AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 2004
REGISTRATION NO. 333-115354
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE MIDLAND COMPANY OHIO 31-0742526
(Exact Name of Registrant (State or Other Jurisdiction (I.R.S. Employer
Specified in Its Charter) of Incorporation or Identification Number)
Organization)
7000 MIDLAND BOULEVARD
AMELIA, OHIO 45102-2607
(513) 943-7100
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants' Principal Executive Offices)
----------
JOHN I. VON LEHMAN
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER & SECRETARY
THE MIDLAND COMPANY
7000 MIDLAND BOULEVARD
AMELIA, OHIO 45102-2607
TELEPHONE: (513) 943-7100
FACSIMILE (513) 943-7111
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
WITH COPIES TO:
F. MARK REUTER, ESQ.
KEATING, MUETHING & KLEKAMP, P.L.L.
1400 PROVIDENT TOWER
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
TELEPHONE (513) 579-6469
FACSIMILE (513) 579-6457
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement as determined by
market conditions and other factors.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 19, 2004
PROSPECTUS
1,600,000 SHARES
THE MIDLAND COMPANY
[THE MIDLAND COMPANY LOGO]
COMMON STOCK
Certain selling shareholders of Midland are offering shares of our common
stock. Midland will not receive any proceeds from the sale of our shares by the
selling shareholders. We will provide a prospectus supplement containing the
specific terms of an offering by the selling shareholders.
You should read this prospectus and the documents that are incorporated by
reference in this prospectus carefully before investing. INVESTING IN OUR COMMON
STOCK INVOLVES SEVERAL RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
Midland's common stock is traded on the Nasdaq National Market under the
symbol "MLAN". On July 14, 2004, the closing price of Midland's common stock on
the Nasdaq National Market was $27.54 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 2004
TABLE OF CONTENTS
<Table>
ABOUT THIS PROSPECTUS....................................... 2
WHERE YOU CAN FIND MORE INFORMATION......................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS........... 3
THE MIDLAND COMPANY......................................... 4
THE OFFERING................................................ 5
RISK FACTORS................................................ 6
SELLING SHAREHOLDERS........................................ 13
USE OF PROCEEDS............................................. 13
DESCRIPTION OF COMMON STOCK................................. 13
PLAN OF DISTRIBUTION........................................ 15
LEGAL MATTERS............................................... 17
EXPERTS..................................................... 17
</Table>
ABOUT THIS PROSPECTUS
The registration statement that contains this prospectus (including the
exhibits) contains additional important information about us and the securities
offered under this prospectus. Specifically, we have filed certain legal
documents that control the terms of the securities offered by this prospectus as
exhibits to the registration statement. We will file certain other legal
documents that control the terms of the securities offered by this prospectus as
exhibits to reports we file with the SEC. That registration statement and the
other reports can be read at the SEC web site or at the SEC offices mentioned
below under the following heading.
As used in this prospectus and any prospectus supplement, the terms
"Midland," "we," "us," "our," "MLAN" or the "Company," refer collectively to The
Midland Company and its subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934, under which we file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy this information at the following
location of the Securities and Exchange Commission:
Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, DC 20549, at prescribed rates. Please call the Securities and
Exchange Commission at (800) 732-0330 for further information about the Public
Reference Room.
The Securities and Exchange Commission also maintains an internet website
that contains reports, proxy statements and other information about issuers that
file electronically with the Securities and Exchange Commission. The address of
that site is www.sec.gov. SEC filings may also be accessed free of charge
through our Internet site at www.midlandcompany.com.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We are "incorporating by reference" into this prospectus certain
information that we file with the Securities and Exchange Commission, which
means that we are disclosing important information to you by referring you to
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those documents. The information incorporated by reference is deemed to be part
of this prospectus, except for any information superseded by information
contained directly in this prospectus. This prospectus incorporates by reference
the documents set forth below that we have previously filed with the Securities
and Exchange Commission. These documents contain important information about us
and our finances.
<Table>
<Caption>
SEC FILINGS (FILE NO. 01-06026) PERIOD
- ----------------------------------------- -----------------------------------------
Annual Report on Form 10-K Year Ended December 31, 2003
Quarterly Report on Form 10-Q Quarter Ended March 31, 2004
Current Reports on Form 8-K Filed on February 6, 2004, February 18,
2004, April 30, 2004 and May 12, 2004
Registration Statement on Form 8-A
(File No. 000-26199) Filed on May 27, 1999
</Table>
All documents that we file with the Securities and Exchange Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
from the date of this prospectus to the end of the offering of the securities
under this document shall also be deemed to be incorporated herein by reference.
Any statement contained in this prospectus or in a document incorporated or
deemed to be incorporated by reference into this prospectus will be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or any other subsequently filed document
that is deemed to be incorporated by reference into this prospectus modifies or
supersedes the statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
You may request a copy of these filings, at no cost, by writing or calling
us at the following address or telephone number:
John I. Von Lehman
Executive Vice President,
Chief Financial Officer & Secretary
The Midland Company
7000 Midland Boulevard
Amelia, Ohio 45102-2607
(513) 943-7100
Exhibits to the filings will not be sent, however, unless those exhibits
have specifically been incorporated by reference in this prospectus.
Information contained on our website is not intended to be incorporated by
reference in this prospectus and you should not consider that information a part
of this prospectus.
You should rely only on the information incorporated by reference or
provided in this prospectus and the prospectus supplement. No one else is
authorized to provide you with any other information or any different
information. We are not making an offer of securities in any state where an
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of this
document.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements include, but are not limited to certain discussions
relating to future revenue, underwriting income, premium volume, investment
income and other investment results, business strategies, profitability,
liquidity, capital adequacy, anticipated capital expenditures and business
relationships, as well as any other statements concerning the year 2004 and
beyond. In some cases, you can identify forward-looking statements by terms such
as "may," "will," "should," "could," "would," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "project," "predict," "potential" and
similar expressions or the negative version of such expressions. These
forward-looking statements reflect our current views about future events, are
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based on assumptions and are subject to known and unknown risks and
uncertainties that may cause results to differ materially from those anticipated
in those statements. Many of the factors that will determine future events or
achievements are beyond our ability to control or predict. Factors that might
cause results to differ from those anticipated include, without limitation,
adverse weather conditions, changes in underwriting results affected by adverse
economic conditions, fluctuations in the investment markets, changes in the
retail marketplace, changes in the laws or regulations affecting the operations
of the company or its subsidiaries, changes in the business tactics or
strategies of the company, its subsidiaries or its current or anticipated
business partners, the financial condition of the company's business partners,
acquisitions or divestitures, changes in market forces, litigation and the other
risk factors that have been identified in the company's filings with the SEC or
may be identified in a prospectus supplement, any one of which might materially
affect the operations of the company or its subsidiaries.
