SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
EMC INSURANCE GROUP INC.
--------------------------------------------------------------
(Name of Subject Company)
EMC INSURANCE GROUP INC. and EMPLOYERS MUTUAL CASUALTY COMPANY
--------------------------------------------------------------
(Name of Persons Filing Statement)
Common Stock
--------------------------------------------------------------
(Title of Class of Securities)
268664 10 9
--------------------------------------------------------------
(CUSIP Number of Class of Securities)
Bruce G. Kelley, President
EMC Insurance Group Inc.
and
Employers Mutual Casualty Company
717 Mulberry Street
Des Moines, Iowa 50309
(515) 280-2950
--------------------------------------------------------------
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Person(s) Filing Statement)
with a copy to:
G. Thomas Sullivan, Esq.
Nyemaster, Goode, Voigts, West, Hansell & O'Brien
700 Walnut, Suite 1600
Des Moines, Iowa 50309-3899
(515) 283-3126
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This statement is filed in connection with (check the appropriate box):
(a) [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
(b) [ ] The filing of a registration statement under the Securities Act of
1933.
(c) [ ] A tender offer.
(d) [X] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]
Calculation of Filing Fee
- -------------------------------------------------------------------------------
Transaction Amount of
Valuation* Filing Fee
- -------------------------------------------------------------------------------
$30,985,017 $6,197
- -------------------------------------------------------------------------------
* Calculated using the closing price on the NASDAQ National Market System
on January 29, 2001, and covering 2,651,011 shares of Subject Company's
Common Stock.
[ ] Check box if any part of the fee is offset by Rule O-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Transaction
Statement") is being filed by EMC Insurance Group Inc. (the "Subject Company")
and Employers Mutual Casualty Company ("EMCC" and together with the Subject
Company, the "Filing Persons"), pursuant to Section 13(e) of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 13e-3
thereunder ("Rule 13e-3").
By filing this Transaction Statement, neither of the Filing Persons concedes
that Rule 13e-3 is applicable to the transactions described herein.
ITEM 1. SUMMARY TERM SHEET.
The Amended and Restated Dividend Reinvestment and Common Stock Purchase Plan
(the "Plan") of the Subject Company provides holders of shares of the Subject
Company's common stock (the "Common Stock") with a variety of services,
including the option to receive automatic reinvestment of dividends paid on
shares of Common Stock rather than cash dividends. In addition, participants
in the Plan may also purchase additional shares of Common Stock without
incurring broker commissions by making optional cash contributions to the Plan.
For a discussion of the terms of the Plan, the information set forth in Item
4(a) is hereby incorporated herein by reference.
Since the third quarter of 1998, all shares of Common Stock issued under the
Plan have been purchased on the open market through the Subject Company's
transfer agent. During the second quarter of 1999, EMCC elected to increase
its participation in the Plan. As a result, EMCC is now reinvesting one
hundred percent (100%) of its dividends in additional shares of Common
Stock. Prior to the second quarter of 1999, EMCC was reinvesting only fifty
percent (50%) of its dividends in additional shares of Common Stock. In
connection therewith, as of December 31, 2000, EMCC owned 8,646,999 shares of
the outstanding Common Stock of the Subject Company, or approximately 76.6% of
the Subject Company's total outstanding Common Stock.
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) Name and Address.
----------------
EMC Insurance Group Inc.
717 Mulberry Street
Des Moines, Iowa 50309
(515) 280-2902
(b) Securities. As of December 31, 2000, the Subject Company had
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11,294,220 shares of Common Stock outstanding.
(c) Trading Market and Price. The Common Stock is traded on the NASDAQ
------------------------
National Market tier of the NASDAQ Stock Market under the symbol EMCI.
The high and low sales prices of the Common Stock for each quarter
during the past two (2) years is as follows:
Quarter Ended High Low
------------- ---- ---
December 31, 2000 $12 1/8 $ 9 1/4
September 30, 2000 10 7 5/8
June 30, 2000 9 1/8 6 13/16
March 31, 2000 11 3/8 8 1/12
December 31, 1999 10 1/2 9
September 30, 1999 13 3/8 9 5/8
June 30, 1999 12 3/4 9 1/4
March 31, 1999 12 7/8 10 5/8
(d) Dividends. There are certain regulatory restrictions relating to the
---------
payment of dividends by Subject Company's insurance subsidiaries (for
a description of the Subject Company's insurance subsidiaries, Item
5(a) is incorporated herein by reference). See Note 6 to the financial
statements dated December 31, 1999 contained in Item 13 hereof for a
discussion of those restrictions. It is the present intention of the
Subject Company's Board of Directors to declare quarterly cash
dividends, but the amount and timing thereof, if any, is to be
determined by the Board of Directors at its discretion. The Subject
Company has made the following dividend payments during the past two
(2) years:
Quarter Ended Amount Per Share
------------- ----------------
December 31, 2000 $ .15
September 30, 2000 .15
June 30, 2000 .15
March 31, 2000 .15
December 31, 1999 .15
September 30, 1999 .15
June 30, 1999 .15
March 31, 1999 .15
(e) Prior Public Offerings. On April 27, 1990, Registration Statement No.
----------------------
33-34499 was filed to register 1,000,000 shares of Common Stock of the
Subject Company for use in the Plan. On December 17, 1997, Post-
Effective Amendment No. 1 to Registration Statement No. 33-34499 was
filed to register an additional 1,000,000 shares of Common Stock for
issuance under the Plan. On September 15, 2000, Post-Effective
Amendment No. 2 to Registration Statement No. 33-34499 was filed to
register an additional 1,000,000 shares of Common Stock for issuance
under the Plan. The proposed maximum offering price per share for
each of such Post-Effective Amendments was $14.00 and $10.125
respectively; however, such prices were estimated solely for the
purposes of calculating the registration fees. Actual amounts paid by
participants in the Plan vary according to the trading price of the
Common Stock on the NASDAQ National Market on each applicable
investment date.
(f) Prior Stock Purchases. Activity under the Plan is as follows:
---------------------
Years Ending December 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
Shares available for purchase,
beginning of year 399,629 729,325 980,904
Additional shares registered 1,000,000 ---- ----
Shares purchased under the Plan (518,950) (392,696) (188,579)
--------- --------- ---------
Shares available for purchase,
end of year 880,679 399,629 792,325
========= ========= =========
Range of purchase prices $7.50 $9.47 $11.25
to to to
$12.66 $12.81 $15.13
Repurchases by Subject Company. During the second quarter of 1999,
------------------------------
the Subject Company completed a $3,000,000 Common Stock repurchase
plan that was approved by the Subject Company's Board of Directors on
November 20, 1998. The repurchase plan authorized the Subject Company
to make repurchases in the open market or through privately negotiated
transactions. The timing and terms of the purchases were determined
by management based on market conditions and were conducted in
accordance with the applicable rules of the Securities and Exchange
Commission. During 1999, 254,950 shares of Common Stock were
repurchased under the plan at an average cost of $11.76 per share.
There were no repurchases of Common Stock during 1998.
At the commencement of the Plan EMCC held 5,573,790 shares of Common
Stock. Through the operation of the Plan, as of December 31, 2000,
EMCC has acquired 3,073,209 additional shares of Common Stock.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSONS.
(a) Name and Address.
----------------
(1) Subject Company. The information set forth in Item 2(a) is
---------------
incorporated herein by reference.
(2) Additional Filing Person:
------------------------
Employers Mutual Casualty Company
717 Mulberry Street
Des Moines, Iowa 50309
(515)280-2902
As of December 31, 2000, EMCC owned approximately 76.6% of the
Subject Company's total outstanding Common Stock.
