liquidator, receiver or other statutory successor,
except(a) where the contract specifically provided another payee
for such reinsurance in the event of the insolvency of the ceding
insurer and (b) where the assuming insurer, with the consent of
the direct insured or insureds and with the approval of the
appropriate insurance department if such approval is required by
state law, has assumed such policy obligations of the ceding
insurer as direct obligations of the assuming insurer to the
payees under such policies and in substitution for the
obligations of the ceding insurer to such payee; and further
provided that the liquidator, receiver or statutory successor of
the ceding insurer shall give written notice of the pendency of
any claim against the insolvent ceding insurer on the policy or
contract reinsured within a reasonable time after such claim; and
the assuming insurer may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem available
to the ceding insurer or its liquidator, receiver or statutory
successor, the expense thus incurred by the assuming insurer to
be chargeable, subject to court approval, against the insolvent
ceding insurer as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue
to the ceding insurer solely as a result of the defense
undertaken by the assuming insurer.
ARTICLE XI
This Agreement does not cover or include contracts or policies of
insurance that any of the parties to this Agreement (a) have
written and designated as substandard automobile insurance or may
hereafter write and designate as substandard automobile insurance
or (b) have written or may hereafter write by direct-response
marketing.
ARTICLE XII
This Agreement has no fixed term and is terminable with respect
to any one of Security, Citizens, Fund, or ICO (herein the
"terminating party") by the mutual consent of Mutual and the
terminating party or parties. This Agreement may be amended or
terminated without the necessity of a vote by the shareholders or
the policyholders of any of the parties. In the event of
termination of this Agreement, the terminating party shall
transfer back to Mutual the liabilities ceded to it by Mutual,
and Mutual shall transfer back to the terminating party the
liabilities ceded to it by the terminating party, and each party
shall receive from the other assets in an amount equal to the
amount of the policy liabilities received by it.
IN WITNESS WHEREOF, this Agreement is entered into as of the date
written above.
MERIDIAN MUTUAL INSURANCE COMPANY
By
Norma J. Oman, President
Attest:
J. Mark McKinzie, Secretary
MERIDIAN SECURITY INSURANCE COMPANY
By
Norma J. Oman, President
Attest:
J. Mark McKinzie, Secretary
CITIZENS SECURITY MUTUAL INSURANCE COMPANY
By__________________________________
Norma J. Oman, President
Attest:___________________________
J. Mark McKinzie, Secretary
CITIZENS FUND INSURANCE COMPANY
By______________________________________
Norma J. Oman, President
Attest:____________________________
J. Mark McKinzie, Secretary
INSURANCE COMPANY OF OHIO
By_____________________________________
Norma J. Oman, President
Attest:___________________________
J. Mark McKinzie, Secretary
EXHIBIT 10.31
MODIFICATION OF TERM LOAN AGREEMENT
THIS MODIFICATION OF TERM LOAN AGREEMENT, made and
entered into as of ______________
___, 1997 by and between MERIDIAN INSURANCE GROUP, INC.
(the "Borrower"), and NBD BANK, N.A. (the "Bank");
WITNESSETH:
WHEREAS, the Borrower and the Bank have entered into a
certain Term Loan Agreement dated July 29, 1996 (the
"Agreement"); and
WHEREAS, pursuant to the terms of the Agreement, the
Borrower has executed and delivered to the Bank a certain
Business Credit Note in the amount of $12,000,000.00 and
dated July 29, 1996; and
WHEREAS, the Borrower has requested and the Bank has
agreed to a modification of the Negative Covenants set out
in Subsection 6.2 of the Agreement;
NOW THEREFORE, in consideration of the mutual covenants,
conditions, provisions and agreements contained herein, the
parties hereto agree as follows:
1. Subsections A, C and D of section 6.2 are replaced
as follows:
A. Risk Based Capital. Permit the ratio of
the combined total adjusted capital of Meridian
Mutual Insurance Company and its Affiliates, to
its company action level to be less than 175.0%,
as calculated at the end of each fiscal year.
C. Total Debt Ratio. Permit the ratio of
(I) the total liabilities for borrowed money and
capitalized leases of Meridian Mutual Insurance
Company and its Affiliates plus Meridian Insurance
Group, to (ii) the sum of combined policy holders'
surplus and liabilities for borrowed money and
capitalized leases of Meridian Mutual Insurance
Company and its Affiliates, other than Citizens
Security Mutual, to be greater than .20 to 1.00.
D. Policyholders' Surplus. Permit the
policyholders' surplus of Meridian Mutual
Insurance Company and its Affiliates to be less
than $105,000,000, which minimum amount will
increase at each fiscal year end beginning
December 31, 1997 by 25.0% of the combined
statutory net income of Meridian Mutual Insurance
Company and its Affiliates.
2. All other terms, conditions, provisions,
representations and warranties set forth in the Agreement
and any documents related thereto (the "Loan Documents"),
not specifically relating to those items explicitly modified
by or otherwise disclosed in the modification shall remain
unchanged and shall continue in full force and effect. This
Modification shall, whenever possible, be construed in a
manner consistent with Loan Documents; provided; however, in
the event of any irreconcilable inconsistency between the
terms of this Modification and the terms of the Loan
Documents, the terms of this modification shall control.
[this space intentionally left blank]
IN WITNESS WHEREOF, Borrower and Bank have executed this
Modification of Term Loan Agreement effective as of
__________________, 1997.
MERIDIAN INSURANCE GROUP INC.
By: ___________________________________
___________________________________
Printed Name - Title
NBD BANK, N.A.
By: ___________________________________
___________________________________
Printed Name - Title
EXHIBIT 10.33
AGENCY PROFIT SHARING AGREEMENT
The Company and the Agent agree that:
I. In addition to the commissions otherwise paid by
the Company to the Agent and subject to
requirements imposed by law and conditions set
forth in this agreement, the Company shall pay to
the Agent a Profit-Sharing Commission based on
underwriting profits realized by the Company on all
Qualified Business.
II. Annual Written Premium must equal or exceed
$250,000 in order to be eligible for Profit-Sharing.
III. Definitions:
A. "Income" means the total of all earned
premiums on Qualified Business less any
dividends paid to policyholders.
B. "Outgo" means the sum of the following items
relating to the Qualified Business.
1. Incurred losses (losses paid less salvage
received and subrogations recovered,
plus reserves for losses at the end of the
year, less reserves for losses at the
beginning of the year) shall not be less
than zero.
a) Incurred losses shall be limited to the
first $100,000 for any one loss or
occurrence on a policy per calendar
year.
2. Loss-adjustment expenses (loss-
adjustment expenses paid, plus reserves
for loss adjustment expenses at the end
of the year, less reserves for loss-
adjustment expenses at the beginning of
the year). Such expenses may be based
on the Company ratio of loss expense to
earned premium.
3. Commissions paid or credited by
Company to Agent, excluding Profit-
Sharing Commissions paid under this
Agreement.
4. Company Underwriting expense, as
determined from the consolidated Annual
Statement of the Company, applied as a
ratio of Underwriting expense to earned
premium.
5. Uncollected premiums developed by
audit or under reporting form policies for
which the Agent is not responsible under
the Agency Agreement. If the premiums
due are collected, such premiums less
expense shall be credited to Agent.
6. Profit and Surplus allowance, equal to
five percent of Income.
C. "Qualified Business" means all business
placed with the Company through the Agent
except "Excluded Business."
D. "Annual Written Premium" means the total of
all written premiums for the year on Qualified
Business less return premiums.
E. "Earned Premiums" shall be computed by the
Company from its records on the business
referred to in Section I.
F. "Agent Profit" means the excess of Income
over Outgo.
G. "Agent Loss" means the excess of Outgo over
Income.
H. "Percentage of Profit" means Agent Profit
divided by Earned Premium.
I. "Excluded Business" means business
excluded from profit sharing by law, business
administered by underwriting associations,
non-standard automobile, syndicates or pools
or assigned-risk plans, special reinsurance
placed by or at the request of the Agent,
health insurance, premiums produced through
safety or commercial group methods,
retrospective rating premium developed as
additional premium through operation of the
retrospective rating plan, and any other
premium or line of business determined to be
Excluded Business by mutual agreement
between the agent and the Company.
Business written by the Agent in the State of
Michigan under what is presently referred to as
the Essential Insurance Plan shall not
constitute Excluded Business.
J. "Annual Growth Rate" means the rate of
growth or decline in Annual Written Premium
compared to prior year Annual Written
Premium. Annual Growth Rate is calculated
by dividing current year Annual Written
Premium by prior year Annual Written
Premium. The excess over 100 (or deficit
below 100) is the Annual Growth Rate
percentage shown in the IV. D. Table.
K. "Initial Profit-Sharing Figure" means the result
from performing all calculations in Steps 1
through 4 of Section IV. D. Table.
IV. Profit-Sharing Commission:
A. Following the close of the year, the Company
shall compute Agent Profit or Loss for that
year and report to the Agent. If there is an
Agent Profit, the Profit-Sharing Commission is
determined by applying (as a percentage) the
Profit-Sharing Factor from the Table in
Section D to the Agent Profit. The Profit-
Sharing Factor is determined from three
elements: (1) The Agent Annual Written
Premium; (2) the Agent Annual Growth Rate;
and (3) the Agent Percentage of Profit.
The Profit-Sharing Factor is the percentage
shown in the appropriate column of the Table
corresponding to the Agent Percentage of
Profit on the line corresponding to the Agent
Annual Growth Rate as shown in the
appropriate column for the Agent Annual
Written Premium.
If an Agent Loss existed in the prior year and
(1) such Agent Loss is less than 50% for the
Initial Profit-Sharing Figure, the prior year
Agent Loss shall be subtracted from the Initial
Profit-Sharing Figure and the resulting
amount is the Profit-Sharing Commission, or
(2) such Agent Loss is 50% or more of the
Initial Profit-Sharing Figure, the Profit-Sharing
Commission shall be 50% of the Initial Profit-
Sharing Figure.
B. The Company agrees that the Profit-Sharing
Commission Report shall be in writing and
delivered to the Agent within ninety (90) days
of the close of the year.
C. Any Profit-Sharing Commission payment
shall be made by the Company within ninety
(90) days after the close of the year, provided
the Agent has paid all premiums outstanding
for the year. No charge or deduction for
Profit-Sharing Commission shall be made or
claimed by the Agent in his accounts.
D. Table.
Steps in computing the Profit-Sharing
Commissions are as follows:
1. Select column corresponding to Agent
Annual Written Premium.
2. Determine Agent Annual Growth Rate
and locate in column corresponding to
Agent Annual Written Premium.
3. Determine Agent Percentage of Profit
and select appropriate column in right-
hand portion of Table.
4. By going horizontally to the right from
the Agent Annual Growth Rate (as
located in Step 2) to the column
containing the Agent Percentage of
Profit (as located in Step 3), the
intersecting figure is the Profit-Sharing
Factor.
<TABLE>
PROFIT-SHARING TABLE
<CAPTION>
(STEP 1) IF ANNUAL WRITTEN PREMIUM IS: (STEP 3) THE PERCENTAGE OF PROFIT IS:
OVER $4,000,001 $2,000,001 $1,000,001 $500,001 $250,000-- 5%or 5.1%to 10.1%to 15.1%to 20.1%to 25%or
$6,000,000 $6,000,000 $4,000,000 $2,000,000 $1,000,000 $500,000 less 10% 15% 20% 25% more
(STEP 2) AND ANNUAL GROWTH RATE IS: (STEP 4) THE PROFIT-SHARING FACTOR IS:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-15.0 -8.1 5 7 9 11 13 17
-15.0 -8.1 -8.0 0 6 8 10 12 14 18
-15.0 -8.1 -8.0 0 .1 4 7 9 11 13 15 19
-15.0 -12.1 -8.0 0 .1 4 4.1 8 8 10 12 14 16 20
-15.0 -12.1 -12 -8.1 .1 4 4.1 8 8.1 12 9 11 13 15 17 21
- -15.0 -12.1 -12 -8.1 -8.0 -4.1 4.1 8 8.1 12 12.1 16 10 12 14 16 18 22
- -12 -8.1 -8.0 -4.1 -4.0 0 8.1 12 12.1 16 16.1 20 11 13 15 17 19 23
-8.0 -4.1 -4.0 0 .1 2 12.1 16 16.1 20 20.1 24 12 14 16 18 20 24
-4.0 0 .1 2 2.1 4 16.1 20 20.1 24 24.1 28 13 15 17 19 21 25
.1 2 2.1 4 4.1 7 20.1 24 24.1 28 28.1 32 14 16 18 20 22 26
2.1 4 4.1 6 7.1 10 24.1 28 28.1 32 32.1 36 15 17 19 21 23 27
4.1 6 6.1 9 10.1 13 28.1 32 32.1 36 36.1 40 16 18 20 22 24 28
6.1 8 9.1 12 13.1 16 32.1 36 36.1 40 40.1 44 17 19 21 23 25 29
8.1 11 12.1 15 16.1 19 36.1 40 40.1 44 44.1 48 18 20 22 24 26 30
11.1 14 15.1 18 19.1 22 40.1 44 44.1 48 48.1 52 19 21 23 25 27 31
14.1 17 18.1 21 22.1 25 Over 44 Over 48 Over 52 20 22 24 26 28 32
17.1 20 21.1 24 25.1 28 21 23 25 27 29 33
Over 20 Over 24 Over 28 22 24 26 28 30 34
</TABLE>
V. Other Provisions.
A. The Agreement supersedes all additional
commission, bonus commission, growth
opportunity bonus, contingent or profit-sharing
agreements of any kind and any such
previous agreements are terminated.
B. The failure of the Company to enforce or apply
at any time, any of the provisions of this
Agreement, shall in no way be construed to be
a waiver of such provisions, nor in any way to
affect the right of the Company thereafter to
enforce or apply each and every such
provision.
C. No Profit-Sharing Commission shall be
payable for any calendar year in which the
Agent's monthly account with the Company is
delinquent in accordance with the Agency
Agreement and the Agent is suspended as a
result of such delinquency.
D. The Agent and the Company recognize that
the Company must record its transactions and
activities in accordance with rules and
regulations of insurance regulatory agencies.
In addition, the parties recognize that their
records may vary as regards the timing and
accounting treatment of transaction entries. It
is agreed that all definitions and computations
under this Agreement shall reflect the records
of the Company which are conclusively
presumed to be correct. The Company will
make a good faith effort to correct any errors
in its records disclosed by computations under
the Agreement, to the extent and in the
manner permitted by insurance accounting
regulations.
E. This agreement may be terminated by either
party following ninety (90) days prior written
notice, or shall terminate automatically
concurrent with the effective date of
termination of the Agency Agreement or
Agent's contract with the Company. Upon
termination, only Profit-Sharing Commission
accrued and unpaid at the end of the year
prior to the year of termination shall be
payable to Agent.
In witness whereof, Agent and Company have executed
this Agreement
on ________________________, 19 ___,
to be effective ________________, 19_______,
and thereafter until terminated as provided herein.
__________________________________________
herein referred to as "Agent"
by________________________________________
Title ______________________________________
Meridian Mutual Insurance Company
Meridian Security Insurance Company
Meridian Mutual Insurance Company and
Meridian Security Insurance Company Jointly
Herein referred to as "Company"
by _______________________________________
Title ______________________________________
EXHIBIT 10.37
AMENDMENT NO. 2
The Property Per Risk Excess of Loss Reinsurance Agreement of
January 1, 1992, between EMPLOYERS REINSURANCE CORPORATION of
Overland Park, Kansas and MERIDIAN MUTUAL INSURANCE COMPANY,
VERNON FIRE AND CASUALTY INSURANCE COMPANY and MERIDIAN
SECURITY INSURANCE COMPANY, all of Indianapolis, Indiana, is
hereby amended as follows:
I. As respects occurrences under policies in force and those
becoming effective on or after January 1, 1997, the
designation of the REINSURED under this agreement is
hereby amended to include the following.
CITIZENS SECURITY MUTUAL INSURANCE COMPANY
of
Red Wing, Minnesota
CITIZENS FUND INSURANCE COMPANY
of
Red Wing, Minnesota
INSURANCE COMPANY OF OHIO
of
Mansfield, Ohio
In all other respects not inconsistent herewith, said agreement
shall remain unchanged.
IN WITNESS WHEREOF, the parties hereto have caused this
amendment to be executed in duplicate.