The forward-looking statements contained in this prospectus reflect our
views and assumptions only as of the date of this prospectus. Except as required
by law, we assume no responsibility for updating any forward-looking statements.
You should read this prospectus and the documents that we reference in this
prospectus and have filed as exhibits to the registration statement of which
this prospectus is a part, completely and with the understanding that our actual
future results may be materially different from what we expect.
We qualify all of our forward-looking statements by these cautionary
statements.
THE MIDLAND COMPANY
The Midland Company is a highly focused provider of specialty property and
casualty insurance products and services. We are a leading provider of insurance
products and services to the manufactured housing market and also provide
insurance products for site-built homes, motorcycles, watercraft, snowmobiles,
recreational vehicles, credit life and financial institutions related products.
We market our insurance products and services throughout the United States
utilizing multiple distribution channels, including insurance agents, lenders,
manufacturers, retailers, financial institutions and strategic alliance
partners. Our fee-based operations provide fee revenue and generate significant
incremental insurance premium.
Our insurance operations, conducted through the American Modern Insurance
Group, Inc., accounted for 96% of our 2003 revenues. American Modern is licensed
to write insurance in all fifty states and the District of Columbia. A.M. Best
Company, an independent company which rates the financial strength of insurance
companies, has assigned American Modern's property and casualty subsidiaries a
group rating of "A+ (Superior)." Our transportation operations, M/G Transport,
generated the remaining 4% of our 2003 revenue. M/G Transport operates a fleet
of barges on the lower Mississippi river and its tributaries to transport
commodity dry cargos.
To support our operating principles and growth strategies, we have built a
management team with extensive experience in the insurance industry. Our 22
senior executives average approximately 20 years each in the insurance industry.
Our principal executive offices are located at 7000 Midland Boulevard,
Amelia, Ohio 45102-2607, and our telephone number is (513) 943-7100. We maintain
our corporate website at www.midlandcompany.com. Information on our website,
except for the information specifically incorporated by reference, is not part
of this prospectus.
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THE OFFERING
Common Stock Offered by:
Robert W. Hayden(1)...... 1,500,000 shares
Michael J. Conaton(1).... 100,000 shares
Total......................... 1,600,000 shares
Common stock outstanding
before and after this
offering...................... 18,767,039 shares
Use of proceeds............... Midland will not receive any proceeds from the
sale of common stock by the selling
shareholders.
Nasdaq National Market
symbol........................ MLAN
- ---------------
(1) It is anticipated that one or more additional relatives and/or trusts
affiliated with the selling shareholders will also be selling common stock
in this offering. The aggregate number of shares to be sold by the selling
shareholders, trusts and relatives affiliated with them will not exceed
1,600,000. Any additional selling relatives and/or trusts will be identified
in a prospectus supplement or an amendment to the registration statement of
which this prospectus is a part.
The above information regarding shares outstanding before and after the
offering is based on the number of shares of common stock outstanding as of July
15, 2004. The number of shares outstanding excludes 1,683,540 shares reserved
for issuance under our incentive compensation plans. Options to purchase
1,297,909 shares at an average exercise price of $17.34 are outstanding as of
July 15, 2004.
See "Selling Shareholders" for a further description of the selling
shareholders.
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RISK FACTORS
You should carefully consider the risks described below, together with all
the other information included in and incorporated by reference in this
prospectus, before making an investment decision to buy our common stock. If any
of the following risks actually occur, our business, financial condition or
results of operations could be materially and adversely affected. In that case,
the trading price of our common stock could decline, and you could lose all or
part of your investment. The risks and uncertainties described below are not the
only ones we may face. Additional risks and uncertainties presently not known to
us or that we currently believe to be immaterial may also harm our business.
WE COULD INCUR SUBSTANTIAL LOSSES FROM CATASTROPHES AND WEATHER-RELATED EVENTS
American Modern, like other property and casualty insurers, has
experienced, and will experience in the future, catastrophe losses, which may
materially reduce our financial results and harm our financial condition.
Catastrophes can be caused by various natural events, including hurricanes,
windstorms, tornadoes, floods, earthquakes, hail, severe winter weather and
fires. The incidence and severity of catastrophes are inherently unpredictable.
Hurricanes and earthquakes may produce significant damage in large areas,
especially those that are heavily populated. In 2003, approximately 51.9% of
American Modern's gross property and casualty written premium was derived from
the southeastern United States, Oklahoma and Texas. Because of this
concentration of business, American Modern may be more exposed to hurricanes,
tornadoes, floods and other weather-related losses than some of its competitors.
A single large catastrophe loss, a number of small or large catastrophe losses
in a short amount of time or losses from a series of storms or other events that
do not constitute a catastrophic event under American Modern's reinsurance
treaties, could have a material adverse effect on our financial condition or
results and could result in substantial outflows of cash as losses are paid.
American Modern's ability to write new business could also be affected should
such an event result in a material reduction in our statutory surplus. Increases
in the value and geographic concentration of insured property and the effects of
inflation could increase the severity of claims from catastrophic events in the
future.
These factors can contribute to significant quarter-to-quarter and
year-to-year fluctuations in the underwriting results of American Modern and our
net earnings. Because of the possibility of these fluctuations in underwriting
results, historical periodic results of operations may not be indicative of
future results of operations. Periodic fluctuations in our operating results
could adversely affect the market price of our common stock.
OUR RESULTS ARE SIGNIFICANTLY AFFECTED BY CONDITIONS IN THE MANUFACTURED HOUSING
INDUSTRY
Level of Manufactured Housing Sales
A significant number of the insurance policies American Modern issues each
year are written in conjunction with the sale of new manufactured homes. A
significant or prolonged downturn in the level of new manufactured housing
sales, such as the one which this industry is currently experiencing, could
cause a decline in American Modern's premium volume and income, which could harm
our financial condition or results. The market for manufactured housing is
affected by many factors, including general economic conditions, interest rate
levels, the availability of credit and government regulations. Recent
difficulties in the manufactured housing market have been exaggerated by a
significant increase in the supply of available credit in the mid-1990s that
resulted in a significant increase in new manufactured homes purchased. In the
current economic environment, lenders have reduced the amount of credit
available for manufactured housing purchases. This trend could result in a
significant decrease in manufactured housing premium volume for American Modern.