(3) Name and Address of Directors and Officers of the Subject Company
-----------------------------------------------------------------
and EMCC:
--------
Subject Company Directors:
George C. Carpenter, III
5322 Robertson Drive
Des Moines, IA 50321
Elwin H. Creese
3663 Grand Avenue
Des Moines, IA 50312
David J. Fisher
4650 N.E. 17th Court
Des Moines, IA 50303-0712
Bruce G. Kelley
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
George W. Kochheiser
7375 E. Onyx Court
Scottsdale, AZ 85258
Raymond A. Michel
3304 Terrace Drive
Des Moines, IA 50312
Fredrick A. Schiek
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Subject Company Officers:
Margaret A. Ball
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Raymond W. Davis
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
John D. Isenhart
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Ronald W. Jean
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Bruce G. Kelley
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Donald D. Klemme
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
David O. Narigon
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Mark E. Reese
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Fredrick A. Schiek
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Douglas J. Zmolek
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
EMCC Directors:
Richard W. Booth
PMB 550
18352 Dallas Parkway, Suite 136
Dallas, TX 75287
William H. Brenton
Wesley Grand
3522 Grand Avenue, #421
Des Moines, IA 50312
Blaine A. Briggs
16765 El Zorro Vista
Rancho Santa Fe, CA 92067
Gale L. Griffin
Bestfoods
700 Sylvan Avenue
Englewood Cliffs, NJ 07632
Robert M. Gunn
908 Wildwood Lane
Northbrook, IL 60062
Dr. John H. Kelley
2038 Thatch Palm Drive
Boca Raton, FL 33432
Bruce G. Kelley
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Richard Koch, Jr.
Koch Brothers
4th & Grand
Des Moines, IA 50309
George W. Kochheiser
7375 E. Onyx Court
Scottsdale, AZ 85258
John M. Lockhart
2770 Walsh Road
Cincinnati, OH 45208
Lanning Macfarland, Jr.
The Law Bulletin
415 N State Street
Chicago, IL 60610
David J. W. Proctor
Bradshaw, Fowler, Proctor & Fairgrave
801 Grand
Des Moines, IA 50309
Fredrick A. Schiek
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Philip T. Van Ekeren
P.O. Box 241
213 N. Buchanan
Monroe, IA 50170
H. Terrill Watts, Jr.
H.T. Watts, Jr. CPA
1827 Powers Ferry Road, #3
Atlanta, GA 30339
EMCC Officers:
Margaret A. Ball
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Raymond W. Davis
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
John D. Isenhart
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Ronald W. Jean
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Bruce G. Kelley
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Donald D. Klemme
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
David O. Narigon
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Mark E. Reese
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Fredrick A. Schiek
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
Douglas J. Zmolek
EMC Insurance Companies
717 Mulberry
Des Moines, IA 50309
(b) Business and Background of Entities.
-----------------------------------
(1) Subject Company, an Iowa corporation formed in 1974, is an
insurance holding company with operations in property and
casualty insurance and reinsurance. Subject Company is
approximately 76.6% owned by EMCC, a multiple-line property and
casualty insurance company organized as an Iowa mutual insurance
company. Subject Company has not been: (i) convicted in a
criminal proceeding during the past five (5) years; or (ii) a
party to any judicial or administrative proceeding during the
past five (5) years, that resulted in a judgment, decree or final
order enjoining Subject Company from further violations of, or
prohibiting activities subject to, federal or state securities
laws, or a finding or any violation of federal or state
securities laws.
(2) EMCC, an Iowa mutual insurance company formed in 1911, is a
multiple-line property and casualty insurance company. EMCC is
licensed in all fifty (50) states and the District of Columbia.
EMCC has not been: (i) convicted in a criminal proceeding during
the past five (5) years; or (ii) a party to any judicial or
administrative proceeding during the past five (5) years, that
resulted in a judgment, decree or final order enjoining Subject
Company from further violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding or any
violation of federal or state securities laws.
(c) Business and Background of Natural Persons.
------------------------------------------
(1) Current Occupation.
------------------
Subject Company Directors:
-------------------------
Position with
Subject Company
Name (address set forth above)
-------------------------- -----------------------
George C. Carpenter III Director
Elwin H. Creese Director
David J. Fisher Director
Bruce G. Kelley President, Chief
Executive Officer and
Director
George W. Kochheiser Chairman of the Board
Raymond A. Michel Director
Fredrick A. Schiek Executive Vice
President, Chief
Operating Officer and
Director
Subject Company Officers:
------------------------
Position with
Subject Company
Name (address set forth above)
-------------------------- -----------------------
Margaret A. Ball Senior Vice President-
Underwriting
Raymond W. Davis Senior Vice President-
Investments and
Treasurer
John D. Isenhart Senior Vice President-
Productivity and
Technology
Ronald W. Jean Executive Vice President
for Corporate
Development
Bruce G. Kelley President, CEO and
Director
Donald D. Klemme Senior Vice President-
Administration
David O. Narigon Senior Vice President-
Claims
Mark E. Reese Vice President & CFO
Fredrick A. Schiek Executive Vice
President, COO and
Director
Douglas J. Zmolek Vice President-Human
Resources
EMCC Directors:
--------------
Position with
EMCC
Name (address set forth above)
-------------------------- -----------------------
Richard W. Booth Director
William H. Brenton Director
Blaine A. Briggs Director
Gale L. Griffin Director
Robert M. Gunn Chairman of the Board
Dr. John H. Kelley Director
Bruce G. Kelley President, CEO and
Director
Richard Koch, Jr. Director
George W. Kochheiser Director
John M. Lockhart Director
Lanning Macfarland, Jr. Director
David J. W. Proctor Director
Fredrick A. Schiek Executive Vice
President, COO and
Director
Philip T. Van Ekeren Director
H. Terrill Watts, Jr. Director
EMCC Officers:
-------------
Position with
EMCC
Name (address set forth above)
-------------------------- -----------------------
Margaret A. Ball Senior Vice President-
Underwriting
Raymond W. Davis Senior Vice President-
Investments and
Treasurer
John D. Isenhart Senior Vice President-
Productivity and
Technology
Ronald W. Jean Executive Vice President
for Corporate
Development
Bruce G. Kelley President, CEO and
Director
Donald D. Klemme Senior Vice President-
Administration
David O. Narigon Senior Vice President-
Claims
Mark E. Reese Vice President & CFO
Fredrick A. Schiek Executive Vice
President, COO and
Director
Douglas J. Zmolek Vice President-Human
Resources
(2) Material Employment During Past Five Years.
------------------------------------------
(a) Subject Company Directors.
George C. Carpenter III was Executive Director of Iowa Public
-----------------------
Television from November 1985 until his retirement in 1993. Prior to
that he served as Vice President of Palmer Communications and as Vice
President and General Manager of WHO Broadcasting Company, a division
of Palmer Communications. He was employed by WHO Broadcasting Company
for 20 years.
Elwin H. Creese was Senior Vice President and Treasurer of the Subject
---------------
Company and of EMCC from 1993 until his retirement on April 1, 1996.
He was Vice President and Treasurer of the Subject Company and of EMCC
from 1985 until 1993. Mr. Creese was employed by EMCC from 1984 to
1996.
David J. Fisher has been Chairman of the Board and President of
---------------
Onthank Company, a Des Moines, Iowa based wholesale distributor of
floor, window and wall covering products, since 1978 and has been
employed by that firm since 1962. Mr. Fisher serves on the Iowa State
Board of Regents and is a Director of Liberty Bank. He also serves as
a member of the Federal Reserve Bank of Chicago's Advisory Council on
Small Business.
Bruce G. Kelley has been President and Chief Executive Officer of the
---------------
Subject Company and of EMCC since 1992 and was Treasurer of both
organizations from 1996 until 2000. He was President and Chief
Operating Officer of the Subject Company and of EMCC from 1991 to 1992
and was Executive Vice President of both companies from 1989 to 1991.
Mr. Kelley has been employed by EMCC since 1985 and has been a
director of the Subject Company since 1991 and EMCC since 1984.
George W. Kochheiser has been Chairman of the Board of the Subject
--------------------
Company since 1994, and was President and Chief Operating Officer of
the Subject Company and of EMCC from 1982 until his retirement in
1991. Mr. Kochheiser also serves as a director of EMCC and was an
employee of EMCC from 1949 to 1991.
Raymond A. Michel is a member of the Board of Directors of Koss
-----------------
Construction Company, a highway and airport construction firm, and was
its Chairman and Chief Executive Officer from 1972 until his
retirement in 1989. He has been affiliated with Koss Construction
Company in one capacity or another since 1955.