MERIDIAN MUTUAL INSURANCE
COMPANY
VERNON FIRE AND CASUALTY
INSURANCE COMPANY
MERIDIAN SECURITY INSURANCE EMPLOYERS REINSURANCE
COMPANY CORPORATION
______________________________ ______________________________
Title: Title:
______________________________ ______________________________
Title: Title:
(Continued)
CITIZENS SECURITY MUTUAL CITIZENS FUND INSURANCE
INSURANCE COMPANY COMPANY
______________________________ ______________________________
Title: Title:
______________________________ ______________________________
Title: Title:
Date:_________________________ Date:_________________________
INSURANCE COMPANY OF OHIO
______________________________
Title:
______________________________
Title:
Date:_________________________
EXHIBIT 10.38
AMENDMENT NO. 3
The Property Per Risk Excess of Loss Reinsurance Agreement of
January 1, 1992, between EMPLOYERS REINSURANCE CORPORATION of
Overland Park, Kansas and MERIDIAN MUTUAL INSURANCE COMPANY,
VERNON FIRE AND CASUALTY INSURANCE COMPANY and MERIDIAN
SECURITY INSURANCE COMPANY, all of Indianapolis, Indiana, and
CITIZENS SECURITY MUTUAL INSURANCE COMPANY and CITIZENS FUND
INSURANCE COMPANY, both of Red Wing, Minnesota, and INSURANCE
COMPANY OF OHIO of Mansfield, Ohio, is hereby amended as
follows:
A. As respects the annual period commencing on January 1,
1998 and each annual period thereafter, the reinsurance
premium rate applicable to Layer 2 as set out in Article
VIII and as amended by Amendment No. 1, is hereby reduced
from 1.0% to 0.5%.
B. As resepects the accounting period commencing January 1,
1998, Article IX is hereby deleted in its entirety and the
designation of Article IX is reserved for future use.
In all other respects not inconsistent herewith, said agreement
shall remain unchanged.
IN WITNESS WHEREOF, the parties hereto have caused this
amendment to be executed in duplicate.
MERIDIAN MUTUAL INSURANCE
COMPANY
VERNON FIRE AND CASUALTY
INSURANCE COMPANY
MERIDIAN SECURITY INSURANCE EMPLOYERS REINSURANCE
COMPANY CORPORATION
______________________________ ______________________________
Title: Title:
______________________________ ______________________________
Title: Title:
Date:_________________________ Date:_________________________
(Continued)
CITIZENS SECURITY MUTUAL CITIZENS FUND INSURANCE
INSURANCE COMPANY COMPANY
______________________________ ______________________________
Title: Title:
______________________________ ______________________________
Title: Title:
Date:_________________________ Date:_________________________
INSURANCE COMPANY OF OHIO
______________________________
Title:
______________________________
Title:
Date:_________________________
EXHIBIT 10.44
Addendum No. 1
to the
Interests and Liabilities Agreement
of
Great Lakes American Reinsurance Company
New York, New York
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1997
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
It Is Hereby Agreed, effective September 30, 1997, that all
rights, interests, liabilities and obligations of the "Subscibing
Reinsurer" under this Agreement shall be transferred from Great
Lakes American Reinsurance Company, New York, New York
(hereinafter referred to as the "Assignor") to Folksamerica
Reinsurance Company, New York, New York (hereinafter referred to
as the "Assignee"). In accordance therewith, the Assignor shall
assign, and the Assignee shall assume, all of the rights,
interests, liabilities and obligations of the "Subscribing
Reinsurer" under this Agreement. The Assinee shall then be
subject to all of the terms and conditions hereof, and the term
"Subscribing Reinsurer," wherever it is used herein, shall refer
to Folksamerica Reinsurance Company, New York, New York.
It Is Understood and Agreed that the Company consents to the
foregoing transfer of rights, interests, liabilities and
obligations from the Assignor to the Assignee, and further
releases the Assignor from all unfulfilled liabilities and
obligations which have arisen under this Agreement and all
liabilities and obligations which may arise in the future under
this agreement.
It Is Further Agreed that the "Notice and Certificate of
Assumption by Folksamerica Reinsurance Company," a copy of which
is attached to and forms part of this Addendum, shall be
recognized as part of this Agreement, effective September 30,
1997.
In Witness Whereof, the parties hereto by their respective duly
authorized representative have executed this Addendum as of the
dates undermentioned at:
Indianapolis, Indiana,this _______ day of _________________199___.
__________________________________________________
Meridian Mutual Group
New York, New York, this _______ day of ___________________199___.
__________________________________________________
Great Lakes American Reinsurance Company
New York, New York, this _______ day of ___________________199___.
__________________________________________________
Folksamerica Reinsurance Company
EXHIBIT 10.45
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively collectively as the
"Company"as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Preamble
The "Meridian Mutual Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Indianapolis,
Indiana, Meridian Security Insurance Company and, Indianapolis,
Indiana, Citizens Security Mutual Insurance Company, Red Wing,
all of Indianapolis, Indiana. It is understood thatMinnesota,
Citizens Fund Insurance Company, Red Wing, Minnesota, and
Insurance Company of Ohio, Mansfield, Ohio. The application of
this Contract shall be to the parties comprising the Meridian
Mutual Group as a group and not separately to each.
Article I - Classes of Business Reinsured
By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Fire and Allied Lines, Homeowners (property perils
only), Mobile Homeowners (property perils only), Farmowners
(property perils only), Commercial Multiple Peril (property
perils only), Businessowners (property perils only), Earthquake,
Inland Marine and Automobile Physical Damage (comprehensive
coverage only) business, subject to the terms, conditions and
limitations set forth herein and in Schedule A attached to and
forming part of this Contract.
Article II - Term
A. This Contract shall become effective on January 1, 1998,
with respect to losses arising out of loss occurrences
commencing on or after that date, and shall remain in force
until December 31, 1998, both days inclusive.
B. If this Contract expires while a loss occurrence covered
hereunder is in progress, the Reinsurer's liability hereunder
shall, subject to the other terms and conditions of this
Contract, be determined as if the entire loss occurrence had
occurred prior to the expiration of this Contract, provided
that no part of such loss occurrence is claimed against any
renewal or replacement of this Contract.
Article III - Territory
The liability of the Reinsurer shall be limited to losses under
policies covering property located within the territorial limits
of the United States of America, its territories or possessions,
Puerto Rico, the District of Columbia and Canada; but this
limitation shall not apply to moveable property if the Company''s
policies provide coverage when said moveable property is outside
the aforesaid territorial limits.
Article IV - Exclusions
This Contract shall not apply to:
1. Reinsurance accepted by the Company other than:
a. Facultative reinsurance on a share basis of risks
accepted individually and not forming part of any
agreement; or
b. Local agency reinsurance on a share basis accepted
in the normal course of business.
2. Nuclear incident per the following clauses attached hereto:
a. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - U.S.A." (NMA 1119);
b. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - Canada" (NMA 1980);
c. "Nuclear Energy Risks Exclusion Clause
(Reinsurance) (1994) (Worldwide Excluding U.S.A. &
Canada)" (NMA 1975(a)).
3. Pool, association, or syndicate business as excluded
by the provisions of the "Pools, Associations and
Syndicates Exclusion Clause" attached to and forming part
of this Contract.
4. Any liability of the Company arising from its
participation or membership in any insolvency fund.
5. Credit, financial guarantee and insolvency business.
6. War risks as excluded in any standard policy.
7. Policies written to apply in excess of underlying
insurance or policies written with a deductible or
franchise of more than $10,000; however, this exclusion
shall not apply to policies which provide a percentage
deductible or franchise in connection with earthquake or
windstorm.
8. Insurance on growing crops.
9. Insurance against flood, surface water, waves, tidal
water or tidal wave, overflow of streams or other bodies
of water or spray from any of the foregoing, all whether
driven by wind or not, when written as such; however, this
exclusion shall not apply as respects the foregoing perils
included in Commercial Multiple Peril, Homeowners Multiple
Peril, Farmowners Multiple Peril, Inland Marine,
Businessowners, Mobile Homeowners, and Automobile Physical
Damage policies, and in endorsements to Fire and Extended
Coverage policies.
10. Mortgage impairment insurance and similar kinds of
insurance, howsoever styled, providing coverage to an
insured with respect to its mortgagee interest in property
or its owner interest in foreclosed property.
11. Difference in conditions insurance and similar kinds
of insurance, howsoever styled.
12. Risks which have a total insurable value of more than
$250,000,000.
13. Any collection of fine arts with an insurable value
of $5,000,000 or more.
14. Inland Marine business with respect to the following:
a. All bridges and tunnels;
b. Cargo insurance when written as such with respect
to ocean, lake, or inland waterways vessels;
c. Commercial negative film insurance and cast insurance;
d. Drilling rigs, except water well drilling rigs;
e. Furriers' customers policies;
f. Garment contractors policies;
g. Insurance on livestock under so-called "mortality
policies," when written as such;
h. Jewelers' block policies and furriers' block policies;
i. Mining equipment while underground;
j. Radio and television broadcasting towers;
k. Registered mail insurance when the limit of any
one addressee on any one day is more than $50,000;
l. Watercraft other than watercraft insured under
personal property floaters, yacht and/or outboard
policies, homeowners, farmowners, or recreational
vehicle policies.
15. Automobile physical damage business with respect to
the following:
a. Insurance against collision;
b. Insurance against theft or larceny;
c. Manufacturers' stocks at factories or warehouses.
16. This Contract excludes loss and/or damage and/or
costs and/or expenses arising from seepage and/or
pollution and/or contamination, other than contamination from
smoke. Nevertheless, this exclusion does not preclude payment
of the cost of removing debris of property damaged by a loss
otherwise covered hereunder, subject always to a limit of 25%
of the Company's property loss under the applicable original
policy.
17. Losses in respect of overhead transmission and
distribution lines and their supporting structures other
than those on or within 150 meters (or 500 feet) of the
insured premises.
It is understood and agreed that public utilities
extension and/or suppliers extension and/or contingent
business interruption coverages are not subject to this
exclusion provided that these are not part of a
transmitters' or distributors' policy.
Article V - Retention and Limit
A. As respects each excess layer of reinsurance coverage provided
by this Contract, the Company shall retain and be liable for
the first amount of ultimate net loss, shown as "Company's
Retention" for that excess layer in Schedule A attached
hereto, arising out of each loss occurrence. The Reinsurer
shall then be liable, as respects each excess layer, for 95.0%
of the amount by which such ultimate net loss exceeds the
Company's applicable retention, but the liability of the
Reinsurer under each excess layer shall not exceed 95.0% of
the amount, shown as "Reinsurer's Per Occurrence Limit" for
that excess layer in Schedule A attached hereto, as respects
any one loss occurrence.
B. As respects each excess layer of reinsurance coverage provided
by this Contract, the Company shall retain, (net and
unreinsured elsewhere, as respects the Fourth and Fifth Excess
Layers), in addition to its initial retention for each loss
occurrence, 5.0% of the excess ultimate net loss to which the
excess layer applies. As respects the Second and Third Excess
Layers of reinsurance coverage, the Company's initial
retention and such additional retention shall be subject to
the reinsurance set forth in paragraph B of Article VIII.
C. No claim shall be made under any excess layer of reinsurance
coverage provided by this Contract in any one loss occurrence
unless at least two risks insured or reinsured by the Company
are involved in such loss occurrence. For purposes of this
Article, the Company shall be the sole judge of what
constitutes one risk.
Article VI - Reinstatement
A. In the event all or any portion of the reinsurance under any
excess layer of reinsurance coverage provided by this Contract
is exhausted by loss, the amount so exhausted shall be
reinstated immediately from the time the loss occurrence
commences hereon. For each amount so reinstated the Company
agrees to pay additional premium equal to the product of the following:
1. The percentage of the occurrence limit for the excess
layer reinstated (based on the loss paid by the Reinsurer
under that excess layer); times
2. The earned reinsurance premium for the excess layer
reinstated for the term of this Contract (exclusive of
reinstatement premium).
B. Whenever the Company requests payment by the Reinsurer of any
loss under any excess layer hereunder, the Company shall
submit a statement to the Reinsurer of reinstatement premium
due the Reinsurer for that excess layer. If the earned
reinsurance premium for any excess layer for the term of this
Contract has not been finally determined as of the date of any
such statement, the calculation of reinstatement premium due
for that excess layer shall be based on the annual deposit
premium for that excess layer and shall be readjusted when the
earned reinsurance premium for that excess layer for the term
of this Contract has been finally determined. Any
reinstatement premium shown to be due the Reinsurer for any
excess layer as reflected by any such statement (less prior
payments, if any, for that excess layer) shall be payable by
the Company concurrently with payment by the Reinsurer of the
requested loss for that excess layer. Any return reinstatement
premium shown to be due the Company shall be remitted by the
Reinsurer as promptly as possible after receipt and
verification of the Company''s statement.
C. Notwithstanding anything stated herein, the liability of the
Reinsurer under any excess layer of reinsurance coverage
provided by this Contract shall not exceed either of the
following:
1. 95.0% of an amount, shown as "Reinsurer's Per
Occurrence Limit" for that excess layer in Schedule 95.0%
of the amount, shown as "Reinsurer's Per Occurrence Limit"
for that excess layer in Schedule A attached hereto, as
respects loss or losses arising out of any one loss
occurrence; or
2. 95.0% of an amount, shown as "Reinsurer's Annual
Limit" for that excess layer in Schedule 95.0% of the
amount, shown as "Reinsurer's Annual Limit" for that
excess layer in Schedule A attached hereto, in all during
the term of this Contract.
Article VII - Definitions
A. "Ultimate net loss" as used herein is defined as the sum or sums
(including interest on judgments, litigation expenseextra contractual
obligations and any loss adjustment expenses, as hereinafter defined)
paid or payable by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims, after
deduction of all salvage, all recoveries and all claims on inuring
insurance or reinsurance, whether collectible or not. Nothing
herein shall be construed to mean that losses under this
Contract are not recoverable until the Company''s ultimate net
loss has been ascertained.
B. "Extra contractual obligations" as used herein shall mean 80%
of any punitive, exemplary, compensatory or consequential
damages paid or payable by the Company as a result of an
action against it by its insured or its insured's assignee,
which action alleges negligence or bad faith on the part of
the Company in handling a claim under a policy subject to this
Contract. However, for the purposes of this Contract, extra
contractual obligations arising out of any one loss occurrence
shall not exceed 25% of the contractual loss under all
policies involved in the loss occurrence. An extra
contractual obligation shall be deemed to have occurred on the
same date as the loss covered or alleged to be covered under
the policy. Notwithstanding anything stated herein, this
Contract shall not apply to any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or
criminal act by any officer or director of the Company acting
individually or collectively or in collusion with any
individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any
claim covered hereunder.
C. "Loss adjustment expense" as used herein shall mean expenses
assignable to the investigation, appraisal, adjustment,
settlement, litigation, defense and/or appeal of specific
claims, regardless of how such expenses are classified for
statutory reporting purposes. Loss adjustment expense shall
include, but not be limited to, interest on judgments and
expenses of outside adjusters, but shall not include office
expenses or salaries of the Company's regular employees.
Article VIII - Other Reinsurance
A. The Company shall maintain in force excess per risk
reinsurance reinsurance, recoveries under which shall inure to
the benefit of this Contract.
B. The Company shall be permitted to carry underlying aggregate
excess catastrophe reinsurance, recoveries under which shall
inure solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this
Contract.
Article IX - Loss Occurrence (NMA 2244/BRMA 27A)
A. The term "loss occurrence""loss occurrence" shall mean the sum
of all individual losses directly occasioned by any one
disaster, accident or loss or series of disasters, accidents
or losses arising out of one event which occurs within the
area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another.
However, the duration and extent of any one "loss
occurrence""loss occurrence" shall be limited to all
individual losses sustained by the Company occurring during
any period of 168 consecutive consecutive hours arising out
of and directly occasioned by the same event, except that the
term "loss occurrence""loss occurrence" shall be further
defined as follows:
1. As regards windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage, all
individual losses sustained by the Company occurring
during any period of 72 consecutive consecutive hours
arising out of and directly occasioned by the same event.
