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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as Permit-
[X] Definitive Proxy Statement ted by Rule 14a-6(e) (2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FOREMOST CORPORATION OF AMERICA
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of its
filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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FOREMOST CORPORATION OF AMERICA
[LOGO]
March 25, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Foremost Corporation of America on Thursday, April 30, 1998, at 10:30
a.m. The meeting will be held at the Company's Corporate Headquarters
located at 5600 Beech Tree Lane, Caledonia, Michigan 49316.
The proxy statement and enclosed form of proxy are being furnished to
stockholders on or about March 25, 1998. The enclosed proxy statement
describes the matters to be presented at the meeting.
Whether or not you plan to attend the meeting, please date, sign and
promptly return your proxy in the envelope provided so that your shares can
be voted at the meeting in accordance with your instructions. Your
cooperation is appreciated. The mailing address of the Company's principal
office is Post Office Box 2450, Grand Rapids, Michigan 49501.
/s/Richard L. Antonini
Richard L. Antonini
Chairman, President and Chief
Executive Officer
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IMPORTANT
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. PROMPT RESPONSE IS
HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
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[FOREMOST CORPORATION OF AMERICA LOGO]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1998
Notice is hereby given that the Annual Meeting of Stockholders of
Foremost Corporation of America will be held at the Company's Corporate
Headquarters located at 5600 Beech Tree Lane, Caledonia, Michigan 49316, on
Thursday, April 30, 1998, at 10:30 a.m., for the following purposes:
(1) To elect four directors for three-year terms expiring in 2001;
(2) To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of
Common Stock;
(3) To adopt an Agreement and Plan of Merger which would cause the
Company to become a Michigan corporation;
(4) To approve the Company's Stock Option Plan of 1998;
(5) To approve a form of indemnity agreement for the Company's
directors and officers;
(6) To ratify the appointment of BDO Seidman, LLP, as independent
auditors for the Company for the year ending December 31, 1998;
and
(7) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record as shown by the transfer books of the
Company at the close of business on March 13, 1998, are entitled to notice
of and to vote at the Annual Meeting of Stockholders or any adjournment of
the Annual Meeting. A list of stockholders entitled to receive notice of
and vote at the Annual Meeting of Stockholders will be available for
examination by the Company's stockholders at the offices of the Company set
forth above during ordinary business hours for the 10-day period before the
meeting.
By Order of the Board of Directors
FOREMOST CORPORATION OF AMERICA
Paul D. Yared
Senior Vice President, Secretary
and General Counsel
March 25, 1998
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YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE
MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY.
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FOREMOST CORPORATION OF AMERICA
5600 BEECH TREE LANE
CALEDONIA, MICHIGAN 49316
APRIL 30, 1998
ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
This proxy statement and the enclosed proxy are being furnished to
holders of Common Stock, $1.00 par value, of Foremost Corporation of
America (the "Company") on and after March 25, 1998, in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Stockholders to be held on Thursday, April 30, 1998, at
10:30 a.m., and any adjournment thereof. The Annual Meeting will be held
at the Company's Corporate Headquarters located at 5600 Beech Tree Lane,
Caledonia, Michigan 49316.
The purpose of the Annual Meeting is to consider and vote upon: (1)
the election of four directors for three-year terms expiring in 2001; (2)
approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock;
(3) adoption of an Agreement and Plan of Merger which would cause the
Company to become a Michigan corporation; (4) approval of the Company's
Stock Option Plan of 1998; (5) approval of a form of indemnity agreement
for the Company's directors and officers; and (6) ratification of the
appointment of BDO Seidman, LLP, as independent auditors for the Company for
the year ending December 31, 1998. The shares represented by your proxy
will be voted as specified if the enclosed proxy is duly executed and
returned to the Company before the meeting. If no choice is specified, the
shares represented by the proxy will be voted for the election of all
nominees named in this Proxy Statement, for approval of an amendment to the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock, for adoption of an Agreement and Plan of
Merger which would cause the Company to become a Michigan corporation, for
approval of the Company's Stock Option Plan of 1998, for approval of a form
of indemnity agreement for the Company's directors and officers, for
ratification of BDO Seidman, LLP, as the Company's independent auditors for
the year ending December 31, 1998, and in accordance with the judgment of
the persons named as proxies with respect to any other matter that may come
before the meeting or any adjournment. A proxy may be revoked at any time
before it is exercised by written notice delivered to the Secretary of the
Company or by attending the Annual Meeting of the Stockholders and voting
in person by ballot. For purposes of determining the presence or absence
of a quorum for the transaction of business at the meeting, all shares for
which a proxy or vote is received, including abstentions and shares
represented by a broker vote on any matter, will be counted as present and
represented at the meeting.
RECORD DATE AND VOTING RIGHTS
The Board of Directors has fixed the close of business on March 13,
1998 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting of Stockholders. There is one
class of voting securities, common stock, $1.00 par value per share,
entitled to be voted at the meeting. As of March 13, 1998, 27,524,531
shares of common stock were outstanding, with each share entitled to one
vote. Shares cannot be voted unless the stockholder is present at the
meeting or represented by proxy.
ELECTION OF DIRECTORS
(Proposal Number 1 on the Enclosed Proxy Card)
On August 7, 1997, the Board of Directors adopted a resolution
increasing the number of directors from nine to 10 effective that date and
elected Mr. Michael B. Targoff as a Class I Director with a term expiring
in 1998. As a result, the election of four Class I Directors will be voted
upon at the Annual Meeting of Stockholders.
The Board of Directors has nominated the following named individuals
for election as directors to serve for terms set forth below:
Class I Directors with terms expiring in 2001:
Michael de Havenon
Robert M. Raives
Michael B. Targoff
F. Robert Woudstra
A plurality of the shares present in person or represented by proxy
and entitled to vote on the election of directors is required to elect
directors. For purposes of counting votes on the election of directors,
abstentions, broker non-votes and other shares not voted will not be
counted as shares voted, and the number of shares of which a plurality is
required will be reduced by the number of shares not voted.
All of the nominees are presently directors of the Company whose terms
will expire at the Annual Meeting of Stockholders. The proposed nominees
are willing to be elected and to serve. In the event that a nominee is
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unable to serve or is otherwise unavailable for election, which is not
contemplated, the incumbent Board of Directors may or may not select a
substitute nominee. If a substitute nominee is selected, all proxies will
be voted for the substitute nominee designated by the Board of Directors.
If a substitute nominee is not selected, all proxies will be voted for the
remaining nominees. Proxies will not be voted for a greater number of
persons than the number of nominees named above.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
INCREASE IN AUTHORIZED COMMON STOCK
(Proposal Number 2 on the Enclosed Proxy Card)
The Board of Directors proposes to amend the Fourth Article of the
Company's Restated Certificate of Incorporation to increase the Company's
authorized capital stock from 35,000,000 shares of common stock, $1.00 par
value per share ("Common Stock"), to 70,000,000 shares of Common Stock.
The purpose of the amendment is to provide additional shares for possible
future issuance.
The Board of Directors believes that it is advisable to have
additional authorized shares available for possible future stock splits and
dividends, public or private offerings of Common Stock or securities
convertible into Common Stock, employee benefit plans, equity-based
acquisitions and other corporate purposes that might be proposed. Except
for shares to be issued under the Company's stock plans, the Company does
not have any present plans to issue additional shares of Common Stock.
As of March 13, 1998, 27,524,531 authorized shares of Common Stock
were issued and outstanding.
All of the additional shares resulting from the increase in the
Company's authorized Common Stock would be of the same class, with the same
dividend, voting and liquidation rights as the shares of Common Stock
presently outstanding. Stockholders have no preemptive rights to acquire
shares issued by the Company under its Restated Certificate of
Incorporation and stockholders would not acquire any such rights with
respect to such additional shares under the proposed amendment to the
Company's Restated Certificate of Incorporation. Under some circumstances,
the issuance of additional shares of Common Stock could dilute the voting
rights, equity and earnings per share of existing stockholders.
If the proposed amendment is adopted by the Company's stockholders,
the newly authorized shares would be unreserved and available for issuance.
No further stockholder authorization would be required before the issuance
of such shares by the Company. Thus, such additional shares will enable
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the Company, as the need may arise, to take timely advantage of market
conditions and the availability of favorable opportunities without the
delay and expense associated with holding a special meeting of its
stockholders.
The increased authorized but unissued shares of Common Stock could be
considered an anti-takeover measure because the additional authorized but
unissued shares of Common Stock could be used by the Board of Directors to
make more difficult a change in control of the Company. The Board of
Directors' purpose in recommending this proposal is for the reasons
discussed above and not as an anti-takeover measure.
The first paragraph of the Fourth Article, as amended, would read in
its entirety as follows:
FOURTH. The total number of shares of all classes which the
Corporation shall have authority to issue shall be 70,000,000
which shall all be designated "Common Stock" each of a par value
of $1.00.
In the event that the proposal to adopt the Agreement and Plan of
Merger (Proposal Number 3), which would cause the Company to become a
Michigan corporation, is adopted by the Company's stockholders, the
increase in authorized Common Stock proposed in this proposal would be
accomplished by including in the Articles of Incorporation of the surviving
Michigan corporation the increased number of shares of authorized Common
Stock.
The affirmative vote of the holders of a majority of the shares
entitled to vote at the Annual Meeting of Stockholders is required to
approve the proposed amendment to the Company's Restated Certificate of
Incorporation. For the purpose of counting votes on this proposal,
abstentions, broker non-votes and other shares not voted have the same
effect as a vote against the proposal.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE INCREASE IN AUTHORIZED COMMON STOCK.
ADOPTION OF AN AGREEMENT AND PLAN OF MERGER
(Proposal Number 3 on the Enclosed Proxy Card)
The Board of Directors of the Company at its February 23, 1998 meeting
unanimously approved and recommended that the Company's stockholders consider
and vote upon a proposal to adopt an Agreement and Plan of Merger (the "Plan
of Merger"), which would change the Company's state of incorporation from
Delaware to Michigan.
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The change of the Company's state of incorporation from Delaware to
Michigan would be accomplished through the merger of the Company into a new
Michigan corporation ("Foremost-Michigan"), which would be a wholly owned
subsidiary of the Company (the "Merger"). Under the terms of the Plan of
Merger, the Company would merge into Foremost-Michigan, with Foremost-
Michigan surviving the Merger. The Merger would not affect the business,
properties or management of the Company.
The following discussion summarizes certain provisions of the Plan of
Merger and aspects of the Merger. This summary discussion is not intended
to be a complete description of the Merger and is qualified in its entirety
by reference to the Plan of Merger, which is attached as Appendix A and
incorporated by reference in this Proxy Statement.
APPROVAL OF THE REINCORPORATION WILL AFFECT CERTAIN RIGHTS OF STOCKHOLDERS
OF THE COMPANY. THEREFORE, STOCKHOLDERS ARE URGED TO READ CAREFULLY THIS
ENTIRE PROXY STATEMENT AND THE APPENDICES ATTACHED HERETO BEFORE VOTING ON
THIS PROPOSAL. UNDER DELAWARE LAW, STOCKHOLDERS DO NOT HAVE APPRAISAL
RIGHTS IN CONNECTION WITH A REINCORPORATION MERGER.
BOARD RECOMMENDATION AND REASONS FOR THE MERGER
The Board of Directors of the Company unanimously has determined that
the Merger is desirable and in the best interests of the Company and its
stockholders. The primary purpose for the change in the Company's state of
incorporation is to decrease the amount that the Company must pay in
franchise taxes. As a Delaware corporation, the Company presently is
required to pay an annual franchise tax of approximately $140,000 to the
state of Delaware, even though it has no operations in Delaware. In the
event that the proposed amendment to the Company's Restated Certificate of
Incorporation increasing the Company's authorized Common Stock is approved
by the stockholders (Proposal Number 2), and this proposal to change the
Company's state of incorporation to Michigan through the Merger is not
adopted by the stockholders, the Company will be required to pay an
increased annual franchise tax to the state of Delaware. The fact that the
Company is a Delaware corporation does not reduce the Company's obligations
to pay taxes to Michigan, the state where the Company's principal
operations exist, or other states in which the Company conducts business.
A change in the state of incorporation from Delaware to Michigan would
eliminate the Company's future liability for the annual Delaware franchise
tax, and yield an estimated present-value benefit of approximately
$1,270,784, using a 10% discount rate. Based on 80,000,000 shares of
authorized capital stock, the Company would be required to pay to the state
of Michigan a one-time franchise fee of approximately $67,500.
Furthermore, the decision by the Company initially to incorporate in
Delaware, despite the fact that the Company's principal executive offices
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were located in Michigan, was made at a time when Delaware corporate law
contained several benefits not then provided under Michigan corporate law.
In recent years, however, Michigan corporate law has been modified so that
many benefits provided under the Delaware Law are now provided to Michigan
corporations. Although Delaware and Michigan corporate laws are
substantially similar, certain significant differences are described below.
The Board did not identify any material factors that would not favor
the Merger. In particular, the Board does not believe there are any
material disadvantages of being incorporated under the laws of the state of
Michigan and, likewise, did not identify any material advantages of being
incorporated under the laws of the state of Delaware.
For the reasons set forth in the preceding paragraphs, the Board of
Directors believes that it would be in the best interests of the Company
and its stockholders for the Company to be incorporated in Michigan. The
proposed Merger is designed to reincorporate the Company under Michigan
law. If the Merger is consummated, the primary place of business and the
corporate headquarters of the Company would remain in Michigan.
All of the directors and officers of the Company are also directors
and officers of Foremost-Michigan. These persons currently do not own any
shares of Foremost-Michigan Common Stock. Foremost-Michigan is a wholly
owned subsidiary of the Company.
RIGHTS TO RECEIVE SHARES OF FOREMOST-MICHIGAN COMMON STOCK
The Company's Board of Directors is soliciting proxies from the
Company's stockholders for the purpose of adopting the Plan of Merger. The
affirmative vote of the holders of a majority of the shares of Common Stock
of the Company is required to adopt the Plan of Merger.
At the time that the Merger becomes effective, the Company would be
merged with and into Foremost-Michigan. The surviving corporation would be
Foremost-Michigan, which would own all of the assets and assume all of the
liabilities of the Company. In the Merger, the Articles of Incorporation
of Foremost-Michigan would be restated to change the name of Foremost-
Michigan to "Foremost Corporation of America," and to increase Foremost-
Michigan's authorized capital stock to 70,000,000 shares of common stock,
$1.00 par value ("Foremost-Michigan Common Stock"), and 10,000,000 shares
of preferred stock, no par value ("Preferred Stock"). Approximately
27,524,531 shares of Foremost-Michigan Common Stock would be issued and
outstanding at the effective time of the Merger and an additional
approximately 2,570,700 shares (including the 750,000 options described
in Proposal 4) would be subject to stock options. No shares of Pre-
ferred Stock would be outstanding at the effective time of the Merger.
The surviving Michigan corporation's articles of incorporation after the
Merger would be identical to the proposed Foremost-Michigan's Restated
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Articles of Incorporation attached as Appendix B to this Proxy Statement.
The Bylaws of the surviving corporation would be the Bylaws of Foremost-
Michigan as in effect immediately before the effective time of the Merger,
which are attached as Appendix C to this Proxy Statement.
Upon the effective date of the Merger, each issued and outstanding
share of Common Stock of the Company would be converted into one share of
Foremost-Michigan Common Stock. Outstanding certificates representing
shares of Common Stock of the Company would represent the same number of
shares of Foremost-Michigan Common Stock. Each share of Foremost-Michigan
Common Stock which is outstanding immediately before the effective time of
the Merger would be canceled. Foremost-Michigan would not issue fractional
shares of Foremost-Michigan Common Stock in the Merger.
It would not be necessary for stockholders to exchange existing
certificates for new certificates of the surviving Michigan corporation.
However, after the Merger, a stockholder would be entitled to present
certificates evidencing shares of stock of the Company to the Company's
transfer agent and receive in exchange certificates evidencing the same
number of shares of stock of the surviving Michigan corporation, subject to
normal requirements as to proper endorsement, signature and guarantee, if
required. Common Stock of the surviving Michigan corporation would be
listed on the New York Stock Exchange, as is the Company's Common Stock.
Delivery of stock certificates issued by the Company before the Merger
would constitute "good delivery" of shares in transactions after the
Merger.
CESSATION OF STOCKHOLDER STATUS
As of the effective time of the Merger, stockholders of the Company
would cease to be stockholders of the Company and consequently would have
no rights as Company stockholders.
EFFECTIVE TIME OF THE MERGER
The Merger would be consummated on the date and time specified in a
Certificate of Merger filed with the Delaware Secretary of State in
accordance with the Delaware General Corporation Law (the "Delaware Law")
and a Certificate of Merger filed with the Michigan Corporation, Securities
and Land Development Bureau in accordance with the Michigan Business
Corporation Act (the "MBCA"). If the stockholders of the Company adopt the
Plan of Merger and the other conditions of the Merger set forth in the Plan
of Merger are satisfied, the effective time of the Merger would occur as
soon after the Annual Meeting of Stockholders as is possible, provided that
the Plan of Merger has not been terminated before such time. It is
anticipated that the Merger, if approved, would become effective during the
second or third quarter of 1998.
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COMPANY STOCK OPTIONS
Before the effective time of the Merger, each outstanding stock option
entitling the holder to purchase shares of Common Stock of the Company
would be amended, if necessary, so that it would become, if and when the
Merger becomes effective, an option to purchase, for an equivalent price,
that number of shares of Foremost-Michigan Common Stock that the holder
would have acquired pursuant to the Merger had the holder exercised the
option immediately before the effective time of the Merger. The options
would in all other respects contain the same terms and conditions as they
do presently.
As of the date of this Proxy Statement, there were stock options
outstanding to purchase an aggregate of 1,820,700 shares of Common Stock of
the Company, exclusive of the option shares described in Proposal 4.
MANAGEMENT AFTER THE MERGER
Upon the consummation of the Merger, the directors and officers of
Foremost-Michigan would be the persons who were the directors and officers
of the Company immediately before the effective time of the Merger. Upon
consummation of the Merger, the employees of Foremost-Michigan would be the
persons who were the employees of the Company immediately before the
effective time of the Merger.
CONDITIONS TO THE MERGER AND ABANDONMENT
The obligations of the Company and Foremost-Michigan to consummate the
Merger are subject to the fulfillment of the following conditions:
(i) the holders of a majority of the shares of the Company's
Common Stock must have voted for adoption of the Plan of Merger;
(ii) neither the Company nor Foremost-Michigan shall be subject
to any order, decree or injunction of a court or agency enjoining
or prohibiting the Merger; and
(iii) the Company and Foremost-Michigan must have obtained any
required regulatory or other governmental approvals with respect
to the Plan of Merger or consummation of the Merger.
Either the Company or Foremost-Michigan, whichever is entitled to the
benefit of the foregoing conditions, may waive one or more of those
conditions except where satisfaction of the condition is required by law.
The Boards of Directors of the Company and Foremost-Michigan may by mutual
consent terminate the Plan of Merger and abandon the Merger at any time
before the effective time of the Merger.
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DESCRIPTION OF FOREMOST-MICHIGAN CAPITAL STOCK
If the Plan of Merger is adopted and the Merger is consummated,
Foremost-Michigan's authorized capital stock would consist of 70,000,000
shares of Foremost-Michigan Common Stock, and 10,000,000 shares of
Preferred Stock. As of the date of the Annual Meeting, there will be 100
shares of Foremost-Michigan Common Stock outstanding and no shares of
Preferred Stock outstanding.
FOREMOST-MICHIGAN COMMON STOCK. Holders of Foremost-Michigan Common
Stock are entitled to dividends out of funds legally available for that
purpose if, as and when declared by the Board of Directors of Foremost-
Michigan. Certain covenants in existing loan agreements between the
Company and its lenders to which Foremost-Michigan would be subject
following the Merger would limit the circumstances under which Foremost-
Michigan would be permitted to pay dividends or make other distributions to
Foremost-Michigan shareholders. The dividend rights of Foremost-Michigan
Common Stock also are subject to the rights of any Preferred Stock which
may be issued in the future. Each holder of Foremost-Corporation Common
Stock is entitled to one vote for each share held on each matter presented
for shareholder action. Foremost-Michigan Common Stock has no preemptive
rights, cumulative voting rights, conversion rights or redemption
provisions.
In the case of any liquidation, dissolution or winding up of the
affairs of Foremost-Michigan, holders of Foremost-Michigan Common Stock
would be entitled to receive, pro rata, any assets distributable to common
shareholders in respect of the number of shares held by them. The
liquidation rights of Foremost-Michigan Common Stock would be subject to
the rights of holders of any Preferred Stock which could be issued in the
future.
All outstanding shares of Foremost-Michigan Common Stock are, and
shares to be issued pursuant to the Merger will be, when issued, fully paid
and nonassessable.
PREFERRED STOCK. The Articles of Incorporation of Foremost-Michigan
would be restated to contain a provision authorizing the Board of Directors
to issue up to 10,000,000 shares of Preferred Stock. The Board of Directors
would be authorized to issue Preferred Stock without additional shareholder
approval, with such relative rights and preferences as may be established
by resolution of the Board of Directors. The terms of the securities to be
authorized, including dividend or interest rates, conversion prices, voting
rights, redemption prices, maturity dates and similar matters would be
determined by the Board of Directors. No class of preferred stock
presently is authorized by the Company's Certificate of Incorporation.
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Under the Restated Articles of Incorporation of the surviving Michigan
corporation, the Board of Directors would be empowered to determine the
designations and relative voting, distribution, dividend, liquidation and
other rights, preferences and limitations of the Preferred Stock,
including, among other things: (i) the designation of each class or series
and the number of shares in the class or series; (ii) the dividend rights,
if any, of the class or series; (iii) the voting rights, if any (in
addition to any prescribed by law), of the holders of shares of the class
or series; (iv) the rights, if any, to convert or exchange the shares into
or for other securities; (v) the conditions or restrictions, if any, on
specified actions of Foremost-Michigan affecting the rights of the shares;
(vi) the redemption provisions, if any, of the shares; (vii) the
preference, if any, to which any class or series would be entitled in the
event of the liquidation or distribution of Foremost-Michigan's assets; and
(viii) the provisions of a sinking fund, if any, provided for the
redemption of the Preferred Stock.
The Board of Directors believes that the availability of preferred
stock would provide Foremost-Michigan with flexibility of action for
possible future financing transactions, acquisitions, employee benefit
plans and other corporate purposes. Such purposes might include meeting
requirements for working capital or capital expenditures through issuance
of additional shares. Authorization of preferred stock would permit the
Board of Directors to choose the exact terms of the class or series at the
time of issuance to respond promptly to investor preferences, developments
in types of preferred stock, market conditions and the nature of a specific
transaction.
It may be advantageous in some cases to pay investors dividends on
equity rather than interest on debt. Preferred stock would allow Foremost-
Michigan to offer equity that is potentially less dilutive of the relative
equity value of the holders of Foremost-Michigan Common Stock than would be
the case if additional shares of Foremost-Michigan Common Stock were
issued. Preferred stock typically does not enjoy dividend growth
corresponding to growth in a corporation's earnings. In addition, preferred
stock can be subject to redemption, which could permit Foremost-Michigan to
limit the dilutive effect on the holders of Foremost-Michigan Common Stock.
If the Plan of Merger is adopted, no further authorization for the
issuance of Preferred Stock by shareholder vote would be required before
issuance of the shares by the Board of Directors. The Board of Directors
presently does not have any plan or proposal to issue Preferred Stock.
Opportunities may arise, however, that require prompt action, such as
properties or businesses becoming available for acquisition or favorable
market conditions existing for the sale of a particular type of preferred
stock. The delay and expense of seeking shareholder approval at the time of
issuance could deprive Foremost-Michigan and its shareholders of the
ability to effectively benefit from such an opportunity.
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The Board of Directors could authorize shares of preferred stock which
have voting, dividend or other preferences over shares of Foremost-Michigan
Common Stock, and the issuance of preferred stock could dilute the voting
power, equity position or share of earnings of common shareholders.
Although the Board of Directors has no present plan or proposal to do so,
preferred stock could be used to discourage or impede an attempt to obtain
control of Foremost-Michigan by merger, tender offer, proxy contest or
other means, and could be used to inhibit the removal of incumbent
management. At this time, management of Foremost-Michigan is not aware of
any attempts to obtain control of Foremost-Michigan.
ANTI-TAKEOVER EFFECTS OF MERGER
The reincorporation of the Company from a Delaware corporation to a
Michigan corporation will have certain anti-takeover effects on the
Company. The laws of Delaware and Michigan differ in their treatment of
certain anti-takeover measures. The reincorporation of the Company may
affect the ability of the Company to accomplish a merger, the ability of a
stockholder to gain control of the Company and the ability to remove the
Company's management.
The Company currently is governed by Section 203 of the Delaware Law.
Section 203 restricts a publicly held Delaware corporation from engaging in
a "business combination" with an "interested stockholder" for three years
following the time that such person becomes an "interested stockholder"
unless certain requirements are met or unless certain exceptions apply.
The term "business combination" generally includes (i) any merger or
consolidation of the corporation or any majority-owned subsidiary of the
corporation with (A) the interested stockholder, or (B) with any other
corporation or other entity if the merger or consolidation is caused by the
interested stockholder and as a result of the merger or consolidation
Section 203 is not applicable to the surviving entity; (ii) with certain
exceptions, any sale, lease or other disposition to or with the interested
stockholder of assets of the corporation or of any majority-owned
subsidiary of the corporation where the assets have an aggregate market
value equal to 10% or more of either the aggregate market value of all the
assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation or by any majority-owned subsidiary of the corporation of any
stock of the corporation or of such subsidiary to the interested
stockholder, with certain exceptions; (iv) any transaction involving the
corporation or any majority-owned subsidiary of the corporation which
increases the proportionate share of the stock which is owned by the
interested stockholder; or (v) any receipt by the interested stockholder
of the benefit, directly or indirectly (except proportionately as a
stockholder of the corporation), of any loans, advances, guarantees,
pledges or other financial benefits (with certain exceptions) provided by
or through the corporation or any majority-owned subsidiary.
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An "interested stockholder" is generally defined as any person (other
than the corporation or a majority-owned subsidiary) that (i) owns 15% or
more of the outstanding voting stock of the corporation, or (ii) is an
affiliate or associate of the corporation and was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within the
past three years and the affiliates and associates of such person. Among
the exceptions from the definition of "interested stockholder" is any
person whose ownership of shares in excess of the 15% limit was the result
of action taken solely by the corporation, unless such person thereafter
acquired additional shares of voting stock of the corporation (except as a
result of further corporate action not caused, directly or indirectly, by
such person).
There are a number of exceptions to the prohibitions of Section 203.
The first exception applies where, before the time that the interested
stockholder became an interested stockholder, the board of directors
approved either the business combination or the transaction which resulted
in the stockholder becoming an interested stockholder.
The second exception is where, upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding
those shares owned (i) by persons who are directors and also officers and
(ii) certain employee stock plans. The third exception is where, at or
subsequent to the time the person became an interested stockholder, the
business combination was approved by the board of directors and authorized
at an annual or special meeting of stockholders (and not by written
consent) by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder.