Reduction of Chattel Financing
Manufactured housing sales have traditionally been financed as personal
property through a financing transaction referred to as chattel financing. The
manufactured housing industry has experienced a substantial reduction in the
number of lenders providing chattel or other personal property financing for
manufactured housing in recent years. This reduction has resulted in a trend
toward traditional mortgage financing for
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manufactured housing units. Because chattel lenders are an important channel of
distribution for American Modern, this trend could harm our financial condition
or results. American Modern has historically had strong relationships with the
major chattel financing sources. To the extent that the manufactured housing
lending market moves away from chattel financing to traditional mortgage
financing, American Modern may not be able to replace lost premium volume.
OUR MOTORCYCLE PRODUCT COULD CONTINUE TO EXPERIENCE UNPROFITABLE RESULTS
Despite changes made to the motorcycle product, including rate increases
and more stringent underwriting parameters, it is uncertain when, or if, this
line of business will become profitable. To the extent that these rating and
underwriting actions are insufficient, we could experience results that could
harm our financial results.
THE RESERVES ESTABLISHED FOR OUR RUN-OFF COMMERCIAL LIABILITY LINES BUSINESS
COULD BE INADEQUATE
The Company has established loss reserves designed to cover losses and loss
adjustment expenses related to its run-off commercial liability lines business.
However, the ultimate liability related to this business is uncertain. If the
established reserves are inadequate, it could harm our earnings in future
periods.
OUR RESULTS MAY FLUCTUATE AS A RESULT OF MANY FACTORS, INCLUDING CYCLICAL
CHANGES IN THE INSURANCE INDUSTRY AND GENERAL ECONOMIC CONDITIONS
The results of companies in the property and casualty insurance industry
historically have been subject to significant fluctuations and uncertainties.
Rates for property and casualty insurance are influenced primarily by factors
that are outside of our control, including market and competitive conditions and
regulatory issues. Our profitability can be affected significantly by:
- downturns in the economy, which historically result in an increase in the
fire loss ratio;
- higher actual costs that are not known to American Modern at the time it
prices its products;
- volatile and unpredictable developments, including man-made,
weather-related and other natural catastrophes;
- any significant decrease in the rates for property and casualty insurance
in the segments American Modern serves or its inability to maintain or
increase such rates;
- changes in loss reserves resulting from the legal environment in which
American Modern operates as different types of claims arise and judicial
interpretations relating to the scope of the insurer's liability develop;
and
- fluctuations in interest rates, inflationary pressures and other changes
in the investment environment, which affect our return on invested
assets.
The demand for property and casualty insurance can also vary significantly,
rising as the overall level of economic activity increases and falling as that
activity decreases. Due to the concentration of American Modern's business in
the southeastern United States, Oklahoma and Texas, changes in the general
economy, regulatory environment and other factors specifically affecting that
region could adversely affect our financial conditions and results. The property
and casualty insurance industry historically is cyclical in nature. These
fluctuations in demand and competition could produce underwriting results that
could harm our financial condition or results.
THE SPECIALTY INSURANCE INDUSTRY IS HIGHLY COMPETITIVE AND WILL REQUIRE
SIGNIFICANT TECHNOLOGY EXPENDITURES
The specialty insurance lines offered by American Modern are highly
competitive. American Modern competes with national and regional insurers, many
of whom have greater financial and marketing resources than American Modern. The
types of insurance coverage that American Modern sells are often a relatively
small portion of the business sold by some of American Modern's competitors.
Also, other financial institutions, such as banks and brokerage firms, are now
able to offer services similar to those offered by American Modern as a
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result of the Gramm-Leach-Bliley Act, which was enacted in November 1999. New
competition from these developments could harm our financial condition or
results.
Many of our competitors are better capitalized than we are and may be able
to withstand significant reductions in their profit margins to capture market
share. If our competitors decide to target American Modern's customer base with
lower-priced insurance, American Modern may decide not to respond competitively,
which could result in reduced premium volume.
Changing practices caused by the Internet have led to greater competition
in the insurance industry. In response, American Modern has invested
substantially in the development of modernLINK(TM), an enterprise-wide computer
network that is being developed in stages and is intended to connect American
Modern's internal systems directly to its sales and distribution channel
partners as well as policyholders over the Internet. The cost of this system is
significant and its development and installation will decrease operating profits
in the short term. This system is in development and its effectiveness has not
been proven. Significant changes to the technology interface between American
Modern and its distribution channel participants and policyholders could
significantly disrupt or alter its distribution channel relationships.
Disruptions to our information technology systems could also occur periodically
during the installation of the modernLINK(TM) system and adversely affect our
business.
AMERICAN MODERN'S INSURANCE RATINGS MAY BE DOWNGRADED, WHICH WOULD REDUCE ITS
ABILITY TO COMPETE AND SELL INSURANCE PRODUCTS
Insurance companies are rated by established insurance rating agencies
based on the rating agencies' opinions of the company's ability to pay claims
and on the company's financial strength. Ratings have become an increasingly
important factor in establishing the competitive position of insurance
companies. Ratings are based upon factors relevant to policyholders and are not
designed to protect shareholders. Rating agencies periodically review their
ratings. There can be no assurance that current ratings will be maintained in
the future. Most recently, A.M. Best has given a group rating of "A+ (Superior)"
to American Modern's property and casualty insurance subsidiaries and has given
a rating of "A- (Excellent)" to American Modern's credit life insurance
companies. In particular, financial institutions, including banks and credit
unions, are sensitive to ratings and may discontinue using an insurance company
if the insurance company is downgraded. A downgrade in American Modern's
insurance rating could also have a negative impact on its ability to obtain
favorable reinsurance rates and terms. Downgrades in the ratings of American
Modern's insurance company subsidiaries could harm our financial condition or
results.