Fredrick A. Schiek has been Executive Vice President and Chief
------------------
Operating Officer of the Subject Company and of EMCC since 1992. He
was Vice President of EMCC from 1983 until 1992. Mr. Schiek has been a
director of Subject Company since 1994 and of EMCC since 1998. Mr.
Schiek has been employed by EMCC since 1959.
(b) Subject Company Officers.
Margaret A. Ball has been Senior Vice President - Underwriting of the
----------------
Subject Company and of EMCC since June 1997. She was Vice President -
Underwriting of the Subject Company and of EMCC from 1992 until June
1997 and was Assistant Vice President - Underwriting prior to that.
Mrs. Ball had been employed by EMCC from 1971 until her retirement on
January 1, 2001.
Raymond W. Davis has been Senior Vice President - Investments and
----------------
Treasurer of the Subject Company and of EMCC since November 2000. He
was Senior Vice President - Investments of the Subject Company and of
EMCC from June 1998 until November 2000 and was Vice President -
Investments prior to that. Mr. Davis has been employed by EMCC since
1979.
John D. Isenhart has been Senior Vice President - Productivity and
----------------
Technology of the Subject Company and of EMCC since September 1992.
He was Vice President - Director of Data Processing prior to that.
Mr. Isenhart has been employed by EMCC since 1963.
Ronald W. Jean has been Executive Vice President for Corporate
--------------
Development of the Subject Company and of EMCC since June 2000. He
was Senior Vice President - Actuary of the Subject Company and of
EMCC from November 1997 until June 2000 and was Vice President -
Actuary prior to that. Mr. Jean has been employed by EMCC since 1979.
Donald D. Klemme has been Senior Vice President - Administration of
----------------
the Subject Company and of EMCC since November 1998. He was Vice
President - Administration of the Subject Company and of EMCC from
1996 until November 1998 and was Vice President - Director of Internal
Audit prior to that. Mr. Klemme has been employed by EMCC since 1972.
Bruce G. Kelley has been the President and Chief Executive Officer of
---------------
the Subject Company and of EMCC since 1992 and was Treasurer of both
organizations from 1996 until 2000. He was President and Chief
Operating Officer of the Subject Company and of EMCC from 1991 to 1992
and was Executive Vice President of both companies from 1989 to 1991.
Mr. Kelley has been employed by EMCC since 1985 and has been a
director of the Subject Company since 1991 and EMCC since 1984.
David O. Narigon has been Senior Vice President - Claims of the
----------------
Subject company and of EMCC since June 1998. He was Vice President -
Claims of the Subject Company and of EMCC from August 1988 until June
1998 and was Claim Superintendent and Assistant Secretary prior to
that. Mr. Narigon has been employed by EMCC since 1983.
Mark E. Reese has been Vice President and Chief Financial Officer of
-------------
the Subject Company and of EMCC since June 1997. He was Vice
President - Controller of the Subject Company and of EMCC from June
1995 until June 1997 and was Assistant Vice President and Assistant
Treasurer prior to that. Mr. Reese has been employed by EMCC since
1984.
Fredrick A. Schiek has been Executive Vice President and Chief
------------------
Operating Officer of the Subject Company and of EMCC since 1992. He
was Vice President of EMCC from 1983 until 1992. Mr. Schiek has been
a director of Subject Company since 1994 and of EMCC since 1998. Mr.
Schiek has been employed by EMCC since 1959.
Douglas J. Zmolek has been Vice President - Human Resources of the
-----------------
Subject Company and of EMCC since June 1996. He was the Personnel
Director of the Subject Company and of EMCC from April 1985 until June
1996 and was Employee Relations Director prior to that. Mr. Zmolek
has been employed by EMCC since 1966.
(c) EMCC Directors.
Richard W. Booth is a retired Vice President, Secretary and Treasurer
----------------
of Lennox Industries Inc., Dallas, Texas. He has been affiliated with
Lennox Industries Inc. since July 1954, and presently serves as
Chairman of the Lennox Foundation.
William H. Brenton was the President and Chairman of the Board of
------------------
Brenton National Bank of Des Moines. He has been associated with
Brenton Banks Inc. since 1949, and currently serves as a member of the
Board of Directors.
Blaine A. Briggs has been President of Management Service, Inc.,
----------------
Rancho Santa Fe, California, since 1974. Prior to that he served as
the President and Chief Executive Officer of the Briggs Corporation,
retiring in 1974. He had been with the Briggs Corporation since 1947.
Gale L. Griffin has been Vice President - Corporate Communications of
---------------
Bestfoods, Englewood Cliffs, New Jersey since December 1995 and has
been employed by that firm since 1983. Prior to that she was the
Director of Public Relations for Midlantic National Bank and the
Public Information Officer for the Englewood, New Jersey Public School
System.
Robert M. Gunn has been a partner in the Law Firm of Wildman, Harold,
--------------
Allen, Dixon, Chicago, Illinois, since January 1979. Prior to that he
had been a partner in the Law Firm of Keck, Mahin and Cate, Chicago,
Illinois. Mr. Gunn serves as the Chairman of the Board of EMCC.
Bruce G. Kelley has been the President and Chief Executive Officer of
---------------
the Subject Company and of EMCC since 1992 and was Treasurer of both
organizations from 1996 until 2000. He was President and Chief
Operating Officer of the Subject Company and of EMCC from 1991 to 1992
and was Executive Vice President of both companies from 1989 to 1991.
Mr. Kelley has been employed by EMCC since 1985 and has been a
director of the Subject Company since 1991 and EMCC since 1984.
Dr. John H. Kelley is a retired orthopedic surgeon from the Des Moines
------------------
Orthopedic Surgeons, P.C., Des Moines, Iowa. Prior to that he had
been in private practice and a partner in Gibson & Kelley, Orthopedic
Surgeons, Des Moines, Iowa.
Richard Koch, Jr. is the Owner and General Manager of Koch Brothers,
-----------------
Des Moines, Iowa, having been with Koch Brothers since June 1976. Mr.
Koch also serves as a member of the Board of Directors of Koch
Brothers.
George W. Kochheiser has been Chairman of the Board of the Subject
--------------------
Company since 1994, and was President and Chief Operating Officer of
the Subject Company and of EMCC from 1982 until his retirement in
1991. Mr. Kochheiser also serves as a director of EMCC and was an
employee of EMCC from 1949 to 1991.
John M. Lockhart is a Management Consultant for the Lockhart Company,
----------------
Cincinnati, Ohio and an Associate Investment Banker with Gradison &
Company, Cincinnati, Ohio. Prior to that Mr. Lockhart served as the
Executive Vice President of Trans World Airlines and retired as
Executive Vice President of Kroger Company.
Lanning Macfarland, Jr. is the Chairman and Chief Executive Officer of
-----------------------
The Law Bulletin Publishing Company, Chicago, Illinois. Prior to that
he served as the President of The Law Bulletin. Mr. Macfarland has
been with The Law Bulletin since 1954 and was named President in 1963.
David J. W. Proctor is a practicing attorney and shareholder with
-------------------
Bradshaw, Fowler, Proctor and Fairgrave, P.C., Des Moines, Iowa. He
joined the law firm in 1971 and was named a partner in 1974. Mr.
Proctor is a member of the American, Iowa and Polk County Bar
Associations. He is also a member of the International Association
and the Iowa Chapter of Arson Investigators.
Fredrick A. Schiek has been Executive Vice President and Chief
------------------
Operating Officer of the Subject Company and of EMCC since 1992. He
was Vice President of EMCC from 1983 until 1992. Mr. Schiek has been
a director of Subject Company since 1994 and of EMCC since 1998. Mr.
Schiek has been employed by EMCC since 1959.
Philip T. Van Ekeren retired from EMCC and a majority of its
--------------------
subsidiaries and affiliates as Corporate Secretary and Senior Vice
President of Administration in 1996. He had been with the Company
since 1961, and continues to serve as a Director for EMCC.
H. Terrill Watts, Jr. has been the President and proprietor of H.
---------------------
Terrill Watts, Jr., CPA Firm, Atlanta, Georgia since June 1992. Prior
to that he had been a Tax Senior Manager for Gifford, Hillegass &
Ingwersen, P.C., Atlanta, Georgia. Mr. Watts also serves as a member
of the Steering Committee for the Stern School of Business, Atlanta
Area Chapter.
