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To: BUSINESS WIRE AMY LYNCH
Fax#: 312-573-0019 Ph.#: 888-292-4446
PRESS RELEASE (#1) September 6, 2000
Contact: M. Gregory M. Shepard
Chairman and President
American Union Insurance Company
Phone: (309) 827-5968
MERIDIAN INSURANCE GROUP ACQUISITION CORPORATION DEMANDS THAT DIRECTORS OF
MERIDIAN INSURANCE GROUP, INC. RECEIVE NO ADVANCE PAYMENTS OF INDEMNIFICATION
UNTIL SPECIAL COUNSEL INVESTIGATES ACTIVITIES OF DIRECTORS
Today, Wednesday, September 6, 2000, Meridian Insurance Group Acquisition
Corporation, through Gregory M. Shepard, its Chairman and President, issued a
letter to Ms. Norma J. Oman, the President and Chief Executive Officer of
Meridian Insurance Group, Inc. demanding that no advance payments of
indemnification be made to directors of Meridian Insurance Group, Inc. until a
special counsel investigates the activities of each director of Meridian
Insurance Group, Inc.
The contents of the letter are as follows:
Ms. Norma J. Oman
President and Chief Executive Officer
Meridian Insurance Group, Inc.
2955 North Meridian Street
Indianapolis, Indiana
Dear Norma:
As you know, American Union Insurance Company, Meridian Insurance
Group Acquisition Corporation, and I have sued Meridian Insurance Group,
Inc. ("MIGI") and its directors. One of our complaints is that MIGI and
its board "tricked" the MIGI shareholders into opting back into of the
Indiana Control Share Acquisitions Statute (Ind. Code Ann. (S)23-1-42-1 et
seq.) and the Indiana Business Combinations Statute (Ind. Code Ann. (S)23-
1-43-1 et seq.) (collectively, the "Indiana Anti-Takeover Statutes"). MIGI
and its directors tricked the shareholders of MIGI by disseminating a proxy
statement, which was filed on April 7, 1997 with the Securities and
Exchange Commission, which discussed, inter alia, an amendment of MIGI's
Articles of Incorporation to incorporate a new class of preferred stock,
while failing to discuss MIGI's intentions to opt back into of the Indiana
Anti-Take-Over Statutes.
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No doubt your directors will ask MIGI to indemnify them and advance
expenses incurred in defending the lawsuit. Consequently, I draw your
attention to Section 7.01 of the Restated Articles of Incorporation of
Meridian Insurance Group, Inc., which states, in relevant part,
"Every director of the Corporation shall be indemnified by the
Corporation . . . provided that it is determined in the specific case
that indemnification of such person is permissible in the
circumstances because such person has met the standard of conduct for
indemnification specified in the Act. . . . (underline added). Upon
demand for indemnification or advancement of expenses, as the case may
be, the Corporation shall determine whether such person is entitled
thereto in accordance with the procedures specified in the Act."
As an approximately 20% shareholder in MIGI, I am demanding that MIGI
not advance any payment for indemnification or advancement of expenses to
MIGI's directors until and unless there is full compliance with the
procedures outlined in the Indiana Business Corporation Law, particularly,
Ind. Code Ann. (S)23-1-37-1 et seq. (the "Act"). In particular, I remind
you that the Act specifies that indemnification and advancement of expenses
is appropriate only if the directors acted in good faith. In accordance
with the Act, the determination of good faith for each director must be
made either (i) by a special legal counsel selected by a majority vote of
the full board of directors or (ii) by MIGI's shareholders that are not
parties to the lawsuit.
Additionally, before any payment for indemnification or advancement of
expenses is made to MIGI's directors, each director must furnish MIGI a
written affirmation of such director's good faith belief that he or she has
met the statutorily required standard of conduct and that he or she will
repay the advance if it is ultimately determined that the director did not
meet the standard of conduct.
I submit to you that MIGI and the board's tricking and deceiving
shareholders and filing a false statement with the Indiana Secretary of
State can never be construed as good faith.
I demand that, before any payments for indemnification or advancement
of expenses is made to any director, (i) each director submit the written
affirmation required by the Act and (ii) a special independent counsel of
national standing be selected in accordance with the Act to investigate
whether MIGI and each of its directors acted in good faith and met the
standard articulated in the Act, and to write an opinion as to whether
expenses should be advanced to the directors, and that this opinion and the
results of its investigation be disseminated to all shareholders.
Very truly yours,
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/s/ Gregory M. Shepard
Gregory M. Shepard
cc: Meridian Board of Directors
Securities and Exchange Commission
On Thursday, August 31, 2000, American Union Insurance Company
commenced a cash tender offer for all of the common stock of Meridian Insurance
Group, Inc., for $20 per share, which represented a 57% premium based on the
closing share price on August 29, 2000.
The offer is conditioned upon, among other things, (1) there being
validly tendered and not properly withdrawn prior to the expiration of the offer
a number of common shares which, together with the 1,588,400 common shares
[20.23% of the June 30, 2000 outstanding] owned by Shepard, constitute at least
50.1% of the voting securities of Meridian Insurance Group Inc. outstanding or
issuable under the company's stock option plans, (2) Meridian's redemption of
its preferred share purchase rights, (3) American Union being satisfied, in its
sole discretion, that the provisions of the Indiana Business Combination chapter
are inapplicable to the offer and the proposed merger described herein, (4)
American Union being satisfied, in its sole discretion, that the provisions of
the Indiana Control Share Acquisitions chapter are inapplicable to the offer and
the proposed merger described herein, (5) American Union having obtained all
insurance regulatory approvals necessary for their acquisition of control of
Meridian and its insurance subsidiaries and affiliates on terms and conditions
satisfactory to American Union, in its sole discretion, and (6) America Union
obtaining financing.
The offer and its withdrawal rights will expire at 5:00 P.M., New York
City time, on September 29, 2000, unless the offer is extended. The offer is
being made through a wholly owned subsidiary of American Union.
The Depositary and Information Agent for the offer is ChaseMellon
Shareholder Services, L.L.C., 44 Wall Street, 7th Floor, New York, New York,
10005, Call Toll-Free (888) 451-6741.
American Union Insurance Company is a Bloomington, Illinois based property
and casualty insurance company originally chartered in 1916 by L.F. Shepard as
Union Automobile Insurance Association. The present name was adopted in 1998.
Today 50% of American Union's common stock is owned by Gregory M. Shepard and
50% by Tracy M. Shepard, who are brothers.