Section 203 also does not apply: (i) if the corporation's original
certificate of incorporation contains a provision expressly electing not to
be governed by Section 203; (ii) if the stockholders adopt an amendment to
the certificate of incorporation or Bylaws expressly electing not to be
governed by Section 203 (the Company's Restated Certificate of
Incorporation does not contain such an amendment); (iii) if the corporation
does not have a class of voting stock that is (A) listed on a national
securities exchange, (B) authorized for quotation on The Nasdaq Stock
Market, or (C) held of record by more than 2,000 stockholders, unless any
of the foregoing results from action taken by an interested stockholder or
from a transaction in which a person becomes an interested stockholder;
(iv) if a stockholder becomes an interested stockholder inadvertently and
(A) as soon as practicable divests itself of ownership of sufficient shares
so that the stockholder ceases to be an interested stockholder; and
(B) would not, at any time within the three-year period immediately before
a business combination between the corporation and such stockholder, have
been an interested stockholder but for the inadvertent acquisition of
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ownership; (v) pursuant to the "competitive bidding" exception; or (vi) if
the business combination is with an interested stockholder who became an
interested stockholder at a time when the restrictions contained in
Section 203 did not apply (with certain exceptions).
The "competitive bidding exception" referred to above provides that
(assuming the satisfaction of certain criteria) any person, including one
about to become and one who is an interested stockholder, may propose a
transaction free from the restrictions of Section 203 in certain
situations. The basic policy behind this exception is that once a board of
directors has decided to sell a corporation or a majority of its assets or
has approved (or not opposed) a tender or exchange offer for 50% or more of
the corporation's outstanding stock, the stockholders are benefitted by the
promotion of bidding contests. Subsequent bidders are excepted from
Section 203 if certain conditions are met. This exception allows a bidder
who announces a transaction after the announcement of a management-approved
transaction and before the completion or abandonment of the management-
approved transaction to be free of the provisions of Section 203.
Under this exception, the corporation must give at least 20 days'
notice to all interested stockholders before the consummation of (i) a
merger or consolidation of the corporation (except for those mergers or
consolidations where no stockholder vote is required), (ii) a sale, lease
or other disposition of assets of the corporation or a majority-owned
subsidiary having an aggregate market value at least equal to 50% of either
the aggregate market value of all of the corporation's assets (determined
on a consolidated basis) or the aggregate market value of 50% of the
corporation's outstanding stock, or (iii) a proposed tender or exchange
offer for 50% or more of the corporation's outstanding stock. This notice
requirement ensures that an interested stockholder will have the
opportunity to decide whether to bid against a management-approved
transaction before the time that the transaction is approved by the
stockholders.
There are three prerequisites to the application of the "competitive
bidding exception." First, there must be board approval of one of the
three types of transactions described above. The second necessary element
is the approval of (or lack of opposition to) a proposed transaction with a
person who was not an interested stockholder during the preceding three
years or who became an interested stockholder with board approval. The
third prerequisite is that the potentially triggering transaction must
either be approved or not opposed by a majority of the members of the board
who were directors before any person became an interested stockholder in
the preceding three years. Alternatively, directors approving or not
opposing the transaction may include those who were elected or recommended
by a majority of the continuing directors to succeed such continuing
directors.
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The MBCA contains two chapters providing corporations with anti-
takeover measures. The first chapter is the Fair Price Act. To comply
with the Fair Price Act, an interested shareholder must receive an advisory
statement from the board of directors and shareholder approval of the
"business combination." The Fair Price Act requires that a business
combination be approved by 90% of the shares of each class entitled to
vote, and 2/3 of each class of shares entitled to vote other than
beneficial shares of an "interested shareholder," or an affiliate, who is
a party to the transaction.
The Fair Price Act defines "business combination" to include the
following transactions: (i) a merger, consolidation or share exchange that
alters the rights of shares as expressly set forth in the articles of
incorporation or that changes or converts, in whole or in part, the
outstanding shares of the corporation with either any interested
shareholder or any other corporation which is not an affiliate of an
interested shareholder that was an interested shareholder before the
transaction; (ii) the sale, lease, transfer or other disposition of assets
totaling 10% or more of the corporation's net worth to an interested
shareholder which is not a subsidiary of the corporation; (iii) the
issuance or transfer of securities of the corporation or a subsidiary which
equal 5% or more of the total market value of the outstanding shares to any
interested shareholder; (iv) any plan of dissolution or liquidation in
which an interested shareholder receives consideration other than cash is a
business combination; and (v) any reclassification of the corporation's
securities, or any merger, consolidation or share exchange, which increases
by 5% or more of the total number of shares outstanding, the proportionate
amount of shares owned by an interested shareholder. The definition of
business combination included in the Fair Price Act is not as comprehensive
as the definition of business combination included in Section 203 of the
Delaware Law.
An "interested shareholder" is a beneficial owner, directly or
indirectly, of 10% or more of the voting power of the outstanding voting
shares of the corporation, or an affiliate who owned 10% or more of the
corporation at some point during the last two years. For the purpose of
determining whether a person is an interested shareholder, the number of
shares of voting shares considered to be outstanding shall include all
voting shares owned by the person except for those shares which may be
issuable pursuant to any agreement, arrangement or understanding upon
exercise of conversion rights, warrants or options or otherwise.
A business combination that meets certain requirements is exempt from
the Fair Price Act. First, the aggregate amount of the cash and the market
value as of the valuation date of consideration other than cash to be
received per share by holders of common stock in the business combination
must be at least equal to the highest of the following: (i) the highest per
share price, including any brokerage commissions, transfer taxes and
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soliciting dealers' fees, paid by the interested shareholder for any shares
of common stock of the same class or series acquired by the interested
shareholder within the two-year period immediately before the announcement
date of the proposal of the business combination, or in the transaction in
which the shareholder became an interested shareholder, whichever is
higher; or (ii) the market value per share of common stock of the same
class or series on the announcement date or on the determination date,
whichever is higher.
The second requirement is that the aggregate amount of the cash and
the market value as of the valuation date for consideration other than cash
to be received per share by holders of shares of any class or series of
outstanding stock other than common stock shall be at least equal to the
highest of the following, whether or not the interested shareholder
previously has acquired any shares of a particular class or series of
stock: (i) the highest per share price, including any brokerage
commissions, transfer taxes and soliciting dealers' fees, paid by the
interested shareholder for any shares of the class of stock acquired by it
within the two-year period immediately before the announcement date of the
proposal of the business combination, or in the transaction in which it
became an interested shareholder, whichever is higher; (ii) the market
value per share of the class of stock on the announcement date or the
determination date, whichever is higher; or (iii) the highest preferential
amount per share to which the holders of any shares of the class of stock
are entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation.
The third requirement states that the interested shareholder must pay
the other shareholders either cash or consideration in the same form as the
interested shareholder previously paid for like shares. If the interested
shareholder has paid for shares of any class of stock with varying forms of
consideration, the form of consideration for the class of stock shall be
either cash or the form used to acquire the largest number of shares of the
class or series of stock previously acquired by the interested shareholder.
The fourth requirement imposes conditions on the interested
shareholder after he or she has attained such status and before
consummation of the business combination. First, full dividends on
preferred stock must have been paid and dividends on common stock not
reduced. Second, the interested shareholder must not have received certain
benefits from the corporation disproportionate to the amount of stock owned
by that interested shareholder. Third, the interested shareholder must not
receive beneficial ownership of any additional shares after becoming an
interested shareholder. Fourth, five years must have elapsed between the
time the interested shareholder became an interested shareholder and the
time the business combination is to be consummated. Unless a shareholder
has been an interested shareholder for five or more years, and meets all
these other requirements discussed above, the interested shareholder must
-15-
receive an advisory statement from the board and supermajority shareholder
approval to enter a business combination with the corporation.
Section 203 of the Delaware Law and Chapter 7A of the MBCA differ in
the following important respects:
(i) Section 203 of the Delaware Law does not apply if the business
combination is approved by holders of 2/3 of the disinterested
shares. Chapter 7A of the MBCA requires approval by 90% of the
shares entitled to vote and 2/3 of the disinterested shares.
(ii) Section 203 does not apply if the interested person acquires 85%
of the voting stock of the corporation. Thus, Section 203 provides
a mechanism for an acquiror to make a tender offer for shares of
the corporation and attain an 85% response. Chapter 7A does not
contain such a provision.
(iii) Section 203 does not prevent the interested stockholder from
replacing the board of directors of the corporation and obtaining
the required approval for the business combination.
(iv) Section 203 does not apply after the board of directors approves
a competing bid.
A corporation can elect not to be covered by the Fair Price Act. A
corporation which had an interested shareholder on the date the Fair Price
Act became effective, which was May 29, 1984, could elect not to be
governed by the Fair Price Act. Additionally, any corporation can elect
not to be governed by the Fair Price Act with respect to any specific
interested shareholder, or interested shareholders in general, so long as
the election is made before the interested shareholder becomes an
interested shareholder. Finally, the Fair Price Act allows a corporation
to elect to be governed partially by the Fair Price Act. A provision in
the Bylaws or articles of incorporation which elects into or out of the
Fair Price Act only can be amended or repealed by a supermajority vote of
the shareholders.
The Company is presently subject to the provisions of Section 203 of the
Delaware Law. The Board of Directors believes it will be in the Company's
best interests to be covered by the Fair Price Act subsequent to the change
in state of incorporation. For this reason, the corporate Bylaws of
Foremost-Michigan contains a provision in which the Company elects to be
governed by the Fair Price Act. The provision, however, specifically
excludes from coverage of the Fair Price Act beneficial owners who own 10% or
more of the Company's outstanding Common Stock as of February 23, 1998, or an
affiliate of such beneficial owner.
The election to be governed by the Fair Price Act will place a
procedural hurdle before any shareholder attempting to gain control of the
Company. The Fair Price Act does not prohibit such actions. It merely
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slows them down by imposing requirements on the interested shareholder.
The Board of Directors believes the Fair Price Act is in the best interests
of the Company and its stockholders because it would allow stockholders to
closely examine any takeover attempts before deciding whether to support
the takeover attempt. Despite this advantage, the Fair Price Act also
could slow actions which may be in the best interests of the Company and
its stockholders.
The Board of Directors' election to be governed by the Fair Price Act
is not a response to a takeover attempt by any specific individual and the
Company is not aware of any such attempt.
The second MBCA anti-takeover provision is the Control Share Act,
which denies voting rights to "control shares" in a "control share
acquisition" of shares of an issuing public corporation unless the
corporation's shareholders, excluding the interested shares, approve a
resolution granting such rights. "Control shares" are defined as shares
that, except for the Control Share Act, would have voting power with
respect to shares of an issuing public corporation, when added to all other
shares of the issuing public corporation owned by a person or in respect to
which that person may exercise or direct the exercise of voting power,
would entitle that person, immediately after acquisition of the shares,
directly or indirectly, alone or as part of a group, to exercise or direct
the exercise of the voting power of the issuing public corporation in the
election of directors within any of the following ranges of voting power:
(i) 1/5 or more but less than 1/3 of all voting power; (ii) 1/3 or more but
less than a majority of all voting power; or (iii) a majority of all voting
power.
A "control share acquisition" is the acquisition, directly or
indirectly, by any person of ownership of, or the power to direct the
exercise of voting power with respect to, issued and outstanding control
shares. Shares acquired within a 90-day period are considered to have been
acquired in the same acquisition if the shares were acquired pursuant to a
plan to make a control share acquisition. Persons who acquire shares for
the benefit of another have voting power only of shares in respect of which
that person would be able to exercise or direct the exercise of votes
without further instruction from others.
The following will not be considered a control share acquisition: (i)
acquiring shares by gift, testamentary disposition, marital settlement,
descent and distribution or otherwise without consideration; (ii) acquiring
shares pursuant to a pledge or other security interest created in good
faith and not for the purpose of circumventing the Control Share Act; (iii)
acquiring shares pursuant to a merger or share exchange effected in
compliance with the merger and share exchange provisions of the MBCA if the
issuing public corporation is a party to the agreement of merger or share
exchange; and (iv) shares acquired by a government official acting in an
-17-
official or fiduciary capacity. An acquisition also will not be considered
a control share acquisition if, subject to certain limitations, the
acquisition is made by a person who previously obtained voting rights from
the shareholders pursuant to the Control Share Act, or would have made a
control share acquisition but for the exceptions stated above. A
corporation may elect not to be governed by the Control Share Act with
respect to a control share acquisition if the corporation's articles of
incorporation or Bylaws provide that the chapter does not apply to that
or any control share acquisition before such control share acquisition
occurs.
Chapter 7B defines "interested shares" to include those shares of an
issuing public corporation entitled to vote in respect of which any of the
following persons are entitled to exercise voting power: (i) an acquiring
person or member of a group with respect to a control share acquisition;
(ii) an officer of the corporation; or (iii) an employee director of the
corporation.
The Control Share Act provides procedures for an acquiring person to
recapture voting rights for control shares. The acquiring person has the
option to file an "acquiring person statement," which is a statement
detailing who the acquiring person is, how many shares the person owns, how
the person plans to pay for the control shares and what the acquiring
person plans to achieve through the control share acquisition. Although
optional, filing an acquiring person statement is necessary for gaining
access to shareholders either at a special or annual shareholder meeting.
Without access to shareholders at a special or annual meeting, the
acquiring person will not have voting rights restored. Chapter 7B
authorizes the acquiring person to request a special meeting of the
shareholders to consider the voting rights to be accorded the shares
acquired or to be acquired in a control share acquisition. The request
must be made at the time of delivery of the acquiring person statement and
must be accompanied by an undertaking to pay the corporation's expenses of
a special meeting. If an acquiring person statement is filed but no
request for a meeting is made, the voting rights issue will be presented
at the next special or annual shareholder meeting.
The Control Share Act states that voting rights are accorded to
control shares if approved by a majority of the votes cast by the holders
of shares entitled to vote, and by a majority of the votes cast by the
holders of shares entitled to vote, excluding all interested shares. The
shareholders can restore full or partial voting power to the control
shares. Where the control shares are accorded full voting rights, and the
acquiring person holds a majority of the voting power of the corporation,
all shares other than those owned by the acquiring person have dissenters'
rights. In addition, the corporation has the right to redeem control
shares if no acquiring person statement was filed, or if an acquiring
person statement was filed and the shareholders did not restore full
voting power to the control shares.
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The Board of Directors has chosen to elect into the Control Share Act
because it believes that is in the best interests of the Company and its
stockholders. Like the Fair Price Act, the Control Share Act does not
prohibit persons from attempting to gain control of the Company. The
Control Share Act merely slows them down by placing a procedural hurdle in
the way of a takeover attempt. The Control Share Act gives shareholders
the right to decide whether to support such an attempt by voting to restore
voting rights to the control shares, or to oppose the attempt by voting not
to restore voting rights. The Control Share Act slows down takeover
attempts or other actions which could be deemed not only harmful, but also
beneficial, to the Company.
The Bylaws of Foremost-Michigan contain a provision in which the
Company elects to be governed by the Control Share Act. The provision,
however, specifically excludes from coverage of the Control Share Act
beneficial owners who own 10% or more of the Company's Common Stock as of
February 23, 1998, or an affiliate of such beneficial owner. The Bylaws of
Foremost-Michigan also allow the Company to redeem control shares when no
acquiring person statement has been filed, or where the shareholders voted
not to restore full voting power to the control shares.
The Board of Directors' election to be governed by the Control Share
Act is not in response to a takeover attempt by any specific individual and
the Company is not aware of any such attempt.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE DELAWARE LAW AND THE MBCA
The MBCA and the Delaware Law differ significantly in several
respects. The following discussion contains a description of the
distinctions:
DIVIDENDS. The Delaware Law permits a corporation to pay dividends
out of surplus, or, if there is no surplus, out of net profits for the
fiscal year in which the dividends are declared and/or for the preceding
fiscal year. The MBCA, however, provides only that distributions are
prohibited if, among other things, the corporation would not be able to pay
its debts as the debts become due in the usual course of business.
TRANSFER OF ASSETS TO ANOTHER ENTITY. The Delaware Law requires
stockholder approval for any sale, lease or exchange of all or
substantially all corporate assets deemed expedient and in the best
interest of the corporation by the board of directors. The MBCA, however,
requires shareholder approval for only those transfers of assets which are
not in the usual and regular course of business as conducted by the
corporation.
AMENDMENTS TO CERTIFICATE/ARTICLES OF INCORPORATION. The board of
directors of a Delaware corporation must propose an amendment of the
-19-
certificate of incorporation before stockholders have the option to amend
the certificate. Shareholders of a Michigan corporation, on the other
hand, can amend the articles of incorporation without any special action by
the board. The Company's Certificate of Incorporation requires that the
affirmative vote of the holders of 80% of the voting power of the Company's
Common Stock is required to amend certain provisions of the Company's
Certificate of Incorporation, unless such amendment is declared advisable
by the Board of Directors by the affirmative vote of 75% of the Board.
Foremost-Michigan's Articles of Incorporation requires a similar super-
majority vote of shareholders to amend the Articles of Incorporation.
AMENDMENTS TO BYLAWS. The Delaware Law provides that the power to
amend the Bylaws of a corporation is held by the stockholders entitled to
vote, unless the corporation's certificate of incorporation provides
otherwise. A corporation's certificate of incorporation may provide the
board of directors with the authority to amend the corporation's Bylaws.
The MBCA provides that the shareholders or the board of directors of a
corporation may amend the Bylaws, unless the corporation's articles of
incorporation provide otherwise. The Company's Bylaws may be amended by a
majority vote of the Board of Directors or the stockholders. Foremost-
Michigan's Bylaws may be amended by the Board upon a majority vote or by
the shareholders upon the affirmative vote of 80% of the shareholders.
SHAREHOLDERS' LIST. Under the Delaware Law, the stockholders' list
must be prepared at least 10 days before the relevant stockholders'
meeting. Inspection and copying rights extend to stockholders, as well as
their agents or attorneys, for a proper purpose. Under the MBCA, the
shareholders' list need only be prepared in time for, and be available for
inspection at, the relevant shareholders' meeting.
STANDARDS OF CONDUCT FOR DIRECTORS AND OFFICERS. The Delaware Law
sets forth no standard of conduct for directors or officers, but rather
provides merely that directors are shielded from liability if they rely in
good faith on the appropriate documents and individuals. Also of note,
Delaware courts have somewhat eroded the protection of the business
judgment rule (which generally protects director's actions if such actions
were made with due care and good faith) if it appears that the directors
did not conduct an adequate investigation before their action. The
Delaware Law protects a director from personal liability unless the
director's acts are grossly negligent.
The MBCA requires that directors and officers act in good faith, with
ordinarily prudent care and with a reasonable belief that their actions are
in the best interest of the corporation. The MBCA also protects directors
and officers by shielding them from liability when they base a decision on
certain types of documents and reports from persons specifically referenced
in the MBCA. Thus, if a director makes a mistake in following the advice
of persons mentioned in the statute, the director will not be personally
liable.
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ACTIONS AGAINST DIRECTORS. The Delaware Law provides that
stockholders have six years in which to bring an action against directors
under whose administration an unlawful dividend (as defined in the Delaware
Law) has been paid, while the MBCA provides that shareholders must bring
such an action, or any other action against the directors for failure to
perform duties, within three years after the cause of action has accrued.
ACTIONS AGAINST A CORPORATION. A derivative lawsuit is one brought by
a shareholder on a corporation's behalf, alleging that someone or another
company has injured the corporation. Courts treat a derivative lawsuit as
being brought by the corporation itself, since the injury the lawsuit seeks
to repair is an injury to the corporation. Both Delaware and Michigan
provide rules on when and how a stockholder or shareholder can bring a
derivative suit on behalf of a corporation. In Delaware, a stockholder
usually must demand that the corporation bring the lawsuit itself. If the
corporation refuses to bring the lawsuit, the stockholder can then bring a
derivative suit. Delaware courts have stated that a stockholder may be
excused from demanding the corporation bring the lawsuit where it would be
futile for the stockholder to make the demand. A second requirement under
the Delaware Law is that the plaintiff must have owned stock in the
corporation at the time of the transaction giving rise to the lawsuit.
Michigan requires a shareholder to demand that the corporation bring a
derivative lawsuit. The MBCA provides a system for evaluating these
shareholder demands. If bringing the lawsuit would not be in the best
interests of the corporation, courts will dismiss the lawsuit. Under this
system, however, courts do not decide whether the lawsuit would be in the
best interests of the corporation. Instead, this decision can be made by
any of four different sources, with certain limitations placed on each: (i)
disinterested directors; (ii) the majority vote of a committee of two or
more disinterested directors if appointed by a majority of disinterested
directors; (iii) a panel of disinterested persons appointed by the court
upon the corporation's motion; or (iv) all disinterested independent
directors.
Michigan, like Delaware, requires that the plaintiff have been a
shareholder at the time of the transaction giving rise to the lawsuit.
Michigan further requires that, with limited exceptions, the plaintiff must
continue to own shares in the corporation until the lawsuit is resolved.
ATTACHMENT OF SHARES. The Delaware Law provides that the stock of a
corporation may be attached by any Delaware court, thereby giving Delaware
courts jurisdiction over nonresident holders of stock of corporations
organized in Delaware. The MBCA has no comparable provision.
INDEMNIFICATION. A Delaware corporation may indemnify a director,
officer, employee or agent for expenses and judgments in a lawsuit brought
against the corporation by a third party, or by the corporation itself
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through a derivative lawsuit. Before a corporation can indemnify that
person, however, a majority of disinterested directors, independent legal
counsel or the stockholders must determine that the person seeking
indemnification acted in good faith and in a manner that person reasonably
believed to be in the best interests of the corporation. A Delaware
corporation may indemnify a director for the amount paid in settlement of a
third-party lawsuit. A Delaware corporation only can indemnify the amount
of the expenses incurred in reaching the settlement, however, and not the
amount of the settlement itself, in a derivative action. A Delaware
corporation must indemnify a director, officer, employee or agent when
that person has successfully defended the lawsuit.
A Michigan corporation may indemnify a director, officer, employee or
agent in similar, but not identical, circumstances as a Delaware
corporation, and must indemnify for a successful defense, as in Delaware.
A Michigan corporation, unlike a Delaware corporation, can reimburse
expenses incurred in and amounts paid in settlement of a derivative action.
As noted above, only expenses can be reimbursed for a settled derivative
lawsuit in Delaware. The MBCA also contains a provision specifically
mandating court-ordered indemnification where the court believes the person
seeking indemnification is reasonably entitled to be reimbursed, based on
all relevant circumstances.
DISSENTERS' RIGHTS. Under the Delaware Law, a dissenting
stockholder's demand is for appraisal, not payment, of the fair value
of the shares when the stockholder has voted against a merger or
consolidation. The MBCA adds certain acquisitions of shares from another
corporation and control share acquisitions as corporate actions that
trigger dissenters' rights. Furthermore, dissenting shareholders of a
Michigan corporation who follow prescribed statutory procedures are
entitled to dissenters' rights in connection with any merger or sale of
substantially all of the assets of a corporation. The Delaware Law
provides appraisal rights in connection with a merger, but does not provide
appraisal rights in connection with sales of substantially all of the
assets of a corporation.
STATE COMMON LAW. One appealing aspect of Delaware incorporation is
the quality of Delaware judges in handling corporate lawsuits.
Consideration should be given to the fact that there is a considerable body
of judicial interpretations of Delaware's widely used corporate law, which
provides the Company's management with a predictable framework within which
to govern the business of the Company. In addition, the quality of
Delaware judges and courts is high and lends itself to a generally
predictable application of a familiar body of law. Also appealing is the
depth of cases defining common law in that state. With its historical role
in defining corporate law, Delaware also has served as a role model for
many other states both in terms of legislation drafting and in deciding
common law cases.
-22-
Michigan courts often look to Delaware courts for guidance on
interpreting Michigan statutes which have been patterned after Delaware
law, and on answering questions for which no solid answer exists in
Michigan case law. This reference to Delaware law leads to more
predictability under Michigan law as well.
Other than the changes specifically described, there will be no
material effect in the rights of holders of the Company's Common Stock, nor
will there be any material changes in the financial statements of the
Company as a result of the Merger.
FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of the federal income tax consequences
resulting from the Merger. The Company and Foremost-Michigan have not
requested a private letter ruling from the Internal Revenue Service as to
the federal income tax consequences of the Merger and, thus, there can be
no assurance that the transaction would constitute a tax-free exchange for
federal income tax purposes.
The Company has been advised, however, that the Merger would
constitute a reorganization within the meaning of Section 368(a)(1)(F) of
the Internal Revenue Code of 1986, as amended (the "Code"), and both the
Company and Foremost-Michigan would be a "party to a reorganization" within
the meaning of Section 368(b) of the Code, and that:
(i) no gain or loss would be recognized by the Company's
stockholders upon receipt of shares of stock of Foremost-Michigan;
(ii) a stockholder's basis of the stock of Foremost-Michigan
would be the same as the basis of the stock of the Company
immediately before the Merger; and
(iii) a stockholder's holding period of the Foremost-Michigan stock
would include the holding period of the stock of the Company
immediately before the Merger.
EACH STOCKHOLDER OF THE COMPANY SHOULD CONSULT A PROFESSIONAL TAX
ADVISER ON THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE MERGER TO
SUCH STOCKHOLDER.
ACCOUNTING TREATMENT
The Merger would be accounted for as a capital restructuring.
Therefore, the Merger would not affect the valuation of the assets or
liabilities of the Company in the hands of Foremost-Michigan, nor would
Foremost-Michigan record any income or expense as a result of the Merger.
-23-
Adoption of the Plan of Merger requires the affirmative vote of a
majority of the shares of Common Stock entitled to vote at the Annual
Meeting of Stockholders. For purposes of counting votes on this proposal,
failures to vote, abstentions, and broker non-votes and other shares not
voted will have the same effect as votes against adoption of the Plan of
Merger.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR ADOPTION OF THE AGREEMENT AND PLAN OF MERGER
APPROVAL OF THE COMPANY'S STOCK OPTION PLAN OF 1998
(Proposal Number 4 on the Enclosed Proxy Card)
INTRODUCTION AND PURPOSE OF THE PLAN
The Committee on Executive Management and Compensation of the Company's
Board of Directors (the "Compensation Committee") firmly believes that the
Company's long-term interests are best advanced by aligning the interests of
its key leaders, such as Mr. Antonini, with the interests of its stockholders.
The grant of a stock option that, by its terms, only becomes valuable upon
the success of all stockholders effectively reinforces the alignment of these
interests. In addition, the Compensation Committee recognizes the importance
of Mr. Antonini to the long-term performance and growth of the Company.
Accordingly, the issuance of a significant stock option--as part of a
comprehensive compensation program--is structured to provide an incentive to
Mr. Antonini to continue his employment with the Company, while keeping his
interests aligned with the Company's stockholders.
On February 23, 1998, the Compensation Committee unanimously adopted and
recommended for stockholder approval the Stock Option Plan of 1998 (the
"Plan"). The Plan consists of a one-time grant by the Company to Mr.
Antonini of an option to purchase 750,000 shares of Common Stock at a price
of $24.00 per share. The Compensation Committee consists of three directors,
of which no director is an officer or former officer of the Company or
receives any compensation from the Company, except in his capacity as a
director.