AMERICAN MODERN MAY BE UNABLE TO REINSURE INSURANCE RISKS AND CANNOT GUARANTEE
THAT AMERICAN MODERN'S REINSURERS WILL PAY CLAIMS ON A TIMELY BASIS, IF AT ALL
American Modern uses reinsurance to attempt to limit the risks, especially
catastrophe risks, associated with its insurance products. The availability and
cost of reinsurance are subject to prevailing market conditions and trends. Poor
conditions in the reinsurance market could cause American Modern to reduce its
volume of business and impact its profitability. American Modern's reinsurance
treaties are generally subject to annual renewal. American Modern may be unable
to maintain its current reinsurance treaties or to obtain other reinsurance
treaties in adequate amounts and at favorable rates and terms. Recently, the
property and casualty industry has experienced significant increases in
reinsurance rates. If American Modern is unable or unwilling to renew its
expiring treaties or to obtain new reinsurance treaties, either its net exposure
to risk would increase or, if American Modern is unwilling to bear an increase
in net risk exposures, American Modern would have to reduce the amount of risk
it underwrites.
Although the reinsurer is liable to American Modern to the extent of the
ceded reinsurance, American Modern remains liable as the direct insurer on all
risks reinsured. As a result, ceded reinsurance arrangements do not eliminate
American Modern's obligation to pay claims. Although we record an asset for the
amount of claims paid that American Modern expects to recover from reinsurers,
we cannot be certain that American Modern will be able to ultimately collect
these amounts. The reinsurer may be unable to pay the amounts recoverable, may
8
dispute American Modern's calculation of the amounts recoverable or may dispute
the terms of the reinsurance treaty.
OUR INVESTMENT PORTFOLIO COULD LOSE VALUE
Market Volatility and Changes in Interest Rates
American Modern's investment portfolio primarily consists of fixed income
securities (such as corporate debt securities and U.S. government securities)
and publicly traded equity securities. As of March 31, 2004, approximately 82%
of American Modern's investment portfolio was invested in fixed income
securities and approximately 18% was invested in equity securities. The fair
value of securities in American Modern's investment portfolio may fluctuate
depending on general economic and market conditions or events related to a
particular issuer of securities. In addition, American Modern's fixed income
investments are subject to risks of loss upon default and price volatility in
reaction to changes in interest rates. Changes in the fair value of securities
in American Modern's investment portfolio are reflected in our financial
statements and, therefore, could affect our financial condition or results. A
decrease in the value of American Modern's equity securities would also cause a
decrease in American Modern's statutory surplus, which in turn would limit
American Modern's ability to write insurance.
Concentration of Investments
As of March 31, 2004, approximately 34.6% of American Modern's equity
investment portfolio and 6.4% of its total investment portfolio (approximately
$55.8 million in market value) was invested in the common stock of U.S. Bancorp.
A material decrease in the price of common stock of U.S. Bancorp would cause the
value of American Modern's investment portfolio to decline and would result in a
decrease in American Modern's statutory surplus. In addition to American
Modern's holdings, Midland also holds common stock of U.S. Bancorp valued at
approximately $12.2 million as of March 31, 2004.
IF AMERICAN MODERN'S LOSS RESERVES PROVE TO BE INADEQUATE, THEN WE WOULD INCUR A
CHARGE TO EARNINGS
American Modern's insurance subsidiaries regularly establish reserves to
cover their estimated liabilities for losses and loss adjustment expenses for
both reported and unreported claims. These reserves do not represent an exact
calculation of liabilities. Rather, these reserves are management's estimates of
the cost to settle and administer claims. These expectations are based on facts
and circumstances known at the time, predictions of future events, estimates of
future trends in the severity and frequency of claims and judicial theories of
liability and inflation. The establishment of appropriate reserves is an
inherently uncertain process, and we cannot be sure that ultimate losses and
related expenses will not materially exceed American Modern's reserves. To the
extent that reserves prove to be inadequate in the future, American Modern would
have to increase its reserves and incur a charge to earnings in the period such
reserves are increased, which could have a material and adverse impact on our
financial condition and results.
REGULATORY ACTIONS COULD IMPAIR OUR BUSINESS
American Modern's insurance subsidiaries are subject to regulation under
the insurance laws of states in which they operate. These laws primarily provide
safeguards for policyholders, not shareholders. Governmental agencies exercise
broad administrative power to regulate many aspects of the insurance business,
including:
- standards of solvency, including risk-based capital measurements;
- restrictions on the amount, type, nature, quality and concentration of
investments;
- policy forms and restrictions on the types of terms that American Modern
can include in its insurance policies;
- certain required methods of accounting;
- reserves for unearned premium, losses and other purposes;
9
- premium rates;
- marketing practices;
- capital adequacy and the amount of dividends that can be paid;
- licensing of agents;
- approval of reinsurance contracts and inter-company contracts;
- approval of proxies; and
- potential assessments in order to provide funds to settle covered claims
under insurance policies provided by impaired, insolvent or failed
insurance companies.
Regulations of state insurance departments may affect the cost or demand
for American Modern's products and may impede American Modern from obtaining
rate increases or taking other actions it might wish to take to increase its
profitability. Further, American Modern may be unable to maintain all required
licenses and approvals and its business may not fully comply with the wide
variety of applicable laws and regulations or the relevant authority's
interpretation of the laws and regulations. Also, regulatory authorities have
relatively broad discretion to grant, renew or revoke licenses and approvals. If
American Modern does not have the requisite licenses and approvals or does not
comply with applicable regulatory requirements, insurance regulatory authorities
could stop or temporarily suspend American Modern from conducting some or all of
its activities or assess fines or penalties against American Modern. In light of
several recent significant property and casualty insurance company insolvencies,
it is possible that assessments American Modern must pay to state guarantee
funds may increase. In addition, insurance laws or regulations adopted or
amended from time to time may result in higher costs to American Modern or may
require American Modern to alter its business practices or result in increased
competition.
THE EFFECTS OF EMERGING CLAIM AND COVERAGE ISSUES, SUCH AS MOLD, ON AMERICAN
MODERN'S BUSINESS ARE UNCERTAIN
As industry practices and legal, judicial, social, environmental and other
conditions change, unexpected and unintended issues related to claims and
coverages may emerge. These issues can have a negative effect on American
Modern's business by either extending coverage beyond its underwriting intent or
by increasing the number or size of claims. Recent examples of emerging claims
and coverage issues include increases in the number and size of water damage
claims related to expenses for testing and remediation of mold conditions and a
growing trend of plaintiffs targeting property and casualty insurers in
purported class action litigation relating to claim-handling and other
practices, particularly with respect to the handling of personal lines claims.
The effects of these and other unforeseen emerging claim and coverage issues are
extremely hard to predict and could harm our financial condition or results.