(d) EMCC Officers.
Margaret A. Ball has been Senior Vice President - Underwriting of the
----------------
Subject Company and of EMCC since June 1997. She was Vice President
- Underwriting of the Subject Company and of EMCC from 1992 until
June 1997 and was Assistant Vice President - Underwriting prior to
that. Mrs. Ball had been employed by EMCC from 1971 until her
retirement on January 1, 2001.
Raymond W. Davis has been Senior Vice President - Investments and
----------------
Treasurer of the Subject Company and of EMCC since November 2000. He
was Senior Vice President - Investments of the Subject Company and of
EMCC from June 1998 until November 2000 and was Vice President -
Investments prior to that. Mr. Davis has been employed by EMCC since
1979.
John D. Isenhart has been Senior Vice President - Productivity and
----------------
Technology of the Subject Company and of EMCC since September 1992.
He was Vice President - Director of Data Processing prior to that.
Mr. Isenhart has been employed by EMCC since 1963.
Ronald W. Jean has been Executive Vice President for Corporate
--------------
Development of the Subject Company and of EMCC since June 2000. He
was Senior Vice President - Actuary of the Subject Company and of EMCC
from November 1997 until June 2000 and was Vice President - Actuary
prior to that. Mr. Jean has been employed by EMCC since 1979.
Donald D. Klemme has been Senior Vice President - Administration of
----------------
the Subject Company and of EMCC since November 1998. He was Vice
President - Administration of the Subject Company and of EMCC from
1996 until November 1998 and was Vice President - Director of Internal
Audit prior to that. Mr. Klemme has been employed by EMCC since 1972.
Bruce G. Kelley has been the President and Chief Executive Officer of
---------------
the Subject Company and of EMCC since 1992 and was Treasurer of both
organizations from 1996 until 2000. He was President and Chief
Operating Officer of the Subject Company and of EMCC from 1991 to 1992
and was Executive Vice President of both companies from 1989 to 1991.
Mr. Kelley has been employed by EMCC since 1985 and has been a
director of the Subject Company since 1991 and EMCC since 1984.
David O. Narigon has been Senior Vice President - Claims of the
----------------
Subject Company and of EMCC since June 1998. He was Vice President -
Claims of the Subject Company and of EMCC from August 1988 until June
1998 and was Claim Superintendent and Assistant Secretary prior to
that. Mr. Narigon has been employed by EMCC since 1983.
Mark E. Reese has been Vice President and Chief Financial Officer of
-------------
the Subject Company and of EMCC since June 1997. He was Vice
President - Controller of the Subject Company and of EMCC from June
1995 until June 1997 and was Assistant Vice President and Assistant
Treasurer prior to that. Mr. Reese has been employed by EMCC since
1984.
Fredrick A. Schiek has been Executive Vice President and Chief
------------------
Operating Officer of the Subject Company and of EMCC since 1992. He
was Vice President of EMCC from 1983 until 1992. Mr. Schiek has been
a director of Subject Company since 1994 and of EMCC since 1998. Mr.
Schiek has been employed by EMCC since 1959.
Douglas J. Zmolek has been Vice President - Human Resources of the
-----------------
Subject Company and of EMCC since June 1996. He was the Personnel
Director of the Subject Company and of EMCC from April 1985 until June
1996 and was Employee Relations Director prior to that. Mr. Zmolek
has been employed by EMCC since 1966.
(3) & (4) None of the above-stated persons have been: (i) convicted
in a criminal proceeding during the past five (5) years; or (ii) a
party to any judicial or administrative proceeding during the past
five (5) years, that resulted in a judgment, decree or final order
enjoining any of the above-stated persons from further violations of,
or prohibiting activities subject to, federal or state securities
laws, or a finding or any violation of federal or state securities
laws.
(5) Each of the above-stated persons is a citizen of the United
States.
ITEM 4. TERMS OF THE TRANSACTION.
(a) Material Terms.
--------------
Description of the Plan
The Plan consists in its entirety of the questions and answers
appearing below. The Subject Company's Board of Directors initially
approved the Plan on May 17, 1990 and approved amendments to the Plan
on February 26, 1997 and November 21, 1997.
(1) Purpose. What is the purpose of the Plan?
-----------------------------------------
The purpose of the Plan is to provide participants with a simple
and convenient way to increase their ownership of shares of the
Subject Company's Common Stock by enabling shareholders of record
to invest their cash dividends and/or make optional cash
payments, without payment of any brokerage commission or service
charge.
(2) Features. What are some of the features of the Plan?
----------------------------------------------------
Participants in the Plan may (a) have cash dividends on all or
less than all of their shares of Common Stock automatically
reinvested and/or (b) invest optional cash payments of up to
$5,000 per month (minimum payment of $50). The Plan permits
participants to make optional cash payments without reinvesting
any of their cash dividends, except that the dividends on any
shares of Common Stock purchased or held for safekeeping under
the Plan will be reinvested until such time as the participant
withdraws such shares from the Plan or sells or transfers such
shares. The Plan provides for fractions of shares, as well as
full shares, to be credited to participants' accounts. In
addition, dividends with respect to fractions, as well as with
respect to full shares, will be credited to participants'
accounts and reinvested in shares of Common Stock under the Plan.
Regular statements of account will be provided for record
keeping.
The Plan also offers a "share safekeeping" service whereby
participants may deposit their Common Stock certificates with the
Plan Administrator and have their ownership of such Common Stock
maintained on the Plan Administrator's records as part of their
Plan account.
A participant may transfer, at any time and at no cost to the
participant, all or a portion of the participant's shares held
under the Plan to another person or persons.
(3) Administration. Who administers the Plan?
-----------------------------------------
UMB Bank, n.a., Kansas City, Missouri (the "Plan Administrator"),
administers the Plan for participants, keeps records, sends
statements of accounts to participants and performs other duties
relating to the Plan. The Plan Administrator purchases shares of
Common Stock for use in the Plan and credits the shares to the
accounts of the individual participants. Shares of Common Stock
purchased under the Plan will be registered in the name of the
Plan Administrator (or its nominee) and held by the Plan
Administrator for each participant in the Plan.
(4) Participation. Who is eligible to participate in the Plan?
----------------------------------------------------------
All holders of record of shares of the Subject Company's Common
Stock are eligible to participate in the Plan. If you are a
beneficial owner of Common Stock whose shares are registered in
names other than your own (e.g., broker), you must become a
shareholder of record by having your shares transferred into your
name in order to become eligible to participate in the Plan. To
do so, you should contact the broker holding the shares
and arrange to withdraw those shares in certificate form. Those
certificates could then be deposited with the Plan Administrator
under the Share Safekeeping Service, described below in Question
16.
The Subject Company reserves the right to exclude any person from
participation in the Plan upon giving notice of such exclusion by
registered mail sent to such person's address as reflected on the
Subject Company's records. In addition, if it appears to the
Subject Company that any person is using or contemplating the use
of the optional cash payment investment mechanism in a manner or
with an effect that, in the sole judgment and discretion of the
Subject Company, is not in the best interests of the Subject
Company or its other shareholders, then the Subject Company may
decline to issue all or any portion of the shares of Common Stock
for which any optional cash payment by or on behalf of such
participant is tendered. Such optional cash payment (or the
portion thereof not invested in shares of Common Stock) will be
returned by the Plan Administrator as promptly as practicable,
without interest.
(5) How does an eligible shareholder sign up for the different
----------------------------------------------------------
options available under the Plan?
--------------------------------
An eligible shareholder may choose from a variety of services and
options under the Plan, including (1) automatic reinvestment of
dividends paid on shares of Common Stock, (2) optional cash
payments of up to $5,000 per month, (3) a free custodial service
for depositing Common Stock certificates with the Plan
Administrator for safekeeping and (4) the ability to sell shares
of Common Stock through the Plan.
The Authorization Card is used to indicate to the Plan
Administrator which dividend or optional cash payment option you
have chosen for your Plan account. The Safekeeping Deposit Form
is used to take advantage of the free custodian service for
depositing Common Stock certificates with the Plan Administrator
for safekeeping. If you wish to sell shares of Common Stock
through the Plan, please refer to Question 19.