The key feature of the Plan is that, except in limited circumstances
discussed below, Mr. Antonini may only exercise the option if the value of
Common Stock at least doubles during the five-year period running from
February 23, 1998 (the date of the grant) to and February 23, 2003. On
February 23, 1998, the Company's Common Stock closed on the New York Stock
Exchange at a price of $22.875 per share; on March 13, 1998, it closed at
$24.125 per share. To exercise the option, shares of Common Stock must
close at a price of at least $48.00 per share on 10 or more days on or
before February 23, 2003.
-24-
The following discussion summarizes the material provisions of the
Plan but is not intended to be a complete discussion of the Plan and is
qualified in its entirety by reference to the Plan, a copy of which is
attached as Appendix D and incorporated by reference in this Proxy
Statement.
TERMS OF THE GRANT
On February 23, 1998, at the direction of the CompensationCommittee, the
Company granted (subject to stockholder approval) Mr. Antonini the option to
purchase 750,000 shares of Common Stock for $24.00 per share. The Company
received no consideration upon the grant of this option other than the
services of Mr. Antonini. The stock option will not qualify as an incentive
stock option within the meaning of Section 422(b) of the Code.
Except in limited circumstances, Mr. Antonini cannot exercise the option
unless the value of Common Stock doubles in five years. Specifically, this
means that the closing price of Common Stock must equal or exceed $48.00 per
share on at least 10 trading days on or before February 23, 2003. The term
of the option continues until February 23, 2008. The stock closing price
requirement of $48.00 per share, as well as the $24.00 per share exercise
price, are subject to certain antidilution adjustments in the event of a
stock split, stock dividend, or other typical corporate restructuring.
In addition to the stock price condition, the Plan also imposes
certain conditions that either accelerate or cancel Mr. Antonini's right to
exercise the option depending on Mr. Antonini's status as an employee of
the Company. For example, if Mr. Antonini dies before exercising the
stock option, his personal representative could exercise the stock option
at any time within one year, but only to the extent that Mr. Antonini could
have exercised the option at the time of his death. Similarly, if Mr.
Antonini becomes permanently disabled (as defined in Mr. Antonini's
Employment Agreement with the Company), he could exercise the stock option
at any time within one year from the date of the permanent disability, but
again, only to the extent that Mr. Antonini could have exercised the option
at the time of his termination of employment as a result of the permanent
disability. If Mr. Antonini retires, he could exercise the stock option at
any time within six months from the date of retirement, but again, only to
the extent that Mr. Antonini could have exercised the option at the time of
his retirement.
If Mr. Antonini is terminated for cause, the stock option terminates
automatically and Mr. Antonini forfeits all rights to exercise the option.
In contrast, Mr. Antonini may exercise his option, regardless of whether
the stock price reaches $48.00 per share, if he is terminated without cause or
if he terminates his employment with the Company for "good reason"
(generally, a diminution of his status or duties or a good faith dispute
with the Board of Directors over the Company's business plan or policies)
-25-
or a "substantial breach" (generally, a failure to pay compensation due, a
relocation or a failure to secure an assumption of the Employment Agreement
by a successor) by the Company.
Finally, if there is a change of control of the Company, Mr. Antonini
may exercise his option, regardless of whether the $48.00 per share stock
price condition is met. The Plan's definition of "change in control" means
the following: a change in control of a nature that would be required to be
reported in resonse to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, whether or not the Company is then subject
to such reporting requirement, other than an acquisition of control by the
Company or an employee benefit plan maintained by the Company; provided that,
without limitation, such a change in control shall be deemed to have occurred
if (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Exchange Act), other than the Company or an employee benefit plan maintained
by the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), directly or indirectly,
of securities of the Company representing 20 <percent> or more of the combined
voting power of the Company's then outstanding securities entitled to vote in
the election of directors of the Company (whether or not such person is a member
of a group that is deemed to be a single person under Section 13(d)(3) of the
Exchange Act and whether or not other members of such group previously had been
the benefical owner of some or all of such securities), (ii) during any period
of two consecutife years, individuals who are the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof (unless the election or nomination for
election by the Company's stockholders of each new director was approved by a
vote of at least 2/3 of the directors then still in office who were directors
at the beginning of the period), or (iii) all or substatnitally all of the
assets of the Company are liquidated, sold or distributed.
When exercising all or a portion of a stock option, Mr. Antonini may
pay the exercise price with cash or, with the consent of the Compensation
Committee, shares of Common Stock. If Common Stock is used to pay the
exercise price and the Compensation Committee consents, Mr. Antonini could
use the value of shares received upon exercise for further exercises in a
single transaction. Mr. Antonini may not transfer a stock option except by
will or the laws of descent and distribution, unless the Compensation
Committee otherwise consents.
The Plan would not be qualified under Section 401(a) of the Code nor
would it be subject to the Employee Retirement Income Security Act of 1974
(ERISA). The Company may register the shares under the Securities Act of
1933.
TAX CONSIDERATIONS
For federal income tax purposes, assuming stockholder approval of the
Plan, Mr. Antonini will not recognize any income and the Company will not
-26-
receive a deduction at the time the non-qualified stock option is granted.
If the stock option is exercised, Mr. Antonini will recognize compensation
income in the year of exercise equal to the difference between the exercise
price and the fair market value on the date of exercise. The Company will
receive a corresponding deduction for federal income tax purposes. Mr.
Antonini's tax basis in the shares acquired will be increased by the amount
of compensation income recognized. Sale of the stock after exercise will
result in recognition of short- or long-term capital gain or loss.
Section 162(m) of the Code, which was adopted in 1993 and implemented
in phases through 1997, limits to $1,000,000 the annual income tax
deduction that may be claimed by a publicly held corporation for
compensation paid to its chief executive officer and to the 4 most highly
compensated officers other than the chief executive officer. Qualified
"performance-based" compensation is exempt from the $1,000,000 limit and
may be deducted even if other compensation exceeds $1,000,000. The Plan is
intended to provide performance-based compensation under Section 162(m) to
permit compensation associated with the stock option awarded under the Plan
to be tax deductible for the Company while allowing, as nearly as
practicable, the continuation of the Company's preexisting practices with
respect to the award and taxation of stock options.
The Company may withhold from any cash otherwise payable to Mr.
Antonini or require Mr. Antonini to remit to the Company an amount
sufficient to satisfy all applicable federal, state and local withholding
taxes. Withholding may be satisfied by withholding Common Stock to be
received upon exercise of a stock option or by delivery to the Company of
shares of previously owned Common Stock.
VOTE REQUIRED AND THE RECOMMENDATION OF THE BOARD
The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy and voting on this
proposal is required to approve the Plan. For purposes of counting votes
on this proposal, abstentions, broker non-votes and other shares not voted
will not be counted as voted on this proposal, and the number of shares of
which a majority is required will be reduced by the number of shares not
voted.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE STOCK OPTION PLAN OF 1998
APPROVAL OF A FORM OF INDEMNITY AGREEMENT
FOR THE COMPANY'S DIRECTORS AND OFFICERS
(Proposal Number 5 on the Enclosed Proxy Card)
As an additional measure to strengthen the protection afforded to the
Company's directors and executive officers, the Board of Directors believes
-27-
that it is in the best interests of the Company to enter into an indemnity
agreement (the "Indemnity Agreement") with each of its directors and
officers (the "Executives"). The Company proposes to enter into Indemnity
Agreements in substantially the form attached to this Proxy Statement as
Appendix E to provide for the maximum indemnification allowed under the
laws of the Company's state of incorporation and the Company's corporate
charter. Proposal 3, "Adoption of an Agreement and Plan of Merger--Certain
Differences Between Delaware Law and the MBCA" contains a description of
the differences between the laws of the states of Delaware and Michigan as
to indemnification.
Stockholder approval of the Indemnity Agreement is not required under
either the Delaware Law or the MBCA. Nevertheless, because the members of
the Board of Directors of the Company will be parties to the Indemnity
Agreement, and are therefore beneficiaries of the rights contained therein,
it is appropriate to submit the Indemnity Agreement to the stockholders for
approval. If the form of Indemnity Agreement is approved by the Company's
stockholders, it is anticipated that Indemnity Agreements will be entered
into with the Company's Executives promptly after the Annual Meeting of
Stockholders and that similar Indemnity Agreements will be entered into
with future Executives as are designated from time to time by the Board of
Directors.
The Board of Directors believes that the Indemnity Agreement serves
the best interests of the Company and its stockholders by strengthening the
Company's ability to attract and retain over time the services of
knowledgeable and experienced persons to serve as Executives who, through
their efforts and expertise, can make a significant contribution to the
success of the Company.
The Indemnity Agreements are intended to supplement the laws of the
Company's state of incorporation, as well as other indemnification
provisions contained in the Company's corporate charter and Bylaws.
Set forth below is a summary of certain key provisions of the
Indemnity Agreement. The summary is qualified in its entirety by reference
to the full text of the Indemnity Agreement set forth in Appendix E to this
Proxy Statement.
First, the Indemnity Agreement provides that expenses incurred by an
Executive and subject to indemnification must be paid directly by the Company
or reimbursed to an Executive within five (5) days after the receipt of a
written request of an Executive setting forth in reasonble detail the amount
requested and accompanied by copies of relevant invoices or other
documentation. An Executive's request for indemnification must be accompanied
by a signed certificate that an Executive in good faith believes that he or she
is entitled to indemnification in accordance with the requirements of this
Agreement. If an Executive certifies that an Executive in good faith believes
-28-
that he or she is entitled to indemnification under the Indemnity Agreement, an
Executive will be deemed t ohave met the necessary standard of conduct unless
and until it is determined by a final judgment or other final adjudication that
an Executive is not entitled to indemnification.
Second, the Indemnity Agreement provides that litigation and
investigation expenses will be advanced to an Executive upon his or her
request, provided that the Executive undertakes to repay amounts advanced
if it is ultimately determined that he or she is not entitled to
indemnification for such expenses.
Third, the Indemnity Agreement provides for partial indemnification of
costs and expenses in the event that an Executive is not entitled to full
indemnification under the terms of the Indemnity Agreement. Under the
Indemnity Agreement, an Executive is automatically entitled to
indemnification for expenses incurred in successfully defending against
any claim, whether on the merits or otherwise.
Although the Indemnity Agreement is intended to indemnify an Executive
to the fullest extent allowed by law, the Indemnity Agreement does not
cover the following: (i) expenses or costs associated with remuneration
paid to the Executive in violation of law; (ii) any judgment or final
adjudication in which it is determined that the Executive's conduct was
knowingly fraudulent, deliberately dishonest or willful misconduct; (iii)
any judgment in which it is found that the Executive acted in bad faith, or
in conduct that the Executive did not reasonably believe to be in or not
opposed to the best interests of the Corporation or its shareholders, or that
produced an unlawful personal benefit; (iv) with respect to a criminal
proceeding if the Eecutive had no reasonabale cause to believe that the
Executive's conduct was unlawful; (v) if a final decision by a court having
jurisdiction in the matter determines that such indemnification is not lawful;
or (vi) any Proceeding initiated by the Executive against the Corporation or any
director, officer, employee, agent or fiduciary of the Corporation (in such
capacity) unless the Corporation has joined in or consented to the
initiation of the Proceeding or such Proceeding relates to the enforcement
by the Executive of the Executive's rights under the Indemnity Agreement.
An Executive's rights under the Indemnity Agreement are not exclusive
of any other rights that the Executive may have under the laws of the state
in which the Company is incorporated, the Company's charter or Bylaws, any
other agreement or any vote of stockholders or the Board of Directors. The
Indemnity Agreement does prevent, however, double payment and specifically
provides that if the Company pays an Executive pursuant to the Indemnity
Agreement, the Company will be subrogated to the Executive's rights to
recover from third parties.
The Indemnity Agreement is designed to provide the maximum protection
allowed by law. Although the enforceability of the provisions of the
-29-
Indemnity Agreement has not been tested in court and remains subject to
public policy considerations, the Board of Directors believes that such
provisions are permitted under the laws of the state in which the Company
is incorporated.
The Indemnity Agreement is intended to supplement the protection from
liability presently provided to Executives, in light of: (i) the increasing
hazard of litigation, and its related expense, directed against directors
and officers of publicly held companies; (ii) the decrease in dollar
amounts of insurance and the broadening of exclusions and increase in
deductibles under the directors' and officers' liability insurance policies
of many companies; and (iii) the potential inability to continue to attract
and retain qualified directors and officers in light of such developments.
In the event that the Company is required under the Indemnity
Agreement to reimburse an Executive for a large damage award entered
against such individual, approval of the Indemnity Agreement could
adversely affect the stockholders' holdings in the Company by reducing the
Company's equity. In addition, to the extent that the Company is required
to indemnify an Executive under the Indemnity Agreement for liability in
situations not covered by the Company's liability insurance, the Company's
obligation to pay such amounts of liability could adversely affect the
equity of the Company and therefore could be detrimental to its
stockholders.
The Company's Board of Directors believes that it is essential that
the Company provide the maximum possible protection to its directors and
officers to be able to continue to attract and retain qualified individuals
to serve as its business leaders. In light of these considerations, the
Board of Directors has determined that the Indemnity Agreement is
reasonable, fair and prudent to the Executives and the stockholders of the
Company and is necessary to promote and ensure the best interests of the
Company and its stockholders.
At present, there is no pending litigation or proceeding involving a
director or officer of the Company where indemnification would be required
or permitted under the Indemnity Agreement, nor is the Board of Directors
of the Company aware of any threatened litigation or proceeding which could
result in a claim for indemnification. The Board of Directors did not
approve the Indemnity Agreement in response to any specific resignation,
threat of resignation or refusal to serve by any current or potential
director or officer. If the Indemnity Agreement is ratified, stockholders
of the Company may be precluded in the future from challenging the validity
of the Indemnity Agreements.
Approval of the Indemnity Agreement requires the affirmative vote of a
majority of the shares of Common Stock entitled to vote at the Annual
Meeting of Stockholders. For purposes of counting votes on this proposal,
abstentions, broker non-votes and other shares not voted will have the same
effect as votes against approval of the Indemnity Agreement.
-30-
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF A FORM OF INDEMNITY AGREEMENT FOR THE
COMPANY'S DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
Effective as of August 7, 1997, the Board of Directors determined to
increase the size of the Board of Directors to 10 members, four of whom
are standing for reelection. The Company's Restated Certificate of
Incorporation provides that the Board of Directors shall be divided into
three classes, with each class to be as nearly equal in number as possible.
The Board of Directors intends in future years as the terms of the
incumbent directors end or additional directors are added to adjust the
number of directors in each class to again make each class as nearly equal
in number as possible. Each class of directors serves a term of office of
three years, with the term of one class expiring at the annual meeting of
stockholders in each successive year.
Biographical information as of December 31, 1997, is presented below
for each person who either is nominated for election as a director at the
Annual Meeting of Stockholders or is continuing as an incumbent director.
Except as indicated, all have had the same principal positions and
employment for over five years.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2001 (CLASS I)
MICHAEL DE HAVENON (age 57) has been a director of the Company since
May 8, 1997. Mr. de Havenon has served since December 1996 as President
of Kulen Capital Corp., a firm engaged primarily in making private
investments. From 1992 to December 1996, Mr. de Havenon served as
President of Merrill Lynch Capital Corporation and its predecessor, a
wholly owned subsidiary of M L & Co., which structured and managed
leveraged private investments. Mr. de Havenon resides in New York City.
ROBERT M. RAIVES (age 71) has been a director of the Company since
1988. Mr. Raives is of counsel to the law firm of Gilbert, Segall and
Young, LLP of New York City since July 1997. From 1993 to July 1997, Mr.
Raives was a partner in the New York City law firm of Rosenman & Colin.
Mr. Raives also is a member of the United States Advisory Board of the
Zurich Insurance Company and a director of the Zurich Holding Company of
America and the American Guarantee & Liability Insurance Company. Mr.
Raives resides in New York City.
MICHAEL B. TARGOFF (age 53) has been a director of the Company since
August 7, 1997. Mr. Targoff served as President and Chief Operating
Officer of Loral Space & Communications, Ltd., a manufacturer of satellites
and a provider of satellite-based services, from April 1996 to January
-31-
1998. From April 1993 to April 1996, Mr. Targoff served as Senior Vice
President of Loral Corporation, a defense electronics and telecommuni-
cations contractor. Mr. Targoff is also Director of Globalstar Tele-
communications, Ltd., a worldwide satellite-based telecommunications
company, and Satelites Mexicanos, S.A. de C.V., a satellite-based
telecommunications company based in Mexico. Mr. Targoff resides in New
York City.
F. ROBERT WOUDSTRA (age 52) has been a director of the Company since
1988. Mr. Woudstra has served as Executive Vice President and Treasurer of
the Company since 1987. Mr. Woudstra has been employed by Foremost
Insurance Company since 1973 and has served in various capacities since
that time. Mr. Woudstra resides near Grand Rapids, Michigan.
INCUMBENT CLASS II DIRECTORS - TERMS EXPIRING IN 1999
RICHARD L. ANTONINI (age 55) has been a director of the Company since
1973 and has served as Chairman of the Board since 1991. Mr. Antonini has
served as the President and Chief Executive Officer of the Company since
July 1986, and has been employed by the Company in various other capacities
since 1969. Mr. Antonini also is a director of Old Kent Financial
Corporation and Old Kent Bank and Chairman of the Board of the Mackinac
Center for Public Policy. Mr. Antonini resides near Grand Rapids,
Michigan.
LARRY J. ORANGE (age 55) has been a director of the Company since
1993. Mr. Orange has served as Executive Vice President of the Company
since 1987. Mr. Orange has been employed by Foremost Insurance Company
since 1970 and has served in various capacities since that time. Mr.
Orange resides near Grand Rapids, Michigan.
JOSEPH A. PARINI (age 66) has been a director of the Company since
1981. Mr. Parini has served as Chairman and an officer of EFW, Inc., a
defense electronics firm, since January 1997. Mr. Parini served as
President of Elbit Systems, Inc., a manufacturer of electronic systems for
the medical and defense industries, from 1990 through 1996. Mr. Parini
also serves as President of Olive Tree Enterprises, a systems engineering
consulting firm, since January 1997. Mr. Parini is a director of Wolverine
World Wide, Inc., a manufacturer of footwear. Mr. Parini resides near
Grand Rapids, Michigan.
INCUMBENT CLASS III DIRECTORS - TERMS EXPIRING IN 2000
JOHN C. CANEPA (age 67) has been a director of the Company since 1994.
Mr. Canepa has been employed as a Consulting Principal for Crowe Chizek,
LLP since November 1995. Mr. Canepa served as Chairman of the Board of
-32-
Directors of Old Kent Financial Corporation from 1988 until 1995. Mr.
Canepa also is a director of ThornApple Valley, Inc., a manufacturer of
food products; Universal Forest Products, a manufacturer, treater and
distributor of lumber products; and Laser Alignment, Inc., a manufacturer of
industrial lasers. Mr. Canepa resides near Grand Rapids, Michigan.
ARTHUR E. HALL (age 59) has been a director of the Company since 1994.
Mr. Hall is a Chartered Financial Analyst by the Association of Investment
Management and Research and a portfolio manager. Mr. Hall has been the
sole general partner of Valarian Associates, a Nevada limited partnership
which purchases, sells and holds investment securities. Mr. Hall resides
in Minden, Nevada.
RICHARD A. KAYNE (age 52) has been a director of the Company since
1994. Mr. Kayne serves as President and a director of KA Holdings, Inc.
and administrative manager of Kayne Anderson Investment Management, LLC,
the parent entities of the investment advisory businesses of the Kayne
Anderson Investment Management Group. Mr. Kayne also serves as President
and Chief Executive Officer and director of K.A. Associates, Inc., a
registered broker/dealer. Mr. Kayne is a director of Glacier Water
Services, Inc., a provider of drinking water services, and The Right Start,
Inc., a children's products retailer. Mr. Kayne resides near Los Angeles,
California.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1997 the Board of Directors held four regular meetings. Each
of the directors attended 75% or more of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings held by all committees of the Board of Directors on which each of
them served (during the periods that each served). The Board of Directors
maintains five standing committees. The committees' functions, members and
number of meetings in 1997 were:
-33-
NUMBER OF
MEETINGS
COMMITTEE FUNCTION MEMBERS IN 1997
- ------------ ---------- --------- ----------
AUDIT. . . . . . The Audit Committee reviews the Messrs. 2
work of the ndependent and internal Canepa,
auditors, and the accounting de Havenon,
principles and methods used in Parini,
presenting financial results. In Raives
addition, the Audit Committee
recommends the independent auditors
to be nominated by the Board
for stockholder approval at the
annual meeting of stckholders.
Mr. Canepa served on the Audit Committee
from January 1997 to May 1997.
COMPENSATION. . . The Committee on Executive Messrs. 1
Maangement Compensation makes Canepa,
recommendations to the Board de Haveon,
of Directors regarding management Parini
incentives and employee retirement
plans and recommends salary levels
for the executive officers. The
Compensation Committee also reviews
employee benefit programs for the
Company.
EXECUTIVE. . . . .The Executive Committee is authorized Messrs. 2
by the Company's Bylaws to exercise Antonini,
all powers and authority of the Board Canepa,
of Directors in the management and Kayne,
affairs of the Company except to the Woudstra
extent that delegation is prohibited
bu law. The Executive Committee may
consider or act upon matters requiring
Board action during periods between
Board meetings. All actions of the
Executive Committee are reviewed by the
Board at the next meeting after the
action is taken.
-34-
INVESTMENT. . . . The Investment Committee recommends the Messrs. 4
Investment Policy of the Company and Antonini,
reviews management's implementation of Canepa,
the policy. Hall,
Kayne,
Woudstra
NOMINATING. . . . The Nominating Committee considers and Messrs. 0
proposes to the Board of Directors Canepa,
suggestions as to qualifiedcandidates Hall,
for nomination to the Board and also Kayne
proposes to the Board the slate of
directors for submission to the
stockholders at each annual meeting.
The Nominating Committee will consider nominees for election to the
Board of Directors submitted by stockholders. The Company's Restated
Certificate of Incorporation provides that any stockholder of record entitled
to vote generally in the election of directors may nominate one or more
persons for election as directors at a meeting only if written notice of such
stockholder's intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Company not less than 120 days nor more than 135 days prior
to the meeting; provided, that in the event that less than 130 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made, whichever first occurs. Each such notice to the Secretary shall
set forth: (i) the name and address of record of the stockholder who intends
to make the nomination; (ii) a representation that the stockholder is a
holder of record of shares of the Company's capital stock entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) the name, age,
business and residence addresses, and principal occupation or employment of
each proposed nominee; (iv) a description of all arrangements or
understandings between the stockholder and each proposed nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (v) such other
information regarding each proposed nominee as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (vi) the written consent of each
proposed nominee to serve as a director of the Company if so elected. The
Company may require any proposed nominee to furnish such other information as
may reasonably be required by the Company to determine the eligibility of
such proposed nominee to serve as a director of the Company.
-35-
COMPENSATION OF DIRECTORS
Nonemployee directors receive a base retainer fee of $15,500 per
year, plus $800 for each Board or committee meeting attended. If more than
one meeting was held on the same day, the director received $800 for the
first meeting and $400 for each subsequent meeting held that day. The
Company also reimbursed its directors for travel, lodging and related
expenses they incurred in attending Board and committee meetings.
Directors who also are employees of the Company or any of its subsidiaries
receive no annual retainer and are not compensated for attendance at Board
or committee meetings.
In 1988, the Company adopted a pension plan for nonemployee directors
who have served a minimum of five years. Under the plan, a retired director
is paid an amount equal to 50% of the current annual directors' retainer fee
for a period of years equal to the number of years served as a director,
subject to a maximum of 10 years. On December 8, 1994, the Board adopted a
resolution to terminate the pension plan; however, accrued benefits will be
preserved for eligible directors even though no additional years of
eligibility will accrue after May 1995.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to each person or entity
known to the Company to have been the beneficial owner of more than 5% of
the Company's outstanding shares of Common Stock as of March 13, 1998
(except as noted in the footnotes):
SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS<Fa>
- ------------------- ------------ ---------
Richard A. Kayne 3,652,157<Fb> 13.3%
Kayne, Anderson Investment
Management, Inc.
1800 Avenue of the Stars
Suite 200
Los Angeles, California 90067
Cortland Associates, Inc. 3,263,019<Fc> 11.9%
8000 Maryland Avenue
Suite 730
St. Louis, Missouri 63105
Albert O. Nicholas 2,815,631<Fd> 10.2%
Nicholas Company, Inc.
700 North Water Street
Milwaukee, Wisconsin 53202
-36-
Arthur E. Hall 2,089,350<Fe> 7.6%
1726 Cedar Wood Drive
Minden, Nevada 89428
First Chicago NBD Corporation 1,456,686<Ff> 5.3%
One First National Plaza
Chicago, Illinois 60670
- -----------------------------
<FN>
<Fa> The percent of class is based upon 27,524,531 shares of the Company's
Common Stock outstanding on March 13, 1998. The figures have been
adjusted to reflect the three-for-one stock split distributed on
January 20, 1998.
<Fb> According to information provided to the Company by Richard A. Kayne,
the shares are held as follows: 839,934 shares are held by Richard A.
Kayne; 14,325 shares are held by Kayne Anderson Investment Management,
Inc., a Nevada corporation ("KAIM, Inc."); 46,275 shares are held by
KAIM Non-Traditional, L.P., a California limited partnership ("KAIM
N-T, LP"); 2,738,378 shares are held by investment partnerships and
other accounts managed by KAIM N-T, LP as investment adviser; and
13,245 shares are held by accounts managed by Kayne Anderson
Investment Management, LLC, a California limited liability company
("KAIM, LLC"), as investment adviser. Mr. Kayne is the president and
majority stockholder of KA Holdings, Inc., a California corporation,
which is the sole stockholder of KAIM, Inc. KAIM, Inc., is the
general partner of KAIM N-T, LP. Mr. Kayne is also the administrative
manager and majority member of KAIM, LLC. As a result of his
positions and ownership, Mr. Kayne has shared voting and dispositive
power with KAIM, Inc., over 14,325 shares; with KAIM N-T, LP over
2,784,653 shares; and with KAIM, LLC, over 13,245 shares. Mr. Kayne
claims beneficial ownership of the shares held by him directly, the
14,325 shares held by KAIM, Inc., and 90,568 of the shares held by
KAIM N-T, LP, for the investment partnerships, which shares represent
Mr. Kayne's direct investment interest in such investment entities.
Mr. Kayne disclaims beneficial ownership as to all other shares.
<Fc> According to Amendment No. 6 to Schedule 13G dated February 19, 1998,
of Cortland Associates, Inc. ("Cortland"), an investment advisory firm
registered under the Investment Advisers Act of 1940, Cortland claims
sole dispositive power over 2,976,522 shares and sole voting power
over 68,517 of such shares. Cortland claims shared voting power over
839,760 of such shares with Cortland's clients who beneficially own
the 2,976,522 such shares. In addition, various principals of Cortland
(or members of their families) also own directly or beneficially
286,497 additional shares. Cortland's Amendment No. 6 to Schedule 13G
reported pre-stock split shares. The numbers reported above reflect
the three-for-one stock split distributed on January 20, 1998.