However, the event need not be limited to one state or
province or states or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 consecutive consecutive hours
within the area of one municipality or county and the
municipalities or counties contiguous thereto arising out
of and directly occasioned by the same event. The maximum
duration of 72 consecutive consecutive hours may be
extended in respect of individual losses which occur
beyond such 72 consecutive consecutive hours during the
continued occupation of an assured''s premises by
strikers, provided such occupation commenced during the
aforesaid period.
3. As regards earthquake (the epicentre of which need
not necessarily be within the territorial confines
referred to in paragraph A of this Article) and fire
following directly occasioned by the earthquake, only
those individual fire losses which commence during the
period of 168 consecutive consecutive hours may be
included in the Company`s "loss occurrence."
4. As regards "freeze," only individual losses
directly occasioned by collapse, breakage of glass and
water damage (caused by bursting frozen pipes and tanks)
may be included in the Company`s "loss occurrence."
B. Except for those "loss occurrences" referred
to in subparagraphs 1 and 2 of paragraph A above, the Company
may choose the date and time when any such period of
consecutive hours commences, provided that it is not earlier
than the date and time of the occurrence of the first recorded
individual loss sustained by the Company arising out of that
disaster, accident or loss, and provided that only one such
period of 168 consecutive consecutive hours shall apply with
respect to one event.
C. However, as respects those "loss occurrences" referred to in
subparagraphs 1 and 2 of paragraph A above, if the disaster, accident
or loss occasioned by the event is of greater duration than 72
consecutive hours, then the Company may divide that disaster, accident
or loss into two or more "loss occurrences," provided that no two periods
overlap and no individual loss is included in more than one
such period, and provided that no period commences earlier
than the date and time of the occurrence of the first recorded
individual loss sustained by the Company arising out of that
disaster, accident or loss.
D. No individual losses occasioned by an event that would be
covered by 72 hours clauses may be included in any "loss occurrence"
claimed under the 168 hours provision.
Article X - Loss Notices and Settlements
A. Whenever losses sustained by the Company appear likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of such losses at its own
expense.
B. All loss settlements made by the Company, provided they are
within the terms of the original policies (or within the terms
of extra contractual obligations coverage, if any, provided
under this Contract) and within the terms of this Contract,
shall be binding upon the Reinsurer. The Reinsurer agrees to
pay all amounts for which it may be liable upon receipt of
reasonable evidence of the amount paid (or scheduled to be
paid) by the Company. The Company shall be the sole judge of
what is covered by an original policy.
Article XI - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article XII - Premium
A. As premium for each excess layer of reinsurance coverage
provided by this Contract, the Company shall pay the Reinsurer
the greater of the following:
1. The amount, shown as "Annual Minimum Premium" for
that excess layer in Schedule A attached hereto; or
2. The percentage, shown as "Premium Rate" for that
excess layer in Schedule A attached hereto, of the
Company's net earned premium for the term of this Contract.
B. The Company shall pay the Reinsurer an annual deposit
premium for each excess layer of an amount, shown as "Annual Deposit
Premium" for that excess layer in Schedule A attached hereto, in four
equal installments of an amount, shown as "Quarterly Deposit Premium"
for that excess layer in Schedule A attached hereto, on January 1,
April 1, July 1 and October 1 of 1998.
C. Within 60 days after the expiration of this Contract, the
Company shall provide a report to the Reinsurer setting forth
the premium due hereunder for each excess layer, computed in
accordance with paragraph A, and any additional premium due
the Reinsurer or return premium due the Company for each such
excess layer shall be remitted promptly.
D. "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured
hereunder, less the earned portion of premiums ceded by the
Company for reinsurance which inures to the benefit of this
Contract. For purposes of calculating net earned premium, 90%
of the total basic policy premium as respects Homeowners,
Mobile Homeowners and Farmowners business, 70% of the total
basic policy premium as respects Businessowners and Commercial
Multiple Peril business and 100% of the Comprehensive portion
of the premium for Automobile Physical Damage business shall
be considered subject premium.
Article XIII - Late Payments
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to
this Contract.
B. In the event any premium, loss or other payment due either
party is not received by the intermediary named in Article
XXVI (hereinafter referred to as the "Intermediary") by the
payment due date, the party to whom payment is due may, by
notifying the Intermediary in writing, require the debtor
party to pay, and the debtor party agrees to pay, an interest
penalty on the amount past due calculated for each such
payment on the last business day of each month as follows:
1. The number of full days which have expired since the
due date or the last monthly calculation, whichever the
lesser; times
2. 1/365ths of the 12-month United States Treasury Bill
Rate, as quoted in The Wall Street Journal on the first
business day of the month for which the calculation is
made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of
the original amount due plus interest penalties have been
received by the Intermediary.
C. The establishment of the due date shall, for purposes of this
Article, be determined as follows:
1. As respects the payment of routine deposits and
premiums due the Reinsurer, the due date shall be as
provided for in the applicable section of this Contract.
In the event a due date is not specifically stated for a
given payment, it shall be deemed due 30 days after the
date of transmittal by the Intermediary of the initial
billing for each such payment.
2. Any claim or loss payment due the Company hereunder
shall be deemed due 10 business days after the proof of
loss or demand for payment is transmitted to the Reinsurer
or received by the Reinsurer, whichever is soonest. If
such loss or claim payment is not received within the
10 days, interest will accrue on the payment or amount
overdue in accordance with paragraph B above, from the
date the proof of loss or demand for payment, in
accordance with the provisions of Article X, was
transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due
either party not otherwise provided for in subparagraphs 1
and 2 of paragraph C above, the due date shall be as
provided for in the applicable section of this Contract.
In the event a due date is not specifically stated for a
given payment, it shall be deemed due 10 business days
following transmittal of written notification that the
provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due
hereunder shall be deemed paid upon receipt by the
Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a
subscribing reinsurer from contesting the validity of any
claim, or from participating in the defense or control of any
claim or suit, or prohibiting either party from contesting the
validity of any payment or from initiating any arbitration or
other proceeding in accordance with the provisions of this
Contract. If the debtor party prevails in an arbitration or
other proceeding, then any interest penalties due hereunder on
the amount in dispute shall be null and void. If the debtor
party loses in such proceeding, then the interest penalty on
the amount determined to be due hereunder shall be calculated
in accordance with the provisions set forth above unless
otherwise determined by such proceedings. If a debtor party
advances payment of any amount it is contesting, and proves to
be correct in its contestation, either in whole or in part,
the other party shall reimburse the debtor party for any such
excess payment made plus interest on the excess amount
calculated in accordance with this Article.
E. Interest penalties arising out of the application of this
Article that are $100 or less from any party shall be waived
unless there is a pattern of late payments consisting of three
or more items over the course of any 12-month period.
Article XIV - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XV - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XVI - Net Retained Lines (BRMA 32E)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted
in this Contract), and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in
respect of that portion of any policy which the Company
retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XVII - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.
Article XVIII - Currency (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this Contract,
they shall be construed to mean United States Dollars and all transactions
under this Contract shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books
of the Company.
Article XIX - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XX - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XXI - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
outstanding loss and loss adjustment expense reserves by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or
2. Escrow accounts for the benefit of the Company; and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company''s ceded Canadian outstanding loss
and loss adjustment expense reserves by:
1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or
2. Cash advances for the remaining balance of the
funding required;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.
C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the term
for at least one additional year at each expiration date unless written
notice of non-renewal is given to the Company not less than 30 days prior
to said expiration date. The Company and the Reinsurer further
agree, notwithstanding anything to the contrary in this
Contract, that said letters of credit may be drawn upon by the
Company or its successors in interest at any time, without
diminution because of the insolvency of the Company or the
Reinsurer, but only for one or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expensess paid under the
terms of policies reinsured hereunder, unless paid in cash
by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves, if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1) or
C(3), or in the case of C(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.
Article XXII - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory successor of the company has failed to pay all or
a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the
approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of the
New York Insurance Law or except (1) where this Contract specifically
provides another payee of such reinsurance in the event of the insolvency
of the company or (2) where the Reinsurer with the consent of the direct
insured or insureds has assumed such policy obligations of the
company as direct obligations of the Reinsurer to the payees
under such policies and in substitution for the obligations of
the company to such payees.
Article XXIII - Arbitration (BRMA 6J)
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days days following a
written request by the other party to do so, the requesting
party may choose two Arbiters who shall in turn choose an
Umpire before entering upon arbitration. If the two Arbiters
fail to agree upon the selection of an Umpire within 30 days
following their appointment, each Arbiter shall nominate three
candidates within 10 days thereafter, two of whom the other
shall decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within 30
days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this Article and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at a location
mutually agreed upon by the parties to this Contract, but
notwithstanding the location of the arbitration, all
proceedings pursuant hereto shall be governed by the law of
the state in which the Company has its principal office.
Article XXIV - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of a
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood
to constitute a waiver of the Reinsurer's rights to commence
an action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.
Article XXV - Agency Agreement
Meridian Mutual Insurance Company shall be deemed the agent of
the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this
Contract, and for purposes of remitting or receiving any monies
due any party.
Article XXVI - Intermediary (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary negotiating
this Contract for all business hereunder. All communications (including
but not limited to notices, statements, premium, return premium, commissions,
taxes, losses, loss adjustment expense, salvages and loss settlements)
relating thereto shall be transmitted to the Company or the
Reinsurer through E. W. Blanch Co., Reinsurance Services, 3500
West 80th Street, Minneapolis, Minnesota 55431. Payments by the
Company to the Intermediary shall be deemed to constitute payment
to the Reinsurer. Payments by the Reinsurer to the Intermediary
shall be deemed to constitute payment to the Company only to the
extent that such payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
Indianapolis, Indiana,this _______ day of __________________199___.
__________________________________________________
Meridian Mutual Group
Schedule A
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Meridian Mutual Group
Indianapolis, Indiana
Second Third Fourth Fifth
Excess Excess Excess Excess
Company's Retention $6,000,000 $10,000,000 $18,000,000 $30,000,000
Reinsurer's Per $4,000,000 $8,000,000 $12,000,000 $35,000,000
Occurrence Limit
(95.0% of)
Reinsurer's Annual $8,000,000 $16,000,000 $24,000,000 $70,000,000
Limit (95.0% of)
Annual Minimum
Premium $616,000 $410,400 $364,800 $664,800
Premium Rate 0.780% 0.520% 0.462% 0.843%
Annual Deposit
Premium $770,000 $513,000 $456,000 $831,000
Quarterly Deposit $192,500 $128,250 $114,000 $207,750
Premium
The figures listed above for each excess layer shall apply to
each Subscribing Reinsurer in the percentage share for that
excess layer as expressed in its Interests and Liabilities
Agreement attached hereto.
Table of Contents
Article Page
Preamble 1
I Classes of Business Reinsured 1
II Term 2
III Territory 2
IV Exclusions 2
V Retention and Limit 4
VI Reinstatement 5
VII Definitions 6
VIII Other Reinsurance 6
IX Loss Occurrence (NMA 2244/BRMA 27A) 7
X Loss Notices and Settlements 8
XI Salvage and Subrogation 8
XII Premium 8
XIII Late Payments 9
XIV Offset (BRMA 36C) 11
XV Access to Records (BRMA 1D) 11
XVI Net Retained Lines (BRMA 32E) 11
XVII Errors and Omissions (BRMA 14F) 11
XVIII Currency (BRMA 12A) 11
XIX Taxes (BRMA 50C) 12
XX Federal Excise Tax (BRMA 17A) 12
XXI Unauthorized Reinsurers 12
XXII Insolvency 13
XXIII Arbitration (BRMA 6J) 14
XXIV Service of Suit (BRMA 49C) 15
XXV Agency Agreement 16
XXVI Intermediary (BRMA 23A) 16
Schedule A
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Meridian Mutual Group
Indianapolis, Indiana
Second Excess Catastrophe Reinsurance
Reinsurers Participations
Dorinco Reinsurance Company 10.00%
Erie Insurance Exchange 2.00
Insurance Corporation of Hannover, An Illinois Corporation 3.50
International Property Catastrophe Reinsurance Company, Ltd. 3.75
Nationwide Mutual Insurance Company 3.50
Odyssey Reinsurance Corporation 4.00
Renaissance Reinsurance Ltd. 10.00
Shelter Reinsurance Company 1.00
Sumitomo Marine Re Management, Ltd.
(for The Sumitomo Marine & Fire Insurance Co., Ltd.,
U.S. Branch) 1.75
Tokio Re Corporation (for The Tokio Marine
and Fire Insurance Co. Ltd., U. S. Branch) 1.00
USF RE Insurance Company 3.00
Vesta Fire Insurance Corporation 5.00
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 7.50
Reinsurance Australia Corporation Limited 3.00
Through Swire Blanch Europe
Bayerische Ruckversicherung A.G. 5.00
La Mutuelle Du Mans Assurances I.A.R.D. 1.50
Mapfre Re Compania de Reaseguros, S.A. 1.00
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 7.00
Second Excess Catastrophe Reinsurance (Continued)
Reinsurers Participations
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 26.50%
Total 100.00%
Third Excess Catastrophe Reinsurance
Reinsurers Participations
AXA Reinsurance Company 5.00%
Employers Mutual Casualty Company 2.00
Erie Insurance Exchange 2.00
Farmers Mutual Hail Insurance Company of Iowa 1.50
Gerling Global Reinsurance Corporation of America 4.00
Insurance Corporation of Hannover, An Illinois Corporation 2.50
LaSalle Re Limited 17.50
Nationwide Mutual Insurance Company 4.00
Odyssey Reinsurance Corporation 4.00
Republic Western Insurance Company 1.00
St. Paul Re, Inc.
(for St. Paul Fire and Marine Insurance Company) 3.00
Shelter Reinsurance Company 1.00
United States Fidelity and Guaranty Company 5.25
USF RE Insurance Company 2.00
Vesta Fire Insurance Corporation 6.50
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 7.50
Through Swire Blanch Europe
Helvetia Swiss Insurance Company, Ltd. 1.00
La Mutuelle Du Mans Assurances I.A.R.D. 3.00
Mapfre Re Compania de Reaseguros, S.A. 3.00
Munchener Ruckversicherungs-Gesellschaft 5.00
SPS Reassurance 1.50
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 7.00
Third Excess Catastrophe Reinsurance (Continued)
Reinsurers Participations
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 10.75%
Total 100.00%
Fourth Excess Catastrophe Reinsurance
Reinsurers Participations
AXA Reinsurance Company 3.00%
Constitution Reinsurance Corporation 4.00
Dorinco Reinsurance Company 6.00
Employers Mutual Casualty Company 0.60
Erie Insurance Exchange 1.50
Gerling Global Reinsurance Corporation of America 1.00
LaSalle Re Limited 11.00
Nationwide Mutual Insurance Company 3.00
Odyssey Reinsurance Corporation 3.00
St. Paul Re, Inc.
(for St. Paul Fire and Marine Insurance Company) 3.00
Shelter Reinsurance Company 1.00
SOREMA North America Reinsurance Company 16.00
Sumitomo Marine Re Management, Ltd.
(for The Sumitomo Marine & Fire Insurance Co., Ltd.,
U.S. Branch) 1.00
Tokio Re Corporation (for The Tokio Marine
and Fire Insurance Co. Ltd., U. S. Branch) 1.00
United Fire & Casualty Company 0.75
Vesta Fire Insurance Corporation 5.70
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 4.25
Reinsurance Australia Corporation Limited 5.00
Fourth Excess Catastrophe Reinsurance (Continued)
Reinsurers Participations
Through Swire Blanch Europe
La Mutuelle Du Mans Assurances I.A.R.D. 2.00%
Mapfre Re Compania de Reaseguros, S.A. 2.00
Munchener Ruckversicherungs-Gesellschaft 5.00
SPS Reassurance 1.50
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 4.50
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 14.20
Total 100.00%
Fifth Excess Catastrophe Reinsurance
Reinsurers Participations
AXA Reinsurance Company 3.00%
Employers Mutual Casualty Company 1.00
Erie Insurance Exchange 2.00
Farmers Mutual Hail Insurance Company of Iowa 0.35
Gerling Global Reinsurance Corporation of America 2.50
International Property Catastrophe Reinsurance Company, Ltd. 2.50
LaSalle Re Limited 4.50
Nationwide Mutual Insurance Company 3.50
Odyssey Reinsurance Corporation 3.15
Renaissance Reinsurance Ltd. 10.00
St. Paul Re, Inc.