BY SIGNING THE AUTHORIZATION CARD OR SAFEKEEPING DEPOSIT FORM,
YOU ARE ACKNOWLEDGING THAT YOU RECEIVED A PLAN PROSPECTUS AND
THAT YOU AGREE TO THE TERMS AND CONDITIONS CONTAINED HEREIN.
(6) When may a shareholder join the Plan?
------------------------------------
An eligible shareholder may join the Plan at any time. Once in
the Plan, the shareholder will remain a participant until he or
she discontinues his or her participation or sells all shares
held in his or her Plan account.
If an Authorization Card specifying reinvestment of dividends is
received by the Plan Administrator no later than three (3)
business days prior to the record date established for a
particular dividend, reinvestment will commence with that
dividend. Dividend record and payment dates for the Subject
Company's Common Stock generally have been on or about the
fourth (4th) and eighteenth (18th) day, respectively, of March,
June, September and December. Actual dividend record and payment
dates are established by the Subject Company's Board of
Directors. A dividend payment date is referred to herein as an
"Investment Date." See Question 11.
If the Authorization Card is received after the record date
established for a particular dividend, then the reinvestment of
dividends will not begin until the dividend payment date
following the next record date, as applicable.
Any optional cash payments submitted with the Authorization Card
will be invested on the next Investment Date, as described in
Question 13.
(7) How may a participant change investment features under the Plan?
---------------------------------------------------------------
As a participant, you may change your participation in the
dividend reinvestment feature or the optional cash payment
feature at any time by completing a new Authorization Card and
returning it to the Plan Administrator or by writing a letter to
the Plan Administrator.
(8) Costs. What are the costs to shareholders who participate in the
-----------------------------------------------------------------
Plan?
----
The Subject Company will pay all fees, commissions and expenses
in connection with the purchase of shares of Common Stock under
the Plan. The Subject Company will also pay all costs of
administration of the Plan, except when a participant sells
shares held in the Plan. See Question 19.
(9) Purchases. How many shares of Common Stock will be purchased for
-----------------------------------------------------------------
participants?
------------
The number of shares to be purchased for a participant on an
Investment Date depends on three factors: the amount of the
participant's dividend (after deducting any required income tax
withholding) on his or her Plan shares, the extent of optional
cash payments made by the participant (if any) and the price of
the shares of Common Stock purchased. Each participant's account
will be credited with that number of shares, including fractions
computed to four decimal places, equal to the total amount to be
invested divided by the purchase price per share.
The manner in which the Plan operates does not permit the Subject
Company to honor a request that a specific number of shares of
Common Stock be purchased.
(10) What will be the price of shares of Common Stock purchased under
----------------------------------------------------------------
the Plan?
--------
The Plan Administrator will purchase shares from the Subject
Company, to the extent that the Subject Company makes shares
available. The Plan Administrator will purchase any other shares
required for the Plan in the open market or from private sources.
The price of shares purchased from the Subject Company will be
the last sale price of the Common Stock as reported on the NASDAQ
National Market System on the relevant Investment Date (or the
next preceding day on which such price was reported if it is not
reported on the Investment Date). The price of shares purchased
in the open market or from private sources will be the weighted
average cost of all shares so purchased in relation to the
relevant Investment Date. Purchases of shares in the open market
may be made over a period of several days. No shares will be
sold under the Plan at less than the par value of such shares.
(11) When is the Investment Date?
---------------------------
For the reinvestment of dividends, the dividend payment date
declared by the Board of Directors of the Subject Company
constitutes the "Investment Date" applicable to the reinvestment
of such dividend. For the investment of optional cash payments,
the Investment Date will be the fifteenth (15th) day of every
calendar month except in any month in which the date on which
dividends are to be paid is within five (5) calendar days of such
date, in which case the Investment Date for optional cash
payments will be the same as the Investment Date for the
reinvestment of dividends. If any Investment Date falls on a
date when the NASDAQ National Market System or the Plan
Administrator is not regularly open for business, the first day
immediately following such date on which the NASDAQ National
Market System or the Plan Administrator is open shall be the
relevant Investment Date.
(12) When will the shares be purchased?
---------------------------------
Shares acquired from the Subject Company will be purchased for
the accounts of the participants as of the close of business on
the relevant Investment Date. Shares acquired in the open market
or from private sources will be purchased promptly by the Plan
Administrator and in no event later than thirty (30) days after a
relevant Investment Date. These purchases may be made on the
NASDAQ National Market System or in negotiated transactions, and
are subject to such terms and conditions (including price and
delivery) as the Plan Administrator may determine to be
acceptable. Dividend and voting rights will commence upon
settlement, which is normally three (3) business days after the
purchase whether from the Subject Company or any other source.
For the purpose of making purchases, the Plan Administrator will
commingle each participant's funds with those of all other
participants.
(13) Optional Cash Payments. What are the optional cash payment
-----------------------------------------------------------
features of the Plan?
--------------------
Participants may make optional cash investments of at least $50
per payment, up to a maximum of $5,000 per month. The same
amount of money need not be sent for each investment. There is
no obligation, however, to make any optional cash investments to
participate in the Plan. Each month, any optional cash payment
received from a participant prior to an Investment Date for the
month will be used by the Plan Administrator to purchase
additional shares of Common Stock for the account of such
participant on such Investment Date. Any optional cash payment
not received prior to an Investment Date in any month will be
used by the Plan Administrator to purchase additional shares for
the account of the participant on the Investment Date in the
following month. No interest will be paid on optional cash
payments held pending investment.
(14) How does a participant make optional cash payments?
--------------------------------------------------
Any shareholder who has submitted a signed Authorization Card is
eligible to make optional cash payments at any time. An optional
cash payment may be made by a participant when enrolling by
enclosing with the Authorization Form a personal check or money
order payable to UMB Bank, n.a. Thereafter, a participant may
make optional cash investments by delivering to the Plan
Administrator a written instruction (using the remittance form
attached to the participant's account statement) and a personal
check or money order payable to "UMB Bank, n.a." in U.S. Funds.
PARTICIPANTS SHOULD NOT SEND CASH.
(15) When should optional cash payments be made?
------------------------------------------
Optional cash payments made by a participant and received prior
to an Investment Date in any month will be invested on such
Investment Date. Optional cash payments not received prior to an
Investment Date will be held by the Plan Administrator until the
next Investment Date. No interest will be paid by the Plan
Administrator on any optional cash payments held pending
investment. The method of delivery of any cash investment is at
the election of the participant and will be deemed received when
actually received by the Plan Administrator. If delivery is by
mail, it is recommended that the mailing be made sufficiently in
advance of the relevant Investment Date.
(16) Safekeeping of Certificates. What is the optional Share
--------------------------------------------------------
Safekeeping Service?
-------------------
Your stock certificates are valuable documents representing your
investment and ownership in the Subject Company. They should be
kept in a secure place where they will be protected from loss,
theft, or destruction. The Plan's Share Safekeeping Service
provides for such protection for your Common Stock certificates
by allowing you to deposit all the certificates for Common Stock
held by you with the Plan Administrator for safekeeping. The
Share Safekeeping Service keeps your Common Stock on deposit in
your Plan account at no cost to you.
At the time you enroll in the Plan, or at any later time, you may
use the Plan's Share Safekeeping Service to deposit all Common
Stock certificates in your possession with the Plan
Administrator. Shares deposited will be transferred into the
name of the Plan Administrator (or its nominee) and credited to
your account under the Plan. Certificates deposited with the
Plan Administrator for safekeeping are treated in the same manner
as shares purchased through the Plan, and may be sold or
transferred through the Plan.
To participate in the Share Safekeeping Service, you must
complete and return a Safekeeping Deposit Form, along with all
Common Stock Certificates to be deposited, to the Plan
Administrator by registered, insured mail. THE CERTIFICATES
SHOULD NOT BE ENDORSED.
(17) Reports to Participants. What kind of reports will be sent to
--------------------------------------------------------------
participants in the Plan?
------------------------
Each participant in the Plan will receive a quarterly statement
of account from the Plan Administrator. Each participant making
an optional cash payment will receive an updated statement after
each such optional cash payment is invested. In each instance,
the detailed statement will indicate, among other things, the
number of shares purchased and the average cost per share. These
statements are a record of the cost of purchases of shares
under the Plan and should be retained for income tax purposes.