-37-
<Fd> According to Amendment No. 6 to Schedule 13G dated February 10, 1998,
of Nicholas Company, Inc., an investment adviser registered under the
Investment Advisers Act of 1940, Nicholas Company, Inc. claims sole
dispositive power over 2,769,131 shares. Nicholas Fund, Inc., an
open-end management investment company registered under the Investment
Company Act of 1940, claims sole voting power over 2,516,331 of such
shares and Albert O. Nicholas, President, Director and majority
shareholder of Nicholas Company, Inc., claims sole voting and
dispositive power over 46,500 of such shares. Mr. Nicholas disclaims
beneficial ownership of the other reported shares.
<Fe> According to information provided to the Company by Arthur E. Hall,
the shares are held as follows: Valarian Associates, a Nevada limited
partnership, owns 1,200,000 shares; Hallco, Inc., a Nevada
corporation, owns 373,350 shares; A. E. Hall and Company, Money
Purchase Plan, a qualified retirement plan ("Plan"), owns 195,000
shares; Hall Family Foundation, a Nevada nonprofit corporation, owns
187,500 shares; and Joanne Ginn Hall Trust, a revocable trust
("Trust"), owns 133,500. Due to his positions as (i) the sole
general partner of Valarian Associates, (ii) the President and
majority stockholder of Hallco, Inc., (iii) the sole trustee and
beneficiary of the Plan, (iv) the Chairman of the Hall Family
Foundation and (v) one of two trustees of the Trust. Mr. Hall claims
sole voting and dispositive power over 2,089,350 shares.
<Ff> According to Amendment No. 10 to Schedule 13G, dated January 30, 1998,
First Chicago NBD Corporation ("NBD") beneficially owns, in a
fiduciary capacity, 1,456,686 shares. NBD claims sole voting power
over 1,395,042 shares, sole dispositive power over 231,057 shares and
shared dispositive power over 1,168,977 shares.
</FN>
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock of
the Company beneficially owned as of March 13, 1998, by each of the
Company's directors and nominees for director, each named executive officer
and all of the Company's directors and executive officers as a group:
-38-
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF COMMON STOCK<FA>
-----------------------------------------------
SOLE SHARED
VOTING AND VOTING OR TOTAL PERCENT
NAME OF DISPOSITIVE DISPOSITIVE BENEFICIAL OF
BENEFICIAL OWNER POWER<FB> POWER<FC> OWNERSHIP<FB> CLASS<FD>
- ---------------------- ----------- ----------- ------------- ---------
Richard L. Antonini 1,019,103 5,385 1,024,488 3.5%
John C. Canepa 3,024 -- 3,024 <F*>
Michael de Havenon 1,500 -- 1,500 <F*>
Arthur E. Hall 2,089,350 -- 2,089,350 7.2%
Jack J. Hannigan 235,157 -- 235,157 <F*>
David A. Heatherly 129,257 -- 129,257 <F*>
Richard A. Kayne 839,934 2,812,223 3,652,157 12.6%
Larry J. Orange 175,336 -- 175,336 <F*>
Joseph A. Parini 6,360 -- 6,360 <F*>
Robert M. Raives -- -- -- --
Michael B. Targoff 243,384 -- 243,384 <F*>
F. Robert Woudstra 104,098 -- 104,098 <F*>
All directors and executive
officers as a group 4,927,055 2,817,788 7,744,843 26.8%
- --------------------
<FN>
<F*> Less than 1%
<Fa> The number of shares stated are based on information provided by each
person listed and include shares personally owned of record by the per-
son and shares which, under applicable regulations, may be considered to
be otherwise beneficially owned by the person. The figures have been
adjusted to reflect the three-for-one stock split distributed on January
20, 1998.
<Fb> These numbers include shares that may be acquired through the exercise
of stock options granted under the Company's Non-Qualified Stock
Option Plan within 60 days after March 13, 1998. The number of shares
subject to stock options for each person is shown below:
Mr. Antonini . . . . . . . . . . . . . . 755,100
Mr. Hannigan . . . . . . . . . . . . . . 210,300
Mr. Heatherly . . . . . . . . . . . . . 115,725
Mr. Orange . . . . . . . . . . . . . . . 165,300
Mr. Woudstra . . . . . . . . . . . . . . 90,000
All directors and executive
officers as a group . . . . . . . . . . 402,575
-39-
The number of shares listed for Mr. Antonini does not include the
proposed grant of 750,000 stock options, which is subject to
stockholder approval. (See Proposal Number 4)
<Fc> These numbers include shares over which the listed person is legally
entitled to share voting or dispositive power by reason of joint
ownership, trust or other contract or propriety right and shares held
by spouses, children or other relatives over whom the listed person
may have substantial influence by reason of relationship. For a
description of the beneficial ownership of shares claimed by Messrs.
Kayne and Hall, see footnotes (b) and (e) under "Security Ownership of
Certain Beneficial Owners."
<Fd> Percent of Class is based upon the 27,524,531 the Company's Common
Stock outstanding on March 13, 1998, plus the 1,402,575 shares
represented by options which may be exercised within 60 days of that
date.
</FN>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following Summary Compensation Table shows certain information
concerning the compensation earned during each of the three fiscal years in
the period ended December 31, 1997, by the Chief Executive Officer of the
Company and each of the Company's four most highly compensated executive
officers who served in positions other than Chief Executive Officer (the
"named executive officers") at the end of the last completed fiscal year.
The number of shares subject to awards of stock options have been adjusted
to reflect the three-for-one stock split distributed in January 1998.
-40-
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
--------------------------
AWARDS PAYOUTS
---------- -------
SECURITIES ALL
ANNUAL COMPENSATION UNDERLYING OTHER
NAME AND ------------------- OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY<FA> BONUS<FA> SARS<FB> PAYOUTS<FC> SATION<FD>
- ------------------ ---- ---------- --------- -------- ----------- ----------
Richard L. Antonini 1997 $563,196 $302,324 0<Fe> $408,318 $71,283
President and Chief 1996 563,196 74,342 0 168,960 71,083
Executive Officer 1995 563,200 337,920 300,000 167,640 71,083
John J. Hannigan 1997 $222,732 $101,633 0 $129,185 $31,891
Executive Vice President 1996 222,732 24,991 0 60,138 31,691
1995 222,736 113,595 30,000 59,555 31,691
F. Robert Woudstra 1997 $218,544 $ 99,722 0 $126,756 $32,594
Executive Vice 1996 218,544 24,521 0 59,007 32,394
President and Treasurer 1995 218,545 111,458 30,000 58,434 32,394
David A. Heatherly 1997 $249,996 $104,198 0 $133,314 $34,341
Executive Vice President 1996 219,780 24,659 0 59,340 30,817
1995 219,774 112,085 30,000 58,763 30,816
Larry J. Orange 1997 $194,172 $ 88,601 0 $112,619 $30,361
Executive Vice President 1996 194,172 21,786 0 52,426 30,161
1995 194,169 99,026 30,000 51,754 30,161
- ------------------------
<FN>
<Fa> The Salary and Bonus columns include any amounts the named executive
officer may have deferred under the Company's 401(k) Savings Plan and
non-qualified deferred compensation plans.
<Fb> In 1995, the Company amended its Non-Qualified Stock Option Plan
deleting all provisions relating to SARs. During 1992, the named
executive officers and other participants in the Company's Non-
Qualified Stock Option Plan released all SARs granted to them in
tandem with all prior option grants under the Non-Qualified Stock
Option Plan. No additional compensation was paid in return for
release of the SARs.
<Fc> These amounts represent the value of awards made to the named
executive officers under the Company's Long-Term Incentive Plan
("LTIP"). The amounts include the value of Company Common Stock and
-41-
cash awarded. The Employment Agreements covering the named executive
officers provide for guaranteed payouts under the LTIP at target
levels. For years commencing with 1993, the named executive officers
have agreed to waive the guaranteed award under the LTIP, except in
the event of the change in control of the Company or termination of
employment.
<Fd> The compensation listed in this column for 1997 consisted of: (i)
Company contributions to the accounts of the named executive officers
under the Company's 401(k) Savings Plan as follows: $3,200 each for
Mr. Antonini, Mr. Hannigan, Mr. Woudstra, Mr. Heatherly, and Mr.
Orange; (ii) Company contributions to the accounts of the named
executive officers under the Company's defined contribution plans as
follows: $61,952 for Mr. Antonini, $24,501 for Mr. Hannigan, $24,040
for Mr. Woudstra, $27,500 for Mr. Heatherly, and $21,359 for Mr.
Orange; and (iii) payments made by the Company for the premiums on
certain split-dollar life insurance policies as follows: $6,131 for
Mr. Antonini, $4,190 for Mr. Hannigan, $5,354 for Woudstra, $3,641 for
Mr. Heatherly, and $5,802 for Mr. Orange.
<Fe> Does not include the proposed grant of 750,000 stock options to Mr.
Antonini, which is subject to stockholder approval.
</FN>
STOCK OPTIONS
The Company's stock option plans are administered by the Compensation
Committee of the Board of Directors which has authority to determine the
individuals to whom and the terms upon which options will be granted, the
number of shares to be subject to each option and the form of consideration
that may be paid upon the exercise of an option.
None of the named executive officers were granted any options during
1997. The following table sets forth information regarding stock options
exercised by the named executive officers during the fiscal year ended
December 31, 1997:
-42-
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
NUMBER SECURITIES UNDERLYING IN-THE-MONEY
OF SHARES UNEXERCISED OPTIONS OPTIONS AT
ACQUIRED AT FISCAL YEAR-END<FA> FISCAL YEAR-END<FB>
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- --------- ---------- ----------- ------------- ----------- -------------
Richard L. Antonini 150,387 $1,248,007 655,100 100,000 $9,158,293 $1,070,800
John J. Hannigan 58,905 499,270 200,300 10,000 2,968,379 107,080
F. Robert Woudstra 57,120 490,687 80,000 10,000 937,919 107,080
David A. Heatherly 58,905 393,598 105,725 10,000 1,394,964 107,080
Larry J. Orange 21,777 171,331 155,300 10,000 2,287,872 107,080
- -------------------
<FN>
<Fa> The Company's Non-Qualified Stock Option Plan authorizes grants for a
total of 3,150,000 shares. As of March 13, 1998, the aggregate number
of options granted and outstanding was 1,820,700 (not including the
750,000 option shares described in Proposal 4). The exercisable
column includes all options vested as of December 31, 1997. The
numbers of shares and options in the above table have been adjusted to
reflect the three-for-one stock split distributed on January 20, 1998.
<Fb> Value of Unexercised In-the-Money Options is based on the fair market
value of the Company's Common Stock on December 31, 1997, $23.375 per
share, adjusted for the three-for-one stock split distributed on
January 20, 1998.
<Fc> In the event of a dissolution or liquidation of the Company, the
options will terminate on a date to be fixed by the Compensation
Committee which shall not be less than 30 days following notice to the
named executive officers of such date and the named executive officers
shall be entitled to exercise all options (including unvested options)
during such period following the notice. In the event of a merger or
consolidation in which the Company is not the surviving corporation, a
sale of all or substantially all of the assets of the Company or a
sale, pursuant to an agreement with the Company, of securities of the
Company as a result of which the Company becomes a wholly owned
subsidiary of another company (a "Reorganization Event"), all
outstanding options shall become immediately exercisable for a period
to be determined by the Compensation Committee which shall not be less
than 30 days following notice to the named executive officers of such
date unless the agreement respecting such Reorganization Event
specifically provides for the continuation or conversion of such
-43-
options, in which case such options shall be exercisable in accordance
with the terms of such agreement.
</FN>
LONG-TERM INCENTIVE AWARDS
The Company has established an LTIP pursuant to which the Company may
award cash and shares of restricted stock to plan participants conditioned
upon the achievement of certain corporate goals over a three-year
performance period.
The following table sets forth certain information concerning awards
of long-term compensation to the named executive officers during the last
fiscal year:
LONG-TERM INCENTIVE PLAN-AWARDS
IN LAST FISCAL YEAR
NUMBER OF PERFORMANCE
SHARES, OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
UNITS PERIOD UNTIL NON-STOCK PRICE-BASED PLANS<FC>
OR OTHER MATURATION ----------------------------------
NAME RIGHTS<FA> OR PAYOUT<FB> THRESHOLD TARGET MAXIMUM
- ------------------- ---------- ------------- --------- -------- --------
Richard L. Antonini 12,228 3 years $140,800 $281,600 $422,400
John J. Hannigan 3,869 3 years 44,500 89,100 133,600
F. Robert Woudstra 3,796 3 years 43,700 87,400 131,100
David A. Heatherly 3,992 3 years 50,000 100,000 150,000
Larry J. Orange 3,373 3 years 38,800 77,700 116,500
- ------------------
<FN>
<Fa> The LTIP provides for awards based on the Company's return on
stockholders' equity ("ROE") over three-year periods. A new three-
year plan starts each year with a ROE goal set for the next three-year
period. The number in the table represents the number of shares of
Common Stock awarded in January of 1998 for the three-year plan 1995
through 1997. The value of the LTIP awards, including the value of
these shares based on the market value of the Company's Common Stock
at year-end 1997 as well as amounts paid in cash are included in the
Summary Compensation Table. The number of shares is adjusted to reflect
the three-for-one stock split distributed on January 20, 1998.
<Fb> LTIP Awards are determined and paid after the end of each three-year
period and the participant must be employed by the Company at the end
of the applicable three-year period. Although awards are fully vested
-44-
upon issuance, Common Stock issued is restricted for resale during an
additional three-year period after payment. However, in the event of
termination of employment, the resale restriction lapses. The
participant is entitled to dividends and may vote the shares of Common
Stock awarded under the LTIP.
<Fc> The Estimated Future Payouts column includes the ranges of annual
payments that could be earned depending on the ROE result over a
three-year performance period and the above estimate is based on 1997
salary level. The actual payout is based on a percentage of the
participant's average annual base salary over the three-year period.
Awards made under the LTIP to the named executive officers are
included in the Summary Compensation Table. Except as noted below, no
awards are paid under the LTIP unless the ROE equals or exceeds the
Threshold ROE. The award is paid 70% in Common Stock of the Company
and 30% in cash. The number of shares paid is determined by
multiplying the actual payout by 70% and dividing that product by the
market value of the Common Stock on December 31 of the third year of
the applicable three-year period. However, under Employment Agreements
between the named executive officers and the Company, the named
executive officers' payments under the LTIP could be greater than the
payment based on the actual ROE in the event of a change in control of
the Company or termination of the executive, in which case the named
executive officer would be entitled to no less than the Target payout.
</FN>
MONEY PURCHASE PENSION AND SAVINGS PLANS
The Company has a tax-qualified defined contribution Money Purchase
Pension Plan and a Profit-Sharing Retirement Savings Plan (the "Pension
Plan") for all full-time employees after they have completed one year of
service. The Pension Plan serves as a retirement income program for longer
service employees. The contribution to the Pension Plan in 1997 was equal
to 11%, less forfeitures, of the base salary of all eligible employees.
Employees become 30% vested after three years and become vested an
additional 10% after four years and an additional 20% per year thereafter.
All of the named executive officers are 100% vested under the Pension Plan.
Distributions are made pursuant to the Pension Plan only upon the
termination of employment, retirement or death of the employee. Named
executive officers participate on the same basis in the Pension Plan as
other employees.
The Company maintains a 401(k) Savings Plan (the "Savings Plan") for
all full-time employees after they have completed one year of service. In
1997, the Savings Plan provided for a Company-paid matching contribution of
$0.50 for each $1.00 of employee elective contribution, up to a maximum of
4% of the employees' eligible compensation. Elective contributions also are
-45-
limited by the Code, to an annual limit (indexed), which was $9,500 for
1997. The funds in the Pension Plan and Savings Plan are invested in equity
(other than the Company's stock) and bond funds at the election of the
participant. The Company-paid matching contributions under the Savings Plan
become 100% vested immediately upon contribution. The Savings Plan balances
generally are paid at the participant's termination of employment or
retirement. Under the Savings Plan, a participant may request a loan
against his or her Savings Plan balance for certain defined purposes. The
Company-paid contributions for the named executive officers under the
Pension Plan and Savings Plan are reflected in the Summary Compensation
Table and noted at footnote (d) to said table.
RETIREMENT SUPPLEMENT PLAN
The Company's non-qualified Retirement Supplement Plan ("SERP")
provides a participant with retirement income equal to a percentage of the
participant's Final Average Earnings (defined as the participant's average
base salary for the highest three of the last five years of employment).
The participant is eligible for early retirement at 55 years of age
provided the participant has a minimum of 10 years of service with the
Company or after 20 years of service regardless of the participant's age at
the time of retirement. The annual retirement income payable under the SERP
is a percentage of the participant's Final Average Earnings determined by
reference to the participant's age and length of service with the Company.
The maximum percentage is 60%, and is available for those participants who
have at least 20 years of service with the Company and are at least 65
years of age at retirement. For those participants who have not attained 20
years of service and have not reached the age of 65 at retirement, the 60%
maximum is reduced by two percentage points for each year of service less
than 20 years and one percentage point for each year that the retirement
age is less than 65. The following table shows examples of income under the
SERP (before taking into account any offset of amounts paid under the
Pension Plan, at the date of the participant's retirement as described
below) assuming an eligible participant retires at age 65:
RETIREMENT SUPPLEMENT PLAN TABLE
YEARS OF SERVICE
-----------------------------------
FINAL AVERAGE EARNINGS 10 Years 15 Years 20 OR MORE
- -------------------------- -------- -------- ----------
$200,000 . . . . . . . . . . . $ 80,000 $100,000 $120,000
300,000 . . . . . . . . . . . 120,000 150,000 180,000
400,000 . . . . . . . . . . . 160,000 200,000 240,000
500,000 . . . . . . . . . . . 200,000 250,000 300,000
600,000 . . . . . . . . . . . 240,000 300,000 360,000
700,000 . . . . . . . . . . . 280,000 350,000 420,000
-46-
For the named executive officers, the covered compensation is reported
in the "Salary" column of the Summary Compensation Table and estimated
credited years of service are as follows: Mr. Antonini - 28 years; Mr.
Woudstra - 25 years; Mr. Hannigan - 14 years; Mr. Heatherly - 14 years; and
Mr. Orange - 28 years.
The Company's obligation under the SERP, however, is offset by the
amount vested in the participant's Pension Plan Account (but excluding any
amounts attributable to the Savings Plan). No deduction is made for Social
Security benefits. In the event that the Participant's Pension Plan Account
(excluding any amounts attributable to the Savings Plan) will not provide
the eligible level of retirement income, the SERP will make up the
shortfall.
The SERP also provides certain benefits payable in the event of death,
disability, involuntary termination without cause (after 20 years of
service or 10 years of service and at least three years as a SERP
participant) or termination of employment within 12 months following a
"change in control." A "change in control" is defined in the SERP as: a
change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Company is then subject to such reporting requirement,
other than an acquisition of control by the Company or any employee benefit
plan maintained by the Company; provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act),
other than the Company or an employee benefit plan maintained by the
Company, becomes the "beneficial owner" (as defined in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities entitled
to vote in the election of directors of the Company (whether or not such
person is a member of a group that is deemed to be a single person under
Section 13(d)(3) of the Exchange Act and whether or not other members of
such group previously had been the beneficial owner of some or all of such
securities), (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of
the Company cease for any reason to constitute at least a majority thereof
(unless the election or nomination for election by the Company's
stockholders of each new director was approved by a vote of at least 2/3 of
the directors then still in office who were directors at the beginning of
the period) or (iii) all or substantially all of the assets of the Company
are liquidated, sold or distributed.
A "change in control" benefit is calculated in the same manner as a
normal retirement benefit under the SERP, except that no reduction is made
for years of service less than 20 nor age less than 65. No payment can be
-47-
made under the SERP upon a "change in control" which would constitute an
"excess parachute payment" in accordance with Section 280G of the Code.
Notwithstanding the above, the benefits due under the SERP may be
supplemented for certain executive officers pursuant to the terms of the
Employment Agreements described below.
The benefits under the SERP, if any, are paid in the form of an
annuity, except that the SERP provides for cash lump sum payments in the
event of death, retirement, involuntary termination without cause or
termination of employment within 12 months following a change in control.
EXECUTIVE STOCK PURCHASE PLAN
On January 8, 1980, Mr. Antonini, the Company's President, Chief
Executive Officer and Chairman of the Board, purchased from the Company
30,000 shares of its Common Stock. The purchase was made pursuant to
requirements established by the Board of Directors upon the recommendation
of the Compensation Committee. The fair market value of the stock on the
date of purchase was $15.50 per share, for an aggregate of $465,000. The
purchase price was $1.00 per share, for an aggregate of $30,000, and a
bargain element of $14.50 a share, for an aggregate of $435,000, which must
be paid by Mr. Antonini to the Company when he sells the stock, terminates
employment or reaches age 60. The stock is restricted as to its
transferability, and the Company has retained a right of first refusal to
purchase the stock. On June 17, 1983, the Company exercised its right of
first refusal and purchased 8,000 shares from Mr. Antonini at the then
current market price of $52.00 for an aggregate purchase price of $416,000.
Mr. Antonini paid the Company $116,000 of that amount for the bargain
element. Adjusting the above for the 1983 three-for-two and 1998 three-for-
one stock splits, 99,000 shares are subject to the executive stock purchase
plan for Mr. Antonini. The adjusted bargain element is $3.223 per share,
for an aggregate amount of $319,000 remaining to be paid.
EMPLOYMENT AGREEMENTS
Effective January 1, 1990, the Company entered into employment
agreements (the "Employment Agreements") with the five named executive
officers. The Employment Agreements provide for a period of employment
continuing until the third anniversary of any change in control. The
definition of change in control used in the Employment Agreements is the
same as is contained in the SERP as described above. The Employment
Agreements specify that the then current base salary of the named executive
officers (set forth in the Summary Compensation Table) plus increases in
base salary comparable to those awarded in the ordinary course of business
to other key executives will be maintained through the term. The Employment
-48-
Agreements provide that the named executive officers continue to receive
benefits at current levels and bonuses under the Company's employee benefit
plans, with bonus payouts guaranteed at the target level in the event of a
change in control or the termination of the executive's employment.
If any of the named executive officers, other than Mr. Antonini, is
terminated without "cause" (as defined in the Employment Agreements) or
resigns as a consequence of the Company's "substantial breach" (generally,
a failure to pay compensation due, a relocation of the executive or a
failure to secure assumption of the Employment Agreement by a successor),
then the executive will be entitled to, among other things, continuation of
salary, bonus and benefits through the end of the term (not in excess of
three years), and payment of all amounts due under benefit plans (including
the SERP) without regard to any limit intended to avoid "excess parachute
payments" within the meaning of Section 280G of the Code. Further, in the
event any payments under the Employment Agreements or any other benefit
plan constitute excess parachute payments, the executives will be
reimbursed for any excise taxes payable under the Code. The named executive
officers, other than Mr. Antonini, are obligated to make reasonable efforts
to mitigate damages by seeking comparable employment, and amounts received
from a successor employer will reduce the salary and benefits owed to the
executive by the Company.
The consequences of termination under Mr. Antonini's Employment
Agreement are generally the same as for the other named executive officers
above, except that, among other things, upon termination of employment for
any reason, Mr. Antonini will receive benefits under the SERP and other
plans in accordance with their terms without regard to any Section 280G cap
contained in the Code, and Mr. Antonini is entitled to receive full
severance in the event of a resignation for "good reason" (defined as a
diminution of Mr. Antonini's status or duties or a good faith dispute with
the Board of Directors over the Company's business plan or policies).
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors makes
recommendations to the Board of Directors regarding compensation of the
Company's executive officers. The philosophy of the Compensation Committee
is that the Company maintains an executive compensation program to help the
Company attract, retain and motivate the executive resources it needs to
maintain its industry leadership and maximize returns to stockholders. Key
to the executive compensation program are initiatives which vary rewards
with performance and build a foundation for stock ownership commitments by
executives. Variable compensation programs are an important component of
reward systems throughout the Company and compensation for all employees
will vary, to some degree, based on Company performance. The Compensation
Committee consists of three directors, none of whom is a current or former
employee of the Company or its subsidiaries.
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The Omnibus Budget Reconciliation Act of 1993 provides a limitation on
the ability of a publicly held corporation to receive a federal income tax
deduction on compensation in excess of $1,000,000 paid in any year to the
Chief Executive Officer or any other named executive officer of the
Company, subject to certain exceptions. The Compensation Committee will
consider ways to maintain the tax deductibility of executive compensation
while retaining the discretion the Compensation Committee needs to
compensate executive officers in a manner commensurate with performance and
to provide the incentives and motivations which it believes should be in
place for the benefit of the Company in the competitive environment for
executive talent.
EXECUTIVE COMPENSATION PROGRAM POLICIES
To achieve its stated goal, the Company has developed the following
executive compensation policies:
(i) The Company will provide levels of executive compensation
that are competitive with those provided by the Company's
competitors (as defined below);
(ii) The Company will provide incentive compensation for
executives that varies in a consistent and predictable manner
with the financial performance of the Company; and
(iii) The Company will provide programs which enable executives
to achieve significant ownership positions to reinforce the link
between executive and stockholder interests.
SALARY AND BONUS
To attract and retain well-qualified executives, it is the Committee's
policy to establish base salaries at levels and provide benefit packages
that are considered to be competitive. Base salaries of senior executives
are determined by the Committee by comparing each executive's position with
similar positions in companies of similar type, size and financial
performance. Although some of the companies included in the peer index
used in the graph of cumulative total stockholder return are among the
companies that the Company uses for comparison, the Company's analysis is
not limited to those companies since the Company competes for talent with a
wide range of corporations. In general, the Committee has targeted salaries
to be at the median of base salaries paid for comparable positions by the
comparable companies. Other factors considered by the Committee are the
executive's performance, the executive's current compensation and the
Company's performance. Although the Committee does not give specific
weight to any particular factor, the most weight is given to the
executive's performance and a significant but lesser weight generally is
given to the comparative data. The last competitive study performed for
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the Company's executive officers was completed in December of 1996. At
that time, base salary levels of the executive officers were, on average,
slightly below the median, while cash bonus levels were uniformly
below the median level of those paid by comparable companies. As a result
of this study, the Committee decided to increase the potential opportunity
levels under the LTIP starting with the payout for the 1995-1997 three-year
plan. With this change, the Committee believed that the total compensation
packages of the executive officers reflect both corporate and individual
results and were competitive as compared to comparable companies.
INCENTIVE COMPENSATION
The Company's incentive plans are designed to ensure that incentive
compensation varies in a consistent and predictable manner with the
Company's financial performance.
The LTIP provides awards based on achievement of performance goals
measuring return on stockholders' equity over a three-year period. For the
three-year period 1995-1997, the Company's ROE nearly reached the maximum
goal and the awards were paid accordingly. In December 1994, to more
closely link executive compensation with stockholder interests, the
Committee amended the LTIP, and awards are now paid 70% in Company Common
Stock. This change took effect starting with the LTIP award paid in 1995
for the three-year period 1992-1994.