(for St. Paul Fire and Marine Insurance Company) 1.50
Shelter Reinsurance Company 1.00
SOREMA North America Reinsurance Company 7.50
United Fire & Casualty Company 0.50
United States Fidelity and Guaranty Company 4.25
Vesta Fire Insurance Corporation 7.50
Fifth Excess Catastrophe Reinsurance (Continued)
Reinsurers Participations
Through Swire Blanch Europe
Albingia Versicherungs AG 1.50%
La Mutuelle Du Mans Assurances I.A.R.D. 4.75
Mapfre Re Compania de Reaseguros, S.A. 3.00
Munchener Ruckversicherungs-Gesellschaft 1.75
Sirius International Insurance Corporation 0.50
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 3.50
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 30.25
Total 100.00%
Interests and Liabilities Agreement
of
AXA Reinsurance Company
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
5.00% of the Third Excess Catastrophe Reinsurance
3.00% of the Fourth Excess Catastrophe Reinsurance
3.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
AXA Reinsurance Company
Interests and Liabilities Agreement
of
Constitution Reinsurance Corporation
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
4.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
Constitution Reinsurance Corporation
Interests and Liabilities Agreement
of
Dorinco Reinsurance Company
Midland, Michigan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
10.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
6.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Midland, Michigan,this _______ day of _____________________199___.
__________________________________________________
Dorinco Reinsurance Company
Interests and Liabilities Agreement
of
Employers Mutual Casualty Company
Des Moines, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
0.60% of the Fourth Excess Catastrophe Reinsurance
1.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Des Moines, Iowa,this _______ day of ______________________199___.
__________________________________________________
Employers Mutual Casualty Company
Interests and Liabilities Agreement
of
Erie Insurance Exchange
Erie, Pennsylvania
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
2.00% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
1.50% of the Fourth Excess Catastrophe Reinsurance
2.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Erie, Pennsylvania,this _______ day of ____________________199___.
__________________________________________________
Erie Insurance Exchange
By: Erie Indemnity Company
(Attorney-In-Fact)
Interests and Liabilities Agreement
of
Farmers Mutual Hail Insurance Company of Iowa
Des Moines, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
1.50% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0.35% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Des Moines, Iowa,this _______ day of _____________________ 199___.
__________________________________________________
Farmers Mutual Hail Insurance Company of Iowa
Interests and Liabilities Agreement
of
Gerling Global Reinsurance
Corporation of America
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
4.00% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
2.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
Gerling Global Reinsurance Corporation of America
Interests and Liabilities Agreement
of
Insurance Corporation of Hannover
An Illinois Corporation
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.50% of the Second Excess Catastrophe Reinsurance
2.50% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Los Angeles, California,this _______ day of _______________199___.
__________________________________________________
Insurance Corporation of Hannover, An Illinois
Corporation
Interests and Liabilities Agreement
of
International Property Catastrophe Reinsurance Company, Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.75% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
2.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of _____________________199___.
__________________________________________________
International Property Catastrophe Reinsurance
Company, Ltd.
Interests and Liabilities Agreement
of
LaSalle Re Limited
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
17.50% of the Third Excess Catastrophe Reinsurance
11.00% of the Fourth Excess Catastrophe Reinsurance
4.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of _____________________199___.
__________________________________________________
LaSalle Re Limited
Interests and Liabilities Agreement
of
Nationwide Mutual Insurance Company
Columbus, Ohio
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.50% of the Second Excess Catastrophe Reinsurance
4.00% of the Third Excess Catastrophe Reinsurance
3.00% of the Fourth Excess Catastrophe Reinsurance
3.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Columbus, Ohio,this _______ day of ________________________199___.
__________________________________________________
Nationwide Mutual Insurance Company
Interests and Liabilities Agreement
of
Odyssey Reinsurance Corporation
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
4.00% of the Second Excess Catastrophe Reinsurance
4.00% of the Third Excess Catastrophe Reinsurance
3.00% of the Fourth Excess Catastrophe Reinsurance
3.15% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
Odyssey Reinsurance Corporation
Interests and Liabilities Agreement
of
Renaissance Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
10.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
10.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of _____________________199___.
__________________________________________________
Renaissance Reinsurance Ltd.
Interests and Liabilities Agreement
of
Republic Western Insurance Company
Phoenix, Arizona
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
1.00% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Phoenix, Arizona,this _______ day of _____________________ 199___.
__________________________________________________
Republic Western Insurance Company
Interests and Liabilities Agreement
of
St. Paul Fire and Marine Insurance Company
St. Paul, Minnesota
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
3.00% of the Third Excess Catastrophe Reinsurance
3.00% of the Fourth Excess Catastrophe Reinsurance
1.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
St. Paul Fire and Marine Insurance Company
by St. Paul Re, Inc.
Interests and Liabilities Agreement
of
Shelter Reinsurance Company
Columbia, Missouri
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.00% of the Second Excess Catastrophe Reinsurance
1.00% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
1.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Columbia, Missouri,this _______ day of ____________________199___.
__________________________________________________
Shelter Reinsurance Company
Interests and Liabilities Agreement
of
SOREMA North America Reinsurance Company
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
16.00% of the Fourth Excess Catastrophe Reinsurance
7.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
SOREMA North America Reinsurance Company
Interests and Liabilities Agreement
of
The Sumitomo Marine & Fire Insurance Co., Ltd.
(U.S. Branch)
New York, New York
through
Sumitomo Marine Re Management, Inc.
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.75% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
The Sumitomo Marine & Fire Insurance Co., Ltd.
(U.S. Branch)
By: Sumitomo Marine Re Management, Inc.
Interests and Liabilities Agreement
of
The Tokio Marine and Fire Insurance Co. Ltd.,
U.S. Branch
through
Tokio Re Corporation
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
Tokio Re Corporation (for and on behalf of the Tokio
Marine and Fire Insurance Co. Ltd., U.S. Branch)
Interests and Liabilities Agreement
of
United Fire & Casualty Company
Cedar Rapids, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0.75% of the Fourth Excess Catastrophe Reinsurance
0.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Cedar Rapids, Iowa,this _______ day of ____________________199___.
__________________________________________________
United Fire & Casualty Company
Interests and Liabilities Agreement
of
United States Fidelity and Guaranty Company
Baltimore, Maryland
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
5.25% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
4.25% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Morristown, New Jersey,this _______ day of ______________ 199___.
United States Fidelity and Guaranty Company
By:______________________________________________
Attorney-In-Fact
Interests and Liabilities Agreement
of
USF RE Insurance Company
Boston, Massachusetts
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.00% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Florham Park, New Jersey,this _______ day of ______________199___.
__________________________________________________
USF RE Insurance Company
Interests and Liabilities Agreement
of
Vesta Fire Insurance Corporation
Birmingham, Alabama
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
5.00% of the Second Excess Catastrophe Reinsurance
6.50% of the Third Excess Catastrophe Reinsurance
5.70% of the Fourth Excess Catastrophe Reinsurance
7.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Birmingham, Alabama,this _______ day of ___________________199___.
__________________________________________________
Vesta Fire Insurance Corporation
Interests and Liabilities Agreement
of
GIO Insurance Ltd.
trading as GIO Reinsurance
Sydney, Australia
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
7.50% of the Second Excess Catastrophe Reinsurance
7.50% of the Third Excess Catastrophe Reinsurance
4.25% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Sydney, Australia,this _______ day of ____________________ 199___.
__________________________________________________
GIO Insurance Ltd.
trading as GIO Reinsurance
Interests and Liabilities Agreement
of
Reinsurance Australia Corporation Limited
Sydney, Australia
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
5.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Sydney, Australia,this _______ day of ____________________ 199___.
__________________________________________________
Reinsurance Australia Corporation Limited
Interests and Liabilities Agreement
of
Albingia Versicherungs AG
Hamburg, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
1.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamburg, Germany,this _______ day of _____________________ 199___.
__________________________________________________
Albingia Versicherungs AG
Interests and Liabilities Agreement
of
Bayerische Ruckversicherung A.G.
Munich, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
5.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Munich, Germany,this _______ day of ______________________ 199___.
__________________________________________________
Bayerische Ruckversicherung A.G.
Interests and Liabilities Agreement
of
Helvetia Swiss Insurance Company, Ltd.
St. Gallen, Switzerland
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
1.00% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
St. Gallen, Switzerland,this _______ day of _______________199___.
__________________________________________________
Helvetia Swiss Insurance Company, Ltd.
Interests and Liabilities Agreement
of
La Mutuelle Du Mans Assurances I.A.R.D.
LeMans, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.50% of the Second Excess Catastrophe Reinsurance
3.00% of the Third Excess Catastrophe Reinsurance
2.00% of the Fourth Excess Catastrophe Reinsurance
4.75% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
LeMans, France,this _______ day of ________________________199___.
__________________________________________________
La Mutuelle Du Mans Assurances I.A.R.D.
Interests and Liabilities Agreement
of
Mapfre Re Compania de Reaseguros, S.A
Madrid, Spain
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.00% of the Second Excess Catastrophe Reinsurance
3.00% of the Third Excess Catastrophe Reinsurance
2.00% of the Fourth Excess Catastrophe Reinsurance
3.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Madrid, Spain,this _______ day of ________________________ 199___.
__________________________________________________
Mapfre Re Compania de Reaseguros, S.A.
Interests and Liabilities Agreement
of
Munchener Ruckversicherungs-Gesellschaft
Munich, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
5.00% of the Third Excess Catastrophe Reinsurance
5.00% of the Fourth Excess Catastrophe Reinsurance
1.75% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Munich, Germany,this ________day of _______________________199___.
__________________________________________________
Munchener Ruckversicherungs-Gesellschaft
Interests and Liabilities Agreement
of
Sirius International Insurance Corporation
Stockholm, Sweden
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Stockholm, Sweden,this _______ day of _____________________199___.
__________________________________________________
Sirius International Insurance Corporation
Interests and Liabilities Agreement
of
SPS Reassurance
Paris, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
1.50% of the Third Excess Catastrophe Reinsurance
1.50% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Paris, France,this _______ day of ________________________ 199___.
__________________________________________________
SPS Reassurance
Interests and Liabilities Agreement
of
SOREMA North America Reinsurance Company
New York, New York
as the fronting company for P.R.A.M. subscriptions
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
7.00% of the Second Excess Catastrophe Reinsurance
7.00% of the Third Excess Catastrophe Reinsurance
4.50% of the Fourth Excess Catastrophe Reinsurance
3.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
SOREMA North America Reinsurance Company
for and on behalf of P.R.A.M.
____________________________________
Interests and Liabilities Agreement
of
Certain Underwriting Members of Lloyd's
shown in the Signing Schedule attached hereto
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
26.50% of the Second Excess Catastrophe Reinsurance
10.75% of the Third Excess Catastrophe Reinsurance
14.20% of the Fourth Excess Catastrophe Reinsurance
30.25% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In any action, suit or proceeding to enforce the Subscribing
Reinsurer's obligations under the attached Contract, service of
process may be made upon Mendes & Mount, 750 Seventh Avenue,
New York, New York 10019.
Signed for and on behalf of the Subscribing Reinsurer in the
Signing Schedule attached hereto.
EXHIBIT 10.47
Addendum No. 1
to the
Sixth Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1997
issued to
Meridian Mutual Group
Indianapolis, Indiana
It Is Hereby Agreed, effective January 1, 1998, with respect to
losses arising out of loss occurrences commencing on or after
that date, that this Contract shall be amended as follows:
1. Paragraph A of Article VIII - Definitions - shall be deleted
and the following substituted therefor:
"A. `Ultimate net loss' as used herein is defined as the sum or sums
(including extra contractual obligations and any loss adjustment
expense, as hereinafter defined) paid or payable by the Company in
in satisfaction of judgments rendered on account of such claims,
after deduction of all salvage, all recoveries and all claims on
inuring insurance or reinsurance, whether collectible or not.
Nothing herein shall be construed to mean that losses under this
Contract are not recoverable until the Company's ultimate net loss
has been ascertained."
2. The following paragraph shall be added to and made part of
Article VIII - Definitions:
"C. `Loss adjustment expense' as used herein shall mean
expenses assignable to the investigation, appraisal,
adjustment, settlement, litigation, defense and/or appeal
of specific claims, regardless of how such expenses are
classified for statutory reporting purposes. Loss
adjustment expense shall include, but not be limited to,
interest on judgments and expenses of outside adjusters,
but shall not include office expenses or salaries of the
Company's regular employees."
It Is Further Agreed, effective January 1, 1998, that this
Contract shall be amended as follows:
1. Paragraphs A and B of Article XIII - Premium - shall be
deleted and the following substituted therefor:
"A. As premium for the reinsurance provided hereunder for
each contract year, the Company shall pay the Reinsurer
.00782% of its Insurance In Force calculated on June 30 of
each respective contract year, subject to an annual
minimum premium of $399,200.
B. The Company shall pay the Reinsurer a deposit premium
of $499,000 for each contract year, payable in four equal
installments of $124,750 on January 1, April 1, July 1 and
October 1, of each contract year."
2. The following Article shall be added to and made part of this
Contract:
"Article XXVII - Late Payments
A. The provisions of this Article shall not be
implemented unless specifically invoked, in writing, by
one of the parties to this Contract.
B. In the event any premium, loss or other payment due
either party is not received by the intermediary named in
Article XXVI (hereinafter referred to as the
` Intermediary') by the payment due date, the party to whom
payment is due may, by notifying the Intermediary in
writing, require the debtor party to pay, and the debtor
party agrees to pay, an interest penalty on the amount
past due calculated for each such payment on the last
business day of each month as follows:
1. The number of full days which have expired since
the due date or the last monthly calculation, whichever
the lesser; times
2. 1/365ths of the 12-month United States Treasury
Bill Rate, as quoted in The Wall Street Journal on the
first business day of the month for which the
calculation is made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until
payment of the original amount due plus interest penalties
have been received by the Intermediary.
C. The establishment of the due date shall, for purposes
of this Article, be determined as follows:
1. As respects the payment of routine deposits and
premiums due the Reinsurer, the due date shall be as
provided for in the applicable section of this
Contract. In the event a due date is not specifically
stated for a given payment, it shall be deemed due
30 days after the date of transmittal by the
Intermediary of the initial billing for each such
payment.
2. Any claim or loss payment due the Company
hereunder shall be deemed due 10 business days after
the proof of loss or demand for payment is transmitted
to the Reinsurer or is received by the Reinsurer,
whichever is soonest. If such loss or claim payment is
not received within the 10 days, interest will accrue
on the payment or amount overdue in accordance with
paragraph B above, from the date the proof of loss or
demand for payment, in accordance with the provisions
of Article X, was transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due
either party not otherwise provided for in
subparagraphs 1 and 2 of paragraph C above, the due
date shall be as provided for in the applicable section
of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be
deemed due 10 business days following transmittal of
written notification that the provisions of this
Article have been invoked.
For purposes of interest calculations only, amounts
due hereunder shall be deemed paid upon receipt by the
Intermediary.
D. Nothing herein shall be construed as limiting or
prohibiting a subscribing reinsurer from contesting the
validity of any claim, or from participating in the
defense or control of any claim or suit, or prohibiting
either party from contesting the validity of any payment
or from initiating any arbitration or other proceeding in
accordance with the provisions of this Contract. If the
debtor party prevails in an arbitration or other
proceeding, then any interest penalties due hereunder on
the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest
penalty on the amount determined to be due hereunder shall
be calculated in accordance with the provisions set forth
above unless otherwise determined by such proceedings. If
a debtor party advances payment of any amount it is
contesting, and proves to be correct in its contestation,
either in whole or in part, the other party shall
reimburse the debtor party for any such excess payment
made plus interest on the excess amount calculated in
accordance with this Article.
E. Interest penalties arising out of the application of
this Article that are $100 or less from any party shall be
waived unless there is a pattern of late payments
consisting of three or more items over the course of any
12-month period."
The provisions of this Contract shall remain otherwise unchanged.
In Witness Whereof, the Company by its duly authorized
representative has executed this Addendum as of the date
undermentioned at:
Indianapolis, Indiana,this _______ day of _________________199___.
__________________________________________________
Meridian Mutual Group
Addendum No. 1
to the
Interests and Liabilities Agreement
of
Munchener Ruckversicherungs-Gesellschaft
Munich, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Sixth Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1997
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 1, as duly
executed by the Company, as part of the Contract, effective
January 1, 1998.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Addendum as of the
date undermentioned at:
Munich, Germany,this ________ day of ______________________199___.