The existence of certain airborne mold spores resulting from moisture
trapped in confined areas has been alleged to cause severe health and
environmental hazards. American Modern has current and potential future exposure
to mold claims in both its commercial and personal lines of business. Due to
uncertainty of future changes in state regulation, we cannot estimate American
Modern's future probable liability for mold claims. Also, as case law expands,
American Modern may be subject to mold-related losses beyond those intended by
policy coverage and not addressed by exclusionary or limiting language. Loss
reserve additions arising from future unfavorable judicial trends cannot be
reasonably estimated at the present time.
IT WOULD BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE MIDLAND
Controlling Shareholders
Without giving effect to any sales of the securities registered hereby,
members or trusts of the Hayden and LaBar families beneficially own over 50% of
our common stock. Some members of these families serve as our executive officers
and directors. Through their ownership of common stock and their positions with
us, these families have the practical ability to effectively control Midland.
They have the practical ability to elect a majority
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of directors, approve or disapprove mergers or similar transactions and amend
our Articles of Incorporation without having to secure the votes of other
shareholders. A third party would need the approval of some members of these
families to gain control of Midland.
Anti-Takeover Considerations
Certain provisions of our Articles of Incorporation and Code of Regulations
and of Ohio law make it difficult for a third party to acquire control of
Midland without the consent of our Board. These anti-takeover defenses may
discourage, delay or prevent a transaction involving a change in control of our
company. In cases where Board approval is not obtained, these provisions could
also discourage proxy contests and make it more difficult for you and other
shareholders to elect directors of your choosing and cause us to take other
corporate actions you desire. These provisions include:
- a staggered Board of Directors;
- the authorization of undesignated preferred stock, the terms of which may
be established and shares of which may be issued without shareholder
approval;
- limitations on persons authorized to call a special meeting of
shareholders; and
- advance notice procedures required for shareholders to nominate
candidates for election as directors or to bring matters before an annual
meeting of shareholders.
We are also subject to the laws of various states that govern insurance
companies and insurance holding companies. Under these laws, a person generally
must obtain the applicable insurance department's approval to acquire, directly
or indirectly, 5% or 10% or more of our outstanding voting securities or the
outstanding voting securities of our insurance subsidiaries. An insurance
department's determination of whether to approve an acquisition would be based
on a variety of factors, including an evaluation of the acquirer's financial
stability, the competence of its management and whether competition in that
state would be reduced. These laws may delay or prevent a takeover of our
company or our insurance company subsidiaries.
Provisions in Ohio law relating to business combinations and interested
shareholder transactions, which are described below in "Description of Capital
Stock," may also make it difficult for Midland to be acquired.
MIDLAND AND ITS SUBSIDIARIES MAY BE UNABLE TO PAY DIVIDENDS
Midland and American Modern are organized as holding companies. Almost all
of our operations are conducted by subsidiaries. For us to pay dividends to our
shareholders and meet our other obligations, we must receive management fees and
dividends from American Modern and M/G Transport. In order for American Modern
to pay dividends and management fees to us and meet its other obligations,
American Modern must receive dividends and management fees from its
subsidiaries.
Payments of dividends by our insurance subsidiaries are regulated under
state insurance laws. The regulations in the states where each insurance company
subsidiary is domiciled limit the amount of dividends that can be paid without
prior approval from state insurance regulators. In addition, state regulators
have broad discretion to limit the payment of dividends by insurance companies.
Without regulatory approval, the maximum amount of dividends that can be paid in
2004 by American Modern is $32.4 million. The maximum dividend permitted by law
does not necessarily indicate an insurer's actual ability to pay dividends. Our
ability to pay dividends may be further constrained by business and regulatory
considerations, such as the impact of dividends on American Modern's surplus. A
decrease in surplus could affect American Modern's ratings, competitive
position, covenants under borrowing arrangements with banks, the amount of
premium that can be written and our ability to pay future dividends. A
prolonged, significant decline in insurance subsidiary profits or regulatory
action limiting dividends could subject us to shortages of cash because our
subsidiaries will not be able to pay us dividends.
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AMERICAN MODERN DEPENDS ON AGENTS AND DISTRIBUTION PARTNERS WHO MAY DISCONTINUE
SALES OF ITS POLICIES AT ANY TIME
American Modern's relationship with its independent agents and other
distribution channel partners is critical to its success. These agencies and
other distribution partners are independent and typically offer products of
competing companies. They require that American Modern provide competitive
product offering, timely application and claims processing, efficient technology
solutions and that they receive prompt attention to their questions and
concerns. If these agents and distribution partners find it easier to do
business with American Modern's competitors or choose to sell the insurance
products of its competitors on the basis of cost, terms or commission structure,
American Modern's sales volume would decrease, harming our financial conditions
and results. We cannot be certain that these agents and distribution partners
will continue to sell American Modern's insurance products to the individuals
they represent.
WE ARE SUBJECT TO VARIOUS LITIGATION
American Modern's insurance subsidiaries are routinely involved in
litigation that arises in the ordinary course of business. It is possible that a
court could impose significant punitive, bad faith, extra-contractual or other
extraordinary damages against American Modern or one of its subsidiaries. This
could harm our financial condition or results.
In addition, a substantial number of civil jury verdicts have been returned
against insurance companies in several jurisdictions in the United States,
including jurisdictions in which American Modern has business. Some of these
verdicts have resulted from suits that allege improper sales practices, agent
misconduct, failure to properly supervise agents and other matters.
Increasingly, these lawsuits have resulted in the award of substantial judgments
against insurance companies. Some of these judgments have included punitive
damages that are in high proportion to the actual damages. Any such judgment
against American Modern could harm our financial condition or results.
OUR RELATIVELY LOW TRADING VOLUME MAY LIMIT YOUR ABILITY TO SELL YOUR SHARES
Although shares of our common stock are listed on the Nasdaq National
Market, on many days in recent months, the daily trading volume for our common
stock was less than 11,000 shares. As a result of this low trading volume, you
may have difficulty selling a large number of shares of our common stock in the
manner or at a price that might be attainable if our common stock were more
actively traded.
OUR SUCCESS DEPENDS ON RETAINING OUR KEY PERSONNEL
Our performance depends on the continued service of our senior management.
None of our senior management is bound by an employment agreement nor do we have
key person life insurance on any of our senior management. Our success also
depends on our continuing ability to attract, hire, train and retain highly
skilled managerial, underwriting, claims, risk management, sales, marketing and
customer support personnel. In addition, new hires frequently require extensive
training before they achieve desired levels of productivity. Competition for
qualified personnel is intense, and we may fail to retain our key employees or
to attract or retain other highly qualified personnel.