The Annual Incentive Plan bases its payout on performance against
objective annual performance goals, including the combined loss and expense
ratio of the Company's property and casualty insurance group, the Company's
earnings per share and other objective criteria. The Compensation Committee
approves the objective performance goals each year before the commencement
of the calendar year to which they relate. For the Chief Executive Officer
and the other named executive officers, awards under the Annual Incentive
Plan for 1997 were weighted against actual Company performance with 20%
based on written premium, 30% based on combined loss and expense ratio and
50% based on earnings per share. For 1997, the Company's result for written
premium was between the minimum and target goal, while the Company achieved
the maximum goals for both the combined loss and expense ratio and earnings
per share. Therefore the payouts under the Annual Incentive Plan were made
accordingly.
STOCK OPTIONS AND EQUITY-BASED INCENTIVE PLANS
Awards under the Company's stock option and equity-based incentive
plans are designed to encourage long-term investment in the Company by
participating executives, more closely align executive and stockholder
interests and reward executives and other key employees for building
stockholder value. The Compensation Committee believes stock ownership by
management has been proven to be beneficial and stock awards have been
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granted by the Company to executives and other key employees pursuant to
various equity-based plans for several decades. The Compensation Committee
administers all aspects of these plans and reviews, modifies (to the extent
appropriate) and takes final action on any such awards.
Under the Company's stock option plans, the Compensation Committee may
grant to executives and other key employees options to purchase shares of
stock. The Compensation Committee reviews, modifies (to the extent
appropriate) and takes final action as to the key employees to be granted
options and the amount, timing, price and other terms of the options. All
of the options granted have been Non-qualified Options with an exercise
price equal to the market price of Common Stock on the date of the grant.
In determining the number of options to be awarded to an executive,
the Compensation Committee considers the recommendations of management, the
individual performance of the executive and the number of shares previously
awarded to and exercised by the executive. As a general practice, the
number of shares granted increases as the level as the level of an
executive's responsibility increases.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's compensation is based upon the policies
and objectives discussed above.
In May 1995, the Compensation Committee decided to freeze Mr.
Antonini's base salary at the 1994 level of $563,200 until 1998. In
conjunction with the salary freeze, the Compensation Committee recommended
the award of 100,000 stock options (pre-1998 stock split to Mr. Antonini
under the Company's Non-Qualified Stock Option Plan on May 5, 1995, with an
exercise price equal to the market price on that date. Mr. Antonini and the
other named executive officers covered by Employment Agreements voluntarily
waived annual salary increase guarantees under the Employment Agreement,
unless a change in control or termination occurs which would reinstate the
guarantee.
Mr. Antonini's cash bonus of $302,324 for 1997 was consistent with
measurement of the Company's performance on written premium, combined ratio
and earnings per share under the terms of the Annual Incentive Plan. Mr.
Antonini and the other executives covered by Employment Agreements had
agreed to voluntarily waive provisions guaranteeing awards under the Annual
Incentive Plan for 1992 and future years, unless a change in control or
termination occurs which would reinstate the guarantee. Mr. Antonini
received an award of $408,318 under the LTIP in 1997. This award was paid
70% in the Company's Common Stock and 30% in cash. Mr. Antonini and the
other executives covered by Employment Agreements have voluntarily waived
provisions guaranteeing LTIP awards for 1993 and future years, unless a
change in control or termination of employment occurs which would reinstate
the guarantee. The waiver of guarantees enhances the relationship between
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the performance of the Company and future earnings of the executives, and
provides linkage with the incentive programs for all employees.
During 1997, Mr. Antonini's base salary and bonus were slightly below
the median of base salaries paid by companies included in the survey group
to chief executive officers.
Subject to approval by the Company's stockholders, the Company has
granted Mr. Antonini an option to purchase 750,000 shares of Common Stock.
See Proposal 4.
All actions and recommendations of the Compensation Committee
attributable to 1997 compensation were unanimous and all recommendations
were approved and adopted by the Board of Directors without modification.
Respectfully submitted,
Michael de Havenon
John C. Canepa
Joseph A. Parini
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Richard L. Antonini is a Director of Old Kent Financial Corporation
and Old Kent Bank. The Company has various banking relationships with Old
Kent Bank including depository and lending accounts, all of which have been
entered into in the regular course of business.
Kayne Anderson Investment Management, LLC, and KAIM Non-Traditional,
L.P. (collectively "Kayne Anderson"), holders of more than 5% of the
Company's outstanding common stock, have investment advisory agreements
with the Company. During 1997, Kayne Anderson earned $905,014 in fees under
these agreements. Mr. Richard A. Kayne, a director of the Company, is the
majority stockholder (through KA Holdings, Inc.), President, Chief
Executive Officer and a Director of Kayne, Anderson Investment Management,
Inc., the General Partner and majority owner of KAIM Non-Traditional, L.P.
Mr. Kayne is also administrative manager and majority member of Kayne
Anderson Investment Management, LLC, and the majority stockholder,
President, Chief Executive Officer and a Director of K.A. Associates, Inc.,
a registered broker dealer. During 1997, the Company paid K.A. Associates,
Inc., approximately $139,898 as commissions for executing certain securities
transactions for the Company.
Mr. Robert M. Raives was a partner in the law firm of Rosenman & Colin
from 1993 until July 1997. The Company has retained this law firm and may
continue to do so in the future for certain legal matters.
Mr. Arthur E. Hall is a financial analyst and investment manager. In
the course of his business, Mr. Hall provides investment advice to Kayne
Anderson in connection with Kayne Anderson's management of certain
investments for the Company. During 1997, Mr. Hall was paid $116,205 by
Kayne Anderson for such investment advisory services Mr. Hall provided to
Kayne Anderson with respect to the investments managed by Kayne Anderson
for the Company. Mr. Hall's investment advisory relationship with Kayne
Anderson ended in December 1997.
STOCK PERFORMANCE GRAPH<F1><F2>
The following graph below summarizes the cumulative total stockholder
return on the Company's Common Stock compared to the Standard & Poor's 500
Index and the Value Line P&C Insurance Group as of December 31 of the
applicable year. The graph assumes an investment of $100 on January 1,
1992. The Standard & Poor's 500 Stock Index is a broad equity market index
published by Standard & Poor's. The index of peer companies was
constructed by Value Line Publishing and consists of the companies listed
in the footnote to the graph below. In constructing the peer index, the
return of each peer group company was weighted according to its respective
stock market capitalization at the beginning of each period indicated.
-54-
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL STOCKHOLDER RETURN
[GRAPH]
- -----------------
[FN]
<F1> The new index of peer companies consists of: 20th Century Industries;
Ace Limited; Allmerica Financial Corp.; Allstate Corp.; American
Financial Group, Inc.; Berkley (WR) Corp.; Chubb Corp.; Cincinnati
Financial Corp.; Fremont Corp.; Frontier Insurance Group, Inc.;
Gainsco, Inc.; General RE Corp.; Hartford Financial Services Group,
Inc.; HSB Group, Inc.; Markel Corp.; Mercury General Corp.; NAC RE
Corp.; Ohio Casualty Corp.; Old Republic International Corp.; Orion
Capital Corp.; Progressive Corp-Ohio; Safeco Corp.; Selective
Insurance Group, Inc.; St. Paul Cos; Transatlantic Holdings, Inc.;
USF&G Corp.
<F2> The old index of peer companies consists of: 20th Century Industries;
Ace Limited; Allstate Corp.; American Financial Group, Inc.; Berkley
(WR) Corp.; Chubb Corp.; Cincinnati Financial Corp.; CNA Surety Corp.;
Fremont General Corp.; Frontier Insurance Group, Inc.; Gainsco, Inc.;
Geico Corp.; General RE Corp.; Hartford Financial Services Group,
Inc.; HSB Group, Inc.; NAC RE Corp.; National RE Corp.; Ohio Casualty
Corp.; Old Republic International Corp.; Orion Capital Corp.;
Progressive Corp-Ohio; Safeco Corp.; Selective Insurance Group, Inc.;
St. Paul Cos; Transatlantic Holdings, Inc.; USF&G Corp.
</FN>
-55-
The dollar values for total stockholder return plotted in the graph
above are shown in the table below:
NEW OLD
FOREMOST S&P VALUE LINE VALUE LINE
FISCAL YEAR-END CORPORATION 500 INDEX P&C GROUP P&C GROUP
- --------------- ----------- --------- ---------- ----------
1992 . . . . . . . . . $100.00 $100.00 $100.00 $100.00
1993 . . . . . . . . . 107.10 110.08 99.60 97.50
1994 . . . . . . . . . 114.69 111.53 95.04 93.04
1995 . . . . . . . . . 167.08 153.45 136.38 133.25
1996 . . . . . . . . . 201.34 188.68 166.75 163.20
1997 . . . . . . . . . 238.45 251.63 249.25 242.61
RATIFICATION OF BDO SEIDMAN AS INDEPENDENT AUDITORS FOR 1998
(Proposal Number 6 on the Enclosed Proxy Card)
The Board of Directors has reappointed the firm of BDO Seidman, LLP, as
independent auditors of the Company for the year ending December 31, 1998.
BDO Seidman, LLP, has audited the Company and its subsidiaries since
1967. It is anticipated that representatives of BDO Seidman, LLP, will be
present at the Annual Meeting of Stockholders, will have the opportunity to
make a statement if they desire to do so and are expected to be available
to respond to appropriate questions from stockholders. In the event of a
negative vote on this proposal, the Board of Directors may allow their
resolution appointing BDO Seidman, LLP, as independent auditors of the
Company for 1998 stand unless the Board finds other compelling reasons for
making a change. Disapproval of this resolution will be considered as
advice to the Board to select other independent auditors for the year
beginning January 1, 1999.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR RATIFICATION OF THE REAPPOINTMENT OF BDO SEIDMAN, LLP
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of the Company's Common Stock,
to file with the Securities and Exchange Commission reports of ownership
and changes in ownership of shares of Common Stock of the Company.
Directors, officers and greater than 10% holders are required by Securities
and Exchange Commission regulations to furnish the Company with copies of
all Section 16(a) forms they file. To the Company's knowledge, based solely
-56-
on its review of the copies of such reports furnished to the Company or
written representations from certain reporting persons that no reports on
Form 5 were required for those persons during the fiscal year ended December
31, 1997, the Company believes that its officers and directors complied with
all applicable filing requirements during the Company's last fiscal year.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 annual
meeting of stockholders must be received by the Company not later than
November 25, 1998, to be considered for inclusion in the proxy statement
and form of proxy relating to that meeting. Proposals of stockholders
should be made in accordance with Securities and Exchange Commission
Rule 14a-8 and should be addressed to the attention of the Secretary of
the Company, Post Office Box 2450, Grand Rapids, Michigan 49501.
AVAILABILITY OF FORM 10-K
The Company will furnish without charge to each stockholder receiving
a proxy statement, upon the written request of such person, a copy of the
Company's Annual Report for 1997 on Form 10-K, including the financial
statements and schedules thereto required to be filed with the Securities
and Exchange Commission. Written requests for such copies should be
directed to Ms. Cathy O'Brien, Corporate Legal Assistant, Foremost
Corporation of America, P.O. Box 2450, Grand Rapids, Michigan 49501.
SOLICITATION OF PROXIES
Solicitation of proxies will be made initially by mail. In addition,
directors, officers and employees of the Company and its subsidiaries may
solicit proxies by telephone or facsimile or personally without additional
compensation. Proxies may be solicited by nominees and other fiduciaries
who mail materials to or otherwise communicate with the beneficial owners
of shares held by them. The Company will bear all costs of the preparation
and solicitation of proxies, including the charges and expenses of
brokerage firms, banks, trustees or other nominees for forwarding proxy
materials to beneficial owners. The Company has engaged Corporate
Investor Communications, Inc., at an estimated cost of $4,000, plus
expenses and disbursements, to assist in solicitation of proxies.
By Order of the Board of Directors
Paul D. Yared
Senior Vice President, Secretary
and General Counsel
March 25, 1998
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF
FOREMOST CORPORATION OF AMERICA
(a Delaware corporation)
AND
FOREMOST CORPORATION-MICHIGAN
(a Michigan corporation)
THIS AGREEMENT AND PLAN OF MERGER (the "PLAN OF MERGER") is made
and entered into by and between FOREMOST CORPORATION OF AMERICA ("FOREMOST"
or the "DELAWARE CORPORATION"), a Delaware corporation, and its wholly
owned subsidiary, FOREMOST CORPORATION-MICHIGAN ("FOREMOST-MICHIGAN" or the
"MICHIGAN CORPORATION"), a Michigan corporation.
The total number of shares of stock which the Michigan
Corporation has or will have authority to issue consists or shall consist
of 70,000,000 shares of Common Stock, par value $1.00 per share, of which
100 shares are issued and outstanding and held by the Delaware Corporation
as of the date hereof and 10,000,000 shares of Preferred Stock, without par
value, of which no shares are outstanding. Each outstanding share of
Common Stock of the Michigan Corporation is entitled to one vote on any
matter submitted to the vote of the shareholders of the Michigan
Corporation.
The total number of shares of stock which the Delaware
Corporation has authority to issue consists of 35,000,000 shares of Common
Stock, par value $1.00 per share, of which _____________ shares are issued
and outstanding at the date hereof. Each outstanding share of Common Stock
of the Delaware Corporation is entitled to one vote on any matter submitted
to the vote of the stockholders. Additional shares of capital stock of the
Delaware Corporation may be issued, and outstanding shares may be retired
before the effective date of the Merger if authorized by action of the
Board of Directors or upon the exercise of previously issued stock options.
The Delaware Corporation does not have authorized preferred stock.
The Board of Directors of Foremost and Foremost-Michigan deem it
in the best interests of said corporations and the stockholders of Foremost
to merge Foremost into Foremost-Michigan pursuant to the provisions of the
Michigan Business Corporation Act and Delaware General Corporation Law upon
the terms and conditions set forth in this Plan of Merger.
IN CONSIDERATION of the foregoing and of the agreements,
covenants and provisions contained in this Plan of Merger, the Michigan
Corporation and the Delaware Corporation hereby agree as follows:
ARTICLE I - GENERAL
Foremost and Foremost-Michigan (the "CONSTITUENT CORPORATIONS")
shall be merged into a single corporation, in accordance with the provision
of the laws of the state of Michigan and the state of Delaware by merging
Foremost into Foremost-Michigan, which shall survive the Merger and
thereafter be named "Foremost Corporation of America."
ARTICLE II - THE TRANSACTION
When the Merger shall become effective, all in accordance with,
and as provided in, the provisions of this Plan of Merger and the
applicable provisions of the laws of the state of Michigan and the state of
Delaware (such time being hereinafter referred to as the "EFFECTIVE DATE OF
THE MERGER"):
1. The Constituent Corporation shall be a single corporation which
shall be Foremost-Michigan (the "SURVIVING CORPORATION"), and the separate
existence of Foremost shall cease.
2. The Surviving Corporation shall thereupon and thereafter have all
rights, privileges, immunities and powers and be subject to all the duties
and liabilities of a corporation under Michigan law and shall have and
possess all the rights, privileges, immunities and franchises, public or
private, of each of the Constituent Corporations.
3. All property, real, personal and mixed, all debts due on whatever
account, including subscriptions to shares, all rights of actions and all
other assets or interests of any description of or belonging to or due to
each of the Constituent Corporations shall be deemed to be transferred and
vested in the Surviving Corporation without further act or deed; and the
title to any real estate, or any interest therein, vested in either of the
Constituent Corporations shall not revert or be in any way impaired because
of such Merger.
4. The Surviving Corporation shall be responsible and liable for all
of the liabilities and obligations of each of the Constituent Corporations
and all debts, liabilities and duties of the Constituent Corporations shall
attach to the Surviving Corporation and may be enforced against it to the
same extent as if said debts, liabilities and duties had been incurred and
or contracted by it; a claim existing or action or proceeding pending by or
against either of the Constituent Corporations may be prosecuted as if such
Merger had not taken place or the Surviving Corporation may be substituted
-2-
in the place of such Constituent Corporation; and the rights of creditors
and any lien upon the property of the Constituent Corporations shall not be
impaired by such Merger.
5. All corporate acts, policies, agreements, arrangements, approvals
and authorizations of the Delaware Corporation, its stockholders, Board of
Directors and committees thereof, officers and agents, which were valid and
effective immediately before the effective date of the Merger shall be
taken for all purposes as the acts, plans, policies, agreements,
arrangements, approvals and authorizations of the Surviving Corporation and
shall be as effective and binding thereon as the same were with respect to
the Delaware Corporation.
6. The employees and agents of Foremost on the effective date of the
Merger shall become the employees and agents of the Surviving Corporation
and continue to be entitled to the same rights and benefits which they
enjoyed as employees and agents of Foremost.
7. The Bylaws of Foremost-Michigan as existing and constituted on
the effective date of the Merger shall be and constitute the Bylaws of the
Surviving Corporation until the same are altered or amended.
8. The directors of Foremost on the effective date of the Merger
shall be and constitute the directors of the Surviving Corporation for the
same terms to which they were elected as directors of Foremost until their
successors are elected in accordance with law and the provisions of the
Articles of Incorporation and Bylaws of the Surviving Corporation.
9. The officers of Foremost in office on the effective date of the
Merger shall be and constitute the officers of the Surviving Corporation
until their successors are elected or they are removed from office by the
Board of Directors of the Surviving Corporation, in accordance with law and
the provisions of the Bylaws of the Surviving Corporation.
10. The stock plans of Foremost, existing on the effective date of the
Merger, including the Nonqualified Stock Option Plan of 1998, the
Nonqualified Stock Option Plan of 1995, the Restricted Stock Plan, the
Directors' Restricted Stock Plan, the Long-Term Incentive Plan and the
Executive Stock Purchase Plan shall be assumed according to their terms by
the Surviving Corporation, and all such stock plans shall constitute stock
plans of the Surviving Corporation.
ARTICLE III - ARTICLES OF INCORPORATION
On the effective date of Merger, the Articles of Incorporation of
Foremost-Michigan shall be amended and restated to read in their entirety
as set forth in EXHIBIT A attached hereto. From and after the effective
date of the Merger, such Articles of Incorporation, as restated, shall be
-3-
and constitute the Restated Articles of Incorporation of the Surviving
Corporation until the same are altered or amended.
ARTICLE IV - CONVERSION OF SHARES
The manner and basis of converting the shares of each of the
Constituent Corporations into shares of the Surviving Corporation are as
follows:
1. On the effective date of the Merger, each of the 100 issued and
outstanding shares of Common Stock of Foremost-Michigan, par value $1.00
per share, all owned by Foremost, shall thereupon, and without the
surrender of stock certificates or any other action, be canceled.
2. On the effective date of the Merger, each of the issued and
outstanding shares of Common Stock of the Delaware Corporation, par value
$1.00 per share, shall thereupon, and without the surrender of stock
certificates or any other action, be converted into one fully paid and
nonassessable share of Common Stock, par value $1.00 per share, of the
Surviving Corporation. Each holder of shares of Common Stock of the
Delaware Corporation outstanding immediately before the effective date of
the Merger shall, upon such conversion, hold one share of Common Stock of
the Surviving Corporation for each such share of Common Stock of the
Delaware Corporation held.
3. On the effective date of the Merger, each owner of an outstanding
certificate or certificates evidencing shares of Common Stock of the
Delaware Corporation, par value $1.00 per share, may, but shall not be
required to (except as set forth below), surrender such certificate or
certificates to the Surviving Corporation and, upon such surrender, to
receive in exchange therefor a certificate or certificates evidencing the
number of shares of Common Stock of the Surviving Corporation, par value
$1.00 per share, represented by the surrendered certificate. Until so
surrendered, each outstanding certificate which, before the effective date
of the Merger, evidenced shares of Common Stock of the Delaware Corporation
shall be deemed, for all corporate purposes, to evidence the ownership of
the number of full shares of Common Stock of the Surviving Corporation into
which the shares of the Common Stock represented by such certificates shall
have been converted as aforesaid.
ARTICLE V - ASSETS AND LIABILITIES
Upon the effective date of the Merger, (1) the respective assets
of the Delaware Corporation and the Michigan Corporation shall be taken up
or continued on the books of the Surviving Corporation in the amounts at
which such assets shall have been carried on their respective books
immediately before the effective date of the Merger, except as provided in
-4-
this Plan of Merger with respect to the cancellation of the shares of the
Michigan Corporation outstanding before the effective date of the Merger;
(2) the respective liabilities and reserves of the Delaware Corporation and
the Michigan Corporation (excluding Common Stock, other paid-in capital and
retained earnings) shall be taken up or continued on the books of the
Surviving Corporation in the amounts at which such liabilities and reserves
shall have been carried on their respective books immediately before the
effective date of the Merger; and (3) the Common Stock, other paid-in
capital and retained earnings of the Delaware Corporation shall be taken up
on the books of the Surviving Corporation as Common Stock, other paid-in
capital and retained earnings, respectively, in the amount at which the
same shall be carried on the books of the Delaware Corporation immediately
before the effective date of the Merger.
ARTICLE VI - FURTHER ACTIONS
The Delaware Corporation shall, from time to time, as and when
requested by the Surviving Corporation or its successors or assigns,
execute and deliver or cause to be executed and delivered such deeds,
instruments, assignments or assurances as the Surviving Corporation may
deem necessary or desirable to vest in and confirm to the Surviving
Corporation title to and possession of any property or rights of the
Delaware Corporation acquired or to be acquired by reason of or as a result
of the Merger, or otherwise to carry out the purposes of this Plan of
Merger, and any person who, immediately before the Merger became effective,
was an officer or director of the Delaware Corporation is hereby fully
authorized in the name of the Delaware Corporation to execute any and all
such deeds, instruments, assignments or assurances, or to take any and all
such action.
ARTICLE VII - CONDITIONS PRECEDENT TO MERGER
All obligations of the parties under this Plan of Merger are
subject to the fulfillment (or waiver in writing by a fully authorized
officer of the party entitled to the benefit of the applicable condition)
of each of the following conditions:
1. The holders of a majority of the shares of Common Stock of the
Delaware Corporation must have voted for adoption of the Plan of Merger;
2. Neither the Delaware Corporation nor the Michigan Corporation
shall be subject to any order, decree or injunction of a court or agency
enjoining or prohibiting the Merger; and
3. The Delaware Corporation and the Michigan Corporation shall have
received any and all such approvals, consents, authorizations and licenses
of all regulatory and other governmental authorities having jurisdiction as
-5-
may be required to permit the performance by the Delaware Corporation and
the Michigan Corporation of their respective obligations under this Plan of
Merger and the consummation of the Merger.
ARTICLE VIII - STOCKHOLDER APPROVAL
This Plan of Merger shall be submitted to the stockholders of the
Delaware Corporation as provided by Section 253(a) of the Delaware General
Corporation Law as the same is now in effect and shall take effect, and be
deemed and be taken to be the Plan of Merger of said corporations, upon the
(1) adoption thereof, by the stockholders of the Delaware Corporation in
accordance with the requirements of the laws of the state of Delaware; and
(2) the filing and recording of such documents, and the doing of such acts
and things, as shall be required to accomplish the Merger under the
provisions of the applicable statutes of the states of Michigan and
Delaware.
Anything in this Plan of Merger to the contrary notwithstanding,
this Plan of Merger may, subject to the laws of the states of Michigan and
Delaware, be amended, abandoned or postponed by either of the Constituent
Corporations by appropriate action by their respective Boards of Directors
at any time before the effective date of the Merger for any reason deemed
appropriate by said Boards.
ARTICLE IX - SERVICE OF PROCESS
The Surviving Corporation agrees that it may be served with
process in the state of Delaware in any proceeding for enforcement of any
obligation of the Delaware Corporation, as well as for enforcement of any
obligation of the Surviving Corporation arising from the Merger provided
for in this Plan of Merger, including any suit or other proceeding to
enforce the right (if any) of any stockholder as determined in appraisal
proceedings pursuant to Section 262 of the Delaware General Corporation
Law, and irrevocably appoints the Secretary of State of the state of
Delaware as its agent to accept service of any such process. A copy of any
such process shall be mailed by such Secretary of State to Paul D. Yared,
Foremost Corporation of America, Post Office Box 2450, Grand Rapids,
Michigan 49501.
ARTICLE X - ABANDONMENT OF MERGER
This Plan of Merger may be terminated and the Merger abandoned at
any time before the effective date of the Merger (notwithstanding that
adoption of this Plan of Merger by the stockholders of the Delaware
Corporation previously may have been obtained) by mutual consent of the
Boards of Directors of the Delaware Corporation and the Michigan
Corporation.
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IN WITNESS WHEREOF, each of the Constituent Corporations,
pursuant to authority duly given by resolution adopted by its Board of
Directors, has caused this Plan of Merger to be executed in its name by its
President and Chief Executive Officer and its corporate seal to be affixed
and attested by its Secretary on this _____ day of _______________, 1998.
FOREMOST CORPORATION OF AMERICA
(a Delaware corporation)
By___________________________________________
Richard L. Antonini
Its President and Chief Executive Officer
ATTEST:
_________________________
Paul D. Yared
Its Secretary
FOREMOST CORPORATION-MICHIGAN
(a Michigan corporation)
By___________________________________________
Richard L. Antonini
Its President and Chief Executive Officer
ATTEST:
_________________________
Paul D. Yared
Its Secretary
-7-
APPENDIX B
ARTICLES OF INCORPORATION
OF
FOREMOST CORPORATION OF AMERICA
Pursuant to the Provisions of Act 284, Public Acts of 1972, as
amended, the undersigned executes the following Articles of Incorporation:
ARTICLE I
NAME
The name of the corporation is Foremost Corporation of America.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the State
of Michigan is 5600 Beech Tree Lane, Caledonia, Michigan 49316. The name
of its registered agent at such address is Paul D. Yared. The mailing
address is Post Office Box 2450, Grand Rapids, Michigan 49501.
ARTICLE III
PURPOSES
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Business
Corporation Act of Michigan.
ARTICLE IV
CAPITAL STOCK
The total number of shares of stock which the Corporation shall
have authority to issue is 70,000,000 shares of Common Stock, each with a
par value of $1.00, and 10,000,000 shares of Preferred Stock, without par
value. Preferred Shares may be issued in series, each series being composed
of such number of shares and having such dividend, liquidation, voting,
conversion, redemption and other rights, if any, as the Board of Directors
may determine from time to time by resolution.
The following provisions shall apply to the authorized stock of
the corporation:
A. PROVISIONS APPLICABLE TO COMMON STOCK.
1. NO PREFERENCE. Except as provided by law or by the
Corporation's shareholder rights plan, as in effect from time to time,
none of the shares of the Common Stock shall be entitled to any
preferences, and each share of Common Stock shall be equal to every
other share of said Common Stock in every respect.
2. DIVIDENDS. After payment or declaration of full dividends
on all shares having a priority over the Common Stock as to dividends,
and after making all required sinking or retirement fund payments, if
any, on all classes of preferred shares and on any other stock of the
Corporation ranking as to dividends or assets prior to the Common
Stock, dividends on the shares of Common Stock may be declared and
paid, but only when and as determined by the Board of Directors.