__________________________________________________
Munchener Ruckversicherungs-Gesellschaft
EXHIBIT 10.49
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Preamble
The "Meridian Mutual Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Indianapolis,
Indiana, Meridian Security Insurance Company, Indianapolis,
Indiana, Citizens Security Mutual Insurance Company, Red Wing,
Minnesota, Citizens Fund Insurance Company, Red Wing, Minnesota,
and Insurance Company of Ohio, Mansfield, Ohio. The application
of this Contract shall be to the parties comprising the Meridian
Mutual Group as a group and not separately to each.
Article I - Classes of Business Reinsured
By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company arising from the peril
of Earthquake and related losses under its policies, contracts
and binders of insurance or reinsurance (hereinafter called
"policies") in force at the effective date hereof or issued or
renewed on or after that date, and classified by the Company as
Fire and Allied Lines, Homeowners (property perils only), Mobile
Homeowners (property perils only), Farmowners (property perils
only), Commercial Multiple Peril (property perils only),
Businessowners (property perils only), Earthquake, Inland Marine
and Automobile Physical Damage (comprehensive coverage only)
business, subject to the terms, conditions and limitations
hereinafter set forth.
Article II - Term
A. This Contract shall become effective on January 1, 1998, with
respect to losses arising out of loss occurrences commencing
on or after that date, and shall remain in force until
December 31, 1998, both days inclusive.
B. If this Contract expires while a loss occurrence covered
hereunder is in progress, the Reinsurer's liability hereunder
shall, subject to the other terms and conditions of this
Contract, be determined as if the entire loss occurrence had
occurred prior to the expiration of this Contract, provided
that no part of such loss occurrence is claimed against any
renewal or replacement of this Contract.
Article III - Territory
The liability of the Reinsurer shall be limited to losses under
policies covering property located within the territorial limits
of the States of Iowa, Illinois, Indiana, Kentucky, Michigan,
Minnesota, Missouri, North Dakota, Ohio, Pennsylvania, South
Dakota, Tennessee and Wisconsin, but this limitation shall not
apply to moveable property if the Company's policies provide
coverage when said moveable property is outside the aforesaid
territorial limits.
Article IV - Exclusions
This Contract does not apply to and specifically excludes the
following:
1. Reinsurance accepted by the Company other than:
a. Facultative reinsurance on a share basis of risks
accepted individually and not forming part of any
agreement; or
b. Local agency reinsurance on a share basis accepted
in the normal course of business.
2. Nuclear incident per the following clauses attached hereto:
a. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - U.S.A." (NMA 1119);
b. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - Canada" (NMA 1980);
c. "Nuclear Energy Risks Exclusion Clause
(Reinsurance) (1994) (Worldwide Excluding U.S.A. &
Canada)" (NMA 1975(a)).
3. Pool, association, or syndicate business as excluded
by the provisions of the "Pools, Associations and
Syndicates Exclusion Clause" attached to and forming part
of this Contract.
4. Any liability of the Company arising from its
participation or membership in any insolvency fund.
5. Credit, financial guarantee and insolvency business.
6. War risks as excluded in any standard policy.
7. Policies written to apply in excess of underlying
insurance or policies written with a deductible or
franchise of more than $10,000; however, this exclusion
shall not apply to policies which provide a percentage
deductible or franchise in connection with earthquake or
windstorm.
8. Insurance on growing crops.
9. Insurance against flood, surface water, waves, tidal
water or tidal wave, overflow of streams or other bodies
of water or spray from any of the foregoing, all whether
driven by wind or not, when written as such; however, this
exclusion shall not apply as respects the foregoing perils
included in Commercial Multiple Peril, Homeowners Multiple
Peril, Farmowners Multiple Peril, Inland Marine,
Businessowners, Mobile Homeowners, and Automobile Physical
Damage policies, and in endorsements to Fire and Extended
Coverage policies.
10. Mortgage impairment insurance and similar kinds of
insurance, howsoever styled, providing coverage to an
insured with respect to its mortgagee interest in property
or its owner interest in foreclosed property.
11. Difference in conditions insurance and similar kinds
of insurance, howsoever styled.
12. Risks which have a total insurable value of more than
$250,000,000.
13. Any collection of fine arts with an insurable value
of $5,000,000 or more.
14. Inland Marine business with respect to the following:
a. All bridges and tunnels;
b. Cargo insurance when written as such with respect
to ocean, lake, or inland waterways vessels;
c. Commercial negative film insurance and cast
insurance;
d. Drilling rigs, except water well drilling rigs;
e. Furriers' customers policies;
f. Garment contractors policies;
g. Insurance on livestock under so-called "mortality
policies," when written as such;
h. Jewelers' block policies and furriers' block
policies;
i. Mining equipment while underground;
j. Radio and television broadcasting towers;
k. Registered mail insurance when the limit of any
one addressee on any one day is more than $50,000;
l. Watercraft other than watercraft insured under
personal property floaters, yacht and/or outboard
policies, homeowners, farmowners, or recreational
vehicle policies.
15. Automobile physical damage business with respect to
the following:
a. Insurance against collision;
b. Insurance against theft or larceny;
c. Manufacturers' stocks at factories or warehouses.
16. This Contract excludes loss and/or damage and/or
costs and/or expenses arising from seepage and/or
pollution and/or contamination, other than contamination
from smoke. Nevertheless, this exclusion does not
preclude payment of the cost of removing debris of
property damaged by a loss otherwise covered hereunder,
subject always to a limit of 25% of the Company's property
loss under the applicable original policy.
17. Losses in respect of overhead transmission and
distribution lines and their supporting structures other
than those on or within 150 meters (or 500 feet) of the
insured premises.
It is understood and agreed that public utilities
extension and/or suppliers extension and/or contingent
business interruption coverages are not subject to this
exclusion provided that these are not part of a
transmitters' or distributors' policy.
Article V - Retention and Limit
A. The Company shall retain and be liable for the first
$90,000,000 of ultimate net loss arising out of each loss
occurrence. The Reinsurer shall then be liable for 95% of the
amount by which such ultimate net loss exceeds the Company's
retention, but the liability of the Reinsurer shall not exceed
95% of $25,000,000 as respects any one loss occurrence.
B. In addition to its initial retention each loss occurrence, the
Company shall retain 5% of the excess ultimate net loss to
which this Contract applies.
C. No claim shall be made under this Contract in any one loss
occurrence unless at least two risks insured or reinsured by
the Company are involved in such loss occurrence. For
purposes of this Article, the Company shall be the sole judge
of what constitutes one risk.
Article VI - Reinstatement
A. In the event all or any portion of the reinsurance hereunder
is exhausted by loss, the amount so exhausted shall be
reinstated immediately from the time the loss occurrence
commences hereon. For each amount so reinstated the Company
agrees to pay additional premium equal to the product of the
following:
1. The percentage of the occurrence limit reinstated
(based on the loss paid by the Reinsurer); times
2. The earned reinsurance premium for the term of this
Contract (exclusive of reinstatement premium).
B. Whenever the Company requests payment by the Reinsurer of any
loss hereunder, the Company shall submit a statement to the
Reinsurer of reinstatement premium due the Reinsurer. If the
earned reinsurance premium for the term of this Contract has
not been finally determined as of the date of any such
statement, the calculation of reinstatement premium due shall
be based on the annual deposit premium and shall be readjusted
when the earned reinsurance premium for the term of this
Contract has been finally determined. Any reinstatement
premium shown to be due the Reinsurer as reflected by any such
statement (less prior payments, if any) shall be payable by
the Company concurrently with payment by the Reinsurer of the
requested loss. Any return reinstatement premium shown to be
due the Company shall be remitted by the Reinsurer as promptly
as possible after receipt and verification of the Company's
statement.
C. Notwithstanding anything stated herein, the liability of the
Reinsurer hereunder shall not exceed 95% of $25,000,000 as
respects loss or losses arising out of any one loss
occurrence, nor shall it exceed 95% of $50,000,000 in all
during the term of this Contract.
Article VII - Definitions
A. "Ultimate net loss" as used herein is defined as the sum or sums
(including extra contractual obligations and any loss
adjustment expenses, as hereinafter defined) paid or payable
by the Company in settlement of claims and in satisfaction of
judgments rendered on account of such claims, after deduction
of all salvage, all recoveries and all claims on inuring
insurance or reinsurance, whether collectible or not. Nothing
herein shall be construed to mean that losses under this
Contract are not recoverable until the Company's ultimate net
loss has been ascertained.
B. "Extra contractual obligations" as used herein shall mean 80%
of any punitive, exemplary, compensatory or consequential
damages paid or payable by the Company as a result of an
action against it by its insured or its insured's assignee,
which action alleges negligence or bad faith on the part of
the Company in handling a claim under a policy subject to this
Contract. However, for the purposes of this Contract, extra
contractual obligations arising out of any one loss occurrence
shall not exceed 25% of the contractual loss under all
policies involved in the loss occurrence. An extra
contractual obligation shall be deemed to have occurred on the
same date as the loss covered or alleged to be covered under
the policy. Notwithstanding anything stated herein, this
Contract shall not apply to any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or
criminal act by any officer or director of the Company acting
individually or collectively or in collusion with any
individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any
claim covered hereunder.
C. "Loss adjustment expense" as used herein shall mean expenses
assignable to the investigation, appraisal, adjustment,
settlement, litigation, defense and/or appeal of specific
claims, regardless of how such expenses are classified for
statutory reporting purposes. Loss adjustment expense shall
include, but not be limited to, interest on judgments and
expenses of outside adjusters, but shall not include office
expenses or salaries of the Company's regular employees.
Article VIII - Other Reinsurance
A. The Company shall maintain in force excess per risk
reinsurance, recoveries under which shall inure to the benefit
of this Contract.
B. The Company shall be permitted to carry underlying aggregate
excess catastrophe reinsurance, recoveries under which shall
inure solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this
Contract.
Article IX - Loss Occurrence
A. The term "loss occurrence" shall mean the sum of all
individual losses directly occasioned by any one disaster,
accident or loss or series of disasters, accidents or losses
arising out of one event which occurs within the area of one
state of the United States or province of Canada and states or
provinces contiguous thereto and to one another. However, the
duration and extent of any one "loss occurrence" shall be
limited to all individual losses sustained by the Company
occurring during any period of 168 consecutive hours arising
out of and directly occasioned by the same event, except that
as regards earthquake (the epicentre of which need not
necessarily be within the territorial confines referred to in
paragraph A of this Article) and fire following directly
occasioned by the earthquake, only those individual fire
losses which commence during the period of 168 consecutive
hours may be included in the Company's "loss occurrence."
B. The Company may choose the date and time when any such period
of consecutive hours commences, provided that it is not
earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the Company arising out
of that disaster, accident or loss, and provided that only one
such period of 168 consecutive hours shall apply with respect
to one event.
Article X - Loss Notices and Settlements
A. Whenever losses sustained by the Company appear likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of such losses at its own
expense.
B. All loss settlements made by the Company, provided they are
within the terms of the original policies (or within the terms
of extra contractual obligations coverage, if any, provided
under this Contract) and within the terms of this Contract,
shall be binding upon the Reinsurer. The Reinsurer agrees to
pay all amounts for which it may be liable upon receipt of
reasonable evidence of the amount paid (or scheduled to be
paid) by the Company. The Company shall be the sole judge of
what is covered by an original policy.
Article XI - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article XII - Premium
A. As premium for the reinsurance provided hereunder, the Company
shall pay the Reinsurer .433% of its net earned premium for
the term of this Contract, subject to a minimum premium of
$342,000.
B. The Company shall pay the Reinsurer a deposit premium of
$427,500 in four equal installments of $106,875 on January 1,
April 1, July 1 and October 1 of 1998.
C. Within 60 days after the expiration of this Contract, the
Company shall provide a report to the Reinsurer setting forth
the premium due hereunder, computed in accordance with
paragraph A, and any additional premium due the Reinsurer or
return premium due the Company shall be remitted promptly.
D. "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured
hereunder, less the earned portion of premiums ceded by the
Company for reinsurance which inures to the benefit of this
Contract. For purposes of calculating net earned premium, 90%
of the total basic policy premium as respects Homeowners,
Farmowners and Mobile Homeowners business, 70% of the total
basic policy premium as respects Businessowners and Commercial
Multiple Peril business and 100% of the Comprehensive portion
of the premium for Automobile Physical Damage business shall
be considered subject premium.
Article XIII - Late Payments
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to
this Contract.
B. In the event any premium, loss or other payment due either
party is not received by the intermediary named in Article
XXVI (hereinafter referred to as the "Intermediary") by the
payment due date, the party to whom payment is due may, by
notifying the Intermediary in writing, require the debtor
party to pay, and the debtor party agrees to pay, an interest
penalty on the amount past due calculated for each such
payment on the last business day of each month as follows:
1. The number of full days which have expired since the
due date or the last monthly calculation, whichever the
lesser; times
2. 1/365ths of the 12-month United States Treasury Bill
Rate, as quoted in The Wall Street Journal on the first
business day of the month for which the calculation is
made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of
the original amount due plus interest penalties have been
received by the Intermediary.
C. The establishment of the due date shall, for purposes of this
Article, be determined as follows:
1. As respects the payment of routine deposits and
premiums due the Reinsurer, the due date shall be as
provided for in the applicable section of this Contract.
In the event a due date is not specifically stated for a
given payment, it shall be deemed due 30 days after the
date of transmittal by the Intermediary of the initial
billing for each such payment.
2. Any claim or loss payment due the Company hereunder
shall be deemed due 10 business days after the proof of
loss or demand for payment is transmitted to the Reinsurer
or received by the Reinsurer, whichever is soonest. If
such loss or claim payment is not received within the
10 days, interest will accrue on the payment or amount
overdue in accordance with paragraph B above, from the
date the proof of loss or demand for payment, in
accordance with the provisions of Article X, was
transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due
either party not otherwise provided for in subparagraphs 1
and 2 of paragraph C above, the due date shall be as
provided for in the applicable section of this Contract.
In the event a due date is not specifically stated for a
given payment, it shall be deemed due 10 business days
following transmittal of written notification that the
provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due
hereunder shall be deemed paid upon receipt by the
Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a
subscribing reinsurer from contesting the validity of any
claim, or from participating in the defense or control of any
claim or suit, or prohibiting either party from contesting the
validity of any payment or from initiating any arbitration or
other proceeding in accordance with the provisions of this
Contract. If the debtor party prevails in an arbitration or
other proceeding, then any interest penalties due hereunder on
the amount in dispute shall be null and void. If the debtor
party loses in such proceeding, then the interest penalty on
the amount determined to be due hereunder shall be calculated
in accordance with the provisions set forth above unless
otherwise determined by such proceedings. If a debtor party
advances payment of any amount it is contesting, and proves to
be correct in its contestation, either in whole or in part,
the other party shall reimburse the debtor party for any such
excess payment made plus interest on the excess amount
calculated in accordance with this Article.
E. Interest penalties arising out of the application of this
Article that are $100 or less from any party shall be waived
unless there is a pattern of late payments consisting of three
or more items over the course of any 12-month period.
Article XIV - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XV - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XVI - Net Retained Lines (BRMA 32E)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted
in this Contract), and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in
respect of that portion of any policy which the Company
retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XVII - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.
Article XVIII - Currency (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this
Contract, they shall be construed to mean United States
Dollars and all transactions under this Contract shall be in
United States Dollars.
B. Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books
of the Company.
Article XIX - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XX - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XXI - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded outstanding
loss and loss adjustment expense reserves by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or
2. Escrow accounts for the benefit of the Company;
and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expense paid under the terms
of policies reinsured hereunder, unless paid in cash by
the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves, if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for B(1) or
B(3), or in the case of B(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.
Article XXII - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory successor of the company has failed to pay all or
a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense
thus incurred by the Reinsurer shall be chargeable, subject to
the approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.
Article XXIII - Arbitration (BRMA 6J)
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within
30 days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this Article and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at a location
mutually agreed upon by the parties to this Contract, but
notwithstanding the location of the arbitration, all
proceedings pursuant hereto shall be governed by the law of
the state in which the Company has its principal office.
Article XXIV - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of a
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.