RISKS RELATED TO M/G TRANSPORT
M/G Transport operates a barge chartering and freight brokerage business.
It arranges for the movement of dry bulk commodities such as petroleum coke,
ore, barite, fertilizers, sugar and other dry cargos primarily on the lower
Mississippi River and its tributaries. Such operations can be dangerous and may,
from time to time, cause damage to other vessels and other water facilities. Any
damage in excess of insurance coverage could harm our operations. The release of
foreign materials into the waterways could cause damage to the environment and
subject M/G Transport to remediation costs and penalties. Any such release could
harm our financial condition or results.
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SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock by the selling shareholders as of July 15, 2004,
and as adjusted to reflect the sale of the shares in this offering.
<Table>
<Caption>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1)(2) SHARES BEING OFFERED OFFERING
------------------- -------------------- -------------------
NAME OF SELLING SHAREHOLDER NUMBER PERCENT NUMBER PERCENT
- --------------------------- --------- ------- -------- --------
Robert W. Hayden(3)................... 1,895,449 10.2 1,500,000 395,449 2.2
Michael J. Conaton(4)................. 243,035 1.4 100,000 143,035 .09
</Table>
- ---------------
(1) Except as set forth in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares shown
as beneficially owned by them.
(2) It is anticipated that one or more relatives and/or trusts affiliated with
the selling shareholders, including the Robert W. Hayden Charitable
Remainder Unitrust dated July 13, 2004 (the"RWH Unitrust"), will also be
selling common stock in this offering. The aggregate number of shares to be
sold by the selling shareholders and entities affiliated with them will not
exceed 1,600,000. Any additional selling relatives and/or trusts will be
identified in a prospectus supplement or an amendment to the registration
statement of which this prospectus is a part.
(3) Includes shares beneficially owned by Robert W. Hayden and shares
beneficially owned by his spouse, children, children's spouses and
grandchildren. Also includes trust beneficiary and limited partnership
interests of such persons, including 300,000 shares held by the RWH Unitrust
for which Mr. Hayden expressly disclaims beneficial ownership which may be
included in this offering. Does not include a total of 19,900 shares that
may be acquired upon exercise of options within 60 days of July 15, 2004 by
such persons.
(4) The 100,000 shares to be sold are held of record by the Margaret A. Conaton
Trust for which Mr. Conaton serves as sole trustee. Mr. Conaton's shares
exclude 24,900 shares that may be acquired through the exercise of options
within 60 days of July 15, 2004.
The selling shareholders are selling the shares as a result individual
estate planning activities, including the diversification of personal
investments. None of the selling shareholders has an active role in the
management of Midland other than as described below. However, Mr. Hayden has
served on Midland's Board of Directors from 1968 to the present and has served
Midland in various other capacities since 1960, including as Vice President
until 1990. Mr. Conaton has served on Midland's Board of Directors since 1969
and has served Midland in various other capacities since 1961. From April 1998
until April 2000, Mr. Conaton served as an officer of Midland in the capacity as
Vice Chairman and from 1988 until April 1998 as President of Midland.
USE OF PROCEEDS
Midland will not receive any proceeds from the sale of its shares by the
selling shareholders.
DESCRIPTION OF COMMON STOCK
The following summary of some provisions of Midland's common stock is not
complete. You should refer to Midland's Articles of Incorporation and Code of
Regulations which are incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and applicable law for more
information.
GENERAL
Midland's authorized common stock consists of 40,000,000 shares, without
par value. As of July 15, 2004, Midland had 18,767,039 shares of common stock
outstanding. Holders of Midland's common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of shareholders.
Cumulative voting rights will be afforded to holders of our common stock at any
shareholders meeting held for the election of directors, if properly requested
by a shareholder. To request cumulative voting, a shareholder must give a timely
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written notice to our president, a vice president or secretary that such
shareholder desires that the voting for directors at a particular meeting be
cumulative. If we give notice of the shareholders meeting at least ten days
prior to the meeting, a shareholder's notice of a desire for cumulative voting
is timely if given at least forty-eight hours before the time fixed for the
shareholders meeting. If we give notice of the meeting less than ten days in
advance, a shareholder's cumulative voting notice is timely if given within
twenty-four hours of the time fixed for the meeting. If notice is properly
given, the chairman, secretary or the requesting shareholder will announce the
availability of cumulative voting at the meeting.
Holders of Midland's common stock are entitled to share in dividends as
declared by Midland's board of directors in its discretion. In the event of
Midland's liquidation, each outstanding share of common stock entitles its
holder to participate ratably in the assets remaining after payment of
liabilities and any preferred stock liquidation preferences. Shareholders have
no preemptive or other rights to subscribe for or purchase additional shares of
any class of Midland's stock or any other securities of Midland. Midland does
not have any redemption or sinking fund provisions with regard to its common
stock. All outstanding shares of common stock are fully paid, validly issued and
non-assessable.
The vote of holders of a majority of all outstanding shares of common stock
is required to amend Midland's articles of incorporation and to approve mergers,
reorganizations, and similar transactions except as discussed below under
"Provisions Affecting Business Combinations".
PROVISIONS AFFECTING BUSINESS COMBINATIONS
Chapter 1704 of the Ohio Revised Code regulates business combinations and
other transactions involving "interested shareholders" of "issuing public
corporations." An interested shareholder under Chapter 1704 is, in general, a
person who directly or indirectly, whether alone or with others, may exercise or
direct the exercise of 10% of the voting power of the issuing public corporation
in the election of directors, after taking into account all of that person's
beneficially owned shares that are not currently outstanding. We are an issuing
public corporation under Chapter 1704. Chapter 1704 may be viewed as having an
anti-takeover effect. The statute, in general, prohibits an issuing public
corporation from entering into a Chapter 1704 Transaction with an interested
shareholder, or any entity which is or would be after the transaction an
affiliate of an interested shareholder, for at least three years following the
date on which the interested shareholder attains such 10% ownership without the
approval of the board of directors of the corporation. As a result, one
significant effect of Chapter 1704 is to cause a person or entity desiring to
become an interested shareholder to negotiate with the board of directors of a
corporation prior to becoming an interested shareholder. A Chapter 1704
Transaction is broadly defined to include, among other things, a merger or
consolidation with, a sale of substantial assets to, or the receipt of a loan,
guaranty or other financial benefit (which is not proportionately received by
all shareholders) by the interested shareholder. Following the expiration of
such three year period, a Chapter 1704 Transaction with the interested
shareholder is permitted under certain circumstances.