3. RIGHTS ON LIQUIDATION. On any liquidation, dissolution, or
winding up of the affairs of the Corporation, after there shall have
been paid to or set aside for the holders of all shares having
priority over the Common Stock the full preferential amounts to which
they are respectively entitled, the holders of the Common Stock shall
be entitled to receive pro rata all the remaining assets of the
Corporation available for distribution to its shareholders.
4. VOTING. At all meetings of shareholders of the Corporation,
the holders of the Common Stock shall be entitled to one vote for each
share of Common Stock held by them respectively.
B. PROVISIONS APPLICABLE TO PREFERRED STOCK.
1. Issuance in Series. The authorized shares of Preferred
Stock may be issued from time to time in one or more series, each of
such series to have such designations, powers, preferences, and
relative, participating, optional, or other rights, and such
qualifications, limitations, or restrictions, as may be stated in a
resolution or resolutions providing for the issue of such series
adopted by the Board of Directors. Authority is hereby expressly
granted to the Board of Directors, subject to the provision of this
Article, to authorize the issuance of any authorized and unissued
shares of Preferred Stock (whether or not previously designated as
shares of a particular series, and including shares of any series
issued and thereafter acquired by the corporation) as shares of one or
more series of Preferred Stock, and with respect to each series to
determine and designate by resolution or resolutions providing for the
issuance of such series:
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(a) The number of shares to constitute the series and the
title thereof;
(b) Whether the holders shall be entitled to cumulative or
noncumulative dividends, and, with respect to shares entitled to
cumulative dividends, the date or dates from which such dividends
shall be cumulative, the rate of the annual dividends thereon
(which may be fixed or variable and may be made dependent upon
facts ascertainable outside of the Articles of Incorporation),
the dates of payment thereof, and any other terms and conditions
relating to such dividends;
(c) Whether the shares of such series shall be redeemable,
and, if redeemable, whether redeemable for cash, property, or
rights, including securities of any other corporation, and
whether redeemable at the option of the holder or the Corporation
or upon the happening of a specified event, the limitations and
restrictions with respect to such redemption, the time or times
when, the price or prices or rate or rates at which, the
adjustments with which, and the manner in which such shares shall
be redeemable, including the manner of selecting shares of such
series for redemption if less than all shares are to be redeemed,
and the terms and amount of a sinking fund, if any, provided for
the purchase or redemption of such shares;
(d) Whether the shares of such series shall be
participating or nonparticipating, and, with respect to
participating shares, the date or dates from which the dividends
shall be participating, the rate of the dividends thereon (which
may be fixed or variable and may be made dependent upon facts
ascertainable outside of the Articles of Incorporation), the
dates of payment thereof, and any other terms and conditions
relating to such additional dividends;
(e) The amount per share payable to holders upon any
voluntary or involuntary liquidation, dissolution, or winding up
of the affairs of the Corporation;
(f) The conversion or exchange rights, if any, of such
series, including, without limitation, the price or prices, rate
or rates, and provisions for the adjustment thereof (including
provisions for protection against the dilution or impairment of
such rights), and all other terms and conditions upon which
shares constituting such series may be converted into, or
exchanged for, shares of any other class or classes or series;
(g) The voting rights per share, if any, of each such
series, provided that in no event shall any shares of any series
be entitled to more than one vote per share; and
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(h) All other rights, privileges, terms, and conditions
that are permitted by law and are not inconsistent with this
Article.
All shares of Preferred Stock shall rank equally and be identical
in all respects except as to the matters specified in this Article or
any amendment thereto, or the matters permitted to be fixed by the
Board of Directors, and all shares of any one series thereof shall be
identical in every particular except as to the date, if any, from
which dividends on such shares shall accumulate.
2. Dividends. The holders of shares of each series of
Preferred Stock shall be entitled to receive, when, as, and if
declared by the Board of Directors, dividends at, but not exceeding,
the dividend rate fixed for such series by the Board of Directors
pursuant to the provisions of this Article.
3. Liquidation Preference. Upon the liquidation, dissolution,
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, the holders of each series of Preferred Stock shall be
entitled to receive in full out of the assets of the Corporation
available for distribution to shareholders (including its capital)
before any amount shall be paid to, or distributed among, the holders
of Common Stock, an amount or amounts fixed by the Board of Directors
pursuant to the provisions of this Article. If the assets of the
Corporation legally available for payment or distribution to holders
of the Preferred Stock upon the voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Corporation are
insufficient to permit the payment of the full preferential amount to
which all outstanding shares of the Preferred Stock are entitled, then
such assets shall be distributed ratably upon outstanding shares of
the Preferred Stock in proportion to the full preferential amount to
which each such share shall be entitled. After payment to holders of
the Preferred Stock of the full preferential amount, holders of the
Preferred Stock as such shall have no right or claim to any of the
remaining assets of the corporation. The merger or consolidation of
the Corporation into or with any other corporation, or the merger of
any other corporation into the Corporation, or the sale, lease, or
conveyance of all or substantially all of the property or business of
the Corporation, shall not be deemed to be a dissolution, liquidation,
or winding up for purposes of this Section 3.
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator is Paul D.
Yared, Post Office Box 2450, Grand Rapids, Michigan 49501.
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ARTICLE VI
DURATION
The Corporation is to have perpetual existence.
ARTICLE VII
BOARD OF DIRECTORS; NUMBER; CLASSIFICATION;
VACANCIES; REMOVAL; NOMINATIONS
A. The number of directors constituting the entire Board shall be
not less than five nor more than 15 as fixed from time to time by vote of a
majority of the entire Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any director at
the time in office.
B. The Board of Directors shall be divided into three classes as
nearly equal in number as possible, with the term of office of one class
expiring each year. At each annual meeting of the shareholders, the
successors of the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting
of shareholders held in the third year following the year of their
election.
C. Any vacancies in the Board of Directors for any reason, and any
directorships resulting from any increase in the number of directors, may
be filled only by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which
such directors shall have been chosen and until their successors shall be
elected and qualified. Subject to the foregoing, at each annual meeting of
shareholders the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Notwithstanding the foregoing, if the holders
of any class or series of Preferred Stock are entitled to elect one or more
directors to the exclusion of other shareholders, vacancies of that class
or series may be filled only by majority vote of the directors elected by
that class or series then in office, whether or not a quorum, or by the
holders of that class or series.
D. Any director may be removed from office at any time, but only for
cause, and only if removal is approved as set forth below. Except as may be
provided otherwise by law, cause for removal shall be construed to exist
only if: (1) the director whose removal is proposed has been convicted of
a felony by a court of competent jurisdiction and such conviction is no
longer subject to direct appeal; (2) such director has been adjudicated by
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a court of competent jurisdiction to be liable for negligence or misconduct
in the performance of his or her duty to the corporation in a matter of
substantial importance to the corporation and such adjudication is no
longer subject to direct appeal; (3) such director has become mentally
incompetent, whether or not so adjudicated, which mental incompetency
directly affects his or her ability as a director of the corporation; or
(4) such director's actions or failure to act are deemed by the Board of
Directors to be in derogation of the director's duties. Whether cause for
removal exists shall be determined by the affirmative vote of 80% of the
voting power of all shares of capital stock of the Corporation then entitled
to vote on the election of directors, voting together as a single class or by
the affirmative vote of a majority of the total number of directors. Any
action to remove a director pursuant to (1) or (2) above shall be taken
within one year of such conviction or adjudication. For purposes of this
paragraph, the total number of directors will not include the director who
is the subject of the removal determination, nor will such director be
entitled to vote thereon.
E. Nominations of directors of the Corporation shall be made in
accordance with the following:
1. Nominations of candidates for election for directors of the
Corporation at any meeting of shareholders called for election of
directors (an "Election Meeting") may be made by the Board of
Directors or by any shareholder entitled to vote at such Election
Meeting, as provided in (2) and (3), immediately below.
2. Nominations made by the Board of Directors shall be made at
a meeting of the Board of Directors, or by written consent of
directors in lieu of a meeting, not less than 30 days prior to the
date of the Election Meeting, and such nominations shall be reflected
in the minute books of the Corporation as of the date made. At the
request of the Secretary of the Corporation, each proposed nominee
shall provide the Corporation with such information concerning himself
or herself as is required under the rules of the Securities and Exchange
Commission, to be included in the Corporation's proxy statements
soliciting proxies for his or her election as a director.
3. Any shareholder who intends to make a nomination at the
Election Meeting shall deliver a timely notice to the Secretary of the
Corporation setting forth (a) the name, age, business address, and
residence address of each nominee proposed in such notice; (b) the
principal occupation or employment of each such nominee; (c) the
number of shares of capital stock of the Corporation which are
beneficially owned by each such nominee; (d) a statement that the
nominee is willing to be nominated; and (e) such other information
concerning each such nominee as would be required under the rules of
the Securities and Exchange Commission in a proxy statement soliciting
-6-
proxies for the election of such nominees. To be timely, a
shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 120
days prior to the date of notice of the Election Meeting in the case
of an annual meeting, and not more than seven days following the date
of notice in the case of a special meeting.
4. If the chairman of the Election Meeting determines that a
nomination was not made in accordance with the foregoing procedures,
such nomination shall be void.
ARTICLE VIII
BOARD AUTHORITY
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
A. To make, alter, or repeal the Bylaws of the Corporation.
B. To adopt resolutions to issue shares of Preferred Stock, in such
amounts and series, and with such dividend, liquidation, voting,
conversion, redemption, and other rights as shall be set forth in the
resolution, and to execute, acknowledge, and file a certificate setting
forth a copy of such resolution(s) and the number of shares of stock of
such class or series as to which the resolution(s) apply, pursuant to
Michigan law. Upon filings, the certificate shall constitute an amendment
to these Articles of Incorporation.
C. To authorize and cause to be executed mortgages and liens upon
the real property of the Corporation.
D. To set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
E. By a majority vote of the whole Board, to designate one or more
committees, each committee to consist of one or more directors of the
Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. The Bylaws may provide that in the
absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he, she or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place
of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, or in the
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Bylaws of the Corporation, shall have and may exercise all of the powers
and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Articles of Incorporation, adopting an agreement of merger or consoli-
dation, recommending to the shareholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets,
recommending to the shareholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation.
F. When and as authorized by the shareholders in accordance with
law, to sell, lease, or exchange all or substantially all of the property
and assets of the Corporation, including its good will and its corporate
franchises, upon such terms and conditions and for such consideration,
which may consist in whole or in part of money or property including shares
of stock in, and/or securities of, any other corporation or corporations,
as its Board of Directors shall deem expedient or for the best interest of
the Corporation.
ARTICLE IX
ELECTION OF DIRECTORS; LOCATION OF MEETINGS, BOOKS, AND OFFICES
Elections of the directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide. If the Bylaws so provide,
the shareholders and directors shall have power to hold meetings, to keep
the books, documents and papers of the Corporation outside the state of
Michigan, and to have one or more offices within or without the state of
Michigan, at such places as may be designated from time to time by the
Bylaws or by resolution of the shareholders or directors, except as
otherwise required by the laws of Michigan.
ARTICLE X
CREDITOR ARRANGEMENTS
When a compromise or arrangement or a plan of reorganization of
this Corporation is proposed between this Corporation and its creditors or
any class of them or between this Corporation and its shareholders or any
class of them, a court of equity jurisdiction within the state, on
application of this Corporation or of a creditor or shareholder thereof,
or on application of a receiver appointed for the Corporation may order a
meeting of the creditors or class of creditors or of the shareholders or
class of shareholders to be affected by the proposed compromise or
arrangement or reorganization to be summoned in such manner as the court
directs. If a majority in number representing 3/4 in value of the
-8-
creditors or class of creditors, or of the shareholders or class of
shareholders to be affected by the proposed compromise or arrangement or
reorganization, agree to a compromise or arrangement or a reorganization of
this Corporation as a consequence of the compromise or arrangement, the
compromise or arrangement and the reorganization, if sanctioned by the
court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on this Corporation.
ARTICLE XI
AMENDMENT OF ARTICLES OF INCORPORATION
The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in these Articles of Incorporation in the
manner now or hereafter prescribed by the statutes of Michigan, and all
rights and powers conferred on directors and shareholders prescribed herein
are subject to this reservation; PROVIDED, HOWEVER, that this Article XI,
as well as the following provisions of these Articles of Incorporation, may
not be amended, altered, changed, or repealed, nor may any provision
inconsistent with the following provisions be adopted, without the approval
of at least 80% of the total voting power of all shares of stock entitled
to vote, voting together as a single class at an annual or special meeting
of shareholders: (i) Article VII - Board of Directors; Number;
Classification; Vacancies; Removal; Nominations; (ii) Article XII -
Amendment of Bylaws; and (iii) Article XIII - Special Shareholder Meetings,
unless such repeal, alteration, or amendment of any inconsistent provision
or provisions is declared advisable by the Board of Directors by the
affirmative vote of at least 75% of the entire Board of Directors,
notwithstanding the fact that a lesser percentage may be specified by the
Michigan Business Corporation Act.
ARTICLE XII
AMENDMENT OF BYLAWS
The Bylaws of the Corporation may be repealed, altered, amended,
or rescinded at any time by the Board of Directors without shareholder
approval. The Bylaws of the Corporation may not be amended by the
shareholders of the Corporation except upon the affirmative vote of at
least 80% of the total voting power of all shares of stock entitled to vote
in the election of directors, voting together as a single class at an
annual or special meeting of shareholders.
-9-
ARTICLE XIII
SPECIAL SHAREHOLDER MEETINGS
Special shareholder meetings may be called by the Board of
Directors or a committee of the Board authorized to call special
shareholder meetings. The shareholders of the Corporation shall not have
the power or ability to call a special shareholder meeting, except as
provided in the Bylaws or under the Michigan Business Corporation Act, and
subject to the rights of the holders of Preferred Stock.
ARTICLE XIV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall indemnify directors and officers of the
corporation as of right, and shall advance expenses, to the fullest extent
now or hereafter permitted by law in connection with any actual or
threatened civil, criminal, administrative, or investigative action, suit,
or proceeding (whether brought by or in the name of the Corporation, a
subsidiary, or otherwise) arising out of their service to the Corporation,
a subsidiary, or to another organization at the request of the Corporation
or a subsidiary. The Corporation may indemnify persons who are not
directors or officers of the Corporation to the extent authorized by Bylaw,
resolution of the Board of Directors, or contractual agreement authorized
by the Board of Directors. The Corporation may purchase and maintain
insurance to protect itself and any such director, officer, or other person
against any liability asserted against him or her and incurred by him or
her in respect of such service whether or not the Corporation would have
the power to indemnify him or her against such liability by law or under
the provisions of this Article. The provisions of this Article shall be
deemed contractual and shall apply to actions, suits, or proceedings,
whether arising from acts or omissions occurring before or after the
adoption of this Article, and to directors, officers, and other persons who
have ceased to render such service, and shall inure to the benefit of the
heirs, executors, and administrators of the directors, officers, and other
persons referred to in this Article.
ARTICLE XV
LIMITATION ON DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for any action
taken or any failer to take any action fiduciary duty as a director, except
that a director's liability is not limited for:
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A. the amount of a financial benefit received by a director to which
he or she is not entitled;
B. intentional infliction of harm on the Corporation or its
shareholders;
C. a violation of Section 551(1) of the Michigan Business
Corporation Act; or
D. an intentional criminal act.
If the Michigan Business Corporation Act is amended to further
eliminate or limit the liability of a director, then a director of the
Corporation (in addition to the circumstances in which a director is not
personally liable as set forth in the preceding paragraph) shall, to the
fullest extent permitted by the Michigan Business Corporation Act, as so
amended, not be liable to the Corporation or its shareholders. No
amendment to or modification or repeal of this Article shall increase the
liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment,
modification or repeal.
This Article applies only to acts or omissions and to breaches
of fiduciary duty occurring after this Article became effective.
ARTICLE XVI
DENIAL OF PREEMPTIVE RIGHTS
The holders of the Common Stock shall have no preemptive rights
to subscribe for any shares of any class of stock or securities of any kind
of the Corporation whether now or hereafter authorized.
The undersigned incorporator, for the purpose of forming a
corporation pursuant to the Michigan Business Corporation Act, has executed
these Articles of Incorporation this ___ day of _________, 1998.
___________________________________
Paul D. Yared, Incorporator
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APPENDIX C
FOREMOST CORPORATION OF AMERICA
(a Michigan Corporation)
BYLAWS
TABLE OF CONTENTS
PAGE
----
ARTICLE I - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. Registered Office and Registered Agent. . . . . . . . . .1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II - MEETINGS OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . .1
Section 1. Times and Places of Meetings. . . . . . . . . . . . . . .1
Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . . .1
Section 3. Notice of Annual Meeting. . . . . . . . . . . . . . . . .1
Section 4. Business Conducted at Annual Meetings . . . . . . . . . .2
Section 5. Shareholder List. . . . . . . . . . . . . . . . . . . . .2
Section 6. Special Meetings of Shareholders. . . . . . . . . . . . .3
Section 7. Notice of Special Meetings. . . . . . . . . . . . . . . .3
Section 8. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 9. Vote Required . . . . . . . . . . . . . . . . . . . . . .3
Section 10. Voting Rights . . . . . . . . . . . . . . . . . . . . . .4
Section 11. Chairman and Secretary of the Meetings. . . . . . . . . .4
Section 12. Conduct of Meetings . . . . . . . . . . . . . . . . . . .4
Section 13. Inspectors of Election. . . . . . . . . . . . . . . . . .5
Section 14. No Written Consent of Shareholders in Lieu of
Meeting . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 15. Fixing of Record Date by Board of Directors . . . . . . .5
Section 16. Registered Shareholders . . . . . . . . . . . . . . . . .5
ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 1. Number of Directors . . . . . . . . . . . . . . . . . . .5
Section 2. Powers. . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 3. Compensation of Directors . . . . . . . . . . . . . . . .6
Section 4. Places of Meetings. . . . . . . . . . . . . . . . . . . .6
Section 5. First Meeting of Newly Elected Board. . . . . . . . . . .6
Section 6. Regular Meetings. . . . . . . . . . . . . . . . . . . . .6
Section 7. Special Meetings. . . . . . . . . . . . . . . . . . . . .6
Section 8. Purpose Need Not be Stated. . . . . . . . . . . . . . . .6
Section 9. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 10. Action Without a Meeting. . . . . . . . . . . . . . . . .7
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Section 11. Meeting by Telephone or Similar Equipment . . . . . . . .7
Section 12. Written Notice. . . . . . . . . . . . . . . . . . . . . .7
Section 13. Waiver of Notice. . . . . . . . . . . . . . . . . . . . .7
Section 14. Interested Directors. . . . . . . . . . . . . . . . . . .7
ARTICLE IV - COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . .8
Section 1. Executive Committee . . . . . . . . . . . . . . . . . . .8
Section 2. Audit Committee . . . . . . . . . . . . . . . . . . . . .8
Section 3. Committee on Executive Management and Compensation. . . .9
Section 4. Nominating Committee. . . . . . . . . . . . . . . . . . .9
Section 5. Investment Committee. . . . . . . . . . . . . . . . . . .9
Section 6. Other Committees. . . . . . . . . . . . . . . . . . . . .9
Section 7. Committee Meetings. . . . . . . . . . . . . . . . . . . .9
ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 1. Officers. . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2. Election of Officers. . . . . . . . . . . . . . . . . . 10
Section 3. Compensation of Officers. . . . . . . . . . . . . . . . 10
Section 4. Term of Office. . . . . . . . . . . . . . . . . . . . . 10
Section 5. Chairman of the Board . . . . . . . . . . . . . . . . . 10
Section 6. President . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Chief Executive Officer . . . . . . . . . . . . . . . . 10
Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . 10
Section 9. Secretary . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. Treasurer . . . . . . . . . . . . . . . . . . . . . . . 11
Section 11. Assistant Secretary and Assistant Treasurer . . . . . . 11
Section 12. Other Officers. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. Indemnification in Action by Third Party. . . . . . . . 11
Section 2. Indemnification in Action by or in Right of the
Corporation . . . . . . . . . . . . . . . . . . . . . . 12
Section 3. Expenses. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4. Authorization of Indemnification. . . . . . . . . . . . 12
Section 5. Advances. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. Other Indemnification Agreements. . . . . . . . . . . . 14
Section 7. Insurance . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. Constituent Corporation . . . . . . . . . . . . . . . . 14
Section 9. Partial Indemnification . . . . . . . . . . . . . . . . 14
Section 10. Savings Clause. . . . . . . . . . . . . . . . . . . . . 15
Section 11. Definitions . . . . . . . . . . . . . . . . . . . . . . 15
Section 12. Construction. . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII - SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 15
Section 2. Subsidiary Officers Not Executive Officers. . . . . . . 16
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ARTICLE VIII - CERTIFICATES OF STOCK . . . . . . . . . . . . . . . . . . 16
Section 1. Form. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2. Facsimile Signature . . . . . . . . . . . . . . . . . . 16
Section 3. Lost Certificates . . . . . . . . . . . . . . . . . . . 16
Section 4. Transfers of Stock. . . . . . . . . . . . . . . . . . . 17
ARTICLE IV - MICHIGAN FAIR PRICE ACT . . . . . . . . . . . . . . . . . . 17
ARTICLE X - MICHIGAN CONTROL SHARE ACT. . . . . . . . . . . . . . . . . .17
Section 1. Governance By Act . . . . . . . . . . . . . . . . . . . 17
Section 2. Power to Redeem if no Acquiring Person Statement
is Filed. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Power to Redeem After Shareholder Vote. . . . . . . . . 17
Section 4. Procedure for Redemption. . . . . . . . . . . . . . . . 17
Section 5. Interpretation of this Article. . . . . . . . . . . . . 18
ARTICLE X - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 18
Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2. Reserves. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3. Checks. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 18
Section 5. Seal. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6. Written Waiver of Notice. . . . . . . . . . . . . . . . 18
ARTICLE XI - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 19
-iii-
BYLAWS
OF
FOREMOST CORPORATION OF AMERICA
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE AND REGISTERED AGENT. The registered
office of the Corporation shall be 5600 Beech Tree Lane, Caledonia,
Michigan 49316. The name of its registered agent at such address is Paul
D. Yared.
SECTION 2. OTHER OFFICES. The Corporation may also have offices
at such places, both within and without the state of Michigan, as the Board
of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. TIMES AND PLACES OF MEETINGS. All meetings of the
shareholders shall be held, except as otherwise provided by statute or
these Bylaws, at such time and place as may be fixed from time to time by
the Board of Directors. Meetings of shareholders may be held within or
without the state of Michigan.
SECTION 2. ANNUAL MEETINGS. Annual meetings of the shareholders
shall be held at a time and place so designated by a majority vote of the
Board of Directors, for the purpose of electing directors and for the
transaction of such other business as may properly be brought before the
meeting.
SECTION 3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting, specifying the date, time, and location of the meeting, shall be
given personally or by mail at least ten (10) and not more than sixty (60)
days before the date of the meeting to each shareholder entitled to vote
thereat who shall have furnished a written address to the Secretary of the
Corporation for such purpose. Notice of any meeting need not be given to
any shareholder who signs a waiver of notice before or after the meeting.
Attendance of a shareholder at a meeting shall constitute a waiver of
notice, except when the shareholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the holding of
the meeting or the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 4. BUSINESS CONDUCTED AT ANNUAL MEETINGS. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at
an annual meeting of the shareholders except in accordance with the
procedures hereinafter set forth in this Section; PROVIDED, HOWEVER, that
nothing in this Section shall be deemed to preclude discussion by any
shareholder of any business properly brought before the annual meeting in
accordance with said procedures.
At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a shareholder. In
addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a shareholder, the shareholder must
comply with all applicable requirements of Securities and Exchange
Commission Rule 14a-8 ("Rule 14a-8") promulgated under the Securities
Exchange Act of 1934, as amended from time to time. Any adjournment(s) or
postponement(s) of the original meeting whereby the meeting will reconvene
within thirty (30) days from the original date shall be deemed for purposes
of notice to be a continuation of the original meeting and no business may
be brought before any such reconvened meeting unless timely notice of such
business was given to the Secretary of the Corporation for the meeting as
originally scheduled.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting,
(ii) the name and record address of the shareholder proposing such
business, (iii) the class and/or series and number of shares of the
Corporation that are beneficially owned by the shareholder, (iv) any
material interest of the shareholder in such business, and (v) any other
information as may be required by Rule 14a-8.
SECTION 5. SHAREHOLDER LIST. The officer or agent who has charge
of the stock ledger or stock transfer books of the Corporation shall make
and certify a complete list of the shareholders entitled to vote at a
shareholders' meeting, arranged by class or series in alphabetical order,
showing the address of and the number of shares registered in the name of
each shareholder. Such list shall be produced at the meeting and be open
to the examination of any shareholder, for any purpose germane to the
meeting, during the whole time of the meeting.
SECTION 6. SPECIAL MEETINGS OF SHAREHOLDERS. A special meeting of
shareholders, for any purpose or purposes, unless otherwise prescribed by
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statute or by the Articles of Incorporation, may be called by the Chairman
of the Board or President and shall be called by the President or Secretary
at the request in writing of a majority of the whole Board of Directors, or
at the request in writing of shareholders owning at least eighty percent
(80%) of the entire capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of
the proposed meeting.
SECTION 7. NOTICE OF SPECIAL MEETINGS. Written notice of a
special meeting of shareholders, stating the date, time, place, and object
thereof, shall be given personally or by mail to each shareholder entitled
to vote thereat who shall have furnished a written address to the Secretary
of the Corporation for such purpose, not less than ten (10) nor more than
sixty (60) days before the date fixed for the meeting. Business transacted
at any special meeting shall be limited to the purpose or purposes stated
in the notice.
SECTION 8. QUORUM. The holders of a majority of the stock issued
and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise provided
by statute or by the Articles of Incorporation. The shareholders present
in person or by proxy at such meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. Whether or not a quorum is present, the meeting may be
adjourned by a vote of the shares present. No notice of the date, time,
and place of adjourned meetings need be given, provided that the time and
place to which the meeting is adjourned is announced at the meeting and at
the adjourned meeting only business is transacted as might have been
transacted at the original meeting. Except when the holders of a class or
series of shares are entitled to vote separately on an item of business,
shares of all classes and series entitled to vote shall be combined as a
single class and series for the purpose of determining a quorum. When the
holders of a class or series of shares are entitled to vote separately on
an item of business, shares of that class or series entitled to cast a
majority of the votes of that class or series at a meeting constitute a
quorum of that class or series at that meeting, unless a greater or lesser
quorum is provided by statute or the Articles of Incorporation.
SECTION 9. VOTE REQUIRED. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
other than the election of directors brought before such meeting, or the
amendment of the Articles of Incorporation or these Bylaws, unless the
question is one upon which by express provision of statute or of the
Articles of Incorporation a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Election of directors shall be by ballot, and directors shall be elected by
a plurality of the shares present in person or represented by proxy and
entitled to vote on the election of directors.
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SECTION 10. VOTING RIGHTS. Except as otherwise provided by the
Articles of Incorporation or the resolution or resolutions of the Board of
Directors creating any class or series of stock, each shareholder shall at
every meeting of shareholders be entitled to one (1) vote in person or by
proxy for each share of the capital stock having voting power held by such
shareholder. A proxy shall be valid only with respect to the particular
meeting, or any adjournment or adjournments thereof, to which it
specifically pertains. No proxy shall be voted or acted upon after eleven
(11) months from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A shareholder may
revoke any proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy
or another duly executed proxy bearing a later date with the Secretary of
the Corporation.
