EXHIBIT 10.1
FOREMOST CORPORATION OF AMERICA
ANNUAL INCENTIVE PLAN
RESTATED JANUARY 1, 1998
Purpose: Annual cash incentive based upon performance against calendar
year goals.
Eligibility:
1. Participants must be in an exempt job position with a Foremost
Job Size rating of 220 or more.
2. Must be employed at least 20 hours per week by Foremost Insurance
Company Grand Rapids, Michigan or its property and casualty
affiliates.
3. Participants in this plan may not receive any other annual
incentive payment or sales bonus, unless pro-rated among plans
due to a change in jobs during the year.
4. As a general rule, the participant must be employed by a
participating company from the 1st working day of July through
December 31 of the plan year.
a. The exception to the 1st working day of July employment
requirement is for persons on approved leave of absence;
b. Exceptions to the December 31 employment requirement are:
(1) Persons on approved leave of absence;
(2) Retirement at age 55 or more; or
(3) Permanent disability or death.
In the event that an eligible plan participant was not actively
employed in an eligible job for the entire year or in the event
of an exception, as provided in subparagraphs (a) or (b) above,
bonus payment will be prorated based upon the number of full
calendar months the person was actively employed in an eligible
position during the calendar year if actual goals are ultimately
met as of December 31 of the plan year.
Any person who is terminated, for reasons other than those set
forth above, or who resigns from employment during a plan year
will not be eligible for payment for the year of termination or
resignation.
Basis of Award:
1. The Committee on Executive Management and Compensation of the
Board of Directors of Foremost Corporation of America
("Compensation Committee") shall establish performance goals by
December 31st of each year prior to the year of performance
measurement, subject to ratification by the Board of Directors
such as:
a. EARNINGS PER SHARE ("EPS") OF FOREMOST CORPORATION OF
AMERICA ("FCOA") - Threshold (Minimum), On-Plan (Target) and
Outstanding (Maximum) Goals for the applicable performance
year. EPS Goals shall remain confidential and shall not be
disclosed to the plan participants until after the end of
the performance year.
b. COMBINED LOSS AND EXPENSE RATIO ("COMBINED RATIO") OF THE
FCOA PROPERTY AND CASUALTY INSURANCE GROUP - Threshold
(Minimum), On-Plan (Target) and Outstanding (Maximum) Goals
for the applicable performance year.
c. WRITTEN PREMIUM OF THE FCOA PROPERTY AND CASUALTY INSURANCE
GROUP - Threshold (Minimum), On-Plan (Target), and
Outstanding (Maximum) for the applicable year.
2. EXECUTIVE OFFICERS - For the Chief Executive Officer, President,
Executive Vice Presidents and the Senior Vice President,
Secretary and General Counsel of FCOA, the awards under this plan
shall be based 50% on the EPS, 30% on the Combined Ratio and 20%
on Written Premium results.
3. OTHER PARTICIPANTS - For most other participants, the awards
under this plan shall be similar or modified goals established by
the CEO. The CEO shall also have authority to establish
different bonus goals or objectives for employee groups or for
employees involved in special initiatives.
Computation of Payment:
1. The measurement of performance against the goals will be on a
GAAP basis as calculated by the Treasurer of FCOA. The Earnings
Per Share calculation shall take into account the average annual
change (increase or decrease) in unrealized gain (after tax) on
the "Total Return" investment portfolio of the FCOA consolidated
group over the most recent 4 calendar years as of each December
31st compared to prior year end. For purposes of this plan, the
Combined Loss and Expense Ratio shall be calculated with a cap so
catastrophe losses shall not exceed 12% of net earned premium.
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2. Payment, if any, will be a percent of a participant's base salary
for the plan year.
3. The opportunity percents will be established from time to time
for each job based upon Foremost Job Size ratings or as otherwise
approved by the CEO. However, the Compensation Committee shall
establish the opportunity percentages of the Executive Officers.
4. Each participant will have a range of opportunity levels
providing:
a. A maximum percent (defined as 150% of target percent) if
performance meets or exceeds the "Outstanding Performance"
goal;
b. A target percent if performance meets the "On-Plan" goal;
c. A minimum percent (defined as 50% of target percent) if
performance meets the "Threshold" goal, but is less than the
"On-Plan" goal; and
d. No bonus (0%) if the "Threshold" goal is not met.
5. If results fall within the Opportunity Levels, percentages will
be pro-rated at least to the nearest 1/10th of a percentage
point.
6. Persons whose jobs change form one Foremost Job Size Range to
another during a calendar year will be subject to pro-rated
payment based upon the number of months in each range (partial
months shall be credited to the previous position).
7. The Compensation Committee shall certify in writing that the EPS,
Combined Ratio and Written Premium performance goals were
achieved prior to payment of the awards under this plan.
Payment:
Will be made in cash after certificate of results by the
Compensation Committee.
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