Article XXV - Agency Agreement
Meridian Mutual Insurance Company shall be deemed the agent of
the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this
Contract, and for purposes of remitting or receiving any monies
due any party.
Article XXVI - Intermediary (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall be
deemed to constitute payment to the Company only to the extent
that such payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
Indianapolis, Indiana,this _______ day of _________________199___.
__________________________________________________
Meridian Mutual Group
Table of Contents
Article Page
Preamble 1
I Classes of Business Reinsured 1
II Term 2
III Territory 2
IV Exclusions 2
V Retention and Limit 4
VI Reinstatement 5
VII Definitions 5
VIII Other Reinsurance 6
IX Loss Occurrence 6
X Loss Notices and Settlements 7
XI Salvage and Subrogation 7
XII Premium 7
XIII Late Payments 8
XIV Offset (BRMA 36C) 9
XV Access to Records (BRMA 1D) 10
XVI Net Retained Lines (BRMA 32E) 10
XVII Errors and Omissions (BRMA 14F) 10
XVIII Currency (BRMA 12A) 10
XIX Taxes (BRMA 50C) 10
XX Federal Excise Tax (BRMA 17A) 11
XXI Unauthorized Reinsurers 11
XXII Insolvency 12
XXIII Arbitration (BRMA 6J) 13
XXIV Service of Suit (BRMA 49C) 14
XXV Agency Agreement 14
XXVI Intermediary (BRMA 23A) 14
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Reinsurers Participations
Employers Mutual Casualty Company 0.640%
Nationwide Mutual Insurance Company 3.400
Partner Reinsurance Company 10.000
United Fire & Casualty Company 1.100
United States Fidelity and Guaranty Company 5.250
USF RE Insurance Company 1.300
Vesta Fire Insurance Corporation 9.050
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 6.800
Reinsurance Australia Corporation Limited 3.570
Through Swire Blanch Europe
Albingia Versicherungs AG 1.250
Bayerische Ruckversicherung A.G. 7.650
La Mutuelle Du Mans Assurances I.A.R.D. 2.125
Mapfre Re Compania de Reaseguros, S.A. 2.125
Sirius International Insurance Corporation 0.640
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 45.100
Total 100.000%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Interests and Liabilities Agreement
of
Employers Mutual Casualty Company
Des Moines, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 0.640% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Des Moines, Iowa,this _______ day of _____________________ 199___.
__________________________________________________
Employers Mutual Casualty Company
Interests and Liabilities Agreement
of
Nationwide Mutual Insurance Company
Columbus, Ohio
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 3.400% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Columbus, Ohio,this _______ day of ________________________199___.
__________________________________________________
Nationwide Mutual Insurance Company
Interests and Liabilities Agreement
of
Partner Reinsurance Company
Pembroke Parish, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 10.000% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Pembroke Parish, Bermuda,this _______ day of ______________199___.
__________________________________________________
Partner Reinsurance Company
Interests and Liabilities Agreement
of
United Fire & Casualty Company
Cedar Rapids, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 1.100% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Cedar Rapids, Iowa,this _______ day of ____________________199___.
__________________________________________________
United Fire & Casualty Company
Interests and Liabilities Agreement
of
United States Fidelity and Guaranty Company
Baltimore, Maryland
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 5.250% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Morristown, New Jersey,this _______ day of _______________ 199___.
United States Fidelity and Guaranty Company
By:______________________________________________
Attorney-In-Fact
Interests and Liabilities Agreement
of
USF RE Insurance Company
Boston, Massachusetts
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 1.300% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Florham Park, New Jersey,this _______ day of ______________199___.
__________________________________________________
USF RE Insurance Company
Interests and Liabilities Agreement
of
Vesta Fire Insurance Corporation
Birmingham, Alabama
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 9.050% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Birmingham, Alabama,this _______ day of ___________________199___.
__________________________________________________
Vesta Fire Insurance Corporation
Interests and Liabilities Agreement
of
GIO Insurance Ltd.
trading as GIO Reinsurance
Sydney, Australia
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 6.800% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Sydney, Australia,this _______ day of ____________________ 199___.
__________________________________________________
GIO Insurance Ltd.
trading as GIO Reinsurance
Interests and Liabilities Agreement
of
Reinsurance Australia Corporation Limited
Sydney, Australia
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 3.570% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Sydney, Australia,this _______ day of ____________________ 199___.
__________________________________________________
Reinsurance Australia Corporation Limited
Interests and Liabilities Agreement
of
Albingia Versicherungs AG
Hamburg, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 1.250% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamburg, Germany,this _______ day of _____________________ 199___.
__________________________________________________
Albingia Versicherungs AG
Interests and Liabilities Agreement
of
Bayerische Ruckversicherung A.G.
Munich, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 7.650% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Munich, Germany,this _______ day of ______________________ 199___.
__________________________________________________
Bayerische Ruckversicherung A.G.
Interests and Liabilities Agreement
of
La Mutuelle Du Mans Assurances I.A.R.D.
LeMans, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.125% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
LeMans, France,this _______ day of ________________________199___.
__________________________________________________
La Mutuelle Du Mans Assurances I.A.R.D.
Interests and Liabilities Agreement
of
Mapfre Re Compania de Reaseguros, S.A
Madrid, Spain
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.125% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Madrid, Spain,this _______ day of _______________________ 199___.
__________________________________________________
Mapfre Re Compania de Reaseguros, S.A.
Interests and Liabilities Agreement
of
Sirius International Insurance Corporation
Stockholm, Sweden
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 0.640% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Stockholm, Sweden,this _______ day of ____________________199___.
__________________________________________________
Sirius International Insurance Corporation
Interests and Liabilities Agreement
of
Certain Underwriting Members of Lloyd's
shown in the Signing Schedule attached hereto
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 45.100% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In any action, suit or proceeding to enforce the Subscribing
Reinsurer's obligations under the attached Contract, service of
process may be made upon Mendes & Mount, 750 Seventh Avenue,
New York, New York 10019.
Signed for and on behalf of the Subscribing Reinsurer in the
Signing Schedule attached hereto.
EXHIBIT 10.51
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
"Reinsurer")
Preamble
The "Meridian Mutual Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Indianapolis,
Indiana, Meridian Security Insurance Company, Indianapolis,
Indiana, Citizens Security Mutual Insurance Company, Red Wing,
Minnesota, Citizens Fund Insurance Company, Red Wing, Minnesota,
and Insurance Company of Ohio, Mansfield, Ohio. The application
of this Contract shall be to the parties comprising the Meridian
Mutual Group as a group and not separately to each.
Article I - Classes of Business Reinsured
By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Fire and Allied Lines, Homeowners (property perils
only), Mobile Homeowners (property perils only), Farmowners
(property perils only), Commercial Multiple Peril (property
perils only), Businessowners (property perils only), Earthquake,
Inland Marine and Automobile Physical Damage (comprehensive
coverage only) business, subject to the terms, conditions and
limitations hereinafter set forth.
Article II - Term
A. This Contract shall become effective on January 1, 1998, with
respect to losses arising out of loss occurrences commencing
on or after that date, and shall remain in force until
December 31, 1998, both days inclusive.
B. If this Contract expires while a loss occurrence covered
hereunder is in progress, the Reinsurer's liability hereunder
shall, subject to the other terms and conditions of this
Contract, be determined as if the entire loss occurrence had
occurred prior to the expiration of this Contract, provided
that no part of such loss occurrence is claimed against any
renewal or replacement of this Contract.
Article III - Territory
The liability of the Reinsurer shall be limited to losses under
policies covering property located within the territorial limits
of the United States of America, its territories or possessions,
Puerto Rico, the District of Columbia and Canada; but this
limitation shall not apply to moveable property if the Company's
policies provide coverage when said moveable property is outside
the aforesaid territorial limits.
Article IV - Exclusions
This Contract shall not apply to:
1. Reinsurance accepted by the Company other than:
a. Facultative reinsurance on a share basis of risks
accepted individually and not forming part of any
agreement; or
b. Local agency reinsurance on a share basis accepted
in the normal course of business.
2. Nuclear incident per the following clauses attached hereto:
a. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - U.S.A." (NMA 1119);
b. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - Canada" (NMA 1980);
c. "Nuclear Energy Risks Exclusion Clause
(Reinsurance) (1994) Worldwide Excluding U.S.A. &
Canada" (NMA 1975(a)).
3. Pool, association, or syndicate business as excluded
by the provisions of the "Pools, Associations and
Syndicates Exclusion Clause" attached to and forming part
of this Contract.
4. Any liability of the Company arising from its
participation or membership in any insolvency fund.
5. Credit, financial guarantee and insolvency business.
6. War risks as excluded in any standard policy.
7. Policies written to apply in excess of underlying
insurance or policies written with a deductible or
franchise of more than $10,000; however, this exclusion
shall not apply to policies which provide a percentage
deductible or franchise in connection with earthquake or
windstorm.
8. Insurance on growing crops.
9. Insurance against flood, surface water, waves, tidal
water or tidal wave, overflow of streams or other bodies
of water or spray from any of the foregoing, all whether
driven by wind or not, when written as such; however, this
exclusion shall not apply as respects the foregoing perils
included in Commercial Multiple Peril, Homeowners Multiple
Peril, Farmowners Multiple Peril, Inland Marine,
Boatowners, Mobile Homeowners, and Automobile Physical
Damage policies, and in endorsements to Fire and Extended
Coverage policies.
10. Mortgage impairment insurance and similar kinds of
insurance, howsoever styled, providing coverage to an
insured with respect to its mortgagee interest in property
or its owner interest in foreclosed property.
11. Difference in conditions insurance and similar kinds
of insurance, howsoever styled.
12. Risks which have a total insurable value of more than $250,000,000.
13. Any collection of fine arts with an insurable value
of $5,000,000 or more.
14. Inland Marine business with respect to the following:
a. All bridges and tunnels;
b. Cargo insurance when written as such with respect
to ocean, lake, or inland waterways vessels;
c. Commercial negative film insurance and cast insurance;
d. Drilling rigs, except water well drilling rigs;
e. Furriers' customers policies;
f. Garment contractors policies;
g. Insurance on livestock under so-called "mortality
policies," when written as such;
h. Jewelers' block policies and furriers' block policies;
i. Mining equipment while underground;
j. Radio and television broadcasting towers;
k. Registered mail insurance when the limit of any
one addressee on any one day is more than $50,000;
l. Watercraft other than watercraft insured under
personal property floaters, yacht and/or outboard
policies, homeowners, farmowners, or recreational
vehicle policies.
15. Automobile physical damage business with respect to the following:
a. Insurance against collision;
b. Insurance against theft or larceny;
c. Manufacturers' stocks at factories or warehouses.
16. This Contract excludes loss and/or damage and/or
costs and/or expenses arising from seepage and/or
pollution and/or contamination, other than contamination
from smoke. Nevertheless, this exclusion does not
preclude payment of the cost of removing debris of
property damaged by a loss otherwise covered hereunder,
subject always to a limit of 25% of the Company's property
loss under the applicable original policy.
17. Losses in respect of overhead transmission and
distribution lines and their supporting structures other
than those on or within 150 meters (or 500 feet) of the
insured premises.
It is understood and agreed that public utilities
extension and/or suppliers extension and/or contingent
business interruption coverages are not subject to this
exclusion provided that these are not part of a
transmitters' or distributors' policy.
18. Extra Contractual Obligations and Loss in Excess of Policy Limits.
Article V - Retention and Limit
A. No claim shall be made hereunder until the Company's subject
ultimate net loss arising out of loss occurrences commencing
during the term of this Contract exceeds 3.0% of net earned
premium for the term of this Contract, subject to a minimum
retention of $7,800,000. The Reinsurer shall then be liable
for 95.0% of the amount by which the Company's subject
ultimate net loss for the term of this Contract exceeds the
Company's retention, but the liability of the Reinsurer shall
not exceed 95.0% of $10,000,000 during the term of this
Contract.
B. "Subject ultimate net loss" as used herein shall mean:
1. The Company's ultimate net loss in excess of $550,000
arising out of any one loss occurrence, not to exceed
$5,450,000 in any one loss occurrence; plus,
2. The Company's 5.0% co-participation under their per
occurrence catastrophe coverage of $12,000,000 excess of
$6,000,000 per loss occurrence.
No loss occurrence shall be included in subject ultimate net
loss unless said loss occurrence involves at least two risks.
C. The Company shall maintain in force excess per risk
reinsurance, recoveries under which shall inure to the benefit
of this Contract.
Article VI - Definitions
A. "Ultimate net loss" as used herein is defined as the sum or
sums (including any loss adjustment expense, as hereinafter
defined) paid or payable by the Company in settlement of
claims and in satisfaction of judgments rendered on account of
such claims, after deduction of all salvage, all recoveries
and all claims on inuring insurance or reinsurance, whether
collectible or not. Nothing herein shall be construed to mean
that losses under this Contract are not recoverable until the
Company's ultimate net loss has been ascertained.
B. "Loss adjustment expense" as used herein shall mean expenses
assignable to the investigation, appraisal, adjustment,
settlement, litigation, defense and/or appeal of specific
claims, regardless of how such expenses are classified for
statutory reporting purposes. Loss adjustment expense shall
include, but not be limited to, interest on judgments and
expenses of outside adjusters, but shall not include office
expenses or salaries of the Company's regular employees.
Article VII - Loss Occurrence (NMA 2244/BRMA 27A)
A. The term "loss occurrence" shall mean the sum of all
individual losses directly occasioned by any one disaster,
accident or loss or series of disasters, accidents or losses
arising out of one event which occurs within the area of one
state of the United States or province of Canada and states or
provinces contiguous thereto and to one another. However, the
duration and extent of any one "loss occurrence" shall be
limited to all individual losses sustained by the Company
occurring during any period of 168 consecutive hours arising
out of and directly occasioned by the same event, except that
the term "loss occurrence" shall be further defined as follows:
1. As regards windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours arising out of
and directly occasioned by the same event. However, the
event need not be limited to one state or province or
states or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours within the area
of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly
occasioned by the same event. The maximum duration of
72 consecutive hours may be extended in respect of
individual losses which occur beyond such 72 consecutive
hours during the continued occupation of an assured's premises
by strikers, provided such occupation commenced during the
aforesaid period.
3. As regards earthquake (the epicentre of which need
not necessarily be within the territorial confines
referred to in paragraph A of this Article) and fire
following directly occasioned by the earthquake, only
those individual fire losses which commence during the
period of 168 consecutive hours may be included in the
Company's "loss occurrence."
4. As regards "freeze," only individual losses directly
occasioned by collapse, breakage of glass and water damage
(caused by bursting frozen pipes and tanks) may be
included in the Company's "loss occurrence."
B. Except for those "loss occurrences" referred to in
subparagraphs 1 and 2 of paragraph A above, the Company may
choose the date and time when any such period of
consecutive hours commences, provided that it is not earlier
than the date and time of the occurrence of the first recorded
individual loss sustained by the Company arising out of that
disaster, accident or loss, and provided that only one such
period of 168 consecutive hours shall apply with respect to
one event.
C. However, as respects those "loss occurrences" referred to in
subparagraphs 1 and 2 of paragraph A above, if the disaster,
accident or loss occasioned by the event is of greater
duration than 72 consecutive hours, then the Company may
divide that disaster, accident or loss into two or more "loss
occurrences," provided that no two periods overlap and no
individual loss is included in more than one such period, and
provided that no period commences earlier than the date and
time of the occurrence of the first recorded individual loss
sustained by the Company arising out of that disaster,
accident or loss.
D. No individual losses occasioned by an event that would be
covered by 72 hours clauses may be included in any "loss
occurrence" claimed under the 168 hours provision.
Article VIII - Loss Notices and Settlements
A. Whenever losses sustained by the Company appear likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of such losses at its own expense.
B. All loss settlements made by the Company, provided they are
within the terms of the original policies (or within the terms
of extra contractual obligations coverage, if any, provided
under this Contract) and within the terms of this Contract,
shall be binding upon the Reinsurer. The Reinsurer agrees to
pay all amounts for which it may be liable upon receipt of
reasonable evidence of the amount paid (or scheduled to be
paid) by the Company. The Company shall be the sole judge of
what is covered by an original policy.