Also, pursuant to Section 1701.831 of the Ohio Revised Code, the purchase
of certain levels of our voting power (one-fifth or more, one-third or more, or
a majority) can be made only with the prior authorization of the holders of at
least a majority of our total voting power and the separate prior authorization
of the holders of at least a majority of the voting power held by shareholders
other than the proposed purchaser, our officers and our directors who are also
employees.
Section 1707.043 of the Ohio Revised Code provides generally that any
profit realized from the disposition of any equity securities of an Ohio
corporation by a person who, within eighteen months before the disposition made
a proposal, or publicly disclosed the intention or possibility of making a
proposal, to acquire control of the corporation, inures to and is recoverable by
the corporation. However, a corporation will have no rights to profits made by a
person who is determined by a court of competent jurisdiction to have made such
proposal or disclosure with the sole purpose of succeeding in acquiring control
of the corporation and having reasonable grounds for believing that such person
would acquire control of the corporation. In general, a corporation will also
have no rights to profits where the person was not acting with the purpose of
affecting market trading and the person's actions did not have a material effect
on the price or volume of market trading in the equity securities.
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Our Code of Regulations provides that our board of directors must consist
of not less than three members and must be divided into three classes.
Currently, we have seventeen members of the board divided into three classes.
Five directors will serve until the annual meeting of 2005 and six directors
will serve until the annual meeting of 2006, and six directors will serve until
the annual meeting of 2007.
Special meetings of the shareholders may be called by our chairman,
president or vice president, a majority of our board of directors or by the
holders of at least 40% of our voting shares.
While we believe that these provisions are in our shareholders' best
interests, potential shareholders should be aware that such provisions could be
disadvantageous to them because the overall effect may be to render more
difficult the removal of incumbent directors and management or the assumption of
effective control by other persons.
Additionally, these provisions of our articles of incorporation and Ohio
law would be important in any attempted takeover of us and could operate,
depending on how utilized by the board of directors, either to discourage a
hostile takeover or to enable the board to negotiate a higher price than may be
initially proposed in any such situation.
LIABILITY OF DIRECTORS AND EXECUTIVE OFFICERS
Under Ohio law, shareholders are entitled to bring suit, generally in an
action on behalf of the corporation, to recover damages caused by breaches of
the duty of care and the duty of loyalty owed to a corporation and its
shareholders by directors and, to a certain extent, executive officers. Ohio law
has codified the traditional business judgment rule. Ohio law provides that the
business judgment presumption of good faith may only be overcome by clear and
convincing evidence, rather than the preponderance of the evidence standard
applicable in most states.
Further, Ohio law provides specific statutory authority for directors to
consider, in addition to the interests of the corporation's shareholders, other
factors such as the interests of the corporation's employees, suppliers,
creditors and customers; the economy of the state and the nation; community and
societal considerations; the long-term and short-term interests of the
corporation and the shareholders; and the possibility that these interests may
be best served by the continued independence of the corporation.
Directors of Ohio corporations are, unless the corporation's articles or
regulations otherwise provide, liable to the corporation for money damages for
actions taken or failed to be taken as a director only if it is proven by clear
and convincing evidence that the act or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the corporation or
reckless disregard for the best interests of the corporation.
Our Code of Regulations provides that we will indemnify directors and
officers to the fullest extent provided by applicable Ohio law as currently
exists or may be broadened by amendment. In addition, our Code of Regulations
provides that in certain circumstances, we will advance to officers and
directors, funds for expenses, liabilities and loss actually and reasonably
incurred or suffered in connection with defending pending or threatened suits.
PLAN OF DISTRIBUTION
The selling shareholders may sell the securities through underwriters or
dealers, directly to one or more purchasers, through agents, through remarketing
firms, through direct sales or auctions performed by using the internet or a
bidding or ordering system, or through a combination of these methods. The
prospectus supplement will include the names of underwriters, dealers, agents or
remarketing firms that we or the selling shareholders retain. The prospectus
supplement also will include the purchase price of the securities, each selling
shareholder's proceeds from the sale, any underwriting discounts or commissions
and other items constituting underwriters' compensation, and any securities
exchanges on which the securities may be listed.
In some cases, the selling shareholders may also repurchase the securities
and reoffer them to the public by one or more of the methods described above.
This prospectus may be used in connection with any offering of securities
through any of these methods or other methods described in the applicable
prospectus supplement.
15
The securities the selling shareholders distribute by any of these methods
may be sold to the public, in one or more transactions, either:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to prevailing market prices; or
- at negotiated prices.
The selling shareholders may solicit offers to purchase securities directly
from the public from time to time. They may also designate agents from time to
time to solicit offers to purchase securities from the public on their behalf.
The prospectus supplement relating to any particular offering of securities will
name any agents designated to solicit offers, and will include information about
any commissions the selling shareholders may pay the agents, in that offering.
Agents may be deemed to be "underwriters" as that term is defined in the
Securities Act.
As one of the means of direct issuance of offered securities, the selling
shareholders may utilize the services of an entity through which it may conduct
an electronic "dutch auction" or similar offering of the offered securities
among potential purchasers who are eligible to participate in the auction or
offering of such offered securities, if so described in the applicable
prospectus supplement.
In connection with the sale of securities, underwriters may receive
compensation from the selling shareholders or from purchasers of the securities,
for whom they may act as agents, in the form of discounts, concessions or
commissions. Underwriters may sell the securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of the securities may be deemed to be underwriters, and any
discounts or commissions they receive from us or the trusts, and any profit on
the resale of the securities they realize may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter, dealer
or agent will be identified, and any such compensation received will be
described, in the applicable prospectus supplement.
We may elect to list any of the other securities on an exchange, but are
not obligated to do so. It is possible that one or more underwriters may make a
market in a series of the securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Therefore, no
assurance can be given as to the liquidity of the trading market for the
securities.
If dealers are utilized in the sale of the securities, the selling
shareholders will sell the securities to the dealers as principals. The dealers
may then resell the securities to the public at varying prices to be determined
by such dealers at the time of resale. The names of the dealers and the terms of
the transaction will be set forth in the applicable prospectus supplement.
The selling shareholders may enter into agreements with underwriters,
dealers and agents who participate in the distribution of the securities which
may entitle these persons to indemnification by the selling shareholders against
certain liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such underwriters, dealers or agents
may be required to make in respect thereof. Any agreement in which the selling
shareholders agree to indemnify underwriters, dealers and agents against civil
liabilities will be described in the applicable prospectus supplement.