In addition, each participant will receive the same
communications as every other shareholder, including the Subject
Company's Annual Report, Notice of Annual Meeting and Proxy
Statement. The Plan Administrator will provide you with the
necessary Internal Revenue Service information for reporting
dividends on shares in your Plan account.
(18) Certificates for Shares. Will certificates be issued for shares
----------------------------------------------------------------
of Common Stock purchased under the Plan?
----------------------------------------
Certificates for shares of Common Stock purchased under the Plan
normally will not be issued to participants. The number of
shares credited to a participant's account under the Plan will be
shown on the participant's statement of account. This feature
protects against loss, theft or destruction of stock
certificates.
A certificate for any number of whole shares credited to an
account under the Plan (whether purchased under the Plan or
deposited with the Plan Administrator for safekeeping) will be
issued upon the written request of the participant. The issuance
of such certificate will not terminate participation in the Plan.
However, if a participant is not reinvesting his or her cash
dividends other than on shares credited to the participant's
account under the Plan, the issuance of a certificate for all
such shares will remove them from the Plan and the cash dividends
on such shares will not be reinvested thereafter. Any full and
fractional shares not issued will continue to be credited to the
participant's account and cash dividends on such shares will
continue to be reinvested in Common Stock.
Certificates for fractions of shares will not be issued under any
circumstances.
Shares credited to the account of a participant under the Plan
may not be pledged as collateral. A participant who wishes to
pledge or assign such shares must request that a certificate for
such shares be issued to the participant in his or her name.
(19) How does a participant sell shares held in the Plan?
---------------------------------------------------
A participant may request the Plan Administrator to sell any
number of shares, including fractional shares, held in his or her
Plan account at any time by giving written instructions to the
Plan Administrator. After the receipt of the request, the Plan
Administrator will sell the shares on the next Investment Date
(or shortly thereafter during months in which dividends are
paid). If an account is in the name of joint tenants, each
individual whose name is on the account must execute the request
to sell shares. The participant or participants will receive the
proceeds, less an administrative charge of $5.00 and applicable
brokerage commissions, if any. Proceeds from shares sold through
the Plan will be paid by check.
(20) How does a participant transfer shares held in the Plan?
-------------------------------------------------------
If a participant wishes to transfer the ownership of all, or part
of, the shares held in his or her Plan account to another person,
whether by gift, private sale or otherwise, the participant may
effect such transfer by mailing a properly completed and executed
stock assignment (stock power) to the Plan Administrator.
Transfers of all or less than all of the participant's shares
must be made in whole share amounts, unless transfer is being
made to another participant in the Plan, in which case fractional
shares may be transferred. If the participant transfers all
whole shares in his or her account, any remaining fractional
share will remain in the account and dividends on the fractional
share, and any optional cash payment, will be invested in Common
Stock unless the participant instructs the Plan Administrator to
sell the fractional share or to terminate participation in the
Plan, in which case the fractional share will be sold
and the proceeds (less any sales commission and a handling charge
of $5.00) will be mailed directly to the participant.
Written requests for transfer sent to the Plan Administrator must
include the name(s), address and tax identification number of the
transferee(s) and be accompanied by an executed stock assignment
(stock power) with medallion signature guarantee. The
signature(s) on the assignment must correspond with the name(s)
on the account.
If instructions for the transfer of all shares credited to a Plan
account are received on or after a dividend record date but
before the related dividend payment date, the transfer will not
be processed until after the dividend payment date. The
dividends on the shares will be reinvested on the dividend
payment date and the shares purchased with the dividends will be
included in the shares transferred. If instructions for the
transfer of less than all shares are received on or after a
dividend record date but before the related dividend payment
date, the transfer will be processed as soon as practicable and
the dividend on the shares that have been transferred, as
well as the dividend on the shares remaining in the account, will
be reinvested on the dividend payment date and the shares
purchased will be credited to the participant's account.
A stock certificate for the shares transferred will be issued to
the transferee(s) and information pertaining to the Plan will be
mailed to the transferee(s), unless the transferee(s) already
participates in the Plan.
(21) Termination. How does a participant terminate his or her
---------------------------------------------------------
participation in the Plan?
-------------------------
A participant may terminate participation in the Plan by
notifying the Plan Administrator, in writing, that he or she
wishes to terminate.
A notice of termination to be achieved by the sale of shares in
the Plan is effective on the next investment date. A notice of
termination to be achieved by the transfer of shares in the Plan
is normally effective when it is received by the Plan
Administrator. However, if the notice to transfer is received on
or after a dividend record date and before the related dividend
payment date, the notice will be effective after the dividend
payment date. The dividend paid on that date, and any optional
cash payment, will be invested under the Plan. The notice will
be processed after the participant's account has been credited
with the shares purchased.
Dividends paid after termination from the Plan will be paid in
cash directly to the shareholder unless he or she elects to re-
enroll in the Plan, which may be done at any time.
(22) How are shares distributed upon termination?
-------------------------------------------
When a participant terminates participation in the Plan, or upon
termination of the Plan by the Subject Company, a certificate for
whole shares credited to his or her account under the Plan will
be issued and a cash payment will be made for any fraction of a
share based on the then current market price of the shares of
Common Stock of the Subject Company, less any sales commission
and a handling charge of $5.00. Upon termination, the
participant may request that all of the shares, both whole and
fractional, credited to his or her account in the Plan be sold.
(23) Other Information. Does participation in the Plan involve any
--------------------------------------------------------------
risk?
----
The Plan itself creates no additional risk. The risk to
participants is the same as with any other investment in shares
of Common Stock of the Subject Company. It is important to
recognize, however, that participants do not have control over
the price or the time at which Common Stock is purchased or sold
for their Plan accounts and participants therefore bear the
market risk associated with fluctuations in the price of Common
Stock during the period that their investment instructions are
being processed by the Plan Administrator. Participants also
must recognize that neither the Subject Company nor the Plan
Administrator can assure a profit or protect against a loss on
the shares purchased under the Plan.
(24) What happens if the Subject Company declares a stock split,
-----------------------------------------------------------
issues a stock dividend or has a Common Stock rights offering?
-------------------------------------------------------------
Any shares distributed by the Subject Company as a stock dividend
on shares credited to a participant's account, or upon any split
of such shares, will be credited to the participant's account and
held by the Plan Administrator for safekeeping. Stock dividends
distributed on shares registered in the name of a participant
that are not held by the Plan Administrator under the Plan, as
well as shares distributed on account of any split of such
shares, will be mailed directly to the shareholder. In the event
that the Subject Company makes available to its shareholders
rights to purchase additional shares, debentures or other
securities, the Subject Company will deliver any such rights
accruing to shares held on behalf of a participant to the Plan
Administrator, and the Plan Administrator will then deliver the
rights to the participant.
(25) How will a participant's shares be voted at a meeting of
--------------------------------------------------------
shareholders?
------------
All proxy soliciting material will be forwarded to each
participant, and full shares credited to a participant's account
under the Plan will be voted in accordance with such
participant's direction.
If a proxy card is not returned or if it is returned unsigned,
none of the participant's shares indicated on such card will be
voted unless the participant votes in person.
(26) What is the responsibility of the Subject Company and the Plan
--------------------------------------------------------------
Administrator under the Plan?
----------------------------
In administering the Plan, neither the Subject Company, the Plan
Administrator nor any agent will be liable for any action done in
good faith, or for any omission to act in good faith, including,
without limitation, any claim of liability arising (a) with
respect to the prices at which shares are purchased or sold for
your account and the times when such purchases or sales are made,
or (b) from any fluctuation in the market value after the
purchase or sale of shares, or (c) from continuation of your
account until receipt by the Plan Administrator of written notice
of termination or written evidence of your death. Nothing in the
above paragraph shall be deemed to constitute a waiver of any
rights that you might have under the Securities Act of 1933 or
other applicable federal laws.
The participant should recognize that neither the Subject Company
nor the Plan Administrator can provide any assurance of a profit
or protection against a loss on any shares purchased under the
Plan.