SECTION 11. CHAIRMAN AND SECRETARY OF THE MEETINGS. Meetings of
the shareholders shall be presided over by the Chairman of the Board or
such executive officer of the Corporation that he may designate, or in his
absence, by the President, or in his absence, by such officer as has been
designated by the Board of Directors, or if none of the foregoing officers
is present, by a chairman to be chosen at the meeting. The Secretary of
the Corporation, or in his absence, such officer as has been designated by
the Board of Directors, or if none of the foregoing officers is present,
such person as is chosen at the meeting by the person presiding thereat,
shall act as Secretary of the meeting.
SECTION 12. CONDUCT OF MEETINGS. Meetings of shareholders
generally shall follow accepted rules of parliamentary procedure, subject
to the following:
(i) The chairman of the meeting shall have absolute
authority over matters of procedure, and there shall be no appeal
from the ruling of the chairman. If, in his absolute discretion,
the chairman deems it advisable to dispense with the rules of
parliamentary procedure as to any one (1) meeting of shareholders
or part thereof, he shall so state and shall clearly state the
rules under which the meeting or appropriate part thereof shall
be conducted.
(ii) If disorder should arise which prevents the
continuation of the legitimate business of the meeting, the
chairman may quit the chair and announce the adjournment of the
meeting. Upon his so doing, the meeting is immediately
adjourned.
(iii) The chairman may ask or require that anyone not a bona
fide shareholder or proxy leave the meeting.
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(iv) A resolution or motion shall be considered for vote
only if proposed by a shareholder or a duly authorized proxy in
accordance with these Bylaws and seconded by an individual who is
a shareholder or a duly authorized proxy other than the
individual who proposed the resolution or motion.
SECTION 13. INSPECTORS OF ELECTION. The Board of Directors or, if
they shall not have so acted, the chairman of the meeting, may appoint, at
or prior to any meeting of shareholders, two (2) persons (who may be
employees of the Corporation other than directors or candidates for the
office of director) to serve as inspectors of election. Such inspectors
shall first take and subscribe an oath or affirmation faithfully to execute
the duties of inspector at such meeting with strict impartiality and
according to the best of their ability. The inspectors shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes or ballots, hear and determine
challenges and questions arising in connection with the right to vote,
count and tabulate votes or ballots, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all
shareholders.
SECTION 14. NO WRITTEN CONSENT OF SHAREHOLDERS IN LIEU OF MEETING.
Any action required or permitted to be taken by the shareholders must be
effected at a duly called annual or special meeting of the holders of
capital stock of the Corporation and may not be effected by any consent in
writing by the shareholders.
SECTION 15. FIXING OF RECORD DATE BY BOARD OF DIRECTORS. For the
purpose of determining the shareholders entitled to notice of or to vote at
any meeting of shareholders, or any adjournment thereof, or to express
consent to or dissent from any corporate action in writing without a
meeting, or for the purpose of determining shareholders entitled to receive
payments of any dividend or the distribution or allotment of any rights or
evidences of interests arising out of any change, conversion, or exchange
of capital stock, or for the purpose of any other action, the Board of
Directors may fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than sixty (60)
days or less than ten (10) days before the date of any such meeting, nor
more than sixty (60) days prior to any other action. Only shareholders of
record on a record date shall be entitled to notice of and to vote at such
meeting or to receive payment of any dividend or the distribution or
allotment of any rights or evidences of interests arising out of any
change, conversion, or exchange of capital stock.
SECTION 16. REGISTERED SHAREHOLDERS. The Corporation shall be
entitled to recognize the exclusive rights of a person registered on its
books as the owner of shares to receive dividends, and to vote as such
owner, and shall not be bound to recognize any equitable or other claim to
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or interest in such share or shares on the part of any other person,
whether or not the Corporation shall have express or other notice thereof,
except as otherwise provided by the laws of the state of Michigan.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. The number of the directors of
the Corporation shall be fixed as provided in the Corporation's Articles of
Incorporation.
SECTION 2. POWERS. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these Bylaws directed or
required to be exercised or done by the shareholders.
SECTION 3. COMPENSATION OF DIRECTORS. Each director who is not a
salaried officer of the Corporation may receive as compensation for his
services in that capacity such sums and such benefits as shall from time to
time be determined by the Board of Directors, plus traveling expenses and
other expenses necessary for attendance at regular or special meetings of
the Board of Directors and committees of the board. Members of special or
standing committees may be allowed like compensation for attending
committee meetings. Nothing herein shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 4. PLACES OF MEETINGS. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Michigan.
SECTION 5. FIRST MEETING OF NEWLY ELECTED BOARD. The first
meeting of each Board of Directors having a newly elected class of
directors shall be held following the annual meeting of shareholders, and
no notice of such meeting shall be necessary to the newly elected directors
in order to legally constitute the meeting, provided a quorum shall be
present. In the event such meeting is not held immediately following the
annual meeting of shareholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as
shall from time to time be determined by the Board.
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SECTION 7. SPECIAL MEETINGS. Subject to the provisions of Section
12 of this Article, special meetings of the Board of Directors may be
called by the Chairman, Chief Executive Officer, or President; special
meetings may be called in like manner and on like notice on the written
request of a majority of the Board of Directors.
SECTION 8. PURPOSE NEED NOT BE STATED. Neither the business to be
transacted at nor the purpose of any regular or special meeting of the
Board of Directors need be specified in the notice of such meeting.
SECTION 9. QUORUM. At all meetings of the Board a majority of the
directors shall constitute a quorum for the transaction of business, and
the acts of a majority of the directors present at any meeting at which
there is a quorum shall be acts of the Board of Directors except as may be
otherwise specifically provided by statute or by the Articles of
Incorporation. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
SECTION 10. ACTION WITHOUT A MEETING. Unless otherwise restricted
by the Articles of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if, before or after the
action, all members of the Board or of such committee, as the case may be,
consent thereto in writing and such written consent is filed with the
minutes or proceedings of the Board or committee.
SECTION 11. MEETING BY TELEPHONE OR SIMILAR EQUIPMENT. The Board
of Directors or any committee designated by the Board of Directors may
participate in a meeting of such Board or committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at
such meeting.
SECTION 12. WRITTEN NOTICE. Notices to directors shall be in
writing and delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed. Notice to
directors also may be given by telegram or telecopy. Notwithstanding the
foregoing, notice shall also be given by telegram or telecopy if the date
of the meeting to which such notice relates is within three (3) days of the
date that such notice is given.
SECTION 13. WAIVER OF NOTICE. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting has not been lawfully
called or convened.
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SECTION 14. INTERESTED DIRECTORS.
(i) No contract or transaction between the Corporation and
one or more of its directors and officers, or between the
Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in
the meeting of the Board or committee thereof which authorizes
the contract or transaction, or solely because his or their votes
are counted for such purpose, if:
(A) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the Board of Directors or the committee, and
the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum;
(B) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the shareholders entitled to vote thereon,
and the contract or transaction is specifically approved in
good faith by the vote of the shareholders; or
(C) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved, or
ratified, by the Board of Directors, a committee thereof, or
the shareholders.
(ii) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
COMMITTEES OF DIRECTORS
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may
appoint an Executive Committee whose membership shall consist of the
Chairman and/or President and such number of other directors as a majority
of the entire Board of Directors may deem advisable from time to time to
serve during the pleasure of the board. One of the members of the
committee shall be designated the chairman thereof by the Board of
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Directors. The Board of Directors also may appoint directors to serve as
alternates for members of the committee in the absence or disability of
regular members. The Executive Committee shall have and may exercise the
powers and authority of the Board in the management of the affairs of the
Corporation, except the power to change the membership or to fill vacancies
in the Board or the Committee, the power to amend, add to, rescind, or
repeal the Bylaws of the Corporation and any other powers that, under
Michigan law, may not be delegated to it by the Board of Directors. The
Board shall have the power at any time to change the membership of the
Executive Committee (subject to the requirement that the Chairman and/or
the President of the Corporation be a member thereof) and to fill vacancies
in it. The Executive Committee may make rules for the conduct of its
business and may appoint such committees and assistants as it shall from
time to time deem necessary. A majority of the members of the committee
shall constitute a quorum.
SECTION 2. AUDIT COMMITTEE. The Audit Committee shall cause a
suitable examination of the financial records and operations of the
Corporation and its subsidiaries to be made by the Corporation. The Audit
Committee also shall recommend to the Board of Directors the employment of
independent certified public accountants to examine the financial
statements of the Corporation and its subsidiaries; and report to the Board
of Directors at least once each calendar year.
SECTION 3. COMMITTEE ON EXECUTIVE MANAGEMENT AND COMPENSATION.
The Committee on Executive Management and Compensation shall make
recommendations to the Board of Directors regarding management incentives,
employee retirement plans and salaries of executive officers. The
Committee on Executive Management and Compensation also shall review
employee benefit programs for the Corporation.
SECTION 4. NOMINATING COMMITTEE. The Nominating Committee, if
there be one, shall develop and recommend to the Board of Directors
criteria for the selection of candidates for director, to seek out and
receive suggestions concerning possible candidates, to review and evaluate
the qualifications of possible candidates, and to recommend to the Board of
Directors candidates for vacancies occurring from time to time and for the
slate of directors to be proposed on behalf of the Board of Directors at
the annual meeting of shareholders. The Nominating Committee will consider
nominees recommended by the shareholders, as properly submitted to the
Secretary of the Corporation.
SECTION 5. INVESTMENT COMMITTEE. The Investment Committee shall
review the Corporation's investment policy and certain capital structure
issues and shall review management's implementation of the investment
policy.
SECTION 6. OTHER COMMITTEES. The Board of Directors may designate
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such other committees as it may deem appropriate, and such committees shall
exercise the authority delegated to them. Unless the Board shall otherwise
provide, a majority of any such Committee may determine its action and fix
the time and place of its meetings. The Board shall have power at anytime
to change the members of any such Committee, to fill vacancies, and to
discharge any such Committee.
SECTION 7. COMMITTEE MEETINGS. Each committee provided for above
shall meet as often as its business may require and may fix a day and time
at intervals for regular meetings, notice of which shall not be required.
Whenever the day fixed for a meeting shall fall on a holiday, the meeting
shall be held on the business day following or on such other day as the
committee may determine. Special meetings of the committees may be called
by the chairman of the committee or any two (2) members other than the
chairman, and notice thereof may be given to the members by telephone,
telegram, telecopy, or letter. A majority of its members shall constitute
a quorum for the transaction of the business of any of the committees. A
record of the proceedings of each committee shall be kept and presented to
the Board of Directors.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chairman of the Board of
Directors, a President, one or more Vice Presidents, a Secretary and a
Treasurer. One or several of the officers may be designated "Executive
Vice President" or "Senior Vice President" by the Board of Directors. The
Board of Directors also may choose such additional officers as it shall
deem advisable and in the best interests of the Corporation. Any two or
more offices may be held by the same person.
SECTION 2. ELECTION OF OFFICERS. The Board of Directors at its
first meeting after each annual meeting of the shareholders shall choose a
Chairman of the Board of Directors, a President, one or more Vice
Presidents, a Secretary and a Treasurer; other officers, or successors to
these, may be elected at any time, in the discretion of the Board.
SECTION 3. COMPENSATION OF OFFICERS. The salaries of all officers
of the Corporation shall be fixed by the Board of Directors or a committee
thereof.
SECTION 4. TERM OF OFFICE. The officers of the Corporation shall
hold office until the next annual meeting and until their successors are
chosen and qualify. Any officer elected or appointed by the Board of
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Directors may be removed at any time by the affirmative vote of a majority
of the whole Board of Directors. Any vacancy occurring in any office of
the Corporation shall be filled by the Board of Directors.
SECTION 5. CHAIRMAN OF THE BOARD. There shall be elected a
Chairman of the Board, who shall be chosen from among the directors. The
Chairman of the Board shall preside at all meetings of the Board of
Directors and shareholder meetings, and shall have such other duties and
powers as may be imposed or given by the Board of Directors.
SECTION 6. PRESIDENT. The President shall, subject to the
direction of the Board of Directors, see that all orders and resolutions of
the Board of Directors are carried into effect, and shall perform all other
duties necessary or appropriate to his office, subject, however, to his
right and the right of the directors to delegate any specific powers to any
other officer or officers of the Corporation. In the absence of the
Chairman of the Board or his designee or if no Chairman is elected, the
President shall preside at all meetings of the shareholders and at all
meetings of the Board of Directors. The President shall be an ex officio
voting member of all standing committees designated by the Board of
Directors except the Audit Committee.
SECTION 7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer,
in addition to any other duties, shall have final authority, subject to the
control of the Board of Directors, over the general policy and business of
the Corporation and shall have the general control and management of the
business and affairs of the Corporation. The Chief Executive Officer shall
perform other duties as may be prescribed from time to time by the Board of
Directors or these Bylaws.
SECTION 8. VICE PRESIDENTS. The Vice President or Vice Presidents
shall perform such duties and have such powers as the Chief Executive
Officer or the Board of Directors may from time to time prescribe. The
Board of Directors may at its discretion designate one or more of the Vice
Presidents as Executive Vice Presidents or Senior Vice Presidents. Any Vice
President so designated shall have such duties and responsibilities as the
Board shall prescribe.
SECTION 9. SECRETARY. The Secretary shall attend all meetings of
the shareholders, and of the Board of Directors and of the Executive
Committee, and shall preserve in the books of the Corporation true minutes
of the proceedings of all such meetings. He shall safely keep in his
custody the seal of the Corporation, if any, and shall have authority to
affix the same to all instruments where its use is required or appropriate.
He shall give all notices required or appropriate pursuant to statute,
Bylaws, or resolution. He shall perform such other duties as may be
delegated to him by the Board of Directors or by the Executive Committee.
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SECTION 10. TREASURER. The Treasurer shall have custody of all
corporate funds and securities and shall keep in books belonging to the
Corporation full and accurate accounts of all receipts and disbursements;
he shall deposit all moneys, securities, and other valuable effects in the
name of the Corporation in depositories as may be designated for that
purpose by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chief Executive
Officer and directors at the regular meetings of the board, and whenever
requested by them, an account of all his transactions as Treasurer and of
the financial condition of the Corporation. If required by the Board of
Directors, he shall deliver to the Chief Executive Officer of the
Corporation, and shall keep in force, a bond in form, amount, and with a
surety or sureties satisfactory to the Board of Directors, conditioned for
faithful performance of the duties of his office, and for restoration to
the Corporation in case of his death, resignation, retirement, or removal
from office, of all books, papers, vouchers, money, and property of
whatever kind in his possession or under his control belonging to the
Corporation.
SECTION 11. ASSISTANT SECRETARY AND ASSISTANT TREASURER. There may
be elected an Assistant Secretary and Assistant Treasurer who shall, in the
absence, disability, or nonfeasance of the Secretary or Treasurer, perform
the duties and exercise the powers of such persons respectively.
SECTION 12. OTHER OFFICERS. All other officers, as may from time
to time be appointed by the Board of Directors, shall perform such duties
and exercise such authority as the Board of Directors shall prescribe.
ARTICLE VI
INDEMNIFICATION
SECTION 1. INDEMNIFICATION IN ACTION BY THIRD PARTY. The
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal (other than an action by or in
the right of the Corporation) by reason of the fact that the person is or
was a director or officer of the Corporation, or, is or was serving at the
request of the Corporation as a director, officer, employee, agent, or
trustee of another foreign or domestic corporation, partnership, joint
venture, trust, or other enterprise, whether for profit or not for profit,
against expenses (including attorneys' fees), judgments, penalties, fines,
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit, or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
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or not opposed to the best interests of the Corporation or its
shareholders, and with respect to a criminal action or proceeding, the
person had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner that the person reasonably believed
to be in or not opposed to the best interests of the Corporation or its
shareholders, and with respect to a criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
SECTION 2. INDEMNIFICATION IN ACTION BY OR IN RIGHT OF THE
CORPORATION. The Corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director or officer of the Corporation, or, is or was serving at the
request of the Corporation as a director, officer, employee, agent, or
trustee of another foreign or domestic corporation, partnership, joint
venture, trust, or other enterprise, whether for profit or not for profit,
against expenses including attorneys' fees and amounts paid in settlement
actually and reasonably incurred by the person in connection with the
action or suit, if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the Corporation or its shareholders. Indemnification shall not be made for
a claim, issue, or matter in which the person shall have been found liable
to the Corporation except to the extent authorized by statute.
SECTION 3. EXPENSES.
(i) To the extent that a person has been successful on the
merits or otherwise in defense of an action, suit, or proceeding
referred to in Section 1 or 2 of this Article, or in defense of a
claim, issue, or matter in the action, suit, or proceeding, the
Corporation shall indemnify that person against actual and
reasonable expenses, including attorneys' fees incurred by him or
her in connection with the action, suit, or proceeding and an
action, suit, or proceeding brought to enforce the mandatory
indemnification provided in this Section.
(ii) The Corporation shall indemnify a director for the
expenses and liabilities described in ths Section 3(ii) without a
determination that the director has met the standard of conduct set
forth in sections 1 and 2, but no indemnification may be made unless
ordered byb a court if (A) the director received a finanical benefit
to which he or she was no tentitled, (B) intentionally inflicted
harm on the Corporation or its shareholders, (C) violated Section 551
of the Michigan Busienss Corporation Act or (D)intentionally
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committed a criminal act. In connection with an action or suit by or
in the right of the Corproation as decribed in Section 2,
indemnification under this Section 3(ii) may be for expenses,
including attorney's fees, actually and reasonably incurred. In
conenctin with an action, suit, or proceeding other than an action,
suit, or proceeding by or in the right of the Corporation, as
described in Section 1, indemnification under this Section 3(ii)
may be for expenses, including attorneys' fees, actually and
reasonably incurred, and for judgements, penalties, fines and amounts
paid in settlement actually and reasonably incurred.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION.
(i) An indemnification under Sections 1 or 2 of this
Article, unless ordered by a court, shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in
Sections 1 or 2 of this Article and upon an evaluation of the
reasonableness of expenses and amounts paid in settlement. This
determination and evaluation shall be made in any of the
following ways:
(A) By a majority vote of a quorum of the Board of
Directors consisting of directors who are not parties or
threatened to be made parties to the action, suit, or
proceeding.
(B) If a quorum cannot be obtained under Subsection
(A) above, by majority vote of a committee duly designated
by the Board and consisting solely of two or more directors
not at the time parties or threatened to be made parties to
the action, suit, or proceeding.
(C) By independent legal counsel in a written opinion,
which counsel shall be selected in one of the following
ways:
(1) By the Board or its committee in the manner
prescribed in Subsections (A) or (B) above.
(2) If a quorum of the Board cannot be obtained
under Subsection (A) above and a committee cannot be
designated under Subsection (B) above, by the Board.
(D) By all independent directors who are not parties
or threatened to be made parties to the action, suit, or
proceeding.
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(E) By the shareholders, but shares held by directors,
officers, employees, or agents who are parties or threatened
to be made parties to the action, suit, or proceeding may
not be voted.
(ii) In the designation of a committee under Subsection
(i)(B) or in the selection of independent legal counsel under
Subsection (i)(C)(2), all directors may participate.
(iii) If a person is entitled to indemnification under
Sections 1 or 2 for a portion of expenses, including reasonable
attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement, but not for the total amount, the corporation may
indemnify the person for the portion of the expenses, judgments,
penalties, fines, or amounts paid in settlement for which the
person is entitled to be indemnified.
(iv) An authorization of payment of indemnification
shall be made in any of the fllowing ways:
(A) by the board in one of the following ways:
(1) If there are two or more directors who are not
parties or threatened to be made parties to the action, suit,
or proceeding, by a majority vote of all directors who are
not parties or threatened to be made parties, a majority of
whom shall constitute a quorum for this purpose.
(2) By a majority of the members of a committee of
two or more directors who are not parties or threatened to
be made parties to the action, suit, or proceeding.
(3) If the Corporation has one or more independent
directors who are not parties or threatened to be made
parties to the action, suit, or proceeding, by a majority
vote of all independent directors who are not parties or are
threatened to be made parties, a majority of whom shall
constitute a quorum for this purpose.
(4) If there are no independent directors and less
than two directors who are not parties or threatened to be
made parties to the action, suit, or proceeding, by the vote
necessary for action by the board in accordance with
Section 523 of the Michigan Business Corproation Act, in
which authorization all directors may participate.
(B) By the shareholders, but shares held by directors,
officers, employees, or agents who arae parties or threatened to
be made parties to the action, suit, or proceeding may not be
voted on the authorizaiton.
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SECTION 5. ADVANCES. The Corporation may pay or reimburse the
reasonable expenses incurred by a director, officer, employee, or agent who
is a party or threatened to be made a party to an action, suit, or
proceeding before final disposition of the proceeding if all of the
following apply:
(i) The person furnishes the Corporation a written
affirmation of the person's good faith belief that he or she has
met the applicable standard of conduct set forth in Sections 1
and 2 of this Article.
(ii) The person furnishes the Corporation a written
undertaking, executed personally or on the person's behalf, to
repay the advance if it is ultimately determined that the person
did not meet the standard of conduct.
The undertaking required by Subsection (ii) above must be an unlimited
general obligation of the person but need not be secured and may be accepted
without reference to the financial ability of the person to make repayment.
Determinations and evaluations under this Section shall be made in the manner
specified in Section 4(i) of this Article. Authorizations of payment shall be
made in the manner provided in Section 4(iv)
SECTION 6. OTHER INDEMNIFICATION AGREEMENTS. The indemnification
or advancement of expenses provided by this Article is not exclusive of any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under any Bylaw, agreement, vote of shareholders
or directors, or otherwise. The indemnification provided in Sections 1 to
6 of this Article continues as to a person who ceases to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of the person.
SECTION 7. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, partner, trustee, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against the person and incurred
by the person in any such capacity or arising out of the person's status as
such whether or not the corporation would have power to indemnify the
person against the liability under Sections 1 to 6 of this Article. Insurance
on behalf of a director may be purchased from an insurer owned by the
Corporation, but insurance purchased from that insurer may insure a director
against monetary liablity to the Corporation or its shareholders only to the
extent to which the Corporation coudl indemnify the director under Section
3(ii).
SECTION 8. CONSTITUENT CORPORATION. For the purposes of this
Article, references to the Corporation include all constituent corporations
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absorbed in a consolidation or merger and the resulting or surviving
corporation, so that a person who is or was a director or officer of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, partner, trustee, employee,
or agent of another corporation, partnership, joint venture, trust, or
other enterprise shall stand in the same position under the provisions of
this Article with respect to the resulting or surviving corporation as he
or she would if he or she had served the resulting or surviving corporation
in the same capacity.
SECTION 9. PARTIAL INDEMNIFICATION. If a person is entitled to
indemnification under Sections 1 or 2 of this Article for a portion of
expenses, including attorneys' fees, judgments, penalties, fines, and
amounts paid in settlement, but not for the total amount thereof, the
Corporation may indemnify the person for the portion of the expenses,
judgments, penalties, fines, or amounts paid in settlement for which the
person is entitled to be indemnified.
SECTION 10. SAVINGS CLAUSE. If this Article or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction,
the Corporation shall nevertheless indemnify each director, executive
officer, or other person whose indemnification is authorized by the Board
of Directors as to expenses, including attorneys' fees, judgments, fines,
and amounts paid in settlement with respect to any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative,
including a grand jury proceeding and an action by the Corporation, to the
full extent permitted by any applicable portion of this Article that shall
not have been invalidated or by any other applicable law.
SECTION 11. DEFINITIONS. For the purposes of this Article, "other
enterprises" shall include employee benefit plans; "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and "serving at the request of the Corporation" shall include any
service as a director, officer, partner, trustee, employee, or agent of the
Corporation, which imposes duties on, or involves services by the director,
officer, employee, or agent with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be considered to have
acted in a manner "not opposed to the best interest of the Corporation or
its shareholders" as referred to in Sections 1 and 2 of this Article.
SECTION 12. CONSTRUCTION. It is the intent of this Article to
grant to the directors and executive officers of the Corporation (and such
other persons as the Board of Directors may designate) the broadest
indemnification permitted under the laws of the state of Michigan, as the
same may be amended from time to time, and this Article shall be liberally
construed to give effect to such intent. The Corporation further intends,
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acknowledges, and agrees that all of the Corporation's directors and
executive officers have undertaken and will undertake the performance of
their duties and obligations in reliance upon the indemnification provided
for in this Article, and accordingly, such rights of indemnification may
not be retroactively reduced or abolished as to any such director or
executive officer with the written consent of such person.
ARTICLE VII
SUBSIDIARIES
SECTION 1. SUBSIDIARIES. The Board of Directors, the Chief
Executive Officer, or any executive officer designated by the Board of
Directors may vote the shares of stock owned by the Corporation in any
subsidiary, whether wholly or partly owned by the Corporation, in such
manner as they may deem in the best interests of the Corporation,
including, without limitation, for the election of directors of any
subsidiary corporation, or for any amendments to the charter or bylaws of
any such subsidiary corporation, or for the liquidation, merger, or sale of
assets of any such subsidiary corporation. The Board of Directors, the
Chief Executive Officer, or any executive officer designated by the Board
of Directors may cause to be elected to the Board of Directors of any such
subsidiary corporation such persons as they shall designate, any of whom
may, but need not, be directors, executive officers, or other employees or
agents of the Corporation. The Board of Directors, the Chief Executive
Officer, or any executive officer designated by the Board of Directors may
instruct the directors of any such subsidiary corporation as to the manner
in which they are to vote upon any issue properly coming before them as the
directors of such subsidiary corporation, and such directors shall have no
liability to the Corporation as the result of any action taken in
accordance with such instructions.
SECTION 2. SUBSIDIARY OFFICERS NOT EXECUTIVE OFFICERS. The
officers of any subsidiary corporation, shall not, by virtue of holding
such title and position, be deemed to be executive officers of the
Corporation, nor shall any such officer of a subsidiary corporation, unless
he shall also be a director or executive officer of the Corporation, be
entitled to have access to any files, records, or other information
relating or pertaining to the Corporation, its business and finances, or to
attend or receive the minutes of any meetings of the Board of Directors or
any committee of the Corporation, except as and to the extent expressly
authorized and permitted by the Board of Directors or the Chief Executive
Officer.
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ARTICLE VIII
CERTIFICATES OF STOCK
SECTION 1. FORM. Every holder of stock in the Corporation shall
be entitled to have a certificate in the name of the Corporation, signed by
the Chairman of the Board or the President or a Vice President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by him
in the Corporation.
SECTION 2. FACSIMILE SIGNATURE. Where a certificate is signed (i)
by a transfer agent or an assistant transfer agent, or (ii) by a transfer
clerk acting on behalf of the Corporation and a registrar, the signature of
any such Chairman, President, Vice President, Treasurer, Assistant
Treasurer, Secretary, or Assistant Secretary may be a facsimile. In case
any officer, transfer agent, or registrar who has signed, or whose
facsimile signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent, or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been
lost or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to
have been lost or destroyed.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment, or
authority to transfer, it shall be the duty of the Corporation to issue a
new certificate to the person entitled thereto, cancel the old certificate
and record the transaction upon its books.