In connection with an offering, the underwriters may purchase and sell
securities in the open market. In a firm commitment underwriting (as opposed to
an "at-the-market" offering), these transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
securities than they are required to purchase in an offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the securities while an
offering is in progress.
16
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased securities
sold by or for the account of that underwriter in stabilizing or short-covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the securities. As a result, the price of the
securities may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on an exchange or
automated quotation system, if the securities are listed on that exchange or
admitted for trading on that automated quotation system, or in the
over-the-counter market or otherwise.
Neither we nor the selling shareholders has authorized any dealer,
salesperson or other person to give any information or represent anything not
contained in this prospectus. You must not rely on any unauthorized information.
This prospectus does not offer to sell or buy any securities in any jurisdiction
where it is unlawful.
Underwriters, dealers and agents may engage in transactions with or perform
services for us or the selling shareholders, or be customers of ours or the
selling shareholders, in the ordinary course of business.
LEGAL MATTERS
Certain legal matters in connection with the offering will be passed upon
for us by Keating, Muething & Klekamp, P.L.L., Cincinnati, Ohio.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedules incorporated in this prospectus by reference from
our Annual Report on Form 10-K for the year ended December 31, 2003 have been
audited by Deloitte & Touche LLP, independent registered public accounting firm,
as stated in its reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the
offering described in this Registration Statement:
Registration Fee $ 5,369
Printing Costs 1,000
Legal fees and expenses 5,500
Accounting fees and expenses 4,500
Blue sky fees and expenses 1,000
Miscellaneous 1,000
---------
Total $ 18,369
All of the above expenses other than the Registration Fee are
estimates. All of the above expenses will be borne by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Ohio Revised Code, Section 1701.13(E), allows indemnification by the
Registrant to any person made or threatened to be made a party to any
proceedings, other than a proceeding by or in the right of the Registrant, by
reason of the fact that he is or was a director, officer, employee or agent of
the Registrant, against expenses, including judgment and fines, if he acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Registrant and, with respect to criminal actions, in which
he had no reasonable cause to believe that his conduct was unlawful. Similar
provisions apply to actions brought by or in the right of the Registrant, except
that no indemnification shall be made in such cases when the person shall have
been adjudged to be liable for negligence or misconduct to the Registrant unless
deemed otherwise by the court. Indemnification is to be made by a majority vote
of a quorum of disinterested directors or the written opinion of independent
counsel or by the shareholders or by the court. The Registrant's Code of
Regulations extends such indemnification.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description of Document
- ---------------- ----------------------------------------------------------
1 Form of Underwriting Agreement (to be filed by amendment)
3.1 Articles of Incorporation, as amended, of the Registrant
(incorporated by reference to Exhibit 3(i) of the Form
10-Q filed by the Registrant for the quarter ended June
30, 1998)
3.2 Code of Regulations (Amended and Restated) of the
Registrant (incorporated by reference to Exhibit 3(ii) of
the Form 10-Q filed by the Registrant for the quarter
ended June 30, 2000)
5 Opinion of Keating, Muething & Klekamp, P.L.L. (previously
filed)
23.1 Consent of Independent Registered Public Accounting Firm
23.2 Consent of Keating, Muething & Klekamp, P.L.L. (contained
in Exhibit 5)
24 Powers of Attorney (contained on the signature page)
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-1
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act if,
in the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrants
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) If the securities to be registered are to be offered at
competitive bidding, the undersigned registrant hereby undertakes: (1) to use
its best efforts to distribute prior to the opening of bids, to prospective
bidders, underwriters, and dealers, a reasonable number of copies of a
prospectus which at that time meets the requirements of Section 10(a) of the
Act, and relating to the securities offered at competitive bidding, as contained
in the Registration Statement, together with any supplements thereto, and (2) to
file an amendment to the Registration Statement reflecting the results of
bidding, the terms of the reoffering and related matters to the extent required
by the applicable form, not later than the first use, authorized by the issuer
after the opening of bids, of a prospectus relating to the securities offered at
competitive bidding, unless no further public offering of such securities by the
issuer and no reoffering of such securities by the purchasers is proposed to be
made.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrants pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes that
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(1) for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to file, if
necessary, an application for the purpose of determining the eligibility of the
Trustee to act under subsection (a) of Section 310 of the Trust Indenture Act of
1939 in accordance with the rules and regulations prescribed by the Securities
and Exchange Commission under Section 305(b)(2) of such Act.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, The Midland
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Cincinnati, State of Ohio, as of the
19th day of July, 2004.
THE MIDLAND COMPANY
By: /s/ J.P. Hayden, III
-----------------------------------
J.P. Hayden, III
Chairman of the Board and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
* Director July 19, 2004
- ------------------------------------
James E. Bushman
* Director July 19, 2004
- ------------------------------------
James H. Carey
* Director July 19, 2004
- ------------------------------------
Michael J. Conaton
* Director July 19, 2004
- ------------------------------------
Jerry A. Grundhofer
* Chairman of the Executive Committee July 19, 2004
- ------------------------------------ of the Board and Director
J.P. Hayden, Jr.
* Chairman of the Board, Chief July 19, 2004
- ------------------------------------ Operating Officer and Director
J.P. Hayden, III
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* President, Chief Executive Officer July 19, 2004
- ------------------------------------ and Director
John W. Hayden
* Director July 19, 2004
- ------------------------------------
Robert W. Hayden
Director July 19, 2004
- ------------------------------------
William T. Hayden
* Director July 19, 2004
- ------------------------------------
William J. Keating, Jr.
* Director July 19, 2004
- ------------------------------------
John R. LaBar
* Director July 19, 2004
- ------------------------------------
Richard M. Norman
Director July 19, 2004
- ------------------------------------
David B. O'Maley
* Director July 19, 2004
- ------------------------------------
John M. O'Mara
* Director July 19, 2004
- ------------------------------------
Glenn E. Schembechler
* Director July 19, 2004
- ------------------------------------
Francis Marie Thrailkill, OSU Ed.D
/s/ John I. Von Lehman Executive Vice President, Chief July 19, 2004
- ------------------------------------ Financial and Accounting Officer,
John I. Von Lehman Secretary and Director
*By: /s/ John I. Von Lehman Attorney-in-Fact July 19, 2004
-------------------------------
John I. Von Lehman
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