C. If the aggregate subject excess ultimate net paid losses
occurring during the term of this Contract exceed the
provisional retention, the Reinsurer shall make preliminary
payment of the Reinsurer's portion of such subject ultimate
net losses. The provisional retention shall be calculated
based upon 3.0% of the estimated net earned premium for the
term of this Contract, as estimated at the inception hereof.
Any such preliminary payment shall be adjusted to actual as
soon as the Company's net earned premium is known.
Article IX - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article X - Premium
A. As premium for the reinsurance provided hereunder, the Company
shall pay the Reinsurer 0.96% of its net earned premium for
the term of this Contract, subject to a minimum premium of
$2,160,000.
B. The Company shall pay the Reinsurer a deposit premium of
$2,700,000 in four equal installments of $675,000 on
January 1, April 1, July 1 and October 1 of 1998.
C. Within 60 days after the expiration of this Contract, the
Company shall provide a report to the Reinsurer setting forth
the premium due hereunder, computed in accordance with
paragraph A, and any additional premium due the Reinsurer or
return premium due the Company shall be remitted promptly.
D. "Net earned premium" as used herein is defined as gross earned
premium of the Company for all classes of business issued by
the Company, less the earned portion of premiums ceded by the
Company for reinsurance which inures to the benefit of this
Contract.
Article XI - Profit Sharing
A. If the premiums paid for the Underlying Aggregate Excess
Catastrophe Reinsurance Contracts effective January 1, 1996
and January 1, 1997 and this Contract exceed the claims
incurred under said contracts, then the Company will be
entitled to a "Return Premium." The "Return Premium" shall be
equal to the greater of zero or 25% of the "Profit Balance"
under said contracts in the aggregate. The "Profit Balance"
shall be equal to 80% of the total premiums, including
reinstatement premiums paid (if any) during the terms of said
contracts, less losses incurred under said contracts.
B. At the date that such a "Return Premium" is mutually
determined by the Company and the Reinsurer and the payment is
made by the Reinsurer to the Company, such contracts shall be
considered commuted, and such payment, once effected, shall be
regarded as a full and final release of the Reinsurer from all
liability under such contracts.
Article XII - Late Payments
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to
this Contract.
B. In the event any premium, loss or other payment due either
party is not received by the intermediary named in Article XXV
(hereinafter referred to as the "Intermediary") by the payment
due date, the party to whom payment is due may, by notifying
the Intermediary in writing, require the debtor party to pay,
and the debtor party agrees to pay, an interest penalty on the
amount past due calculated for each such payment on the last
business day of each month as follows:
1. The number of full days which have expired since the
due date or the last monthly calculation, whichever the
lesser; times
2. 1/365ths of the 12-month United States Treasury Bill
Rate, as quoted in The Wall Street Journal on the first
business day of the month for which the calculation is
made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of
the original amount due plus interest penalties have been
received by the Intermediary.
C. The establishment of the due date shall, for purposes of this
Article, be determined as follows:
1. As respects the payment of routine deposits and
premiums due the Reinsurer, the due date shall be as
provided for in the applicable section of this Contract.
In the event a due date is not specifically stated for a
given payment, it shall be deemed due 30 days after the
date of transmittal by the Intermediary of the initial
billing for each such payment.
2. Any claim or loss payment due the Company hereunder
shall be deemed due 10 business days after the proof of
loss or demand for payment is transmitted to the Reinsurer
or received by the Reinsurer, whichever is soonest. If
such loss or claim payment is not received with the 10
days, interest will accrue on the payment or amount
overdue in accordance with paragraph B above, from the
date the proof of loss or demand for payment, in
accordance with the provisions of Article VIII, was
transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due
either party not otherwise provided for in subparagraphs 1
and 2 of paragraph C above, the due date shall be as
provided for in the applicable section of this Contract.
In the event a due date is not specifically stated for a
given payment, it shall be deemed due 10 business days
following transmittal of written notification that the
provisions of this Article have been invoked.
For purposes of interest calculations only, amounts hereunder
shall be deemed paid upon receipt by the Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a
subscribing reinsurer from contesting the validity of any
claim, or from participating in the defense or control of any
claim or suit, or prohibiting either party from contesting the
validity of any payment or from initiating any arbitration or
other proceeding in accordance with the provisions of this
Contract. If the debtor party prevails in an arbitration or
other proceeding, then any interest penalties due hereunder on
the amount in dispute shall be null and void. If the debtor
party loses in such proceeding, then the interest penalty on
the amount determined to be due hereunder shall be calculated
in accordance with the provisions set forth above unless
otherwise determined by such proceedings. If a debtor party
advances payment of any amount it is contesting, and proves to
be correct in its contestation, either in whole or in part,
the other party shall reimburse the debtor party for any such
excess payment made plus interest on the excess amount
calculated in accordance with this Article.
E. Interest penalties arising out of the application of this
Article that are $100 or less from any party shall be waived
unless there is a pattern of late payments consisting of three
or more items over the course of any 12-month period.
Article XIII - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XIV - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XV - Net Retained Lines (BRMA 32B)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account, and in
calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this
Contract attaches, only loss or losses in respect of that
portion of any policy which the Company retains net for its
own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XVI - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.
Article XVII - Currency (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this
Contract, they shall be construed to mean United States
Dollars and all transactions under this Contract shall be in
United States Dollars.
B. Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books
of the Company.
Article XVIII - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XIX - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XX - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
outstanding loss and loss adjustment expense reserves by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities; and/or
2. Escrow accounts for the benefit of the Company; and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company's ceded Canadian outstanding loss and
loss adjustment expense reserves by:
1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or
2. Cash advances for the remaining balance of the funding required;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.
C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expense paid under the terms
of policies reinsured hereunder, unless paid in cash by
the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves, if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1) or
C(3), or in the case of C(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.
Article XXI - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory successor of the company has failed to pay all or
a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the
approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.
Article XXII - Arbitration (BRMA 6J)
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within
30 days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this Article and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at a location
mutually agreed upon by the parties to this Contract, but
notwithstanding the location of the arbitration, all
proceedings pursuant hereto shall be governed by the law of
the state in which the Company has its principal office.
Article XXIII - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of a
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.
Article XXIV - Agency Agreement
Meridian Mutual Insurance Company shall be deemed the agent of
the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this
Contract, and for purposes of remitting or receiving any monies
due any party.
Article XXV - Intermediary (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall be
deemed to constitute payment to the Company only to the extent
that such payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
Indianapolis, Indiana,this _______ day of _________________199___.
__________________________________________________
Meridian Mutual Group
Table of Contents
Article Page
Preamble 1
I Classes of Business Reinsured 1
II Term 2
III Territory 2
IV Exclusions 2
V Retention and Limit 4
VI Definitions 5
VII Loss Occurrence (NMA 2244/BRMA 27A) 5
VIII Loss Notices and Settlements 7
IX Salvage and Subrogation 7
X Premium 7
XI Profit Sharing 8
XII Late Payments 8
XIII Offset (BRMA 36C) 10
XIV Access to Records (BRMA 1D) 10
XV Net Retained Lines (BRMA 32B) 10
XVI Errors and Omissions (BRMA 14F) 10
XVII Currency (BRMA 12A) 10
XVIII Taxes (BRMA 50C) 11
XIX Federal Excise Tax (BRMA 17A) 11
XX Unauthorized Reinsurers 11
XXI Insolvency 12
XXII Arbitration (BRMA 6J) 13
XXIII Service of Suit (BRMA 49C) 14
XXIV Agency Agreement 15
XXV Intermediary (BRMA 23A) 15
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Meridian Mutual Group
Indianapolis, Indiana
Reinsurers Participations
Dorinco Reinsurance Company 19.0%
Erie Insurance Exchange 2.0
Gerling Global Reinsurance Corporation of America 3.5
The Nissan Fire & Marine Insurance Co., Ltd. 2.0
Odyssey Reinsurance Corporation 4.0
Renaissance Reinsurance Ltd. 67.5
USF RE Insurance Company 2.0
Total 100.0
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Interests and Liabilities Agreement
of
Dorinco Reinsurance Company
Midland, Michigan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 19.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Midland, Michigan,this _______ day of _____________________199___.
__________________________________________________
Dorinco Reinsurance Company
Interests and Liabilities Agreement
of
Erie Insurance Exchange
Erie, Pennsylvania
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Erie, Pennsylvania,this _______ day of ___________________ 199___.
__________________________________________________
Erie Insurance Exchange
By: Erie Indemnity Company
(Attorney-In-Fact)
Interests and Liabilities Agreement
of
Gerling Global Reinsurance
Corporation of America
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 3.5% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
Gerling Global Reinsurance Corporation of America
Interests and Liabilities Agreement
of
The Nissan Fire & Marine Insurance Co., Ltd.
Tokyo, Japan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Tokyo, Japan,this _______ day of ________________________ 199___.
__________________________________________________
The Nissan Fire & Marine Insurance Co., Ltd.
Interests and Liabilities Agreement
of
Odyssey Reinsurance Corporation
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts a 4.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
Any rights, interests, liabilities and obligations of Cie
Transcontinentale de Reassurance, Paris, France, under its
Interests and Liabilities Agreements with respect to the
Company's Underlying Aggregate Excess Catastrophe Reinsurance
Contract, effective January 1, 1996, and the Company's Underlying
Aggregate Excess Catastrophe Reinsurance Contract, effective
January 1, 1997, shall be assumed by the Subscribing Reinsurer,
for purposes of calculating "Return Premium" in accordance with
the provisions of Article XI - Profit Sharing - of the attached
Contract.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the parties hereto by their respective duly
authorized representatives have executed this Agreement as of the
dates undermentioned at:
Indianapolis, Indiana,this _______ day of ________________199___.
__________________________________________________
Meridian Mutual Group
New York, New York,this _______ day of __________________ 199___.
__________________________________________________
Odyssey Reinsurance Corporation
Interests and Liabilities Agreement
of
Renaissance Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 67.5% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of _____________________199___.
__________________________________________________
Renaissance Reinsurance Ltd.
Interests and Liabilities Agreement
of
USF RE Insurance Company
Boston, Massachusetts
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1998, and
shall continue in force until December 31, 1998, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Florham Park, New Jersey,this _______ day of _____________199___.
__________________________________________________
USF RE Insurance Company
EXHIBIT 10.53
Addendum No. 2
to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
It Is Hereby Agreed, effective January 1, 1997, with respect to
business issued or renewed on or after that date, that the
Preamble (as amended by Addendum No. 1) to this Contract shall be
deleted and the following substituted therefor:
"Preamble
The `Meridian Mutual Group' for purposes of this Contract
shall consist of Meridian Mutual Insurance Company,
Indianapolis, Indiana, Meridian Security Insurance Company,
Indianapolis, Indiana, Citizens Security Mutual Insurance
Company, Red Wing, Minnesota, Citizens Fund Insurance Company,
Red Wing, Minnesota, and Insurance Company of Ohio, Mansfield,
Ohio. The application of this Contract shall be to the
parties comprising the Meridian Mutual Group as a group and
not separately to each."
It Is Further Agreed, effective January 1, 1998, with respect to
losses arising out of loss occurrences commencing on or after
that date, that Article VI - Definition of Ultimate Net Loss -
shall be deleted and the following substituted therefor:
"Article VI - Definition of Ultimate Net Loss
A. `Ultimate net loss' as used herein is defined as the
sum or sums (including any loss adjustment expense, as
hereinafter defined) paid or payable by the Company in
settlement of claims and in satisfaction of judgments
rendered on account of such claims, after deduction of all
salvage, all recoveries and all claims on inuring
insurance or reinsurance, whether collectible or not.
Nothing herein shall be construed to mean that losses
under this Contract are not recoverable until the
Company's ultimate net loss has been ascertained.
B. `Loss adjustment expense' as used herein shall mean
expenses assignable to the investigation, appraisal,
adjustment, settlement, litigation, defense and/or appeal
of specific claims, regardless of how such expenses are
classified for statutory reporting purposes. Loss
adjustment expense shall include, but not be limited to,
interest on judgments and expenses of outside adjusters,
but shall not include office expenses or salaries of the
Company's regular employees."
It Is Also Agreed, effective January 1, 1998, that the following
Article shall be added to and made part of this Contract:
"Article XXV - Late Payments
A. The provisions of this Article shall not be
implemented unless specifically invoked, in writing, by
one of the parties to this Contract.
B. In the event any premium, loss or other payment due
either party is not received by the intermediary named in
Article XXIV (hereinafter referred to as the
`Intermediary') by the payment due date, the party to whom
payment is due may, by notifying the Intermediary in
writing, require the debtor party to pay, and the debtor
party agrees to pay, an interest penalty on the amount
past due calculated for each such payment on the last
business day of each month as follows:
1. The number of full days which have expired since
the due date or the last monthly calculation, whichever
the lesser; times
2. 1/365ths of the 12-month United States Treasury
Bill Rate, as quoted in The Wall Street Journal on the
first business day of the month for which the
calculation is made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until
payment of the original amount due plus interest penalties
have been received by the Intermediary.
C. The establishment of the due date shall, for purposes
of this Article, be determined as follows:
1. As respects the payment of routine deposits and
premiums due the Reinsurer, the due date shall be as
provided for in the applicable section of this
Contract. In the event a due date is not specifically
stated for a given payment, it shall be deemed due
30 days after the date of transmittal by the
Intermediary of the initial billing for each such
payment.
2. Any claim or loss payment due the Company
hereunder shall be deemed due 10 business days after
the proof of loss or demand for payment is transmitted
to the Reinsurer or received by the Reinsurer,
whichever is soonest. If such loss or claim payment is
not received within the 10 days, interest will accrue
on the payment or amount overdue in accordance with
paragraph B above, from the date the proof of loss or
demand for payment, in accordance with the provisions
of Article VIII, was transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due
either party not otherwise provided for in
subparagraphs 1 and 2 of paragraph C above, the due
date shall be as provided for in the applicable section
of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be
deemed due 10 business days following transmittal of
written notification that the provisions of this
Article have been invoked.
For purposes of interest calculations only, amounts
due hereunder shall be deemed paid upon receipt by the
Intermediary.
D. Nothing herein shall be construed as limiting or
prohibiting a subscribing reinsurer from contesting the
validity of any claim, or from participating in the
defense or control of any claim or suit, or prohibiting
either party from contesting the validity of any payment
or from initiating any arbitration or other proceeding in
accordance with the provisions of this Contract. If the
debtor party prevails in an arbitration or other
proceeding, then any interest penalties due hereunder on
the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest
penalty on the amount determined to be due hereunder shall
be calculated in accordance with the provisions set forth
above unless otherwise determined by such proceedings. If
a debtor party advances payment of any amount it is
contesting, and proves to be correct in its contestation,
either in whole or in part, the other party shall
reimburse the debtor party for any such excess payment
made plus interest on the excess amount calculated in
accordance with this Article.
E. Interest penalties arising out of the application of
this Article that are $100 or less from any party shall be
waived unless there is a pattern of late payments
consisting of three or more items over the course of any
12-month period."
The provisions of this Contract shall remain otherwise unchanged.
In Witness Whereof, the Company by its duly authorized
representative has executed this Addendum as of the date
undermentioned at:
Indianapolis, Indiana,this _____ day of ___________________199___.
__________________________________________________
Meridian Mutual Group
Addendum No. 2
to the
Interests and Liabilities Agreement
of
Dorinco Reinsurance Company
Midland, Michigan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 2, as duly
executed by the Company, as part of the Contract, effective
January 1, 1997.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Addendum as of the
date undermentioned at:
Midland, Michigan,this _______ day of _____________________199___.
__________________________________________________
Dorinco Reinsurance Company
Addendum No. 2
to the
Interests and Liabilities Agreement
of
Erie Insurance Exchange
Erie, Pennsylvania
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 2, as duly
executed by the Company, as part of the Contract, effective
January 1, 1997.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Addendum as of the
date undermentioned at:
Erie, Pennsylvania,this _______ day of ___________________ 199___.
__________________________________________________
Erie Insurance Exchange
By: Erie Indemnity Company
(Attorney-In-Fact)
Addendum No. 2
to the
Interests and Liabilities Agreement
of
Renaissance Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 2, as duly
executed by the Company, as part of the Contract, effective
January 1, 1997.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Addendum as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of _____________________199___.
__________________________________________________
Renaissance Reinsurance Ltd.