ARTICLE IX
MICHIGAN FAIR PRICE ACT
The Corporation shall be governed by Chapter 7A (Section 775
through Section 784) of the Michigan Business Corproation Act; provided,
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however, that business combinations with existing beneficial owners or more than
10% of the outstanding shares of Common Stock of the Delaware corporate afiliate
of this corporation, Foremost Corporation of America, as of February 23, 1998,
or with an affiliate of such existing beneficial owners, shall not be subject to
the provisions of the Michigan Fair Price Act.
ARTICLE X
MICHIGAN CONTROL SHARE ACT
SECTION 1. GOVERNANCE BY ACT. The Corporation shall be governed
by Chapter 7B (Section 790 through Section 799) of the Michigan Business
Corporation Act; provided, however, that existing beneficial owners of more
than ten percent (10%) of the outstanding shares of Common Stock of the
Delaware corporate affiliate of this corporation, Foremost Corporation of
America, as of February 23, 1998, shall not be subject to the voting
rights, redemption, and other provisions of the Michigan Control Share
Acquisition Act.
SECTION 2. POWER TO REDEEM IF NO ACQUIRING PERSON STATEMENT IS
FILED. Control shares acquired in a control share acquisition, with
respect to which no acquiring person statement has been filed with the
Corporation, may, at any time during the period ending sixty (60) days
after the last acquisition of control shares or the power to direct the
exercise of voting power of control shares by the acquiring person, be
redeemed by the Corporation at the fair value of the shares.
SECTION 3. POWER TO REDEEM AFTER SHAREHOLDER VOTE. After an
acquiring person statement has been filed and after the meeting which the
voting rights of the control shares acquired in a control share acquisition
are submitted to the shareholders, the shares are subject to redemption by
the Corporation at the fair value of the shares unless the shares are
accorded full voting rights by the shareholders pursuant to Section 798 of
the Michigan Business Corporation Act.
SECTION 4. PROCEDURE FOR REDEMPTION. A redemption of shares by
the Corporation pursuant to Sections 1 or 2 of this Article shall be made
upon election to redeem by the Board of Directors. Written notice of the
election shall be sent to the acquiring person within seven (7) days after
the election is made. The determination of the Board of Directors as to
fair value shall be conclusive. Payment shall be made for the control
shares subject to redemption within thirty (30) days after the election to
redeem is made at a date and place selected by the Board of Directors. The
Board of Directors may adopt additional procedures to accomplish a
redemption.
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SECTION 5. INTERPRETATION OF THIS ARTICLE. This Article is
adopted pursuant to Section 799 of the Michigan Business Corporation Act,
and the terms used in this Section shall have the meanings of the terms in
Section 799.
ARTICLE X
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors or the Executive Committee
thereof. Dividends may be paid in cash, in property, or in shares of
capital stock, subject to the provisions of the Articles of Incorporation.
SECTION 2. RESERVES. Before payment of any dividends, there may
be set aside out of any funds of the Corporation available for dividends
such sum or sums as the directors from time to time, in their absolute
discretion, think proper as reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of
the Corporation, or for such other purpose as the directors shall think
conducive to the interest of the Corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
SECTION 3. CHECKS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time
designate.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall
be the calendar year, unless otherwise fixed by the Board of Directors.
SECTION 5. SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, and the words "Corporate Seal, Michigan." The
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
SECTION 6. WRITTEN WAIVER OF NOTICE. Whenever any notice is
required to be given under the provisions of the statutes or of the
Articles of Incorporation or of these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
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ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended, or repealed, in whole or in
part, or new Bylaws may be adopted by, the Board of Directors; PROVIDED,
HOWEVER, that notice of such alteration, amendment, repeal, or adoption of
new Bylaws, be contained in the notice of such meeting of the Board of
Directors. Except as otherwise required by statute, the Articles of
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Incorporation, or these Bylaws, these Bylaws may be altered, amended, or
repealed, in whole or in part, or new Bylaws may be adopted by, the
Shareholders upon the affirmative vote of at least eighty percent (80%) of
the total voting power of all shares of stock entitled to vote, voting
together as a single class.
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APPENDIX D
FOREMOST CORPORATION OF AMERICA
STOCK OPTION PLAN OF 1998
This Stock Option Plan of 1998 (the "AGREEMENT") is made as of
February 23, 1998 (the "GRANT DATE") between FOREMOST CORPORATION OF
AMERICA, a Delaware corporation (the "COMPANY"), and Richard L. Antonini
("GRANTEE"). This Agreement is implemented to provide Grantee with a
further incentive to contribute to the long-term growth and success of the
Company through stock ownership.
Pursuant to the recommendation and action of the Committee on
Executive Management and Compensation of the Company's Board of Directors
(the "COMMITTEE"), which consists of at least two members of the Board and
all of whom are "outside directors," as that term is defined in Section
162(m) of the Internal Revenue Code of 1986, as amended (the "CODE"), the
Company hereby grants a stock option to Grantee, and Grantee accepts this
option, subject to the terms, conditions, and provisions contained in this
Agreement.
1. GRANT. The Company grants to Grantee an option to purchase
750,000 shares of the Company's Common Stock ("COMMON STOCK") at $24.00 per
share (the "EXERCISE PRICE"). This option is not an incentive stock option
as defined in Section 422(b) of the Code.
2. VESTING BASED ON STOCK PRICE. Except as provided below,
Grantee's right to exercise this option shall vest if the closing per share
sales price of shares of Common Stock on the New York Stock Exchange (or
any successor exchange that is the primary stock exchange for trading of
Common Stock) ("NYSE") is equal to or greater than $48.00 on at least 10
trading days on or before the fifth anniversary of the Grant Date.
3. CONDITIONS. Grantee's right to exercise this option is
conditional upon (a) the approval for listing of the stock to be received
upon exercise of this stock option on the NYSE; and (b) the approval of
this Agreement by the Company's stockholders at the Company's Annual
Meeting of Stockholders on April 30, 1998.
4. TERM. Upon vesting, Grantee's right to exercise this option
shall terminate on February 23, 2008, unless earlier terminated as set
forth this Agreement.
5. PAYMENT BY GRANTEE. Grantee may pay the Exercise Price for each
share of Common Stock purchased in cash or, if the Committee consents, in
shares of the Company's Common Stock (including Common Stock to be received
upon a simultaneous exercise).
6. EXERCISE OF OPTION. Grantee may exercise this option by giving
the Company written notice of the exercise of this option. The notice
shall set forth the number of shares to be purchased and shall be effective
when received by the corporate Secretary at the Company's main office,
accompanied by full payment of the Exercise Price for each share purchased.
The Company will deliver to Grantee a certificate or certificates for such
shares out of previously authorized but unissued shares of its Common
Stock, as it may elect; PROVIDED, HOWEVER, that the time of delivery shall
be postponed for such period as may be required for the Company with
reasonable diligence to comply with any registration or exemptive
requirements under the Securities Act of 1933, as amended, the Exchange
Act, and any requirements under this Agreement or any other law,
regulation, or agreement applicable to the issuance, listing, or transfer
of such shares. If Grantee fails to accept delivery of and pay for all or
any part of the number of shares specified in the notice upon tender or
delivery of the shares, Grantee's right to exercise the option with respect
to such undelivered shares shall terminate. In such event, Grantee's
remaining options not yet exercised or terminated shall continue in force.
7. TERMINATION OF EMPLOYEE STATUS.
a. TERMINATION FOR GOOD REASON. If Grantee terminates his
employment with the Company for "Good Reason" or "Substantial Breach"
(as those terms are in the Employment Agreement, dated as of January
1, 1990, between Grantee and the Company (the "EMPLOYMENT
AGREEMENT")), all of Grantee's unvested options shall be deemed to
have vested on the day immediately preceding such termination,
notwithstanding Section 2 of this Agreement. Grantee may exercise the
option for a period of six months after the date Grantee ceases to be
an employee.
b. TERMINATION FOR CAUSE. If the Company terminates Grantee's
employment with the Company for "Cause" (as defined in the Employment
Agreement), or if Grantee terminates his employment with the Company
for reasons other than Good Reason, Substantial Breach, or
"Retirement" (as defined in the Employment Agreement), Grantee's right
to exercise any outstanding options shall terminate as of such
termination.
c. DISABILITY OR DEATH. If Grantee's employment is terminated
as a result of his death or "Permanent Disability" (as defined in the
Employment Agreement), Grantee or his personal representative may
exercise the option for a period of one year after the date Grantee
ceases to be an employee, but only to the extent that Grantee was
entitled to exercise the option on the date Grantee ceased to be an
employee.
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d. RETIREMENT. If Grantee terminates his employment with the
Company on account of "Retirement" (as defined in the Employment
Agreement), Grantee may exercise the option for a period of six months
after the date Grantee ceases to be an employee, but only to the
extent that Grantee was entitled to exercise the option on the date
Grantee ceased to be an employee.
8. CHANGE IN CONTROL. Grantee's conditional right to exercise this
option shall vest immediately if there is a "Change in Control" (as defined
below) of the Company, notwithstanding Section 2 of this Agreement.
Grantee may exercise the option for a period of six months after the date
of the Change in Control. "CHANGE IN CONTROL" of the Company shall mean a
change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act, whether or not the Company is then subject to such
reporting requirement, other than an acquisition of control by the Company
or an employee benefit plan maintained by the Company; provided that,
without limitation, such a Change in Control shall be deemed to have
occurred if (a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Company or an employee
benefit plan maintained by the Company, becomes the "beneficial owner" (as
defined in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities entitled to vote in the election of directors of the
Company (whether or not such person is a member of a group that is deemed
to be a single person under Section 13(d)(3) of the Exchange Act and
whether or not other members of such group previously had been the
beneficial owner of some or all of such securities), (b) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof (unless the election or nomination
for election by the Company's stockholders of each new director was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period), or (c) all or
substantially all of the assets of the Company are liquidated, sold, or
distributed.
9. ADJUSTMENT PROVISIONS. If the number of shares of Common Stock
outstanding changes by reason of any stock dividend, stock split,
recapitalization, merger, consolidation, combination, exchange of shares,
or any other change in the corporate structure or shares of the Company,
the aggregate number and class of shares available under this Agreement and
subject to each option, together with the Exercise Price, shall be adjusted
appropriately.
10. NO FRACTIONAL SHARES. No fractional shares shall be issued
pursuant to this Agreement and any fractional shares resulting from
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adjustments shall be eliminated from the respective option award, with an
appropriate cash adjustment for the value of any option eliminated.
11. STOCKHOLDER RIGHTS. Grantee shall have no rights as a
stockholder with respect to any shares covered by this option until
exercise of the option and payment for such shares.
12. TRANSFERABILITY. The option granted under this Agreement may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution
without the consent of the Committee. The option granted by this Agreement
during Grantee's lifetime shall be exercisable during Grantee's lifetime
only by such Grantee, his guardian, or legal representative.
13. NO RIGHT TO EMPLOYMENT. This Agreement shall not be construed as
giving Grantee the right to be retained in the employ or directorship of
the Company.
14. WITHHOLDING. The Company shall be entitled to (a) withhold and
deduct from future wages of Grantee (or from other amounts that may be due
and owing to Grantee from the Company), or make other arrangements for the
collection of, all amounts deemed necessary to satisfy any and all federal,
state and local withholding and employment-related tax requirements
attributable to this Agreement; or (b) require Grantee promptly to remit
the amount of such withholding to the Company before taking any action with
respect to the exercise of the stock option. Withholding may be satisfied
by withholding Common Stock to be received upon exercise or by delivery to
the Company of previously owned Common Stock.
15. CERTIFICATIONS. Grantee hereby represents and warrants that
Grantee is acquiring the option granted under this Agreement for Grantee's
own account and investment and without any intent to resell or distribute
the shares upon exercise of the option. Grantee shall not resell or
distribute the shares received upon exercise of the option except in
compliance with this Agreement and such other conditions as the Company
reasonably may specify to ensure compliance with federal and state
securities laws.
16. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the state of Michigan.
17. SEVERABILITY. In the event that any provision of this Agreement
shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of this Agreement, and this
Agreement shall be construed and enforced as if such illegal or invalid
provision had not been included.
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18. BINDING EFFECT; AMENDMENT. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties to this Agreement and their
respective heirs, successors, and permitted assigns. This option shall not
be modified except in a writing executed by Grantee and a duly authorized
officer of the Company.
FOREMOST CORPORATION OF AMERICA
By __________________________________________
Paul D. Yared
Its Senior Vice President and General
Counsel
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I have received a copy of the Stock Option Plan of 1998 (the
Agreement") concerning the grant of 750,000 shares on February 23, 1998
and agree to receive stock options according to the terms of the Agreement.
_____________________________________________
(Signature)
RICHARD L. ANTONINI
Print name
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APPENDIX E
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made as of
______________________, 1998, by and between FOREMOST CORPORATION OF AMERICA
(the "Corporation"), and ______________________ ("Indemnitee").
It is essential to the Corporation to attract and retain as directors
and executive officers the most capable persons available. The substantial
increase in corporate litigation subjects directors and executive officers to
expensive litigation risks at the same time that the availability and coverage
of directors and officers liability insurance has been limited. It is the
express policy of the Corporation to indemnify its directors and executive
officers so as to provide them with the maximum possible protection
permitted by law, and in furtherance of that policy and in consideration of
Indemnitee's agreement to serve as a director or executive officer of the
Corporation, the parties are entering into this Agreement.
ACCORDINGLY, the parties agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement:
(a) "Expenses" means all costs, expenses and obligations paid or
incurred in connection with investigating, litigating, being a witness in,
defending or participating in, or preparing to litigate, defend, be a witness in
or participate in any matter that is the subject of a Proceeding (as defined
below), including attorneys' and accountants' fees and court costs.
(b) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, or any inquiry or investigation, whether brought by or in
the right of the Corporation or otherwise and whether of a civil, criminal,
administrative or investigative nature, in which Indemnitee may be or may have
been involved as a party or otherwise by reason of the fact that Indemnitee is
or was a director, officer, employee, agent or fiduciary of the Corporation, or
by reason of any action taken by Indemnitee or any inaction on Indemnitee's part
while acting as a director, officer, employee, agent or fiduciary of the
Corporation, or by reason of the fact that Indemnitee is or was serving at
the request of the Corporation as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise.
(c) "Resolution Costs" includes any amount paid in connection with a
Proceeding in satisfaction of a judgment, fine, penalty or any amount paid in
settlement.
SECTION 2. AGREEMENT TO SERVE. Indemnitee agrees to serve as a
director or officer of the Corporation for so long as Indemnitee is duly elected
or appointed or until the tender of Indemnitee's written resignation.
SECTION 3. INDEMNIFICATION. The Corporation shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by Indemnitee
in connection with any Proceeding. Additionally, the Corporation shall
indemnify Indemnitee against all Resolution Costs actually and reasonably
incurred by Indemnitee in connection with any Proceeding. It is the intent of
the parties to provide Indemnitee, to the fullest extent allowed by law as now
or later enacted or interpreted, with indemnification against any Expenses and
Resolution Costs incurred by Indemnitee in connection with any Proceeding. To
the extent a change in the laws of the state in which the Corporation is
incorporated (whether by statute or judicial decision) permits greater
indemnification, either by agreement or otherwise, than presently provided by
law or this Agreement, it is the intent of the parties that Indemnitee shall
enjoy by this Agreement the greater benefits afforded by the change.
Notwithstanding the foregoing, no indemnification shall be made under this
Agreement:
(a) with respect to remuneration paid to Indemnitee if the
remuneration was in violation of law;
(b) on account of Indemnitee's conduct that was knowingly fraudulent,
deliberately dishonest or willful misconduct;
(c) on account of Indemnitee's conduct that was in bad faith, in
opposition to the best interests of the Corporation or produced an unlawful
personal benefit;
(d) with respect to a criminal proceeding if Indemnitee knew or
reasonably should have known that Indemnitee's conduct was illegal;
(e) if a final decision by a court having jurisdiction in the matter
determines that indemnification under this Agreement is not lawful; or
(f) in connection with any Proceeding initiated by Indemnitee against
the Corporation or any director, officer, employee, agent or fiduciary of the
Corporation (in such capacity) unless the Corporation has joined in or consented
to the initiation of the Proceeding or such Proceeding relates to the
enforcement by Indemnitee of Indemnitee's rights under this Agreement.
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SECTION 4. PAYMENT OF INDEMNIFICATION.
(a) Expenses incurred by the Indemnitee and subject to
indemnification under Section 3 above shall be paid directly by the Corporation
or reimbursed to the Indemnitee within two (2) days after the receipt of a
written request of the Indemnitee providing that Indemnitee undertakes to repay
any amount paid or advanced under this Section to the extent that it is
ultimately determined that Indemnitee is not entitled to indemnification under
Section 3.
(b) Except as otherwise provided in Section 4(a) above, any
indemnification under Section 3 above shall be made no later than thirty (30)
days after receipt by the Corporation of the written request of Indemnitee,
unless within that thirty (30) day period the Board of Directors, by a
majority vote of a quorum consisting of directors who are not parties to the
Proceeding, determines that the Indemnitee is not entitled to the
indemnification set forth in Section 3 or unless the Board of Directors refers
the Indemnitee's indemnification request to independent legal counsel. In cases
here there are no directors who are not parties to the Proceeding, the
indemnification request shall be referred to independent legal counsel. If the
indemnification request is referred to independent legal counsel, then
Indemnitee shall be paid no later than forty-five (45) days after Indemnitee's
iitial request to the Corporation unless within that time independent legal
counsel presents to the Board of Directors a written opinion stating in
unconditional terms that indemnification is not allowed under Section 3 of this
Agreement. If a Change in Control occurs and results in individuals who were
directors before the circumstances giving rise to the Change in Control ceasing
for any reason to constitute a majority of the Board of Directors, the above
determination, if any, shall be made by independent legal counsel and not the
Board of Directors. The Corporation agrees to pay the reasonable fees of the
independent legal counsel and to fully indemnify that counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant to this
Agreement. If there has not been a Change in Control, the independent legal
counsel shall be selected by the Board of Directors, and if there has been a
Change in Control, the independent legal counsel shall be selected by
Indemnitee.
(c) The Corporation shall take all actions necessary to enable it to
indemnify Indemnitee under this Agreement. The right to indemnification
payments as provided by this Agreement shall be enforceable by Indemnitee in any
court of competent jurisdiction. The burden of proving that indemnification is
not permitted by this Agreement shall be on the Corporation or on the person
challenging the indemnification. Neither the failure of the Corporation,
including its Board of Directors, to have made a determination before the
commencement of any Proceeding that indemnification is proper, nor an actual
determination by the Corporation, including its Board of Directors or legal
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counsel, that indemnification is not proper, shall bar an action by Indemnitee
to enforce this Agreement or create a presumption that Indemnitee is not
entitled to indemnification under this Agreement. If the Board of Directors or
independent legal counsel determines in accordance with Section 4(b) above that
Indemnitee would not be permitted to be indemnified in whole or in part,
Indemnitee shall have the right to commence litigation in any court in the state
in which the Corporation is incorporated having subject matter jurisdiction and
that venue is proper seeking an independent determination by the court or
challenging the determination by the Board of Directors or independent legal
counsel, and the Corporation hereby consents to service of process and to appear
in that Proceeding. Expenses incurred by Indemnitee in connection with
successfully establishing Indemnitee's right to indemnification, in whole or in
part, shall also be fully reimbursed by the Corporation.
SECTION 5. DEFENSE OF CLAIM.
(a) The Corporation, jointly with any other indemnifying party, shall
be entitled to assume the defense of any Proceeding as to which Indemnitee
requests indemnification. After notice from the Corporation to Indemnitee of
its election to assume the defense of a Proceeding, the Corporation shall not be
liable to Indemnitee under this Agreement for any legal or other Expenses
subsequently incurred by Indemnitee in connection with the defense of such
matter other than reasonable costs of investigation or as otherwise provided in
subsection (c) below.
(b) The Corporation need not, in any action or actions, employ or
approve the employment of more than one counsel to represent Indemnitee and any
other director, officer or other party entitled to indemnification pursuant to
an agreement similar to this Agreement or otherwise.
(c) Indemnitee may employ his or her own counsel in a Proceeding and
be indemnified therefor if (i) the Corporation approves, in writing, the
employment of such counsel, or (ii) either (A) Indemnitee has reasonably
concluded that there are conflicts of interest between the Corporation
and Indemnitee or between Indemnitee and other parties represented by counsel
employed by the Corporation to represent Indemnitee in the Proceeding, or (B)
the Corporation has not employed counsel to assume the defense of the
Proceeding.
SECTION 6. PARTIAL INDEMNIFICATION; SUCCESSFUL DEFENSE. If Indemnitee
is entitled under any provision of this Agreement to indemnification by the
Corporation for some or a portion of the Expenses or Resolution Costs actually
and reasonably incurred by Indemnitee but not, however, for the total amount,
the Corporation shall nevertheless indemnify Indemnitee for the portion of the
Expenses or Resolution Costs to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
or all claims relating in whole or in part to a Proceeding or in defense of any
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issue or matter in a Proceeding, including dismissal with or without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection with
that Proceeding.
SECTION 7. CONSENT. Neither party may settle any Proceeding without
the other's written consent, and the Corporation shall not be liable to
indemnify Indemnitee under this Agreement for amounts paid in settlement of a
Proceeding made without the Corporation's written consent. Neither the
Corporation nor Indemnitee will unreasonably withhold consent to any proposed
settlement.
SECTION 8. SEVERABILITY. If this Agreement or any portion of this
Agreement (including any provision within a single section, subsection or
sentence) shall be held to be invalid, void or otherwise unenforceable on any
ground by any court of competent jurisdiction, the Corporation shallnevertheless
indemnify Indemnitee as to any Expenses or Resolution Costs with respect to any
Proceeding to the full extent permitted by law or any applicable portion of this
Agreement that shall not have been invalidated,declared void or otherwise held
to be unenforceable.
SECTION 9. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The
indemnificationprovided by this Agreement shall be in addition to any other
rights that Indemnitee may be entitled under the Corporation's charter, the
Bylaws, any agreement, any vote of shareholders or the Board of Directors,
the corporate statute of the Corporation's state of incorporation or
otherwise.
SECTION 10. NO PRESUMPTION. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.
SECTION 11. SUBROGATION. In the event of payment under this Agreement,
the Corporation shall be subrogated to the extent of the payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do everything that may be necessary to secure those rights, including the
execution of all documents necessary to enable the Corporation to effectively
bring suit to enforce those rights.
SECTION 12. NO DUPLICATION OF PAYMENT. The Corporation shall not be
liable under this Agreement to make any payment to the extent Indemnitee has
otherwise actually received payment (under any insurance policy, Bylaw or
otherwise) of the amounts otherwise indemnifiable under this Agreement.
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SECTION 13. NOTICE. Indemnitee shall, as a condition precedent to his
right to be indemnified under this Agreement, give to the Corporation notice in
writing as soon as practicable of any claim for which indemnity will or could be
sought under this Agreement. Notice to the Corporation shall be directed to
FOREMOST CORPORATION OF AMERICA, Post Office Box 2450, Grand Rapids, Michigan
49501, Attention: Corporate Secretary (or to any other individual or address
that the Corporation designates in writing to Indemnitee). Notice shall be
deemed received three (3) days after the date postmarked if sent by prepaid mail
properly addressed. In addition, Indemnitee shall give the Corporation any
information and cooperation that the Corporation may reasonably require and is
within Indemnitee's power to give.
SECTION 14. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original, and all of which
taken together shall constitute a single document.
SECTION 15. CONTINUATION OF INDEMNIFICATION. The indemnification rights
provided to Indemnitee under this Agreement shall continue after Indemnitee has
ceased to be a director, officer, employee, agent or fiduciary of the
Corporation or any other corporation, partnership, joint venture, trust or other
enterprise that Indemnitee served in any of those capacities at the request of
the Corporation.
SECTION 16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Corporation and Indemnitee and their
respective successors and assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of
the business or assets of the Corporation, spouses, heirs, and personal and
legal representatives.
SECTION 17. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state in which the Corporation is
incorporated applicable to contracts made and to be performed in that state
without giving effects to the principles of conflicts of laws.
SECTION 18. LIABILITY INSURANCE. To the extent the Corporation
maintains an insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by the policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any director, officer, employee, agent or fiduciary of the
Corporation.
SECTION 19. AMENDMENTS; WAIVER. No supplement, modification, amendment
or waiver of this Agreement or any of its terms shall be binding unless executed
in writing by all of the parties to this Agreement or, in the case of waiver, by
the party against whom the waiver is asserted. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions of this Agreement (whether or not similar) nor shall any waiver
constitute a continuing waiver.
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The parties have executed this Agreement as of the date stated in the
first paragraph of this Agreement.
FOREMOST CORPORATION OF AMERICA
By_____________________________
Its_______________________
INDEMNITEE
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PROXY CARD
APPENDIX F
FOREMOST CORPORATION OF AMERICA
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD APRIL 30, 1998
P
The undersigned acknowledges receipt of the Notice of Annual
R Meeting and Proxy Statement for the Annual Meeting of Stock-
holders of Foremost Corporation of America to be held on
O April 30, 1998, and hereby appoints Richard L. Antonini and
F. Robert Woudstra, or any of them, attorneys and proxies of
X the undersigned, each with full power of substitution, to
vote all shares of the undersigned in Foremost Corporation of
Y America at such Annual Meeting, and at any adjournment thereof,
for the purpose of acting upon the proposals referred to below,
and of acting in their discretion upon such other matters as
may properly come before the meeting.
Election of Four Class I Directors
Nominees:
Michael de Havenon, Robert M. Raives
Michael B. Targoff, F. Robert Woudstra (Change of address)
__________________________
__________________________
__________________________
__________________________
(If you have written in
the above space, please
mark the corresponding box
on the reverse side of
this card.)
You are encouraged to specify your choices by marking the appropriate
boxes. SEE REVERSE SIDE, but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations. The Proxies
cannot vote your shares unless you sign and return this card.
[BOX-SEE REVERSE SIDE]
SHARES IN YOUR NAME
[X] Please mark your votes
as in this example.
FOR WITHHELD ABSTAIN
1. Election of Directors (see reverse) [ ] [ ] [ ]
For, except vote withheld from the
following nominees(s):
- ----------------------------------
FOR WITHHELD ABSTAIN
2. Approval of amendment to [ ] [ ] [ ]
Certificate of Incorporation
to increase the number of authorized
shares of Common Stock
3. Adoption of Agreement and Plan of Merger [ ] [ ] [ ]
to cause the Company to become a
Michigan corporation
4. Approval of the Stock Option Plan of 1998 [ ] [ ] [ ]
5. Approval of Form of Indemnity Agreement [ ] [ ] [ ]
for the Company's directors and officers.
6. Ratification of BDO Seidman, [ ] [ ] [ ]
as independent auditors for 1998.
Change of Address [ ]
Attend Meeting [ ]
SIGNATURE(S)__________________________ DATE__________________________
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such.
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