(27) May the Plan be changed?
-----------------------
The Subject Company reserves the right to amend, suspend, modify
or terminate the Plan at any time. Notice of any such amendment,
suspension, modification or termination will be sent to all
participants as soon as is practicable. Any uninvested funds
held by the Plan Administrator at the time of any suspension or
termination of the Plan will be remitted by the Plan
Administrator to the participants. The Subject Company also
reserves the right to terminate any participant's participation
in the Plan at any time.
As of the date of the Prospectus, the Subject Company has
authorized the issuance of up to 3,000,000 shares of Common Stock
pursuant to the Plan. As of September 15, 2000, 1,893,633 shares
have been issued pursuant to the Plan. If all 3,000,000 shares
are issued pursuant to the Plan and no further shares are
authorized by the Subject Company, the Plan will be discontinued.
(28) How is the Plan to be interpreted?
---------------------------------
Any question of interpretation arising under the Plan will be
determined by the Subject Company.
(29) What about foreign participants in the Plan whose dividends are
---------------------------------------------------------------
subject to income tax withholding?
---------------------------------
In the case of a foreign shareholder who is participating in the
Plan and whose dividends are subject to United States Income Tax
Withholding, the Plan Administrator will purchase Common Stock in
an amount equal to the net cash dividend, after the deduction of
taxes withheld. Amounts received from foreign shareholders under
optional cash payment provisions of the Plan must be in U.S.
dollars.
Federal Income Tax Consequences.
-------------------------------
The following discussion is provided for purposes of general
information only. Participants are advised to consult their own
tax advisors to determine how the federal income tax laws apply
to their own situations.
Generally, to the extent cash dividends are declared and
distributed by the Subject Company from its current year or
accumulated earnings and profits, any dividends reinvested under
the Plan will be taxable as ordinary income to the participant,
even though the participant does not receive cash. Thus,
participants are taxed on dividends in the same manner as
shareholders who are not participants in the Plan. This means
that the amount of the dividend which is reinvested will be
taxable as ordinary income in the year the dividend is paid.
Upon withdrawals from or termination of the Plan, participants
will not realize federal taxable income when they receive
certificates for whole shares that have been credited to their
accounts under the Plan. However, a participant who receives a
cash adjustment for a fractional share credited to his account
may realize a gain or loss.
Gain or loss may also be realized by the participant when whole
shares are sold by the participant after withdrawal from the
Plan. The amount of such gain or loss will be the difference
between the amount the participant receives for his shares and
his tax basis. The tax basis of any shares acquired through the
Plan with reinvested dividends or optional cash payments
generally will be equal to the amount paid for the shares. Gains
or losses upon the sale of shares held for more than one year are
classified as long-term, while gains or losses attributable to
shares held for less than one year are classified as short-term.
Generally, sales and exchanges classified as long-term are
subject to a reduction in the tax rate applicable to the gain.
There is a further tax rate reduction on assets held more than
five years which are acquired (or deemed to be acquired) after
December 31, 2000. Capital gains are generally taxed to
corporations in the same manner as ordinary income (although the
technical distinction between capital gains and ordinary income
is retained). The holding period for shares acquired through the
Plan will begin on the day after the purchase date.
In the case of any participant as to whom federal income tax
withholding on dividends is required, the Plan Administrator will
make dividend reinvestment net of the amount of tax required to
be withheld.
(c) Different Terms. The information set forth in Item 4(a) is
---------------
incorporated herein by reference.
(d) Appraisal Rights. None.
----------------
(e) Provisions for Unaffiliated Security Holders. None.
--------------------------------------------
(f) Eligibility for Listing or Trading. The Common Stock of the Subject
----------------------------------
Company, including without limitation, shares purchased pursuant to
the Plan, is currently traded on the NASDAQ National Market tier of
the NASDAQ Stock Market under the symbol EMCI.
ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(a) Transactions. The Subject Company conducts its insurance business
------------
through two business segments as follows:
...............................
: :
: EMC INSURANCE GROUP INC. :
:.............................:
:
:
Property and :
Casualty Insurance : Reinsurance
......................:................................
: :
: :
Illinois EMCASCO Insurance Company ("Illinois EMCASCO") EMC
Dakota Fire Insurance Company ("Dakota Fire") Reinsurance
Farm and City Insurance Company ("Farm and City") Company
EMCASCO Insurance Company ("EMCASCO")
:
:
EMC Underwriters, LLC.
Illinois EMCASCO was formed in Illinois in 1976, Dakota Fire was
formed in North Dakota in 1957 and EMCASCO was formed in Iowa in 1958
for the purpose of writing property and casualty insurance. Farm and
City was formed in Iowa in 1962 to write nonstandard risk automobile
insurance and was purchased by the Subject Company in 1984. These
companies are licensed to write insurance in a total of thirty-five
(35) states and are participants in a pooling agreement with EMCC.
The reinsurance subsidiary was formed in 1981 to assume reinsurance
business from EMCC. The Subject Company assumes a portion of EMCC's
assumed reinsurance business, exclusive of certain reinsurance
contracts, and is licensed to do business in nine (9) states.
The Subject Company's excess and surplus lines insurance agency, EMC
Underwriters, LLC., was acquired in 1985. The company was formed in
Iowa in 1975 as a broker for excess and surplus lines insurance.
Effective December 31, 1998, the excess and surplus lines insurance
agency was converted to a limited liability company and the ownership
was contributed to EMCASCO.
The four property and casualty insurance subsidiaries of the Subject
Company and two subsidiaries and an affiliate of EMCC (Union Insurance
Company of Providence, EMC Property & Casualty Company and Hamilton
Mutual Insurance Company) are parties to reinsurance pooling
agreements with EMCC (collectively the "pooling agreement"). Under
the terms of the pooling agreement, each company cedes to EMCC all of
its insurance business, with the exception of any voluntary
reinsurance business assumed from nonaffiliated insurance companies,
and assumes from EMCC an amount equal to its participation in the
pool. All losses, settlement expenses and other underwriting and
administrative expenses, excluding the voluntary reinsurance business
assumed by EMCC from nonaffiliated insurance companies, are prorated
among the parties on the basis of participation in the pool. Since
1998, the Subject Company's aggregate participation in the pool has
been 23.5%. Operations of the pool give rise to intercompany balances
with EMCC, which are settled on a quarterly basis. The investment and
income tax activities of the pool participants are not subject to the
pooling agreement.
The purpose of the pooling agreement is to spread the risk of an
exposure insured by any of the pool participants among all the
companies. The pooling agreement produces a more uniform and stable
underwriting result from year to year for all companies in the pool
than might be experienced individually. In addition, each company
benefits from the capacity of the entire pool, rather than being
limited to policy exposures of a size commensurate with its own
assets, and from the wide range of policy forms, lines of insurance
written, rate filings and commission plans offered by each of the
companies. A single set of reinsurance treaties is maintained for the
protection of all companies in the pool.
(b) Significant Corporate Events. None.
----------------------------
(c) Negotiations or Contracts. Not applicable.
-------------------------
(e) Agreements Involving Subject Company's Securities. The information
-------------------------------------------------
set forth in Item 4(a) is incorporated herein by reference.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(b) Use of Securities Acquired. Any shares of Common Stock of the Subject
--------------------------
Company acquired through dividend reinvestments pursuant to the terms
of the Plan will be retained by EMCC.
(c) Plans. The Board of Directors of EMCC does not have any specific
-----
intent to acquire all shares of Common Stock of the Subject Company at
this time. However, if Subject Company continues to operate the Plan,
and the Common Stock issued through the Plan continues to be purchased
in the open market, and EMCC continues to participate in the Plan,
EMCC could conceivably own 100% of the Subject Company at some time
in the future. Subject Company has no specific plans to de-register
its Common Stock with the Securities and Exchange Commission or de-
list the Common Stock from the NASDAQ National Market System. In the
event that the number of shareholders of Subject Company falls below
the Securities and Exchange Commission's minimum threshold for
mandatory periodic reporting, Subject Company's Board of Directors
may reevaluate the registration and listing status of the Common
Stock.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a) Purposes. It is anticipated that EMCC will continue to purchase the
--------
Common Stock of Subject Company by reinvesting cash dividends received
pursuant to the terms of the Plan until it achieves 80% ownership of
Subject Company. Once the 80% ownership threshold is achieved,
EMCC's participation level in the Plan (i.e. dividend reinvestment
percentage) may fluctuate, or even cease, depending upon current
market conditions and the availability and price of the Common Stock.