Addendum No. 2
to the
Interests and Liabilities Agreement
of
Shelter Reinsurance Company
Columbia, Missouri
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 2, as duly
executed by the Company, as part of the Contract, effective
January 1, 1997.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Addendum as of the
date undermentioned at:
Columbia, Missouri,this _______ day of ____________________199___.
__________________________________________________
Shelter Reinsurance Company
Addendum No. 2
to the
Interests and Liabilities Agreement
of
SOREMA North America Reinsurance Company
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 2, as duly
executed by the Company, as part of the Contract, effective
January 1, 1997.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Addendum as of the
date undermentioned at:
New York, New York,this _______ day of ___________________ 199___.
__________________________________________________
SOREMA North America Reinsurance Company
Addendum No. 2
to the
Interests and Liabilities Agreement
of
The Nissan Fire & Marine Insurance Co., Ltd.
Tokyo, Japan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 2, as duly
executed by the Company, as part of the Contract, effective
January 1, 1997.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Addendum as of the
date undermentioned at:
Tokyo, Japan,this _______ day of ________________________ 199___.
__________________________________________________
The Nissan Fire & Marine Insurance Co., Ltd.
Addendum No. 2
to the
Interests and Liabilities Agreement
of
Cie Transcontinentale de Reassurance
Paris, France
with respect to the
Second Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: May 10, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
It Is Hereby Agreed that Addendum No. 2 to the Contract shall
form part of the Contract, effective January 1, 1997.
It Is Further Agreed, effective January 1, 1998, that all rights,
interests, liabilities and obligations of the "Subscribing
Reinsurer" under this Agreement shall be transferred from Cie
Transcontinentale de Reassurance, Paris, France, (hereinafter
referred to as the "Assignor") to Odyssey Reinsurance
Corporation, Wilmington, Delaware (hereinafter referred to as the
"Assignee"). In accordance therewith, the Assignor shall assign,
and the Assignee shall assume, all of the rights, interests,
liabilities and obligations of the "Subscribing Reinsurer" under
this Agreement. The Assignee shall then be subject to all of the
terms and conditions hereof, and the term "Subscribing
Reinsurer," wherever it is used herein, shall refer to Odyssey
Reinsurance Corporation, Wilmington, Delaware.
It Is Understood and Agreed that the Company consents to the
foregoing transfer of rights, interests, liabilities and
obligations from the Assignor to the Assignee, and further
releases the Assignor from all unfulfilled liabilities and obligations
which have arisen under this Agreement and all liabilities and
obligations which may arise in the future under this Agreement.
In Witness Whereof, the parties hereto by their respective duly
authorized representatives have executed this Addendum as of the
dates undermentioned at:
Indianapolis, Indiana,this _____ day of ___________________199___.
__________________________________________________
Meridian Mutual Group
Paris, France,this _____ day of __________________________ 199___.
__________________________________________________
Cie Transcontinentale de Reassurance
New York, New York,this _____ day of _____________________ 199___.
__________________________________________________
Odyssey Reinsurance Corporation
EXHIBIT 10.55
ENDORSEMENT NO. 2
to the
PROPERTY EXCESS OF LOSS REINSURANCE BINDING AGREEMENT
between
MERIDIAN INSURANCE COMPANY
of Indianapolis, Indiana
CITIZENS SECURITY GROUP
(hereinafter called "Company")
and the
NAC REINSURANCE CORPORATION
New York, NY
(hereinafter called "Reinsurer")
It is hereby understood and agreed that effective January 1,
1997, the following amendment is made:
Meridian Insurance Company is expanded to also include
Citizens Security Group
Accepted by:
____________________________
Meridian Insurance Company
Date:_______________________
____________________________
NAC Resinsurance Corporation
Date:________________________
ENDORSEMENT NO. 3
to the
PROPERTY EXCESS OF LOSS REINSURANCE BINDING AGREEMENT
between
MERIDIAN INSURANCE COMPANY
of Indianapolis, Indiana
CITIZENS SECURITY GROUP
(hereinafter called "Company")
and the
NAC REINSURANCE CORPORATION
New York, NY
(hereinafter called "Reinsurer")
Effective June 15, 1996, the following amendment is made:
Article 6 - Limit of Liability of the Reinsurer is deleted
in it's entirety and replaced with the following:
Reinsurance Accepted for Protected Risks defined as Meridian
CLUG Classifications 1,2,3 and 4, in ISO Protection Classes
1 through 8 shall be limits up to two times the Company's
maximum net and treaty retention as outlined in the
Commercial Lines Divisional Authority Level section of the
CLUG. Reinsurance limits shall be subject to maximum limit
of $8,000,000 any one risk.
Reinsurance Accepted for Unprotected Risks defined as
Meridian CLUG Classifications 1,2,3 and 4 located in ISO
Protection Classes 9 and 10 shall be limits up to three
times the Company's maximum net and treaty retention as
outlined in the Commercial Lines Divisional Authority Level
section of the CLUG. Reinsurance limits shall be subject to
a maximum limit of $3,750,000 for any one risk.
The reinsurance limits are subject to a $12,000,000
limitation in any one occurrence.
Garage Keepers Legal Liability is included with a maximum
sublimit of $500,000 to be written by Meridian.
Accepted by:
_____________________________ ___________________
Meridian Insurance Company Date
_____________________________ ___________________
NAC Reinsurance Corportation Date
EXHIBIT 10.58
AGREEMENT FOR THE TRANSFER
OF CLAIM PROCESSING SERVICES
THIS AGREEMENT FOR THE TRANSFER OF CLAIM PROCESSING
SERVICES ("Agreement") is effective the 1st day of December,
1997, between Citizens Security Mutual Insurance Company,
Citizens Fund Insurance Company, Insurance Company of Ohio
(collectively, "Citizens Security Companies") and Virtual
Insurance Solutions Network, Inc. ("Visn").
WHEREAS, on or about July 31, 1996 Citizens Security
Companies and Visn entered into a Claims Administration
Agreement ("Claims Agreement"), which agreement had a term
of three years from its Commencement Date as defined
therein; and
WHEREAS, the parties to the Claims Agreement have
agreed to terminate said agreement effective December 1,
1997; and
WHEREAS, the parties wish to provide for the orderly
transfer of claim processing services from Visn to Citizens
Security Companies and resolve matters between them relating
to the Claims Agreement.
NOW, THEREFORE, in consideration of the foregoing, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
agree as follows.
1. Termination of Claims Agreement. The claims
Agreement between the parties is terminated as of the
effective date of this Agreement. Notwithstanding, the
indemnification provisions of sections 8.1 and 8.2 of the
Claims Agreement shall remain in effect.
2. Term of Agreement. This Agreement shall be for a
term of five months, beginning December 1, 1997 and ending
April 30, 1998.
3. Services to be Performed by Visn.
3.1 From the effective date of this Agreement
through February 28, 1998, Visn shall assist with the
orderly and professional transfer to Citizens Security
Companies of the claim processing services provided
pursuant to the Claims Agreement. The assistance to be
rendered by Visn shall include fair and reasonable
systems support from the same general group of
individuals who provided claim processing services
pursuant to the Claims Agreement.
3.2 Visn agrees to obtain the approval of Citzens
Security Companies before (a) setting reserves; (b)
changing reserves; or (c) making any indemnity payment,
if such action involves funds in the amount of Fifteen
Thousand and no/100ths Dollars ($15,000) or more. Visn
shall forward to Citizens Security Companies all
correspondence, mail and other information that relate
to matters to be handled by Citizens Security Companies
after the term of this Agreement.
3.3 The services referenced in paragraphs 3.1 and
3.2 above shall be provided at the locations and during
the times that such services were routinely rendered
pursuant to the Claims Agreement.
3.4 The parties recognize and acknowledge that Visn
has assigned certain rights and obligations pursuant to
the Claims Agreement to Claim Solutions, Inc., and that
the employees of Claims Solutions, Inc. will provide
the services referenced in this section 3.
3.5 The obligations of Visn pursuant to this
section 3 shall cease as of February 28, 1998.
4. Services to be Performed by Citizens Security
Companies.
4.1 Citizens Security Companies shall timely
respond to any request made by Visn pursuant to
paragraph 3.2 above.
4.2 Citizens Security Companies shall participate
in the transfer contemplated hereunder by providing on-
site assistance in Red Wing, Minnesota. Citizen
Security Companies may have at least one individual,
and up to two individuals if it so desires, on-site two
days each week during the term of this Agreement. It
is contemplated that the following individuals will be
providing the assistance referenced: Mr. Bill Irk, Mr.
Gary Abel, Mr. Dick Yockey, and Mr. Stan Knauff.
Citizens Security Companies will provide a schedule
that details (a) the dates on which it will provide on-
site assistance and (b) its anticipated schedule for
the transfer of claim processing services.
5. Compensation.
5.1 During the term of this Agreement, Citizens
Security Companies shall pay to Visn a monthly fee of
Two Hundred Thirty Thousand Dollars and no/100ths
($230,000). Said fee shall be paid on the first day of
each month, with the fee for the first month being paid
in full by December 19, 1997. The last monthly payment
owed to Visn under this contract shall be paid by April
1, 1998.
5.2 Compensation for salvage and subrogation
services shall remain a monthly fee of fifteen percent
(15%) of Net Recoverables. "Net Recoverables" shall
mean funds obtained in the preceeding month as a result
of the salvage and subrogation efforts of Visn (or its
assignee), less collection expenses and administrative
fees incurred by Visn (or its assignee), less any
deductible recoveries made and issued to policyholders.
6. Notice; Off-Site Services; Travel. Citizens
Security Companies shall provide Visn with twenty-four (24)
hours notice of any site visit. In the event Citizens
Security Companies desires that the services agreed to
herein be provided at a location other than the locations at
which such services were routinely rendered pursuant to the
Claims Agreement, Citizens Security Companies shall pay a fee
of One Thousand Dollars and no/100ths ($1,000) per day for each
person providing services off-site. Citizens Security Companies
shall pay all travel and out-of-pocket expenses incurred in
providing the services off-site. Visn shall be available, upon
three (3) calendar days notice, to provide off-site services.
7. Termination of Sublease. With regard to the office
space that Visn has subleased from Citizens Security
Companies, Visn has given notice of its intent to terminate
the parties' Sublease Agreement effective December 1, 1998.
The parties agree that the rent and all other payments owed
pursuant to the Sublease Agreement, including utilities, will be
proportionately abated commencing March 1, 1998, through
December 1, 1998. Said abatement shall be the pro rata
square footage of the lease vacated by Visn's removal of
personnel and functions related to the performance of
services provided under the Claims Agreement. During the
transfer of services contemplated hereunder, all file
cabinets and other equipment owned by Citizens Security Companies
and used by Visn in providing claim processing services will be
returned to Citizens Security Companies.
8. Cooperation; Futher Assurances.
8.1 The parties agree to be at all times positive
and mutually supportive of each other. The parties agree to use
their best efforts to complete the transfer of the
claim processing services within ninety (90) days from
the effective date of this Agreement. Each party, in
its sole discretion, shall decide the timing, method,
and nature of the communication of the decision by the
parties to transfer the claim processing services.
8.2 The parties acknowledge that during the term of
this Agreement, and thereafter, additional matters will arise
that will require the mutual cooperation of the parties. Both
parties agree to take the action reasonably required to
deal with such anticipated but unknown matters,
including, but not limited to, inquiries from third
parties and government agencies that may arise from the
claim files handled under the Claims Agreement.
9. Choice of Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Minnesota, notwithstanding any state's choice of law rules to
the contrary.
10. Effect of Agreement. Except as modified
herein, this Agreement shall not effect the terms of the Sublease
Agreement, the computer support agreements or any other contract
or agreement between or among the parties.
Virtual Insurance Solutions Network, Inc.
Date: __________________ _________________________________________
Scott S. Broughton
Chief Executive Officer
Citizens Security Mutual Insurance Company
Citizens Fund Insurance Company
Insurance Company of Ohio
Date: __________________ _________________________________________
Norma J. Oman
President and Chief Executive Officer
EXHIBIT 21.01
MERIDIAN INSURANCE GROUP, INC.
Listing of Subsidiaries
As of December 31, 1997
State of Incorporation
Name of Subsidiary or Organization
Meridian Security Insurance Company Indiana
Citizens Fund Insurance Company Minnesota
Insurance Company of Ohio Ohio
Meridian Service Corporation Indiana
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Registration
No. 33-10943 on Form S-8 effective August 28, 1996; in
Registration Statement No. 33-31003 on Form S-8 as amended
by Post-Effective Amendment No. 1 effective July 31, 1997;
in Registration Statement No. 33-42771 on Form S-8
effective December 18, 1997; in Registration No. 33-11413 on
Form S-1 as amended by Post-Effective Amendment No. 1
effective March 19, 1987; and in Registration Statement No.
33-58406 on Form S-2 effective April 27, 1993 of Meridian
Insurance Group, Inc. of our report, dated February 25,
1998, on our audits of the consolidated financial statements
and financial statement schedules of Meridian Insurance
Group, Inc. as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997, which
report is included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 7
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<DEBT-HELD-FOR-SALE> 248,404
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 3,996
<EQUITIES> 54,379
<MORTGAGE> 700
<REAL-ESTATE> 0
<TOTAL-INVEST> 308,427
<CASH> 1,188
<RECOVER-REINSURE> 48,850
<DEFERRED-ACQUISITION> 17,652
<TOTAL-ASSETS> 413,586
<POLICY-LOSSES> 169,801
<UNEARNED-PREMIUMS> 82,839
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0
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<COMMON> 41,802
<OTHER-SE> 90,092
<TOTAL-LIABILITY-AND-EQUITY> 413,586
194,587
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<OTHER-INCOME> 1,042
<BENEFITS> 149,219
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<INCOME-TAX> 207
<INCOME-CONTINUING> 6,921
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<CHANGES> 0
<NET-INCOME> 6,921
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.03
<RESERVE-OPEN> 161,309
<PROVISION-CURRENT> 165,577
<PROVISION-PRIOR> (16,358)
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<PAYMENTS-PRIOR> 50,332
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<CUMULATIVE-DEFICIENCY> (16,358)
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<TABLE> <S> <C>
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<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1997
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<DEBT-HELD-FOR-SALE> 238,343 220,037 247,723
<DEBT-CARRYING-VALUE> 0 0 0
<DEBT-MARKET-VALUE> 1,327 2,483 3,296
<EQUITIES> 40,630 31,120 54,986
<MORTGAGE> 704 727 701
<REAL-ESTATE> 0 0 0
<TOTAL-INVEST> 281,689 254,694 307,666
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<DEFERRED-ACQUISITION> 16,690 13,355 18,338
<TOTAL-ASSETS> 397,798 322,588 409,674
<POLICY-LOSSES> 161,309 123,577 162,439
<UNEARNED-PREMIUMS> 84,066 64,559 87,836
<POLICY-OTHER> 0 0 0
<POLICY-HOLDER-FUNDS> 0 0 0
<NOTES-PAYABLE> 11,875 0 11,500
0 0 0
0 0 0
<COMMON> 44,078 44,077 41,802
<OTHER-SE> 78,096 74,166 89,202
<TOTAL-LIABILITY-AND-EQUITY> 397,798 322,588 409,674
167,304 143,866 146,130
<INVESTMENT-INCOME> 14,908 14,564 12,170
<INVESTMENT-GAINS> 3,794 1,538 2,760
<OTHER-INCOME> 562 (146) 967
<BENEFITS> 130,101 99,124 111,522
<UNDERWRITING-AMORTIZATION> 36,443 30,820 31,828
<UNDERWRITING-OTHER> 13,767 14,156 13,281
<INCOME-PRETAX> 5,950 15,722 5,396
<INCOME-TAX> 150 4,105 265
<INCOME-CONTINUING> 5,800 11,617 5,131
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 5,800 11,617 5,131
<EPS-PRIMARY> 0.86 1.72 0.77
<EPS-DILUTED> 0.85 1.71 0.76
<RESERVE-OPEN> 123,577 123,755 161,309
<PROVISION-CURRENT> 137,817 104,585 121,535
<PROVISION-PRIOR> (7,716) (5,461) (10,013)
<PAYMENTS-CURRENT> 93,199 61,792 68,121
<PAYMENTS-PRIOR> 30,470 36,899 43,305
<RESERVE-CLOSE> 161,309 123,577 162,439
<CUMULATIVE-DEFICIENCY> (7,716) (3,938) (10,013)
</TABLE>