(b) Alternatives. EMCC has considered negotiating block purchases of
------------
Common Stock of the Subject Company; however, at this time no
agreements or understandings have been reached or are expected to be
reached and the transaction described inevitably results from the
operation of the Plan.
(c) Reasons. Not Applicable.
-------
(d) Effects. Upon achievement of the 80% ownership threshold of Subject
-------
Company, EMCC will realize a significant income tax benefit as 100%
of the dividends received from Subject Company will be excluded from
taxable income. EMCC currently pays tax on 20% of the dividend
income received from Subject Company. Additionally, the continued
operation of the Plan may reduce the liquidity of the Common Stock of
the Subject Company.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) Fairness. The Common Stock of the Subject Company is traded on the
--------
NASDAQ National Market System. Pursuant to the Plan, the Plan
Administrator will purchase shares from the Subject Company, to the
extent that the Subject Company makes shares available. The Plan
Administrator will purchase any other shares required for the Plan in
the open market or from private sources. The price of shares purchased
from the Subject Company will be the last sale price of the Common
Stock as reported on the NASDAQ National Market System on the
relevant Investment Date (or the next preceding day on which such
price was reported if it is not reported on the Investment Date). The
price of shares purchased in the open market or from private sources
will be the weighted average cost of all shares so purchased in
relation to the relevant Investment Date. No shares will be sold
under the Plan at less than the par value of such shares. The Plan's
operation is the same for both affiliated and unaffiliated security
holders; therefore, management believes it to be fair for all security
holders.
(b) Factors in Determining Fairness. The information set forth in Item
-------------------------------
8(a) is incorporated herein by reference.
(c) Approval of Security Holders. Not Applicable.
----------------------------
(d) Unaffiliated Representative. Not Applicable.
---------------------------
(e) Approval of Directors. The Finance Committee of the Board of
---------------------
Directors of EMCC has approved the reinvestment of its dividends and
continues to monitor EMCC's participation in the Plan.
(f) Other Offers. Not Applicable.
------------
ITEM 9. REPORTS, OPINIONS, APPRAISALS, NEGOTIATIONS.
(a) Report, Opinion or Appraisals. None.
-----------------------------
(b) Preparer and Summary of Report, Opinion or Appraisal. Not Applicable.
----------------------------------------------------
(c) Availability of Documents. Not Applicable.
-------------------------
ITEM 10. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) Source of Funds. In the event EMCC continues to purchase Common Stock
---------------
of the Subject Company pursuant to the Plan, the source of funds for
such purchases will be reinvested dividends. In the event that EMCC
negotiates a block purchase of the Common Stock of the Subject
Company, the source of funds for such purchases will be the general
operating funds of EMCC.
(b) Conditions. At this time, EMCC reinvests one hundred percent (100%)
----------
of the dividends it receives pursuant to the Plan. It is anticipated
that EMCC will continue to reinvest at such percentage until an
ownership level of eighty percent (80%) is achieved. After obtaining
the eighty percent ownership level, EMCC's participation may change.
(c) Expenses. Estimated expenses related to the transactions described
--------
herein include:
Filing Fees: $6,197
Legal Fees: $7,000
Accounting Fees: $5,000
Reports: $0
Printing Costs: $0
(d) Borrowed Funds. Not Applicable.
--------------
ITEM 11: INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) Securities Ownership. The information set forth in Items 2 and 3 of
--------------------
this Transaction Statement is incorporated herein by reference.
Number of shares of Common
--------------------------
Stock Beneficially Owned
------------------------
(1) Subject Company Directors:
George C. Carpenter, III 6,140
Elwin H. Creese 22,185
David J. Fisher 1,661
Bruce G. Kelley 183,569
George W. Kochheiser 55,000
Raymond A. Michel 5,000
Fredrick A. Schiek 23,131
(2) Subject Company Officers:
Margaret A. Ball 13,083
Raymond W. Davis 15,979
John D. Isenhart 14,706
Ronald W. Jean 13,723
Bruce G. Kelley 183,569
Donald D. Klemme 17,720
David O. Narigon 18,948
Mark E. Reese 17,835
Fredrick A. Schiek 23,131
Douglas J. Zmolek 16,338
(3) EMCC Directors:
Richard W. Booth 2,740
William H. Brenton 1,200
Blaine A. Briggs 22,772
Gale L. Griffin 1,000
Robert M. Gunn 5,000
Dr. John H. Kelley 9,486
Bruce G. Kelley 183,569
Richard Koch, Jr. 2,626
George W. Kochheiser 55,000
John M. Lockhart 19,939
Lanning Macfarland, Jr. 6,200
David J. W. Proctor 1,800
Fredrick A. Schiek 23,131
Philip T. Van Ekeren 17,740
H. Terrill Watts, Jr. 1,395
(4) EMCC Officers:
Margaret A. Ball 13,083
Raymond W. Davis 15,979
John D. Isenhart 14,706
Ronald W. Jean 13,723
Bruce G. Kelley 183,569
Donald D. Klemme 17,720
David O. Narigon 18,948
Mark E. Reese 17,835
Fredrick A. Schiek 23,131
Douglas J. Zmolek 16,338
(b) Securities Transactions Within Last 60 Days.
-------------------------------------------
NAME DATE #SHARES PRICE LOCATION
---- ---- ACQUIRED ----- --------
--------
Margaret A. Ball 12/7/00 500 8.7500 Option Exercise
Margaret A. Ball 12/7/00 191 9.6250 Option Exercise
Margaret A. Ball 12/7/00 2,250 9.5625 Option Exercise
Margaret A. Ball 12/7/00 1,000 8.8125 Option Exercise
Donald D. Klemme 1/4/01 5,841 9.7500 Option Exercise
Fredrick A. Schiek 1/18/01 1,094 10.0000 Option Exercise
ITEM 12. SOLICITATION OR RECOMMENDATION.
(d) Intent to Tender or Vote in a Going Private Transaction. Not
-------------------------------------------------------
Applicable.
(e) Recommendations of Others. None.
-------------------------
ITEM 13. FINANCIAL STATEMENTS.
(a) Financial Information.
---------------------
(1) and (2) The Subject Company's annual report on Form 10-K
filed pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the years ended December 31, 1998 and 1999, which
contains audited financial statements, and the Company's quarterly
report on Form 10-Q filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarter ended September 30,
2000, which contains unaudited financial statements, are incorporated
herein by reference.
(3) There is no ratio of earnings to fixed charges.
(4) The Subject Company's book value per share as of September 30,
2000 was $12.89.
(b) Pro Forma Information. None.
---------------------
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
(a) Solicitations or Recommendations. The Subject Company has retained
--------------------------------
the law firm of Nyemaster, Goode, Voigts, West, Hansell & O'Brien
located at 700 Walnut, Suite 1600, Des Moines, Iowa 50309-3899 in
connection with the preparation and filing of this Transaction
Statement. However, no persons have been employed, retained or will
be compensated to make solicitations or recommendations in connection
with the Plan.
(b) Employees and Corporate Assets. Not Applicable.
------------------------------
ITEM 15. ADDITIONAL INFORMATION.
(b) None.
----
ITEM 16. EXHIBITS.
(a) Disclosure Material. None.
-------------------
(b) Loan Agreement. None.
--------------
(c) Report, Opinion or Appraisal. None.
----------------------------
(d) Contracts, Arrangements or Understandings. None.
-----------------------------------------
(f) Statement Re: Appraisal Rights. None.
------------------------------
(g) Oral Solicitation Materials. None.
---------------------------
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
EMC INSURANCE GROUP INC.
By:__________________________________________
Name: Bruce G. Kelley
Title: President, Chief Executive Officer and Director
Date: January 31, 2001
EMPLOYERS MUTUAL CASUALTY COMPANY
By:__________________________________________
Name: Bruce G. Kelley
Title: President, Chief Executive Officer and Director
Date: January 31, 2001